Ninth Edition
Ninth Edition
Human Resource Selection and Development
Across Cultures
Luthans | Doh
Fred Luthans
Jonathan P. Doh

International Management
Ninth Edition
Luthans | Doh
• The specific objectives of this chapter are to
1.
IDENTIFY the three basic sources that MNCs can tap when filling management vacancies in overseas operations in addition to options of subcontracting and outsourcing.
2.
DESCRIBE the selection criteria and procedures used by organizations and individual managers when making final decisions.
3.
DISCUSS the reasons why people return from overseas assignments, and present some of the strategies used to ensure a smooth transition back into the home-market operation.
4.
DESCRIBE the training process, the most common reasons for training, and the types of training that often are provided.
5.
EXPLAIN how cultural assimilators work and why they are so highly regarded.

International Management
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• Human resources is an essential part of any organization.
• It is important to understand how employees feel they are being treated.
• The selection and development of human resources in an international organization is especially challenging.
– Employees should be seen as critical resources.
• Sending employees overseas can be expensive.
• Economic pressures are changing the nature of the human resources process.

International Management
Ninth Edition
Luthans | Doh

International Management
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• MNCs can tap four basic sources for positions:
1. Home-country nationals
2. Host-country nationals
3. Third-country nationals
4. Inpatriates
• Many MNCs are outsourcing aspects of their global operations, using temporary or contingent employees.

International Management
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• Home-Country Nationals
– Expatriate managers who are citizens of the country where the multinational corporation is headquartered
• Sometimes called headquarters nationals or expatriates
• Common reasons to use home-country nationals include to start up operations, to provide technical expertise, to develop promising managers, and to facilitate coordination and control.

International Management
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• Host-Country Nationals
– Local managers hired by the MNC
• Common reasons to use host country nationals include:
– Familiarity with the culture
– Knowledge of the language
– They are less expensive than expatriates.
– Hiring them is good public relations.

International Management
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• Third-Country Nationals
– Managers who are citizens of countries other than the country in which the MNC is headquartered or the one in which the managers are assigned to work by the MNC.
– Advantages:
• TCN managers can often achieve corporate objectives more effectively than expatriates or local nationals.
• During rapid expansion, TCNs can substitute for expatriates and complement and expand on the viewpoints of local nationals and headquarters personnel.
• In joint ventures, TCNs can demonstrate a global or transnational image and bring unique cross-cultural skills to the relationship.

International Management
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• Inpatriates
– Individuals from a host country or third country who are assigned to work in the home country.
• Inpatriates can help MNCs develop their global core competencies.
– A new breed of multilingual, multiexperienced global managers is emerging.
– This growing group of international executives can manage across borders.
– They are in great demand and migrate to where the demand is strongest.
– MNCs can subcontract or outsource to take advantage of lower human resource costs and increased flexibility.

International Management
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• International selection criteria
– Factors used to choose personnel for international assignments
– MNCs usually give serious consideration to five or six criteria.
• To assess the suitability of the manager’s family for a foreign assignment may involve an
adaptability screening:
– The process of evaluating how well a family is likely to stand up to the stress of overseas life.

International Management
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Criteria
• Adaptability
• Physical & emotional health
• Age
• Experience
• Education
• Knowledge of local language
• Motivation
• Support of spouse & children
• Leadership
Coping Strategies
• Feeling comfortable that their work challenges can be met
• Being able to adjust to their new living conditions
• Learning how to interact well with host-country nationals outside of work
• Feeling reasonably happy and being able to enjoy day-to-day activities

International Management
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International Management
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International Management
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International Management
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• Adaptability to cultural change is essential for expatriates
• Research shows that that those who are best able to deal with their new situation have developed coping strategies characterized by socio-cultural and psychological adjustments including
– Feeling comfortable that their work challenges can be met
– Being able to adjust to their new living conditions
– Learning how to interact well with host-country nationals outside of work
– Feeling reasonably happy and being able to enjoy day-today activities

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International Management
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International Management
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• Applicants can better prepare themselves for international assignments by preparing in phases.
• Phase 1
– Focus on self-evaluation and general awareness include the following questions:
• Is an international assignment really for me?
• Do my spouse and family support the decision to go international?

International Management
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• Phase 2
– Conduct a technical skills assessment.
• Do I have the technical skills required for the job?
– Start learning the language, customs, and etiquette of the region you will be posted.
– Develop an awareness of the culture and value systems of the geographic area.
– Inform your superior of your interest in the international assignment.

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• Phase 3
– Attend training sessions provided by the company
– Confer with colleagues who have had experience in the assigned region.
– Speak with expatriates and foreign nationals about the assigned country.
– Visit the host country with your spouse before the formally scheduled departure if possible.

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• Despite the 2008–2010 economic recession, most MNCs are still sending employees on foreign assignments.
• This trend is driven in part by
– Growth in emerging markets, especially in China
– The continued integration of the European Union
• The most common reason to turn down a foreign assignment is family concerns, followed by spousal career concerns.

International Management
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• Anticipatory Adjustment
– Training: cross-cultural seminars or workshops
– Previous experience
• In-country Adjustment
– Individual’s ability to maintain a positive outlook, interact well with host nationals, and to perceive and evaluate the host country’s cultural values and norms correctly
– The job itself: the management role, the authority, the challenges, the amount of conflict
– Expat’s adjustment to the organizational culture
– Nonwork matters: new culture, family adjustment
– Expat’s ability to develop effective socialization tactics and to understand roles in the host organization

International Management
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• Process model factors:
– Stage 1: expatriates’ motivation to seek support from actors in the host country
– Stage 2: expatriates’ selection of and support seeking toward actors
– Stage 3: contacted actors’ ability and willingness to provide support
– Stage 4: expatriates’ utilization of received support
– Stage 5: expatriates’ addition of actors to network

International Management
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International Management
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International Management
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• Common elements of compensation packages
1. Base salary
• Amount of money that an expatriate normally receives in the home country
2. Benefits
• Should host-country legislation regarding termination of employment affect employee benefits entitlements?
• Is the home or host country responsible for the expatriates’ social security benefits?
• Should benefits be subject to the requirements of the home or host country?
• Which country should pay for the benefits?
• Should other benefits be used to offset any shortfall in coverage?
• Should home-country benefits programs be available to local nationals?

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3. Allowances
• Cost-of-Living Allowance
– Payment for differences between the home country and the overseas assignment.
– Designed to provide the expatriate the same standard of living enjoyed in the home country
• May cover a variety of expenses, including relocation, housing, education, and hardship
• Incentives
– A growing number of firms have replaced the ongoing premium for overseas assignments with a one-time, lumpsum premium

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4. Taxes
• Tax equalization
• An expatriate may have two tax bills for the same pay.
– Host country
– U.S. Internal Revenue Service
• MNCs usually pay the extra tax burden.

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• Tailoring the compensation package
– Balance-sheet approach
• Ensure the expatriate doesn’t lose money on the assignment
– Negotiation approach
• Negotiate to work out an acceptable ad hoc arrangement
– Localization
• Pays the expatriate a salary comparable to local nationals
– Lump sum method
• Gives the expatriate a lump sum of money
– Cafeteria approach
• Gives the individual a series of options
– Regional system
• Sets a compensation system for all expatriates who are assigned to a particular region

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• Candidate motivations
– Why do individuals accept foreign assignments?
• Greater demand for their talents abroad than at home
• Host-country desires
– Whom would it like to see put in managerial positions?
– Host countries prefer a managerial style similar to that of their country.

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• Repatriation
– The return to one’s home country from an overseas assignment.
• Reasons for returning to home country
– The agreed-on tour of duty is over
– Want their children educated in a home-country school
– Not happy in their overseas assignment (or family isn’t happy)
– Failed to do a good job
• Readjustment problems
– “Out of sight, out of mind” syndrome
– Organizational changes
– Technological advances
– Adjusting to the new job back home

International Management
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• Transition strategies
– Repatriation agreements
• Firm agrees with individual how long she or he will be posted overseas and promises to give the individual, on return, a job that is mutually acceptable.
– Some of the main problems of repatriation include
• Adjusting to life back home
• Facing a financial package that is not as good as that overseas
• Having less autonomy in the stateside job than in the overseas position
• Not receiving any career counseling from the company

International Management
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International Management
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• Training
– The process of altering employee behavior and attitudes in a way that increases the probability of goal attainment.
• Times of training:
– Prior to a foreign assignment
– Place a cultural integrator in each foreign operation
• Cross-cultural training is becoming increasingly popular.
• Cultural training: social etiquette, customs, economics, history, politics, and business etiquette

International Management
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• Four management philosophies on training
1. Ethnocentric MNC
• Stresses nationalism and often puts home office people in charge of key international management positions.
2. Polycentric MNC
• Places local nationals in key positions and allows these managers to appoint and develop their own people.
3. Regiocentric MNC
• Relies on local managers from a particular geographic region to handle operations in and around that area.
4. Geocentric MNC
• Seeks to integrate diverse regions of the world through a global approach to decision making.

International Management
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• Reasons for Training
– Organizational reasons
• Ethnocentrism
– The belief that one’s own way of doing things is superior to that of others.
• To improve communication flows
• To increase overall efficiency and profitability
– Personal reasons
• To train overseas managers to improve their ability to interact effectively with local people in general and with their personnel in particular
• Increasing numbers of training programs address social topics―these programs also focus on dispelling myths and stereotypes by replacing them with facts about the culture.

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• Standard vs. tailor-made
• Small firms usually rely on standard training programs.
– Larger firms tend to design their own.
• Tailor-made programs are designed for the specific needs of the participants.
• Cultural assimilator
– Programmed learning techniques designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another culture.

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• Positive organizational behavior (POB)
– The study and application of positively oriented human resource strengths and psychological capacities that can be measured, developed, and effectively managed for performance improvement in today’s workplace.
• Positivity in the workplace has been linked to employee satisfaction.
– Positive organizations try to match employee skills and talents with organizational goals and expectations.

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• A critical issue for international human resources in the coming decades is linking talent management and employee mobility.
• Many question the value of an overseas assignment and find it doesn’t advance their career or motivate them to stay with the firm.
• Another issue is the emergence of cross-border commuters.
• A final issue is the rise and growth of emerging markets.

International Management
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1. A New York-based MNC is in the process of staffing a subsidiary in New Delhi, India. Why would it consider using expatriate managers in the unit? Local managers? Third-country managers?
2. What selection criteria are most important in choosing people for an overseas assignment? Identify and describe the four that you judge to be of most universal importance and defend your choice.
3. What are the major common elements in an expat’s compensation package? Besides base pay, which would be most important to you? Why?

International Management
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4. Why are individuals motivated to accept international assignments? Which of these motivations would you rank as positive reasons? Which would you regard as negative reasons?
5. Why do expatriates return early? What can MNCs do to prevent this from happening? Identify and discuss three steps they can take.
6. What kinds of problems do expatriates face when returning home? Identify and describe four of the most important. What can MNCs do to deal with these repatriation problems effectively?

International Management
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7. How do the following types of MNCs differ: ethnocentric, polycentric, regiocentric, and geocentric? Which type is most likely to provide international management training to its people?
Which is least likely to provide international management training to its people?
8. IBM is planning on sending three managers to its
Zurich office, two to Madrid, and two to Tokyo. None of these individuals has any international experience.
Would you expect the company to use a standard training program or a tailor-made program for each group?

International Management
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9. Zygen Inc., a medium-sized manufacturing firm, is planning to enter into a joint venture in China. Would training be of any value to those managers who will be part of this venture? If so, what types of training would you recommend?
10. Hofstadt & Hoerr, a German-based insurance firm, is planning on expanding out of the EU and opening offices in Chicago and Buenos Aires. How would a cultural assimilator be of value in training the MNC's expatriates?
Is the assimilator a valid training tool?
11. Ford is in the process of training managers for overseas assignments. Would a global leadership program be a useful approach? Why or why not?

International Management
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12.Microsoft is weighing setting up a new R&D facility in India to develop new software applications. Should it staff it with Microsoft employees? Indian employees? Or should it subcontract with an Indian firm? Explain your answer and some of the potential challenges in implementing it.