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International Human Resource Management

International Human Resource Management. The Quality of the People is the only Source of Competitive Advantage. International Differences Affecting Labor Relations. Cultural Factors Power Distances Individualism vs. Collectivism Masculine vs. Feminine Uncertainty Avoidance

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International Human Resource Management

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  1. International Human Resource Management The Quality of the People is the only Source of Competitive Advantage

  2. International Differences Affecting Labor Relations • Cultural Factors • Power Distances • Individualism vs. Collectivism • Masculine vs. Feminine • Uncertainty Avoidance • Short vs. Long-Term Orientation • Economic Factors • Capitalism: emphasizes productivity; efficiency • Socialism: emphasizes low unemployment • Labor Cost Factors • Higher labor costs mean a focus on efficiency • Industrial Relations Factors • Strong vs. Weak labor unions

  3. International Human Resources Management • Staffing Philosophy • Management Selection Criteria • Performance Appraisal • Overseas Training Programs • Compensation

  4. Staffing Philosophies for International Enterprises • The Ethnocentric Approach • The Polycentric Approach • The Regiocentric Approach • The Geocentric Approach

  5. Ethnocentric Staffing Policies (1) • Uses parent-company nationals to staff management positions in overseas subsidiaries • Advantages • Easy to get people with detailed knowledge of company policies and culture • Expatriates have detailed knowledge of parent companies’ technology and product development. • Parent company has a good deal of knowledge of expatriates’ managerial ability. • No problem with loyalty to company

  6. Ethnocentric Staffing Policies (2) • Disadvantages • Unfamiliarity with many host country political, legal, and economic issues • Difficulty of adapting to new culture • Difficulty with intercultural communication • Very expensive for the parent company (high salary and benefits needed to attract people + relocation expenses) • The most qualified people may not want to go overseas

  7. Ethnocentric Staffing Policies (3) • Evidence of high failure rate of expatriate managers • Cost of failure = 3X annual salary + relocation costs ($250,000 - $1,000,000) • Reasons for failure • Inability of spouse to adjust • Inability of manager to adjust • Other family problems • Manager’s emotional immaturity • Inability to cope with larger responsibility • Lack of technical competence

  8. Polycentric Staffing Policies (1) • Appointing host country nationals in middle and lower management ranks in overseas subsidiaries • Used by many firms, such as DuPont, Shell, and Qantas • Advantages • Familiarity with local language, culture, customs, economy, business conditions, and legal requirements • Less expensive than relocating expatriates

  9. Polycentric Staffing Policies (2) • Disadvantages • Difficulty of coordinating activities and goals between the parent and subsidiary • Loyalty may be to the host country and not to the company • Difficulty in communicating with the home office and with other employees • May be unable or unwilling to relocate • May lack understanding of the home office’s corporate culture

  10. Regiocentric Staffing Policies • Handles global markets regionally • Staffing for a region (for example, Europe or North America) is handled regionally. • Used when product sold globally is the same, but marketing must be tailored to the tastes of different cultures

  11. Geocentric Staffing Policies • Favors the appointment of managers with the best qualifications, regardless of nationality or ethnic background • Used by Coca-Cola

  12. Management Selection Criteria for International Positions (1) • Technical ability • Ability to do the job • Managerial Ability • Based on previous track record • Cross-Cultural Sensitivity • Tolerance, openness, and understanding of other cultures • Adaptability and Flexibility • High degree of ability to integrate with other cultures • Ability to change • Ability to solve problems in a changing environment • Ability to manage an operation on a continuous basis, despite a lack of information or assistance

  13. Management Selection Criteria for International Positions (2) • Diplomatic Skills • Ability to discuss issues and negotiate with the host country’s government • Foreign Language Aptitude • Ability to learn foreign languages quickly • Positive Attitude • Emotional Stability and Maturity • Adaptability of Family

  14. Performance Appraisal (1) • Purpose • Providing feedback to individuals as to how well they are doing • Providing a basis for rewarding top performers • Identifying areas in which additional training and development may be needed • Identifying problem areas that may call for a change in assignment

  15. Performance Appraisal (2) • International performance evaluations need to be carefully designed to avoid biases toward one cultural frame of reference. • Should be a combination of the following • Hard Goals: quantifiable (example: market share) • Soft Goals: relationship-based, such as leadership style • Contextual Goals: situational

  16. Performance Appraisal (3) • Other ways to improve the expatriate appraisal process • State the assignments difficulty level • Weigh the evaluation more toward the on-site manager’s appraisal • Modify the normal performance evaluation to fit the overseas position

  17. Overseas Training Programs • Environmental briefings • Geography • Climate • Housing • Schools • Cultural Orientation • Cultural Institutions • Value Systems • Cultural Assimilators • Programmed learning techniques geared to provide the participants with intercultural interactions • Language Training • Sensitivity Training • Develop flexibility • Field Experience • Real overseas experience

  18. International Compensation (1) • The strategic purpose of any compensation system is to attract, motivate, reward, and retain competent staff. • An appropriately designed compensation system is essential to enable a firm to appoint staff who will work toward the organization’s goals.

  19. International Compensation (2) • Pay a similar base salary company-wide. • Add various allowances according to individual market conditions. • Have local managers conduct compensation surveys in their countries • Most Common Approach is to equalize purchasing power across countries. Thus expatriates enjoy the same standard of living. Companies focus on expenses: • Taxes • Housing • Goods and Services • Cash Reserve

  20. International Compensation (3) • Common Allowances • Cost of living allowance for housing and consumer goods price differentials • Tax equalization adjustment • Children’s education expenses • Periodic family home leaves • Differential for inflation and currency depreciation • Hardship bonuses for working abroad • Relocation expenses • Overseas premium (10% to 25% of salary)

  21. International Compensation (4) • Common Perks (Benefits) • Company car (and possibly driver) • Private pension plan • Life insurance • Health insurance • Company house or apartment • Holiday travel • Club membership • Hidden expense fund (illegal)

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