Chapter Eighteen

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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 18 - 4

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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 18 - 5

International Human Resource

Management

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 18 - 6

Staffing Policy

Staffing policy
- Selecting individuals with requisite skills to do a particular
job
- Tool for developing and promoting corporate culture
Types of Staffing Policy
- Ethnocentric
- Polycentric
- Geocentric

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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
Disadvantages:
- Produces resentment in host country
- Can lead to cultural myopia

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 18 - 8

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
Disadvantages:
- Limits opportunity to gain experience of host country nationals
outside their own country
- Can create gap between home and host country operations

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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
Disadvantages:
- National immigration policies may limit implementation
- Expensive to implement due to training and relocation
- Compensation structure can be a problem

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 18 - 10

Comparison of Staffing
Approaches

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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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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
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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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 18 - 13

Expatriate Failure Rate

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Expatriate Selection

Reduce expatriate failure rates by improving selection

procedures
An executives domestic performance does not
(necessarily) equate to 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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 18 - 15

Four Attributes that

Predict Success

Self-Orientation
- Possessing high self-esteem, self-confidence and mental
well-being
Others-Orientation
- Ability to develop relationships with host country nationals
- Willingness to communicate

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Four Attributes that

Predict Success

Perceptual Ability
- The ability to understand why people of other countries
behave the way they do
- Being nonjudgmental and flexible in management style
Cultural Toughness
- Relationship between country of assignment and the
expatriates adjustment to it

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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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Training and Management

Development

Development: Broader concept involving developing

managers skills over his or her career with the firm
- Several foreign postings over a number of years
- Attend management education programs at regular
intervals

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Repatriation 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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Repatriation of Expatriates

Didnt 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 70
percent
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 18 - 21

Management Development and

Strategy

Development programs designed to increase the

overall skill levels of managers through:
- Ongoing management education
- Rotation of managers through a number of jobs within the
firm to give broad range of experiences
Used as a strategic tool to build a strong unifying
culture and informal management network
Above techniques support transnational and global
strategies

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 18 - 22

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
evaluate and under-appreciate 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 on-site 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,
home-office manager should be consulted before
completion of formal evaluation

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 18 - 24

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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 18 - 25

Compensation in Various
Countries

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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
Foreign service premium
- Extra pay for work outside country of origin
Allowances
- Hardship, housing, cost-of-living, and education
allowances
Taxation
- Firm pays expatriates income tax in the host country
Benefits
- Level of medical and pension benefits identical
overseas
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 18 - 28

The Balance Sheet Approach

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 18 - 29

International Labor
Relations
Key Issue
- Degree to which organized labor can limit the choices of an
international business
Aims to foster harmony and minimize conflicts
between firms and organized labor

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Concerns of Organized
Labor
Multinational can counter union bargaining power
with threats to move production to another country
Multinational will keep highly skilled tasks in its
home country and farm out only low-skilled tasks to
foreign plants
- Easy to switch locations if economic conditions warrant
- Bargaining power of organized labor is reduced
Attempts to import employment practices and
contractual agreements from multinationals home
country

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 18 - 31

Strategy of Organized
Labor
Attempts to establish international labor organizations
Lobby for national legislation to restrict multinationals
Attempts to achieve international regulations on
multinationals through such organizations as the
United Nations

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 18 - 32

Looking Ahead to Chapter 19

Accounting in the International Business

- Country Differences in Accounting Standards
- National and International Standards
- Multinational Consolidation and Currency Translation
- Accounting Aspects of Control Systems

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