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Hiring and Hiring and Managing Managing EmployeesEmployees

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Human Resource Management Human Resource Management (HRM)(HRM)

Refers to the activities an organization carries out to use its human resources effectively

Four major tasks of HRM - Staffing policy

- Management training and development

- Performance appraisal

- Compensation policy

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International Human Resource International Human Resource ManagementManagement

Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls

Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems

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International H.R.M.International H.R.M.

Often modifiedOften modified

ExpatriatesCitizens of one country who are living

and working in another country

ExpatriatesCitizens of one country who are living

and working in another country

Recruitment and selectionRecruitment and selection

Training and developmentTraining and development

Compensation Compensation

Labor relations Labor relations

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Factors Making International HR Factors Making International HR DifficultDifficult

Different labor markets- Mix of available workers- Mix of labor costs

International worker mobility problemsNational management styles and practicesNational orientationsStrategy and control

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International Managerial International Managerial TermsTerms

Locals – citizens of the countries in which they are working

Expatriates – non-citizen - Home-country national

- Third-country national

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Ethnocentric StaffingEthnocentric Staffing

AdvantagesAdvantages

+ Tight control over subsidiaries

+ Locally qualified people not always available

+ Re-create local operations in home-office image

+ Interests of home office may be better protected

– Relocations are expensive

– Create “foreign” image for the businessDisadvantagesDisadvantages

Individuals from home country manage operations abroadIndividuals from home country manage operations abroad

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Polycentric StaffingPolycentric Staffing

AdvantagesAdvantages+ Responsibility on those knowing local business+ Avoid expensive relocations from home nation

– Potentially lose control of subsidiaryDisadvantagesDisadvantages

Individuals from host country manage operations abroadIndividuals from host country manage operations abroad

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Geocentric StaffingGeocentric Staffing

AdvantagesAdvantages+ Develop global managers who can adjust easily to any business environment

– These individuals command high salariesDisadvantagesDisadvantages

Best-qualified individuals, regardless of nationality,Best-qualified individuals, regardless of nationality,manage operations abroadmanage operations abroad

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Filling Foreign Managerial Filling Foreign Managerial PositionsPositions

Typically more difficult to fill than domestic positions because:- People don’t like to move

- There are legal impediments to using expatriates

- Many are apprehensive about language issues

- Many assignments are open-ended

- Perception that assignment abroad will negatively affect family lifestyle

- Living is more expensive abroad

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Reasons to Use ExpatriatesReasons to Use Expatriates

Lack of locally qualified candidatesBroaden the companies understanding of the overall corporate systemGain professional/foreign experienceCan control operations according to headquarters’ preferencesNeed to transfer technology abroadGain valuable educational experience

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Human Resource PlanningHuman Resource Planning

Phase 1 Phase 2 Phase 3

Take inventory of

current human

resources

Estimate firm’s

future human

resource needs

Develop plan to recruit and select people for vacant and anticipated new positions

Forecasting human resource needs and supplyForecasting human resource needs and supply

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Recruiting Human ResourcesRecruiting Human Resources

• Recent college graduatesRecent college graduates

• Local managerial talentLocal managerial talent

• Nonmanagerial workersNonmanagerial workers

• Current employeesCurrent employees

Process of identifying and attracting a qualified pool of applicants for vacant positions

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Selecting Human ResourcesSelecting Human Resources

Ability to bridge cultural differences is key

Expatriates must adapt to new ways of life

Cultural sensitivity raises odds for success

Process of screening and hiring the best-qualified applicantswith the greatest performance potential

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Selecting the Proper Selecting the Proper ExpatriateExpatriate

Technical competenceAdaptiveness- Those needed for self-maintenance- Those related to development of satisfactory

relationships• Flexibility• Tolerance

- Cognitive skills

Local acceptanceMost common reason for failure is inability of the expatriate’s family to adjust

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Allegiance of Expatriate ManagersAllegiance of Expatriate Managers

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The Expatriate ProblemThe Expatriate Problem

Expatriate failure: premature return of the expatriate manager to his/her home country

• Cost of failure is high: estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

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Reasons for Expatriate Reasons for Expatriate FailureFailure

US multinationals- Inability of spouse to adjust

- Manager’s inability to adjust

- Other family problems

- Manager’s personal or emotional immaturity

- Inability to cope with larger overseas responsibilities

European multinationals

Inability of spouse to adjust

Japanese Firms

- Inability to cope with larger overseas responsibilities

- Difficulties with the new environment

- Personal or emotional problems

- Lack of technical competence

- Inability of spouse to adjust

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Stage I:

Thrilling experience

Stage II:

Downward slide

Stage III:

Recovery begins

Stage IV:

Embrace local culture

Culture ShockCulture Shock

Psychological process affecting people living abroad that is characterized by homesickness, irritability,

confusion, aggravation and depression

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Training and Management Training and Management DevelopmentDevelopment

Training: Obtaining skills for a particular foreign posting

- Cultural training: Seeks to foster an appreciation of the host country’s culture

- Language training: Can improve expatriate’s effectiveness, aids in relating more easily to foreign culture, and fosters a better firm image

- Practical training: Ease into day-to-day life of the host country

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Cultural Training MethodsCultural Training Methods

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Compiling a Cultural ProfileCompiling a Cultural Profile

CultureGramsBackground

NotesCountry

Studies AreaHandbooks

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Nonmanagerial workersNonmanagerial workersNonmanagerial workersNonmanagerial workersManagerial employeesManagerial employeesManagerial employeesManagerial employees

Employee CompensationEmployee Compensation

Bonus andBonus andtax incentivestax incentives

Bonus andBonus andtax incentivestax incentives

Cultural andCultural andsocial factorssocial factors

Cultural andCultural andsocial factorssocial factors

Greater labor mobilityGreater labor mobilityin some marketsin some markets

Greater labor mobilityGreater labor mobilityin some marketsin some markets

Cost-of-livingCost-of-livingeffectseffects

Cost-of-livingCost-of-livingeffectseffects Greater cross-borderGreater cross-border

investmentinvestment

Greater cross-borderGreater cross-borderinvestmentinvestment

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Components of Expatriate PayComponents of Expatriate Pay

Base Salary- Same range as a similar position in the home country

Foreign service premium- Extra pay for work outside country of origin

Allowances- Hardship, housing, cost-of-living, and education

allowancesTaxation- Firm pays expatriate’s income tax in the host country

Benefits- Level of medical and pension benefits identical

overseas

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Repatriation of ExpatriatesRepatriation of Expatriates

A critical issue in the training and development of expatriate managers is preparing them for reentry into their home country

Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers

Research shows that there is a problem with the repatriation process

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Reverse Culture ShockReverse Culture Shock

Psychological processof readapting to one’s

home culture

Methods ofreducing its effects

• Once-natural thoughts andfeelings now strange

• Can be more unsettling thanculture shock

• Many companies reabsorbexpatriates poorly

• Once-natural thoughts andfeelings now strange

• Can be more unsettling thanculture shock

• Many companies reabsorbexpatriates poorly

• Home-culture reorientationprograms

• Career-counseling sessions• Career-development program

before posting abroad

• Home-culture reorientationprograms

• Career-counseling sessions• Career-development program

before posting abroad

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Repatriation of ExpatriatesRepatriation of Expatriates

Didn’t know what position they hold upon return.

Firm vague about return, role and career progression.

Took lower level job.

Leave firm within one year.

Leave firm within three years

10 20 30 40 50 60 70percent

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Labor-Management RelationsLabor-Management Relations

• Rooted in local culture

• Often affected by political movements

• Directly influences workers’ lives

Positive or negative condition of relations betweena company’s management and its workers

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Can affectCan affectselectionselection

of a locationof a location

Can affectCan affectselectionselection

of a locationof a location

Can affect companyCan affect companyperformanceperformancein a marketin a market

Can affect companyCan affect companyperformanceperformancein a marketin a market

Popularity ofPopularity ofemerging marketsemerging markets

in Asiain Asia

Popularity ofPopularity ofemerging marketsemerging markets

in Asiain Asia

Union powerUnion powerdeclining acrossdeclining acrossmuch of Europemuch of Europe

Union powerUnion powerdeclining acrossdeclining acrossmuch of Europemuch of Europe

Importance of Labor UnionsImportance of Labor Unions

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But generating support

can be difficult because:

• Events in distant lands difficult to comprehend

• Workers in different nations often compete

International Labor International Labor MovementsMovements

International activities of unions are making progress in improving treatment of workers and reducing child labor