chapter copyright© 2007 thomson learning all rights reserved 11 international human resource...

Chapter

11International Human Resource Management

Learning Objectives

• Know the basic functions of human resource management

• Define international human resource management• Understand the difference between international and

domestic human resource management• Know the types of workers used by multinationals

• Know the basic functions of human resource management

• Define international human resource management• Understand the difference between international and

domestic human resource management• Know the types of workers used by multinationals

Learning Objectives

• Know how and when to use expatriate managers• Know the skills necessary for a successful expatriate

assignment• Understand how expatriate managers are

compensated and evaluated• Appreciate the issues regarding expatriate

assignments of women managers

• Know how and when to use expatriate managers• Know the skills necessary for a successful expatriate

assignment• Understand how expatriate managers are

compensated and evaluated• Appreciate the issues regarding expatriate

assignments of women managers

Learning Objectives

• Know what to do to make the expatriate assignment easier for their female expatriates

• Understand e.HR systems and how they can be useful in IHRM

• Understand the relationship between choice of a multinational strategy and international human resource management

• Know what to do to make the expatriate assignment easier for their female expatriates

• Understand e.HR systems and how they can be useful in IHRM

• Understand the relationship between choice of a multinational strategy and international human resource management

Human Resource Management and Functions

• Human resource management (HRM): deals with the entire relationship of the employee with the organization

• Recruitment: process of identifying and attracting qualified people to apply for vacant positions

• Selection: process of filling vacant positions in the organization

• Human resource management (HRM): deals with the entire relationship of the employee with the organization

• Recruitment: process of identifying and attracting qualified people to apply for vacant positions

• Selection: process of filling vacant positions in the organization

Basic HRM Functions

• Training and development: giving employees the knowledge, skills, and abilities to perform successfully

• Performance appraisal: system to measure and assess employees’ work performance

• Training and development: giving employees the knowledge, skills, and abilities to perform successfully

• Performance appraisal: system to measure and assess employees’ work performance

Basic HRM Functions

• Compensation: organization’s entire reward package, including financial rewards, benefits, and job security

• Labor relations: ongoing relationship between an employer and those employees represented by labor organizations

• Compensation: organization’s entire reward package, including financial rewards, benefits, and job security

• Labor relations: ongoing relationship between an employer and those employees represented by labor organizations

International Human Resource Management (IHRM)

• All HRM functions, adapted to the international setting• Two added complexities compared to domestic HRM

- Must choose a mixture of international employees- Must decide the extent of adaptation to local

conditions

• All HRM functions, adapted to the international setting• Two added complexities compared to domestic HRM

- Must choose a mixture of international employees- Must decide the extent of adaptation to local

conditions

Types of Employees in Multinational Organizations

• Expatriate: employee from a different country • Home country nationals: expatriate employees from

the parent firm’s home country• Third country nationals: expatriate workers who come

from neither the host nor home country

• Expatriate: employee from a different country • Home country nationals: expatriate employees from

the parent firm’s home country• Third country nationals: expatriate workers who come

from neither the host nor home country

Types of Employees in Multinational Organizations

• Host country nationals: local workers who come from the host country where the unit is located

• Inpatriate: employees from foreign countries who work in the country where the parent company is located

• Flexpatriates: employees who are sent on frequent but short-term international assignments

• Host country nationals: local workers who come from the host country where the unit is located

• Inpatriate: employees from foreign countries who work in the country where the parent company is located

• Flexpatriates: employees who are sent on frequent but short-term international assignments

The Expatriate or the Host Country Manager

• Multinationals must decide whether to use expatriates or home country nationals

• Need to look at some questions- Given the firm’s strategy, what is the preference for

the position?

• Multinationals must decide whether to use expatriates or home country nationals

• Need to look at some questions- Given the firm’s strategy, what is the preference for

the position?

The Expatriate or the Host Country Manager

• Using expatriate managers- Do parent country managers have the appropriate

skills?- Are they willing to take expatriate assignments?- Do any laws affect the assignment of expatriate

managers?• Using host country managers

- Do they have the expertise for the position?- Can we recruit them from outside the company?

• Using expatriate managers- Do parent country managers have the appropriate

skills?- Are they willing to take expatriate assignments?- Do any laws affect the assignment of expatriate

managers?• Using host country managers

- Do they have the expertise for the position?- Can we recruit them from outside the company?

Is the Expatriate Worth It?

• Decisions must take into account costs of such assignments- High cost- High failure rate

Exhibit 11.1: Paying for the Expatriate Manager: Indices of Cost of Living Abroad

Reasons for U.S. Expatriate Failure

• Individual- Personality of the manager- Lack of technical proficiency- No motivation for assignment

• Family- Spouse or family members fail to adapt- Family members or spouse do not want to be there

• Individual- Personality of the manager- Lack of technical proficiency- No motivation for assignment

• Family- Spouse or family members fail to adapt- Family members or spouse do not want to be there

Reasons for U.S. Expatriate Failure (cont.)

• Cultural- Manager fails to adapt- Manager fails to develop relationship with key

people

• Cultural- Manager fails to adapt- Manager fails to develop relationship with key

people

Reasons for U.S. Expatriates Failure (cont.)

• Organizational- Excessively difficult responsibilities- Failure to provide cultural training- Company fails to pick the right person- Company fails to provide the technical support- Excess of difficult responsibilities of international

assignment- Failure of company to consider gender equity

• Organizational- Excessively difficult responsibilities- Failure to provide cultural training- Company fails to pick the right person- Company fails to provide the technical support- Excess of difficult responsibilities of international

assignment- Failure of company to consider gender equity

Strategic Role of Expatriate Assignments

• Helps managers acquire international skills• Helps coordinate and control operations dispersed

activities• Communication of local needs/strategic information to

headquarters• In-depth knowledge of local markets• Provide important network knowledge

• Helps managers acquire international skills• Helps coordinate and control operations dispersed

activities• Communication of local needs/strategic information to

headquarters• In-depth knowledge of local markets• Provide important network knowledge

International Cadre

• International cadre (or Globals): Separate group of expatriate managers who specialize in a career of international assignments- Have permanent international assignments- Move from international assignments to international

assignments- Recruited from any country- Sent to worldwide locations to develop cross-cultural

skills

• International cadre (or Globals): Separate group of expatriate managers who specialize in a career of international assignments- Have permanent international assignments- Move from international assignments to international

assignments- Recruited from any country- Sent to worldwide locations to develop cross-cultural

skills

Flexpatriates

• The frequent flyers who travel on short notice for shorter time durations while maintaining their family and personal lives at the home-country location

• Key functions- Sent to explore markets- Consider problem areas in the foreign subsidiary- Manage projects- Help with transfer of technology

• The frequent flyers who travel on short notice for shorter time durations while maintaining their family and personal lives at the home-country location

• Key functions- Sent to explore markets- Consider problem areas in the foreign subsidiary- Manage projects- Help with transfer of technology

Flexpatriates

• Advantages- Do not experience many of the family and personal

difficulties and stress associated with expatriate assignments

- Much less expensive than expatriate – no relocation or repatriation costs

• Advantages- Do not experience many of the family and personal

difficulties and stress associated with expatriate assignments

- Much less expensive than expatriate – no relocation or repatriation costs

Flexpatriate

• Disadvantages- Taxation issues can become complicated if the

assignment exceeds six months – he company may end up paying the tax

- Does not fully integrate into the local work environment and does not learn low to adapt locally

- May be resented for neglecting the host-country culture

• Disadvantages- Taxation issues can become complicated if the

assignment exceeds six months – he company may end up paying the tax

- Does not fully integrate into the local work environment and does not learn low to adapt locally

- May be resented for neglecting the host-country culture

Key Success Factors for Expatriate Assignments

• Technical and managerial skills• Personality traits• Relational abilities• Family situation• International motivation• Stress tolerance• Language ability• Emotional intelligence

Exhibit 11.2: Expatriate Success Factors and Selection Methods

Priority of Success Factors

• Assignment length- Technical and professionals skills are key for short

assignments• Cultural similarity• Required interaction with local people• Job complexity and responsibility

• Assignment length- Technical and professionals skills are key for short

assignments• Cultural similarity• Required interaction with local people• Job complexity and responsibility

Exhibit 11.3: Selecting Expatriates: Priorities for Success Factors by Assignment Characteristics

Training and Development

• Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families

• Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions

• Cross-cultural training: increases the relational abilities of future expatriates and their spouses and families

• Training rigor: extent of effort by both trainees and trainers required to prepare the trainees for expatriate positions

Training and Development (cont.)

• Low rigor training- Short time period- Lectures and videos on local cultures- Briefings on company operations

• High rigor training- Last over a month- Experiential learning- Extensive language training- Includes interactions with host country nationals

• Low rigor training- Short time period- Lectures and videos on local cultures- Briefings on company operations

• High rigor training- Last over a month- Experiential learning- Extensive language training- Includes interactions with host country nationals

Exhibit 11.4: Training Rigor: Techniques and Objectives

Exhibit 11.5: How the Rigor of Training Relates to the Basic Expatriate Assignment Conditions

Expatriate Performance Appraisal

• Conducting reliable performance appraisal for the expatriate is very challenging

• Challenges• Fit of international operation in multinational strategy• Unreliable date• Complex and volatile environments• Time difference and distance separation• Local cultural situation

• Conducting reliable performance appraisal for the expatriate is very challenging

• Challenges• Fit of international operation in multinational strategy• Unreliable date• Complex and volatile environments• Time difference and distance separation• Local cultural situation

Steps to Improve the Expatriate Performance Appraisal

1. Fit the evaluation criteria to strategy2. Fine-tune the evaluation criteria3. Use multiple sources of evaluation with varying periods

of evaluation

1. Fit the evaluation criteria to strategy2. Fine-tune the evaluation criteria3. Use multiple sources of evaluation with varying periods

of evaluation

Exhibit 11.6: Evaluation Sources, Criteria, and Time Periods for Expatriate Performance Appraisals

Expatriate Compensation

• Compensation packages tend to include many common factors includes:- Local market cost of living- Housing- Taxes- Benefits

Exhibit 11.7: Average Rent of Two-Bedroom, Unfurnished Apartments in Selected European Cities

The Balance-Sheet Approach

• Provides a compensation package that equates purchasing power

• Allowances for cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care

• Provides a compensation package that equates purchasing power

• Allowances for cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care

Exhibit 11.8: Balance Sheet Approach To Expatriate Compensation

Additional Allowances and Perquisites

• Foreign service premiums• Hardship allowance• Relocation allowances• Home-leave allowances

Expatriate Manager Compensation: Other Approaches

• Headquarters-based compensation: paying home country wages regardless of location

• Host-based compensation system: adjusting wages to local lifestyles and costs of living

• Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used

• Headquarters-based compensation: paying home country wages regardless of location

• Host-based compensation system: adjusting wages to local lifestyles and costs of living

• Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales are used

Repatriation Problem

• Difficulties faced coming back home• Three basic cultural problems—“reverse culture

shocks”- Adapt to new work environment and culture of home- Expatriates must relearn own national and

organization culture- Need to adapt to basic living environment

• Difficulties faced coming back home• Three basic cultural problems—“reverse culture

shocks”- Adapt to new work environment and culture of home- Expatriates must relearn own national and

organization culture- Need to adapt to basic living environment

Strategies for Successful Repatriation

• Provide a strategic purpose for the repatriation• Establish a team to aid the expatriate• Provide parent country information sources• Provide training and preparation for the return• Provide a home-leave policy to encourage expatriates

to make regular visits to the home office• Provide support for the expatriate and family on return

• Provide a strategic purpose for the repatriation• Establish a team to aid the expatriate• Provide parent country information sources• Provide training and preparation for the return• Provide a home-leave policy to encourage expatriates

to make regular visits to the home office• Provide support for the expatriate and family on return

International Assignments for Women: Two Myths

• Myth 1: Women do not wish to take international assignments.

• Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women.

• Successful women expatriates- Foreign not female—emphasize nationality not

gender

• Myth 1: Women do not wish to take international assignments.

• Myth 2: Women will fail in international assignments because of the foreign culture’s prejudices against local women.

• Successful women expatriates- Foreign not female—emphasize nationality not

gender

International Assignments for Women: Advantages

• More visible• Strong in relational skills• Wider range of interaction options

International Assignments for Women: Disadvantages

• Face the glass ceiling- Isolation and loneliness- Constant proving of themselves, working harder than

male• Need to balance work and family responsibilities• Need to worry about accompanying spouse

• Face the glass ceiling- Isolation and loneliness- Constant proving of themselves, working harder than

male• Need to balance work and family responsibilities• Need to worry about accompanying spouse

More Women in the Future?

• Women expatriate managers are expected to grow• Acute shortage of high-quality managers• Increasing number of women provide role models

What Can Companies Do To Ensure Female Expatriate Success?

• Provide mentors• Provide opportunities for interpersonal networks as a

form of organizational support• Remove sources of barriers• Provide support to cope with dual-career issues

• Provide mentors• Provide opportunities for interpersonal networks as a

form of organizational support• Remove sources of barriers• Provide support to cope with dual-career issues

Multinationals and Electronic Human Resource Management

• Electronic human resources (e.HR): automation of various aspects of the human resources system of a company

Strategic Benefits of e.HR Systems

• Reduce HR and administrative system cost• Improve HR services to employees• Employees take control of their own data• Repository of the wealth of knowledge and skills of

expatriates• Employee tracking for career management and other

HR purposes

• Reduce HR and administrative system cost• Improve HR services to employees• Employees take control of their own data• Repository of the wealth of knowledge and skills of

expatriates• Employee tracking for career management and other

HR purposes

Proper Steps to e.HR Implementation

• Develop business case to justify using e.HR or upgrade to e.HR

• Make the system customer-focused• Be proactive• Organize collected data in ways that is useful to the

organization

• Develop business case to justify using e.HR or upgrade to e.HR

• Make the system customer-focused• Be proactive• Organize collected data in ways that is useful to the

organization

Multinational Strategy and IHRM

• IHRM orientation: company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers

Exhibit 11.9: IHRM Orientation and IHRM Practices for Managers and Technical Workers

Multinational Strategy and IHRM

• Ethnocentric IHRM: all aspects of HRM for managers and technical workers tend to follow the parent organization’s home-country HRM practices

Benefits of Ethnocentric IHRM

• Little need to recruit qualified host country nationals for higher management

• Greater control and loyalty of home country nationals• Key decisions centralized

• Little need to recruit qualified host country nationals for higher management

• Greater control and loyalty of home country nationals• Key decisions centralized

Costs of Ethnocentric IHRM

• May limit career development for host country nationals

• Host country nationals may never identify with the home company

• Expatriate managers are often poorly trained for international assignments and make mistakes

• Expatriates may have limited career development

• May limit career development for host country nationals

• Host country nationals may never identify with the home company

• Expatriate managers are often poorly trained for international assignments and make mistakes

• Expatriates may have limited career development

Regiocentric and Polycentric IHRM

• Regiocentric IHRM: region-wide HRM policies are adopted

• Polycentric IHRM: firm treats each country-level organization separately for HRM purposes

• Greater responsiveness to host country differences

• Regiocentric IHRM: region-wide HRM policies are adopted

• Polycentric IHRM: firm treats each country-level organization separately for HRM purposes

• Greater responsiveness to host country differences

Benefits of Polycentric and Regiocentric HRM Policies

• Reduces costs for training of expatriate managers from headquarters

• No investment in language training • Fewer problems with adjustments to local cultures• Less expensive

• Reduces costs for training of expatriate managers from headquarters

• No investment in language training • Fewer problems with adjustments to local cultures• Less expensive

Costs of Polycentric and Regiocentric IHRM Policies

• Coordination problems with headquarters- based on cultural, language, and loyalty differences

• Limited career-path opportunities for host country and regional managers

• Limited international experience for home country managers

• Coordination problems with headquarters- based on cultural, language, and loyalty differences

• Limited career-path opportunities for host country and regional managers

• Limited international experience for home country managers

Global IHRM Orientations

• Recruiting and selecting worldwide• Assigning the best managers to international

assignments regardless of nationality

• Recruiting and selecting worldwide• Assigning the best managers to international

assignments regardless of nationality

Global IHRM Orientations

• Benefits- Bigger talent pool- Develops international expertise- Helps build transnational organizational cultures

• Costs- Importing managerial and technical employees not

always possible- Added expense

• Benefits- Bigger talent pool- Develops international expertise- Helps build transnational organizational cultures

• Costs- Importing managerial and technical employees not

always possible- Added expense

IHRM Orientation and Multinational Strategy

• Early stages of internationalization—ethnocentric IHRM

• Multilocal strategies—ethnocentric or regiocentric• Regional strategy—regiocentric, polycentric or global

• Early stages of internationalization—ethnocentric IHRM

• Multilocal strategies—ethnocentric or regiocentric• Regional strategy—regiocentric, polycentric or global

Exhibit 11.10: IHRM Orientations and Multinational Strategies

Conclusion

• When basic HRM practices are applied to a company’s international operations, they become International HRM

• Chapter focused on HRM practices as applied to the expatriate employees

• Expatriates present special challenges for multinationals

• It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences

• When basic HRM practices are applied to a company’s international operations, they become International HRM

• Chapter focused on HRM practices as applied to the expatriate employees

• Expatriates present special challenges for multinationals

• It is important for multinationals to find ways to properly manage expatriates to benefit from their experiences

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