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Global
Human Resource
Management

McGraw-Hill/Irwin
Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Introduction
lIntegration of the world’s economies and business
globalization continues unabated
lInternational trade is growing more rapidly than
world output
lForeign direct investment (FDI) flows are
increasing
lThe number of cross-border, inter-firm agreements
has risen dramatically
lSocial, economic, and political developments
throughout the world changed the way global
business is conducted
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Introduction
lThe external environment greatly influences HRM
activities
lEach country has its own:
lLaws
lBusiness customs
lWorkforce characteristics
lPolitical climate

lThe most difficult challenge to overcome is the

“people challenge”
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Introduction
lKey challenges to international effectiveness:
lFinding suitable candidates
lIntercultural understanding
lCareer management
lEmployee retention
lAdjusting to environment
lPartner dissatisfaction
lRelocation reluctance
lGlobal human resource management has the same
functions as domestic HRM, plus unique aspects
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Introduction
lOrganizations expand beyond domestic boundaries
to achieve:
lSatisfied employees
lCompetitive products and services
lNew or broader markets
lNew, more efficient manufacturing technology
lLarge, inexpensive labor forces
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Introduction
lMaquiladoras are Mexican assembly
plants used by international companies
lSometimes called “twin plants”
lMost owned by American,
Japanese, and Korean manufacturers
lSavings outweigh extra shipping costs
lAfter a slowdown in recent years, the maquiladora
industry is showing strong growth
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Introduction
lMexico is not the only area popular with American
firms, nor is inexpensive labor the only driving
force
lIntel built a manufacturing facility in Ireland in
exchange for a guaranteed tax break
lForeign direct investment in developed countries has
decreased since 2001
lDeveloping countries are seeing increases in
foreign direct investment
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The Cultural Nature of Global HRM

lCultural differences between nations can influence
the effectiveness of HRM policies and practices
lHRM must be congruent with the cultural
orientation of the workers
lHefstede says cultures vary in five dimensions:
lIndividualism versus collectivism
lPower distance
lAvoidance of uncertainty
lMasculinity
lLong-term versus short-term orientation
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The Concept of “Fit” in Global HRM

l“Fit” is the degree to which HRM
policies are congruent with the:
lStrategic plan of the organization
lWork-related values of the foreign
culture
lInternal fit: making sure HRM policies facilitate the
work values and motivation of employees
lExternal fit: the degree to which HRM matches the
context in which the organization is operating
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Multinational and Global Corporations

lMultinational corporations (MNCs) are usually in
the early stages of an international strategy
lOperations in many nations, but each is a separate
enterprise
lEach enterprise adapts products to the local culture
lMost control remains with the home office or with
an expatriate from the home country
lMost employees and managers are from the home
country (polycentric staffing)
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Multinational and Global Corporations

lGlobal corporations (GC) are structured so that
national boundaries disappear
lThe best people are hired, regardless of national
origin (geocentric staffing)
lSubsidiaries are not limited to serving the local
culture
lThe national affiliation of an employee becomes
less important than his/her area of expertise
lGHRM in the 21st century will be challenging for
both MNCs and GCs
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Multinational and Global Corporations

lThree sources of employees for an international

assignment:
lHost country nationals (HCNs)
lParent country nationals (PCNs)
lThird country nationals (TCNs)
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Multinational and Global Corporations

lMNCs generally take an ethnocentric perspective
lThey use HRM policies from home with minor
adaptations
lThey believe key personnel should be PCNs
lEthnocentricity is strong in many foreign
organizations conducting business in the U.S.
lNearly every executive in Japanese-owned
businesses in the U.S. is a Japanese national
lThe geocentric organization ignores national
boundaries for staffing overseas operations
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Multinational and Global Corporations

lThe biggest HR challenge facing any globally
oriented corporation is finding competent
managers
lAn expatriate manager (PCN) comes from the
corporation’s home nation
lRelocation can be troublesome, regardless of the
managers country of origin
lThe challenge is to capitalize on the diversity of a
global workforce without suppressing cultural
heritage
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Multinational and Global Corporations

lThe biggest mistake global organizations make is:
lAssuming there is “one best way” to structure
HRM policies and practices
lThere are 120 critical differences between Japanese
and American workplace norms
lThese differences impact issues related to:
lFeedback and performance evaluation
methods
lLines of authority
lInformation management
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The Expatriate Manager in the MNC

lManaging the expatriate’s adjustment process is a
primary focus of GHRM
lThe difficulty of this task has increased because:
lSales and production shifted closer to markets
lThere is higher use of host country and third
country management
lThere is a concurrent increase in the number
of “inpats”
lBoth inpats and expats can have a difficult time
adapting to their new surroundings
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The Expatriate Manager in the MNC

l80percent of all middle- to large-size companies use
expatriates
lMany companies are not effectively selecting and
preparing employees for overseas assignments
lAmerican expatriates fail more often than their
Japanese and European counterparts
lOnly 57 percent of companies provide cross-
cultural training
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Selecting the Expatriate Manager

lFactors
associated with expatriate failure:
lUncertain technical competency
lWeak language skills
lUnsure about going overseas
lFamily problems
lLow spouse support
lBehavioral rigidity
lInability to adapt
lPoor relational ability
lWeak stress management skills
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Selecting the Expatriate Manager

lFactorsassociated with expatriate success:
lGood technical and language skills
lStrong desire to work overseas
lSpecific knowledge of overseas culture
lWell-adjusted family situation
lComplete support of spouse
lBehavioral flexibility
lAdaptability and open-mindedness
lGood relational ability
lGood stress management skills
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Selecting the Expatriate Manager

lSuccess in domestic operations may have little to do
with success overseas
lMany expatriates believe too little attention is paid
to other critical factors during the selection
process
lExpatriate selection should focus on the manager’s:
lSelf-image
lNormal way of interacting
with others
lPerceptual orientation
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Selecting the Expatriate Manager

lTherole of the expatriate’s family should not be
underestimated
lDual career marriages are another difficult issue
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Culture Shock
lExposure to a foreign culture can produce a
predictable series of reactions:
lA period of fascination
lCulture shock
lAdaptation
lDealing with culture shock involves:
lPreparation
lLanguage skills
lPreparing the host country personnel who will
work with the expatriate
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Training the Expatriate Manager

lIntercultural training improves the odds for success
on an overseas assignment
lAccording to Tung, two things determine the
training an expatriate should receive:
lLevel of contact the person will have with the
host culture
lDegree of dissimilarity between the home and
host cultures
lSelf-awareness is an important aspect of successfully
preparing for an international assignment
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Training the Expatriate Manager

lThe second phase of training occurs at the host
country site
lLanguage training continues
lMentoring relationships may
be established
lLocal support groups may
help the entire family
lGetting involved with daily
experiences as soon as possible
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Training the Expatriate Manager

lThe final phase occurs when the manager prepares
to return to the parent country (repatriation)
lRepatriation can result in more culture shock than
was experienced while overseas
lRepatriates are more likely to leave the parent
company than their domestic counterparts
lMany returning managers feel they have lost
ground in terms of career advancement
l
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Training the Expatriate Manager

lTo help managers deal with such issues:
lActively plan how the international assignment
will fit with the manager’s career aspirations
lIdentify prospective international managers early
in their careers
lTreat every new hire as a prospective global
employee
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Compensating the Expatriate Manager

lA middle- to upper-level expatriate can cost two to
three times more than a domestic manager
lThis is often due to the compensation practices of
multinational organizations
lThe balance-sheet approach ensures that the
expatriate maintains a similar standard of living
l“Extras” are often provided as an incentive
lForeign service premiums adjust the expatriate’s
base salary for the inconvenience the assignment
causes
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Compensating the Expatriate Manager

lThecost of living in foreign cities can be very high
lExpatriates usually receive a cost-of-living
premium to offset these differences, plus optional:
lHome furnishings and maintenance
allowances
lHelp with maintaining or selling a current
home
lTransportation differential allowances
To combat these
lEducational allowances costs, some firms
have shifted to
lHardship premiums using more short-
term assignees
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Host Country Nationals and the GNC

lGlobal corporations use fewer expatriates
lHCNs have greater cultural sensitivity and better
understand local employees’ motivations and
needs
lMore companies are giving key managerial
positions in their foreign operations to HCNs and
TCNs
lCareful recruitment, selection, and training can
reduce or eliminate many problems with HCNs
lExpatriates must learn to be more culturally
sensitive
lHost country managers must learn to accept greater
responsibility
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Host Country Nationals and the GNC

lWhen an organization recruits HCNs:
lIts HRM policies must be more flexible
lIt must strive for a reasonable fit between HRM
policies and cultural values
lSuggestions that can help:
lUse the same methods/sources as host country
organizations
lUse a recruiting liaison
lWrite job ads consistent with local custom and
jargon
lAllow HCNs to use native language during
interviews
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Global Corporate Boards of Directors

lBoards of directors of most American corporations
have been slow to include foreign members
lA survey of 589 America businesses found a
global representative on these boards:
l24 percent of manufacturing firms
l14 percent of financial firms
l9 percent of other, non-financial firms
lEuropean companies are progressing more quickly
lNestlé, Unilever, Fiat, and Volvo all have global
representation on their boards
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Legal and Ethical Climate of GHRM

lInternationalbusiness is conducted in a maze of:
lInternational trade agreements
lParent country laws
lHost country regulations
lEthical behavior challenges
may also be encountered:
lEnvironmental regulation
may be weaker
l“Gift giving” or “greasing”
may be common practice
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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Legal and Ethical Climate of GHRM

lRegulations regarding employment discrimination
vary from country to country
lThe U.S. has some of the more stringent
anti-discrimination laws
lMany countries have not created this kind of
enforcement
lThe Civil Rights Act of 1991
applies to the overseas
operations of American
corporations
l
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Legal and Ethical Climate of GHRM

lEthicaldilemmas between profits and the
preservation of basic human rights may also exist
lExample: The clash between business, morality,
and politics that occurred in South Africa during
apartheid
lSimilar dilemmas occur around the globe in
developing countries
lResolving ethical issues is not an easy task
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Legal and Ethical Climate of GHRM

lThefirst African American on the board of General
Motors proposed his Sullivan Principles:
lNon-segregation in all work facilities
lEqual and fair employment practices for all
lEqual pay for all employees performing equal
work
lTraining programs to prepare blacks and other
nonwhites for supervisory and technical jobs
lIncreasing the number of blacks and other
nonwhite minorities in management
lImproving the quality of employees’ lives outside
of the work environment
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Labor Relations & the International Corp.

lLabor relations issues that may arise in the
international environment:
lUnions
lLabor laws
lLess emphasis on written contracts
lHow much participation employees
are entitled to in HRM policies
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Labor Relations & the International Corp.

lEmployee participation is guaranteed in Germany
lSouth Korea’s giant industrial firms, the chaebol,
control every aspect of worker’s lives
lGovernment business regulations may differ
lIn Singapore, annual wage adjustments are set by a
national council and strikes are nearly impossible
lThere is no simple solution to the labor relations
problems with which MNCs and GCs are
confronted
lLabor has been trying to establish global labor
organizations
l