International Human Resource Management

1. 11 International Human Resource Management

2. Learning Objectives (1 of 3) • Know the basic functions of human resource management. • Define international human resource management. • Understand how international human resource management differs from domestic human resource management. • Know the types of workers that multinational companies use.

3. Learning Objectives (2 of 3) • Explain how and when multinational companies decide 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 for female managers.

4. Learning Objectives (3 of 3) • Know what companies can do to make the expatriate assignment easier for their female expatriates. • Understand the relationship between choice of a multinational strategy and international human resource management.

5. Human Resource Management (HRM) • Human Resource Management (HRM): deals with the overall relationship of the employee with the organization • Major goals of HRM are managing and developing human assets.

6. Basic HRM Functions (1 of 2) • Basic HRM functions are: • Recruitment: identification of qualified individuals for a vacant position • Selection: process of filling vacant positions in the organization • Training: providing opportunities to help the individual to perform • Performance Appraisal: assessing the individual’s performance

7. Basic HRM Functions (2 of 2) • Basic HRM functions are: (cont’d) • Compensation: providing the adequate reward package • Labor Relations: the relationship between the individual and the company

8. International Human Resource Management (IHRM) • When applied to the international setting, the HRM functions make up International Human Resource Management. • In the international arena, the basic HRM activities take on an added complexity, for two reasons: • Employees of MNCs include a mixture of workers of different nationalities. • HR Managers must decide the necessary extent of adaptation to local business & national cultures.

9. Types of Employees in Multinational Organizations (1 of 2) • Expatriate: Employees who come from a country that is different from the one in which they are working • Home Country Nationals: Expatriate employees who come from the parent firm’s home country • Third Country Nationals: Expatriate workers who come from neither the host nor the home country. • Host Country Nationals: Local workers who come from the host country where the MNC unit is located.

10. Types of Employees in Multinational Organizations (2 of 2) • 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. • International Cadre (Globals): Managers who specialize in international assignments. • Commuter Assignments Employees: Employees who live in one country, but spend part of the work week in another country.

11. Multinational Managers:Expatriate or Host Country (1 of 2) • Deciding whether to use expatriate or local mangers depends mostly on a firm’s multinational strategy. • Transnational strategists see their managerial recruits as employable anywhere in the world. • Multidomestic strategists tend to favor local managers. • For a particular position, the firm should ask: • Given our strategy, what is our preference for this position (host, home, or third country national)?

12. Multinational Managers:Expatriate or Host Country (2 of 2) • For expatriate managers (parent or third country): • Is there an available pool of managers with appropriate skills for the position? • Are they willing to take expatriate assignments? • Do any laws affect the assignment of expatriate managers? • For host country managers: • Do they have the expertise for the position? • Can we recruit them from outside our firm?

13. Is the Expatriate Worth It? • IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments. • The total compensation of expatriate managers is often 3-4 times higher than home-based salaries. • In addition to high costs of relocating expatriates, more multinationals are now concerned with expatriate safety worldwide. • Also, the failure rate of U.S. expatriates is higher than those from Europe and Japan.

14. Exhibit 11.1: Percent of Millenials Who Want to Work Outside of their Home Country

15. Exhibit 11.2: The Ten Most Expensive and Least Expensive Cities

16. Reasons for U.S. Expatriate Failure (1 of 3) • Individual: • Personality of the manager • Lack of technical proficiency • No motivation for international assignment • Family: • Spouse or family members fail to adapt to local culture. • Spouse or family members do not want to be there.

17. Reasons for U.S. Expatriate Failure (2 of 3) • Cultural: • The Manager fails to adapt to local culture or environment. • The Manager fails to develop relationships with key people in the new country because of the complexity of cultivating networks with diverse people.

18. Reasons for U.S. Expatriate Failure (3 of 3) • Organizational: • Excess of difficult responsibilities in the assignment • Failure to provide cultural and other important pre-assignment training, like language and culture • Failure of company to pick the right person • Company’s failure to provide the level of technical support that domestic managers are used to • Failure of the company to consider gender equity

19. The Strategic Role of Expatriate Assignments • Help managers acquire skills necessary to develop successful strategies in a global context • Help the company coordinate and control operations that are dispersed geographically and culturally • Provide important strategic information. • Provide crucial information about local markets • Provide opportunities for management development • Provide important network knowledge

20. Selecting Expatriate Managers • Selecting the wrong person for the job leads to failure. • Selecting the wrong person can be a major expense, costing more than $1 million per expatriate failure. • Improperly selected employees who cannot perform but who remain on assignment can be more damaging to the firm than those who leave prematurely. • Domestic performance does not predict expatriate performance. Selection criteria may differ.

21. Key Success Factors for Expatriate Assignments • Technical and managerial skills • Personality traits (flexible, willing to learn) • Relational abilities (ability to adapt to other cultures) • Family situation (spouse & family willingness to go) • Stress tolerance (ability to maintain composure) • Language ability (speak, read & write the language) • Emotional intelligence (empathize, relate to others)

22. Exhibit 11.3: Expatriate Success Factors and Selection Methods

23. The Priority of Success Factors for Expatriate Assignments • The importance of success factors for a particular assignment depends on four assignment conditions: • Assignment length • Short assignments focus on technical and professionals skills • Cultural similarity • Required interaction and communication with locals • Job complexity and responsibility

24. Exhibit 11.4: What Percentage of Companies are Using More Short Term Assignments?

25. Exhibit 11.5: Selecting Expatriates: Priorities for Success Factors by Assignment

26. Training and Development (1 of 2) • Predeparture cross-cultural training reduces expatriate failure rates and increases job performance. • The main objective of Cross-Cultural Training is to increase the relational abilities of the future expatriate and the spouse and family. • The training rigor depends on the assignment. • Training Rigor: The extent of effort by both trainees and trainers to prepare the expatriate for work abroad

27. Training and Development (2 of 2) • Low rigor training • Short time period • Consists of lectures and videos on local cultures • Briefings on company operations • High rigor training • Lasts over a month • More experiential learning • Extensive language training • Includes interactions with host country nationals

28. Exhibit 11.6: Building Cross-Cultural Training Rigor: Techniques and Objectives

29. Exhibit 11.7: Training Needs and Expatriate Assignment Characteristics

30. Performance Appraisal for the Expatriate • Conducting reliable performance appraisal for the expatriate is very challenging. • Seldom can the firm use same performance criteria. • Challenges: • Fit of international operation in multinational strategy • Unreliable data • Complex and volatile environments • Time differences and distance separation

31. Steps to Improve the Expatriate Performance Appraisal • Without intensive and direct contact, performance appraisals can fail to demonstrate a comprehensive understanding of the expatriate manager’s situation. • To overcome these difficulties: • Fit the evaluation criteria to the strategy. • Fine-tune the evaluation criteria. • Use multiple sources of evaluation with varying periods of evaluation.

32. Exhibit 11.8: Evaluation Sources, Criteria, and Time Periods for Expatriate Evaluation

33. Expatriate Compensation • Compensation packages must be attractive to skilled managers, but also consider the increasing costs. • Compensation packages have many common factors: • Local market cost of living • Housing • Taxes • Benefits

34. The Balance-Sheet Approach (1 of 2) • Provides a compensation package that attempts to balance purchasing power in the host country with that in the home country. • The expatriate should not be in a better or worse position financially because of the assignment. • The firm provides allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care.

35. The Balance-Sheet Approach (2 of 2) • In addition to matching purchasing power, firms may provide additional allowances: • Foreign service premiums (often 10-20% of base pay) • Hardship allowance (extra money for difficult postings) • Relocation allowances (miscellaneous costs of move) • Home-leave allowances (transportation costs to return home once or twice per year)

36. Exhibit 11.9: The Balance Sheet Approach To Expatriate Compensation

37. Other Approaches to Expatriate Compensation • The high cost of expatriate compensation and the trend toward worldwide workers has resulted in modifications of the balance sheet approach. Some variations: • Headquarters-based Compensation: paying home country wages regardless of location • Host-based Compensation: adjusting wages to local lifestyles and costs of living • Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales

38. The Repatriation Problem • Repatriation Problem: the difficulties that mangers face coming back to their home countries and reconnecting with their old jobs. • Three basic cultural problems “reverse culture shocks:” • Adapting to new work environment and culture of home office • Relearning to communicate with others in home and organizational cultures • Adapting to their basic living environment

39. Strategies for Successful Repatriation • These strategies may help firms to successfully repatriate their managers: • 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.

40. International Assignments for Women (1 of 2) • Women in international assignments are strikingly rare. • Estimates are that women represent only 12% of expatriate managers, but 45% of management. • Women face a glass ceiling at home, and an expatriate glass ceiling worldwide, because of 2 myths: • Myth 1: Women do not wish to take international assignments. • Myth 2: Women will fail because of the foreign culture’s prejudices against local women.

41. International Assignments for Women (2 of 2) • Don’t assume that people from foreign cultures apply the same gender role expectations to foreign workers that they do to local women. • Successful women expatriates emphasize nationality, not gender. • The issues that arise in cross-cultural interactions depend more on how foreigners react to those of a different nationality.

42. International Assignments for Women: Advantages • Women may have advantages in expatriate positions: • Being unique means she becomes more visible. • Local business people from traditional cultures assume that she is the best person for the job. • Women are more likely to excel in relational skills, a major factor in expatriate success. • Local men speak at ease with a woman about more topics than men, leading to more interaction.

43. International Assignments for Women: Disadvantages • Women also suffer disadvantages worse than males: • Face the glass ceiling, isolation and loneliness; need to work harder to prove themselves. • Seldom given an international assignment until later in their careers. • Need to balance work and family responsibilities • Need to worry about accompanying spouse

44. What Can Companies Do to Ensure Female Expatriate Success? • Despite the disadvantages they face, opportunities for women as expatriate managers are expected to grow: • Shortage of high-quality multinational managers. • Fewer men are willing to take the assignments. • What firms can do to ensure the success of women: • Provide mentors, networking with other women • Identify and remove sources of barriers to international assignment.

45. Multinational Strategy and IHRM (1 of 2) • Multinational companies have several options for developing the appropriate IHRM policies for the implementation of their multinational strategies. • One way is to examine its IHRM orientation, or philosophy. • IHRM Orientation: A company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers.

46. Multinational Strategy and IHRM (2 of 2) • There are four basic IHRM orientations: • Ethnocentric: All aspects of HRM tend to follow the parent organization’s home country HRM practices. • Regiocentric & Polycentric: HRM is more responsive to the host country differences in HRM practices. • Global: The firm assigns its best managers to international assignments, recruiting worldwide.

47. Exhibit 11.10: IHRM Orientation and Practices for Managers & Technical Workers

48. Ethnocentric IHRM Benefits • Benefits: • Little need to recruit qualified host country nationals for higher management • Greater control and loyalty of home country nationals • Little need to train home country nationals • Key decisions centralized

49. Ethnocentric IHRM Costs • Costs: • 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

50. Regiocentric & Polycentric IHRM Benefits • Benefits: • Reduces training expenses • Fewer language and adjustment issues • Lessened hiring and relocation costs