Global Human Resource Management

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Human resource management (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 Management

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International human resource management

Strategic role: HRM policies should be congruent with the firms 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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Strategy, structure and control systems

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Four basic strategies

Fig 12.6

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Staffing policy

Staffing policy

Selecting individuals with requisite skills to do a particular job Tool for developing and promoting corporate culture Ethnocentric (International Strategy) Polycentric (Multidomestic Strategy) Geocentric (Global and Transnational Strategy)

Types of Staffing Policy

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Comparison of staffing approaches

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Ethnocentric policy

Key management positions filled by parent-country nationals Best suited to international businesses Advantages:

Overcomes lack of qualified managers in host nation Unified culture Helps transfer core competencies Produces resentment in host country Can lead to cultural myopia

Disadvantages:

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Polycentric policy

Host-country nationals manage subsidiaries Parent company nationals hold key headquarter positions Best suited to multi-domestic businesses Advantages:

Alleviates cultural myopia. Inexpensive to implement Helps transfer core competencies Limits opportunity to gain experience of host-country nationals outside their own country. Can create gap between home-and host-country operations

Disadvantages:

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Geocentric policy

Seek best people, regardless of nationality Best suited to Global and trans-national businesses Advantages:

Enables the firm to make best use of its human resources Equips executives to work in a number of cultures Helps build strong unifying culture and informal management network National immigration policies may limit implementation Expensive to implement due to training and relocation Compensation structure can be a problem.
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Disadvantages:

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The expatriate problem

Expatriate: citizens of one country working in another Expatriate failure: premature return of the expatriate manager to his/her home country
Cost

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

Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer

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Expatriate failure rates

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Reasons for expatriate failure

US multinationals Inability of spouse to adjust Managers inability to adjust Other family problems Managers 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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Expatriate selection

Reduce expatriate failure rates by improving selection procedures An executives domestic performance does not (necessarily) equate his/her overseas performance potential Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

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Four attributes that predict success

Self-Orientation

Possessing high self-esteem, self-confidence and mental well-being Ability to develop relationships with host-country nationals Willingness to communicate The ability to understand why people of other countries behave the way they do Being nonjudgmental and being flexible in management style Relationship between country of assignment and the expatriates adjustment to it

Others-Orientation

Perceptual Ability

Cultural Toughness

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Training and management development

Training: Obtaining skills for a particular foreign posting

Cultural training : Seeks to foster an appreciation of the host-countrys culture Language training : Can improve expatriates 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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Performance appraisal

Problems:

Unintentional bias Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience working abroad

Expatriate managers believe that headquarters unfairly evaluates and under appreciates them In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to ones career.

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Guidelines for performance appraisal

More weight should be given to onsite managers evaluation as they are able to recognize the soft variables Expatriate who worked in same location should assist home-office manager with evaluation If foreign on-site managers prepare an evaluation, homeoffice manager should be consulted before completion of formal the terminal evaluation

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Compensation

Two issues:

Pay executives in different countries according to the standards in each country? or Equalize pay on a global basis? Method of payment

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Compensation for four positions in 26 countries

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National differences in compensation

Table 18.4 b CEO Argentina Canada Germany Taiwan United Kingdom United States $860,704 742,228 421,622 179,486 719,665 1,403,899 HR Director $326,874 188, 070 189,785 102,491 268,302 306,181 Accountant $63, 948 44,866 61,375 30,652 107,839 66,377 Mfg. Employee $17, 884 36,289 36,934 11,924 28,874 44,680

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National differences in CEO pay for midsize companies

Fig 18.1

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Compensation issues
Type of Company Ethnocentric (International Strategy) Polycentric (Multidomestic Strategy) Geocentric/Transnational Payment How much home-country expatriates should be paid. Pay can and should be country-specific. May have to pay its international cadre of managers the same.

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Expatriate pay

Typically use balance sheet approach Equalizes purchasing power to maintain same standard of living across countries Provides financial incentives to offset qualitative differences between assignment locations.

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Components of expatriate pay

Base Salary

Same range as a similar position in the home country Extra pay for work outside country of origin Hardship, housing, cost-of-living and education allowances Firm pays expatriates income tax in the host country Level of medical and pension benefits identical overseas

Foreign service premium Allowances Taxation Benefits

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