Chapter 11
International Human Resource
Management
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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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
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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
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
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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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
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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)?
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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?
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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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 11.1:
Percent of Millenials Who Want to
Work Outside of their Home Country
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Exhibit 11.2:
The Ten Most Expensive
and Least Expensive Cities
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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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Reasons for
U.S. Expatriate Failure (3 of 3)
• Organizational:
• Excess of difficult responsibilities in the assignment
• Failure to provide cultural and other important preassignment 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
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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
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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.
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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)
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Exhibit 11.3:
Expatriate Success Factors
and Selection Methods
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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
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Exhibit 11.4:
What Percentage of Companies are
Using More Short Term Assignments?
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Exhibit 11.5:
Selecting Expatriates: Priorities for
Success Factors by Assignment
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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
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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
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Exhibit 11.6:
Building Cross-Cultural Training
Rigor: Techniques and Objectives
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Exhibit 11.7:
Training Needs and
Expatriate Assignment Characteristics
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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
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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.
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Exhibit 11.8:
Evaluation Sources, Criteria, and Time
Periods for Expatriate Evaluation
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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
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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.
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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)
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Exhibit 11.9:
The Balance Sheet Approach
To Expatriate Compensation
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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
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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
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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.
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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.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
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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.
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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
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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.
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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.
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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.
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Exhibit 11.10:
IHRM Orientation and Practices
for Managers & Technical Workers
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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
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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
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Regiocentric & Polycentric
IHRM Benefits
• Benefits:
• Reduces training expenses
• Fewer language and adjustment issues
• Lessened hiring and relocation costs
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Regiocentric & Polycentric
IHRM Costs
• Costs:
• Coordination problems with headquarters based on
cultural, language, and loyalty differences
• Limited career-path opportunities for host country
and regional managers
• Limited international experiences for home country
managers
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Global IHRM Benefits & Costs
• Benefits
• Bigger talent pool
• High international expertise
• Development of transnational organizational
cultures
• Costs
• Difficulty in importing managerial and technical
employees
• Added expense
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Summary
• When basic HRM practices are applied to a company’s
international operations, they become IHRM.
• Chapter 11 focused on HRM practices for expatriates.
• Expatriates present special challenges for MNCs.
• Successful IHRM is a 21st century challenge.
• Globalization allows MNCs to hire from a worldwide
pool of talent.
• It is important for multinationals to find ways to properly
manage expatriates successfully.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.