Global Business Management
(MGT380)
Lecture #27
Global Human Resource
Management
Learning Objectives
To understand the strategic role of human
resource management in the international
business
 Identify the pros and cons of different
approaches to staffing policy in the
international business.
 To understand why managers may fail to
thrive in foreign postings.

Quick recap of the last lecture
Three factors are important when making location decisions:
1. country factors 2. technological factors 3. product factors
Three characteristics of a manufacturing technology are of interest:
1. the level of fixed costs 2. the minimum efficient scale[(the minimum efficient
scale is defined as the lowest production point at which long-run total
average costs are minimized) of a plant, the more likely centralized
production in a single location or a limited number of locations makes sense]
3. the flexibility of the technology [ is a systematic method for the
elimination of waste within a manufacturing process. Lean also takes into
account waste created through overburden and waste created through
unevenness in work loads. Essentially, lean is centered on making obvious
what adds value by reducing everything else. Lean manufacturing is a
management philosophy derived mostly from the Toyota Production System]

Firms using flexible manufacturing technologies can produce a wide variety
of end products at a unit cost that at one time could only be achieved
through the mass production of a standardized output
Mass customization (Production of personalized or custom-tailored goods or
services to meet consumers' diverse and changing needs at near mass
production prices. Enabled by technologies such as computerization,
internet, product modularization, and lean production, it portends the
ultimate stage in market segmentation where every customer can have
exactly what he or she wants) implies that a firm may be able to customize
its product range to meet the demands of local markets yet still control costs
Technological factors: Concentrating production at a few choice locations
makes sense when: i) fixed costs are substantial ii) the minimum efficient
scale of production is high iii) flexible manufacturing technologies are
available
Two product factors impact location decisions:1. the product's value-to-weight
ratio. 2. Does product serves universal needs: When products serve universal
needs, the need for local responsiveness falls, central location preferred

There are two basic strategies for locating manufacturing facilities: 1.
concentrating them in the optimal location and serving the world market
from there 2. decentralizing them in various regional or national locations
that are close to major markets




Improvement in a facility comes from two sources: 1. pressure to lower costs
or respond to local markets 2. an increase in the availability of advanced
factors of production
A major aspect of a transnational strategy is a belief in global learning, or
the idea that valuable knowledge does not reside just in a firm’s domestic
operations, it may also be found in its foreign subsidiaries
Make-or-buy decisions are important factors in many firms' manufacturing
strategies
Advantages of make: lower costs; facilitate investments in highly specialized
assets ; protect proprietary technology; facilitate the scheduling of
adjacent processes
What Is Human
Resource Management?


Human resource management (HRM) - the activities an
organization carries out to utilize its human resources
effectively
These activities include
determining human resource strategy
 staffing
 performance evaluation
 management development
 compensation
 labor relations


Firms need to ensure there is a fit between their
human resources practices and strategy
What Is The Strategic Role Of
HRM In International Firms?

HRM can help the firm reduce the costs of value
creation and add value by better serving customer
needs
 more
complex in an international business
 differences
between countries in labor markets,
culture, legal systems, economic systems, etc.
What Is The Strategic Role Of
HRM In International Firms?

HRM must also determine when to use expatriate
managers
 citizens
 who
of one country working abroad
should be sent on foreign assignments
 how they should be compensated
 how they should be trained
 how they should be reoriented when they return
home
What Is The Strategic Role Of
HRM In International Firms?
The Role of Human Resources in Shaping Organizational Architecture


As shown in in this figure, people are the linchpin of a firm’s
organization architecture. For a firm to outperform its rivals in the
global marketplace, it must have the right people in the right
postings. Those people must be trained appropriately so that they
have the skill sets required to perform their jobs effectively, and so
that they behave in a manner that is congruent with the desired
culture of the firm. Their compensation packages must create
incentives for them to take actions that are consistent with the
strategy of the firm, and the performance appraisal system the firm
uses must measure the behavior that the firm wants to encourage.
As indicated, the human resource function, through its staffing,
training, compensation, and performance appraisal activities, has a
critical impact upon the people, culture, incentive, and control
system elements of the firm’s organization architecture
(performance appraisal systems are part of the control systems in
an enterprise). Thus, human resource professionals have a critically
What Is A Staffing Policy?

Staffing policy is concerned with the selection of
employees who have the skills required to perform
a particular job

can be a tool for developing an promoting the firm’s
corporate culture


the organization’s norms and value system
a strong corporate culture can help the firm implement
its strategy
What Is A Staffing Policy?

1.
2.
3.
Three main approaches to staffing policy
The ethnocentric approach - fill key management
positions with parent-country nationals
The polycentric approach recruit host country
nationals to manage subsidiaries in their own
country, and parent country nationals for positions
at headquarters
The geocentric approach seek the best people,
regardless of nationality for key jobs
Why Choose An Ethnocentric
Staffing Policy?


Firms that pursue an ethnocentric policy believe that
 there is a lack of qualified individuals in the host country to
fill senior management positions
 it is the best way to maintain a unified corporate culture
 value can be created by transferring core competencies to
a foreign operation via parent country nationals
 it makes sense with an international strategy
But
 it limits advancement opportunities for host country nationals
 it can lead to "cultural myopia"
Why Choose A Polycentric
Staffing Policy?

The polycentric approach
makes sense for firms pursuing a localization strategy
 can minimize cultural myopia
 may be less expensive to implement than an ethnocentric
policy


But
host country nationals have limited opportunities to gain
experience outside their own country and so cannot progress
beyond senior positions in their own subsidiaries
 a gap can form between host country managers and parent
country managers

Why Choose A Geocentric
Staffing Policy?

The geocentric approach
is consistent with building a strong unifying culture and
informal management network
 makes sense for firms pursuing a global or transnational
strategy
 enables the firm to make the best use of its human resources
 builds a cadre of international executives who feel at home
working in a number of different cultures


But
can be limited by immigration laws
 is costly to implement

Which Staffing Policy
Is Best?
Comparison of Staffing Approaches
What Is Expatriate Failure?


Firms using an ethnocentric or geocentric staffing
strategy will have expatriate managers
Expatriate failure is the premature return of an
expatriate manager to the home country
each expatriate failure can cost between $40,000 and $1
million
 between 16 and 40% of all American expatriates in
developed countries fail and almost 70% of Americans
assigned to developing countries fail

What Is The Rate Of
Expatriate Failure?
Expatriate Failure Rates
Why Do Expatriate
Managers Fail?

The main reasons for U.S. expatriate failure are
 the
inability of an expatriate's spouse to adapt
 the manager’s inability to adjust
 other family-related reasons
 the manager’s personal or emotional maturity
 the manager’s inability to cope with larger overseas
responsibilities
Why Do Expatriate
Managers Fail?

The reason for European expatriate failure is


the inability of the manager’s spouse to adjust
The main reasons for Japanese expatriate failure are
the inability to cope with larger overseas responsibility
 difficulties with the new environment
 personal or emotional problems
 a lack of technical competence
 the inability of spouse to adjust

How Can Firms Reduce
Expatriate Failure?


1.
2.
3.
4.
Firms can reduce expatriate failure through improved
selection procedures
Four dimensions that predict expatriate success are
Self-orientation - the expatriate's self-esteem, selfconfidence, and mental well-being
Others-orientation - the ability to interact effectively with
host-country nationals
Perceptual ability - the ability to understand why people of
other countries behave the way they do
Cultural toughness – the ability to adjust to the posting
Why Is A
Global Mindset Important?

A global mindset may be the fundamental attribute
of a global manager
cognitive complexity
 cosmopolitan outlook


A global mindset is often acquired early in life from
a family that is bicultural
 living in foreign countries
 learning foreign languages as a regular part of family life

What Is Training And
Management Development?



After selecting a manager for a position, training and
development programs should be implemented
Training focuses upon preparing the manager for a
specific job
Management development is concerned with
developing the skills of the manager over time


gives the manager a skill set and reinforces organizational
culture
Historically, most firms focus more on training than on
management development
Why Is Training Important For
Expatriate Managers?





Training can reduce expatriate failure
Cultural training - fosters an appreciation for the host country's
culture
Language training - an exclusive reliance on English diminishes
an expatriate's ability to interact with host country nationals
Practical training - helps the expatriate and her family ease
themselves into day-to-day life in the host country
But, studies show only about 30% of managers sent on one- to
five-year expatriate assignments received training before their
departure
Summary of the lecture





Human resource management (HRM) - the activities an organization carries
out to utilize its human resources effectively
These activities include i) determining human resource strategy ii) staffing
performance evaluation iii) management development iv) compensation
labor relations v) Firms need to ensure there is a fit between their human
resources practices and strategy
HRM can help the firm reduce the costs of value creation and add value by
better serving customer needs
HRM must also determine when to use expatriate managers i)citizens of
one country working abroad ii) who should be sent on foreign assignments
iii) how they should be compensated iv) how they should be trained v) how
they should be reoriented when they return home
Staffing policy is concerned with the selection of employees who have the
skills required to perform a particular job
 can be a tool for developing an promoting the firm’s corporate culture
the organization’s norms and value system; a strong corporate culture
can help the firm implement its strategy

1.
2.
3.


Three main approaches to staffing policy
The ethnocentric approach - fill key management positions with parentcountry nationals
The polycentric approach recruit host country nationals to manage
subsidiaries in their own country, and parent country nationals for
positions at headquarters
The geocentric approach seek the best people, regardless of nationality
for key jobs
Firms using an ethnocentric or geocentric staffing strategy will have
expatriate managers Expatriate failure is the premature return of an
expatriate manager to the home country
The main reasons for U.S. expatriate failure are i) the inability of an
expatriate's spouse to adapt ii) the manager’s inability to adjust iii) other
family-related reasons iv) the manager’s personal or emotional maturity v)
the manager’s inability to cope with larger overseas responsibilities








A global mindset may be the fundamental attribute of a global manager
 cognitive complexity
 cosmopolitan outlook
After selecting a manager for a position, training and development
programs should be implemented
Training focuses upon preparing the manager for a specific job
Management development is concerned with developing the skills of the
manager over time
Cultural training - fosters an appreciation for the host country's culture
Language training - an exclusive reliance on English diminishes an
expatriate's ability to interact with host country nationals
Practical training - helps the expatriate and her family ease themselves into
day-to-day life in the host country
But, studies show only about 30% of managers sent on one- to five-year
expatriate assignments received training before their departure