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International Human Resources Management. Objectives After studying this chapter, you should be able to:. Identify the types of organizational forms used for competing internationally.

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international human resources management

International HumanResources Management

Copyright © 2008 by Nelson, a division of Thomson Canada Limited.All rights reserved.

objectives after studying this chapter you should be able to
ObjectivesAfter studying this chapter, you should be able to:
  • Identify the types of organizational forms used for competing internationally.
  • Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider.
  • Explain how domestic and international HRM differ.
  • Discuss the staffing process for individuals working internationally.
  • Identify the unique training needs for international assignees and their employees.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

objectives cont d after studying this chapter you should be able to
Objectives (cont’d)After studying this chapter, you should be able to:
  • Identify the characteristics of a good international compensation plan.
  • Reconcile the difficulties of home- and host-country performance appraisals.
  • Explain how labour relations differ around the world.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

increasing importance of global human resource understanding
Increasing Importance of Global Human Resource Understanding

International Mergers and Acquisitions

Importance of

Global Human

Resources

Management

Foreign Human Resources

Global Competition

Market Access Opportunities

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

managing across borders
International corporation

Domestic firm that uses its existing capabilities to move into overseas markets.

Multinational corporation (MNC)

Firm with independent business units operating in multiple countries.

Global corporation

Firm that has integrated worldwide operations through a centralized home office.

Transnational corporation

Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units.

Managing Across Borders

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

types of organizations
Types of Organizations

Figure 15.1

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

top international companies
Top International Companies

MARKET VALUE

(BILLIONS OF U.S. DOLLARS)

1. General Electric $286.10

2. Microsoft 263.99

3. ExxonMobil 244.93

4. Pfizer 244.89

5. Wal-Mart Stores 232.22

6. Citigroup 210.86

7. Johnson & Johnson 161.36

8. Royal Dutch/Shell Group 158.48

9. BP 153.24

10. AIG 150.97

Figure 15.2

Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

top international companies cont d
Top International Companies (cont’d)

SALES

(BILLIONS OF U.S. DOLLARS)

1. Wal-Mart Stores $244.52

2. ExxonMobil 204.51

3. General Motors 184.21

4. Royal Dutch/Shell 179.43

5. BP 178.72

6. Ford Motor 162.59

7. DaimlerChrysler 156.84

8. Toyota Motor 134.23

9. General Electric 131.70

10. Allianz 126.80

Figure 15.2

Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

top international companies cont d9
Top International Companies (cont’d)

PROFITS

(BILLIONS OF U.S. DOLLARS)

1. Citigroup $15.32

2. General Electric 15.13

3. Altria Group 11.10

4. ExxonMobil 11.01

5. Royal Dutch/Shell 9.42

6. Bank of America 9.25

7. Pfizer 9.18

8. Wal-Mart Stores 8.04

9. Toyota Motor 7.90

10. Microsoft 7.83

Figure 15.2

Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

how international companies affect the world economy
How International Companies Affect the World Economy
  • Their production and distribution extend beyond national boundaries, making it easier to transfer technology.
  • They have direct investments in many countries, affecting the balance of payments.
  • They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

how does the global environment influence management
How Does the Global Environment Influence Management?
  • Unified Economies
    • Closely partnered nations such as the European Union (EU) have developed into strong competitors.
    • Promotes job growth in trading nations.
  • Cultural environment
    • The communication patterns, religion, values and ideologies, education, and social structure of a host country influence how HR is conducted in that country.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

the nations of the european union
The Nations of the European Union

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

cultural environment of international business
Cultural Environment of International Business

Figure 15.3

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

domestic versus international hrm
Domestic versus International HRM
  • Issues in international HRM in helping employees adapt to a new and different environment outside their own country:
    • Relocation
    • Orientation
    • Objective
    • Translation services

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

international staffing
International Staffing
  • Expatriates, or Home-country Nationals
    • Employees from the home country who are on international assignment.
  • Host-country Nationals
    • Employees who are natives of the host country.
  • Third-country Nationals
    • Employees who are natives of a country other than the home country or the host country.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

changes in international staffing over time
Changes in International Staffing over Time

Figure 15.4

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

hiring host country nationals
Hiring Host-Country Nationals
  • Three main advantages:
    • Hiring local citizens is generally less costly than relocating expatriates.
    • Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally.
    • Most customers want to do business with companies they perceive to be local versus foreign.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

recruiting internationally
Recruiting Internationally
  • Work Permit, or Visa
    • Government document granting a foreign individual the right to seek employment.
  • Guest Workers
    • Foreign workers invited to perform needed labour.
  • Apprenticeships
    • Vocational training programs in skilled trades.
  • Transnational Teams
    • Teams composed of members of multiple nationalities working on projects that span multiple countries.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

selecting global managers
Selecting Global Managers
  • Global manager
    • A manager equipped to run an international business
  • Skills Categories
    • Ability to seize strategic opportunities
    • Ability to manage highly decentralized organizations
    • Awareness of global issues
    • Sensitivity to issues of diversity
    • Competence in interpersonal relations
    • Skill in building community

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

selecting global managers20
Selecting Global Managers
  • Begin with self-selection.
  • Create a candidate pool.
  • Assess core skills.
  • Assess augmented skills and attributes.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

highlights in hrm
Highlights in HRM

Skills of Expatriate Managers

CORE SKILLS AUGMENTED SKILLS

Experience Technical skills

Decision making Negotiation skills

Resourcefulness Strategic thinking

Adaptability Delegation skills

Cultural sensitivity Change management

Team building

Maturity

Highlights 15.4

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

measured expatriate characteristics
Measured Expatriate Characteristics
  • Core Skills
    • Skills that are considered critical to an employee’s success abroad.
  • Augmented Skills
    • Skills that are helpful in facilitating the efforts of expatriate managers.
  • Failure rate
    • Percentage of expatriates who do not perform satisfactorily.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

comparison of advantages in sources of overseas managers
Comparison of Advantages in Sources of Overseas Managers

HOST-COUNTRY HOME-COUNTRY NATIONALS THIRD-COUNTRY

NATIONALS (EXPATRIATES) NATIONALS

Less costly Talent available within company Broad experiencePreferred by host-country Greater control International outlook governments

Intimate knowledge of Company experience Multilingualismenvironment and culture

Language facility Mobility

Experience provided to corporate executives

Figure 15.6

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

expatriate selection criteria
Expatriate Selection Criteria

Figure 15.7

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

causes of expatriate assignment failure
Causes of Expatriate Assignment Failure
  • Family adjustment
  • Lifestyle issues
  • Work adjustment
  • Bad selection
  • Poor performance
  • Other opportunities arise
  • Business reasons
  • Repatriation issues

Figure 15.8

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

training and development
Training and Development
  • Essential training program content to prepare employees for working internationally:
    • Language training
    • Cultural training
    • Assessing and tracking career development
    • Managing personal and family life
    • Repatriation
  • Culture shock
    • Perpetual stress experienced by people who settle overseas

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

preparing for an international assignment
Preparing for an International Assignment

To prepare for an international assignment, one should become acquainted with the following aspects of the host country:

  • Social and business etiquette
  • History and folklore
  • Current affairs, including relations between the host country and Canada
  • Cultural values and priorities
  • Geography, especially its major cities
  • Sources of pride and great achievements of the culture
  • Religion and the role of religion in daily life
  • Political structure and current players
  • Practical matters such as currency, transportation, time zones, hours of business
  • The language

Figure 15.9

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

training methods
Training Methods
  • Reviewing available information about the host company: books, magazines, video tapes.
  • Conversations with host country natives.
  • Sensitivity training to become familiar with the customs and overcome prejudices.
  • Temporary assignments to encourage shared learning.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

highlights in hrm29
Highlights in HRM

Stressors and Coping Responses in the Developmental Stages of Expatriate Executives

PRIMARYSTRESSORRESPONSE

Expatriate selection Cross-cultural unreadiness.

Assignment acceptance Unrealistic evaluation of stressors to come. Hurried time frame.

Pre- and post-arrival Ignorance of cultural training differences.

Arrival Cultural shock. Stressor reevaluation. Feelings of lack of fit and differential treatment.

Novice Cultural blunders or inadequacy of coping responses. Ambiguity owing to inability to decipher meaning of situations.

Transitional Rejection of host or parent culture.

Mastery Frustration with inability to perform boundary spanning role. Bothered by living with a cultural paradox.

Repatriation Disappointment with unfulfilled expectations. Sense of isolation. Loss of autonomy.

Highlights 15.5

Source: J. Sanchez, P. Spector, and C. Cooper, “Adapting to a Boundaryless World: A Developmental Expatriate Model,” Academy of Management Executive 14, no. 2 (May 2000): 96–106.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

returning from an overseas assignment
Returning from an Overseas Assignment
  • Repatriation
    • The process of an employee transitioning home from an international assignment.
      • Throw a “welcome home” party.
      • Offer counseling to ease the transition.
      • Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated.
      • Get feedback from the employee and the family about how well the organization handled the repatriation process.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

compensation
Compensation
  • Different countries have different norms for employee compensation.
    • Financial (money) incentives versus nonfinancial incentives (prestige, independence, and influence)
    • Individual rewards versus collectivist concerns for internal equity and personal needs
    • General rule: match the rewards to the values of the local culture—create a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of employees in specific locations.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

forces driving global pay
Forces Driving Global Pay

CULTURAL PREFERENCES

Importance of status

Role of individual vs. organization

vs. government

Equality vs. disparity

Achievement vs. relationships

PERSONAL PREFERENCES

Attitudes toward risk

Quality of life vs. work

Short- vs. long-term

Competitiveness vs. solidarity

ECONOMIC CONDITIONS

Size of economy

Types of industries, natural resources

Inflation, unemployment

Protectionism vs. open market

SOCIAL CONSTRAINTS

Income tax rates, social costs

Laws and regulations

Collective bargaining, worker

participation

Skills, education of workforce

Figure 15.11

Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!” Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

compensation of host country employees
Compensation of Host-Country Employees
  • Hourly wages vary dramatically from country to country.
  • Pay periods are different.
  • Seniority may be an important factor.
  • High pay rates can upset local compensation practices.
  • Bonuses, profit-sharing, benefits and paid leave may be more extensive and legally required.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

hourly wages in different countries
Hourly Wages in Different Countries*

COUNTRY $/HOUR

Norway 31.5 5

Germany (former West) 31.25

Switzerland 27.87

Belgium 27.73

Sweden 25.18

United States 21.97

France 21.13

Britain 20.37

Japan 20.09

Australia 20.05

Canada 19.28

Italy 18.35

Spain 14.96

Israel 11.73

Korea 10.28

Portugal 6.23

Taiwan 5.84

Brazil 2.67

Mexico 2.48

China 0.63

Sri Lanka 0.49

*Hourly compensation costs in U.S. dollars for production workers in manufacturing.

Figure 15.12

Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2004.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

compensation of expatriate managers
Provide an incentive to leave Canada

Allow for maintaining a N.A. standard of living

Provide for security in countries that are politically unstable or present personal dangers

Include provisions for good healthcare

Provide for the education of children

Consider foreign taxes the employee is likely to have to pay (in addition to domestic taxes) and help with tax forms and filing

Allow for maintaining relationships with family, friends, and business associates.

Facilitate reentry home

Be in writing

Compensation of Expatriate Managers

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

expatriate compensation systems
Expatriate Compensation Systems
  • Home-Based Pay
    • Pay based on an expatriate’s home country’s compensation practices
  • Balance-Sheet Approach
    • A compensation system designed to match the purchasing power in a person’s home country
      • Calculate base pay
      • Figure cost-of-living allowance (COLA)
      • Add incentive premiums
      • Add assistance programs

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

expatriate compensation systems cont d
Expatriate Compensation Systems (cont’d)
  • Host-Based Pay
    • Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned
  • Localization
    • Adapting pay and other compensation benefits to match that of a particular country
  • Other Issues
    • Adequacy of medical care
    • Personal security
    • Education

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

performance appraisal of international managers
Performance Appraisal of International Managers
  • Who Should Appraise Performance?
    • Home-country evaluations
    • Host-country evaluations
  • Adjusting Performance Criteria
    • Augmenting job duties
    • Individual learning
    • Organizational learning
  • Providing Feedback
    • Debriefing interview

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

boosting roi of expatriates
Boosting ROI of Expatriates

Major initiatives planned to improve assignment return on investment (ROI):

Better candidate selection 32%

Career-planning skills 26

Communicating objectives 24

Assignment preparation 20

Monitoring program 17

Cross-cultural training 10

Developing or expanding intranet 7

Communication/recognition 6

Web-based cultural training 5

Mandating destination support 4

Other 17

Business Case

Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

international organizations and labour relations
International Organizations and Labour Relations
  • International Differences in Unions
    • The level at which bargaining takes place (national, industry, or workplace)
    • The degree of centralization of union-management relations
    • The scope of bargaining (parties and issues)
    • The degree to which government intervenes
    • The degree of unionization and union strength.

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.

key terms
augmented skills

balance-sheet approach

codetermination

core skills

cultural environment

culture shock

expatriates, or home-country nationals

failure rate

global corporation

global manager

guest workers

home-based pay

host-based pay

host country

host-country nationals

international corporation

localization

multinational corporation (MNC)

repatriation

third-country nationals

transnational corporation

transnational teams

work permit, or visa

Key Terms

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd.