PART SIX
INTERNATIONAL HRM
C H A P T E R
S i x t e e n
16
Managing Global
Human Resources
Lecture Outline
Strategic Overview
HR and the Internationalization of Business
The HR Challenges of International Business
How Intercountry Differences Affect HRM
Improving International Assignments Through
Selection
Why International Assignments Fail
International Staffing: Home or Local?
Values and International Staffing Policy
Selecting International Managers
The New Workplace
Training and Maintaining International Employees
Orienting and training Employees of International
Assignments
International Compensation
Performance Appraisal of International Managers
International Labor Relations
Safety and Fair Treatment Abroad
HR.NET
Repatriation: Problems and Solutions
Strategic HR
A Final Word: Strategic HR
Strategy and Strategic HR
Management Values and Philosophy
Auditing the HR Function
In Brief: This chapter outlines some
of the HR problems and issues
involved
with
international
businesses. The subjects covered
include intercountry differences,
using
selection
to
improve
international
assignments,
and
training and maintaining international
employees.
Interesting Issues: Many companies
desire to rotate managers through
international assignments, but find
that work visa requirements of the
host countries (including the U.S.)
can sometimes greatly hinder these
efforts.
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ANNOTATED OUTLINE
I.
HR and The Internationalization of Business
A. International Business and Its Impact on Managing – Due to the European Market
unification, the introduction of the euro currency, the opening of Eastern Europe,
and the rapid development of demand in Asia and other areas of the world, large
and small firms are finding their success depends on their ability to market and
manage overseas.
B. The HR Challenges of International Business are: deployment, knowledge and
innovation dissemination, and identifying and developing talent on a global basis.
Complicating these decisions are the cultural, political, legal, and economic
differences among countries and their peoples.
C. How Intercountry Differences Affect HRM – A company operating multiple units
abroad does not have the luxury of dealing with a relatively limited set of
economic, cultural, and legal variables.
1. Cultural Factors – Countries differ widely in their cultures, which are the basic
values to which their citizens adhere. Cultural differences from country to
country necessitate corresponding differences in management practices
among a company’s subsidiaries.
2. Economic Systems – Differences in economic systems translate into
differences in HR practices. Differences in labor costs are substantial.
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3. Legal and Industrial Relations Factors vary dramatically from country to
country. In many European countries, work councils replace the informal or
union based worker-management mediations typical in U.S. firms. In
Germany and several other countries, codetermination is the rule where
employees have the legal right to a voice in setting company policies.
4. The European Community (EC) refers to the unification of separate
European countries in the 1990s into a common market for goods, services,
capital, and labor.

II.
NOTES
Educational Materials to Use
Improving International Assignments Through Selection
A. Why International Assignments Fail – International assignments fail for various
reasons including: personality, the person’s intentions, and nonwork factors.
B. International Staffing: Home or Local? Sources of managers include: locals
(citizens of the countries where they are working); expatriates (noncitizens of the
countries in which they are working); home-country nationals (citizens of the
country in which the multinational company has its headquarters); and thirdcountry nationals (citizens of a country other than the parent or the host country).
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C.
Values and International Staffing Policy – Ethnocentric run firms would staff
foreign subsidiaries with parent-country nationals because they believe that
home country attitudes, management styles, and knowledge are superior to the
host country. Polycentric run firms would staff foreign subsidiaries with hostcountry nationals because they are the only ones that can really understand the
culture and the behavior of the host country market. Geocentric run firms would
staff foreign subsidiaries with the best people for key jobs regardless of
nationality because they believe that the best manager for any specific position
anywhere on the globe may be in any of the countries in which the firm operates.
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D. Selecting International Managers is similar to selecting domestic managers, but
you need to determine if managers for international assignments can cope
internationally. Adaptability screening, often conducted by a psychologist or
psychiatrist, is aimed at assessing the assignee’s and family’s probable success
in handling the foreign transfer.

III.
NOTES
Educational Materials to Use
Training and Maintaining International Employees
A. Orienting and Training Employees for International Assignments – Some claim
there is generally little or no systematic selection and training for assignments
overseas. A four-step approach is recommended: 1) focus on the impact of
cultural differences, and on raising trainees’ awareness of such differences and
their impact on business outcomes; 2) get participants to understand how
attitudes (positive and negative) are formed and how they influence behavior; 3)
provide factual knowledge about the target country; and 4) provide skill building
in areas like language, adjustment and adaptation skills.
1. Trends in Expatriate Training: more firms are providing continuing, in-country
cross-cultural training during the early stages of a person’s overseas
assignment; employers are returning managers as resources to cultivate the
“global mindsets” of the rest of their home office staff; there is increased use
of software and the Internet for cross-cultural training. Internet examples
include:
www.bennettinc.com/indexie.htm; www.livingabroad.com; www.worldwiseinc.com; and www.globaldynamics.com.
B. International Compensation presents some tricky problems due to the question of
whether or not to maintain companywide pay scales and policies
1. The Balance Sheet Approach, the common approach to expatriate pay,
refers to equalizing purchasing power across countries.
2. Incentives – Many firms offer overseas managers long-term incentives that
are tied more closely to performance at the foreign subsidiary level.
3. Beyond Compensation – Particularly for employees in less-industrialized
countries, HR managers also take nonmonetary rewards into account.
C. Performance Appraisal of International Managers can be improved by: stipulating
the assignment’s level; weighing the evaluation more toward the on-site
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manager’s appraisal than toward the home-site manager’s distant perceptions of
the employee’s performance; if the home-office manager does the actual written
appraisal, having him/her use a former expatriate from the same overseas
location provide background advice; modifying the normal performance criteria
used for that particular position to fit the overseas position; and giving the
expatriate manager credit for his/her insights into the functioning of the operation
and specifically the interdependencies of the domestic and foreign operations.
D. International Labor Relations are substantially different at subsidiaries abroad.
E. Safety and Fair Treatment Abroad is necessary because other countries are quick
to adopt U.S. laws. It’s hard to make a legitimate case for being less safety
conscious or fair with workers abroad than you are with those at home.
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This feature of HR.NET shows how Internet-based HRIS are used to integrate
and update a global firm’s HR systems.
F. Repatriation: Problems and Solutions – Some common repatriation problems are:
they often fear that out of sight is out of mind; returning expatriates are assigned
to mediocre or makeshift jobs; returnees are taken aback when the trappings of
the overseas job are lost upon return; the expatriate’s former colleagues have
been promoted while he/she was gone; and the expatriate’s family may go
through culture shock.
Some possible solutions are: written repatriation
agreements; assign a sponsor; provide career counseling; keep communications
open; and develop reorientation programs.
1.

IV.
NOTES
Strategic HR – Siemen’s multinational strategy is supported by the following
five points of its basic HR strategy: a) a living company is a learning
company; b) global teamwork is the key to developing and using all the
potential of the firm’s human resources; c) redefined management to meet
the challenges of globalization; d) long-term growth and profitability depend
on achieving a balance of interests; and e) a climate of mutual respect is the
basis of all relationships – within the company and within society.
Educational Materials to Use
A Final Word: Strategic HR
A. Strategy and Strategic HR – A firm’s HR strategies support its efforts to achieve
its overall strategy and succeed in tomorrow’s challenging global environment.
B.
Management Values and Philosophy – Management should build employee
commitment through HR practices by: establishing people-first values;
guaranteeing fair treatment; using value-based hiring; providing for employee
security; assessing the rewards package; and actualizing employees.
C. Auditing the HR Function requires using accounting and statistical techniques to
calculate the cost of human resources.
1. The HR Review should be aimed at tapping top managers’ opinions
regarding the HR function’s effectiveness by assessing what should be, and
what is.
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“What should be” refers to HR’s broad aim, which involves a broad
philosophy and vision statement, and a focused mission statement. “What
is” should address the following questions. What are the HR functions? How
important are these functions? How well is each of the functions performed?
What needs improvement? How effectively does the corporate HR function
use resources? How can HR become most effective?

NOTES
Educational Materials to Use
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KEY TERMS
foreign service premiums
Financial payments over and above regular base pay, typically ranging
between 10% and 30% of base pay.
hardship allowances
Compensate expatriates for exceptionally hard living and working
conditions at certain locations.
mobility premiums
Typically, lump-sum payments to reward employees for moving from one
assignment to another.
employee commitment
An employee’s identification with and agreement to pursue the
company’s or the unit’s missions – to act like an owner rather than as an
employee.
DISCUSSION QUESTIONS
1. You are the president of a small business. What are some of the ways you expect being
involved internationally will affect your business? Being involved internationally can affect
virtually every aspect of your business. It can affect the growth of your business due to additional
markets, it can affect costs of doing business, and it can affect every aspect of HRM as outlined in the
chapter
2. What are some of the specific uniquely international activities an international HR manager
typically engages in? 1) Formulating and implementing HR policies and activities in the home-office
of a multinational company. This HRM manager would engage in selecting, training, and transferring
parent-company personnel abroad and formulating HR policies for the firm as a whole and for its
foreign operations. 2) Conducting HR activities in the foreign subsidiary of an MNC is another form.
Again, local HR practices are often based on the parent firm's HR policies, fine-tuned for local country
practices.
3. What intercountry differences affect HRM? Give several examples of how each may
specifically affect HRM. 1) Cultural Factors - U.S. managers may be most concerned with getting
the job done. Chinese managers may be most concerned with maintaining a harmonious
environment. And Hispanic managers may be more concerned with establishing trusting, friendship
relationships. 2) Economic Factors - U.S. economic systems tend to favor policies that value
productivity while more socialistic countries like Sweden would favor policies that prevent
unemployment. 3) Labor Cost Factors - Mexican labor costs (low) can allow inefficiencies of labor,
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while German labor costs (high) might require a focus on efficiency. 4) Industrial Relations Factors German law requires that workers have a vote in setting policies while in Japan the employees do not
have a say, but the government may have a say in establishing policies. 5) The European
Community - The EC will gradually reduce the differences between member countries.
4. You are the HR manager of a firm that is about to send its first employees overseas to staff a
new subsidiary. Your boss, the president, asks you why such assignments fail, and what you
plan to do to avoid such failures. How do you respond? Estimates say that 20% to 25% of all
overseas assignments fail. Reasons include: inability of spouse to adjust, managers' inability to
adjust, other family problems, and managers' inability to cope with responsibility. We will need to
select a manager that displays: adaptability and flexibility, cultural toughness, self-orientation, othersorientation, perceptual ability, and has a family with adaptability.
5. What special training do overseas candidates need? In what ways is such training similar to
and different from traditional diversity training? It is suggested that a four-step training approach
be taken: 1) training focused on the impact of cultural differences and their impact on business
outcomes; 2) training focused on attitudes that are aims at getting participants to understand how
attitudes (both positive and negative) are formed and how the influence behavior; 3) training focused
on factual knowledge about the target country; and 4) skill building in areas like language and
adjustment and adaptation skills. This training is different from traditional diversity training in the last
two steps, which are not normally part of diversity training. In addition, traditional training and
development is needed as with any other manager.
6. How does appraising an expatriate's performance differ from appraising that of a home-office
manager? How would you avoid some of the unique problems of appraising the expatriate's
performance? A major difficulty is: Who actually appraises the performance? (Cultural differences
could affect it) There are five suggestions: 1) Stipulate the assignment's difficulty level; 2) Weight the
evaluation towards the on-site manager's appraisal; 3) Have a former expatriate advise the home-site
manager in his or her evaluation; 4) Modify the normal performance criteria to fit the position and
characteristics of the locale; 5) Attempt to give credit for insights, not just measurable criteria.
7. As an HR manager, what program would you establish to reduce repatriation problems of
returning expatriates? The programs listed in the chapter give a good summarization of the types
of programs and activities that should be established to assure a smooth repatriation.
DESSLER COMPANION WEB SITE
We invite you to visit the Dessler homepage (http://www.prenhall.com/dessler) on the
Prentice Hall Web site for the best online business support available. This site
provides professors with a customized course Web site, including new
communication tools, one-click navigation of chapter content, and great resources,
such as Internet Resources, an HRCI Exam Prep Guide, assessment exercises, and
more.
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INDIVIDUAL AND GROUP ACTIVITIES
1. Working individually or in groups, write an expatriation and repatriation plan for your
professor, who your school is sending to Bulgaria to teach HR for the next three years. In
developing their expatriation and repatriation plan, the students should use Internet resources to find
information on various cultural, economic, and legal factors that could affect their professor. They
should include a description of the type of training program their professor should take prior to leaving
for Bulgaria, the pay structure while on the international assignment, and particulars for how the
repatriation plan will work for the professor’s return.
2. Give three specific examples of multinational corporations in your area. Check the library or
Internet or with each firm to determine in what countries these firms have operations and
explain the nature of some of their operations, and whatever you can find out about their
international HR policies. The examples will vary according to what companies have operations in
your area. This can be an exciting opportunity for students to find out more about companies and
what they are doing beyond your immediate geographic area.
3. Choose three traits useful for selecting international assignees, and create a straightforward
test (not pencil and paper) to screen candidates for these traits. There are an infinite number of
responses that you might get to this question. First, make sure that the traits either are on the list in
the chapter, or are reasonable and logical traits that would be useful. Second, assure that the tests
that the students develop are ones that will actually identify the presence of these traits.
4. Use a library source to determine the relative cost of living in five countries as of this year,
and explain the implications of such differences for drafting a pay plan for managers being
sent to each country. The most common approach is to equalize purchasing power across
countries, a technique known as the balance sheet approach. The basic idea is that each expatriate
should enjoy the same standard of living he or she would have had at home.
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EXPERIENTIAL EXERCISES & CASES
Experiential Exercise: Compensation Incentives for Expatriate Employees
This exercise forces students to think realistically about the compensation problems with expatriate
employees. The rankings will vary, but students should be prepared to defend their rankings with reason
and logic. Similarly, while the described “effects on compensation” may vary, they should be reasonable
and logical. When discussing the problems that the higher level of compensation might create, do not
forget: 1) jealousy of other employees, 2) problems of adjustment when repatriation occurs, and 3)
whether even this level will be adequate to entice employees to take the foreign assignments.
(Completed table)
Your
Issues
Rank
(example) Health care
Description
Effect on Compensation
% +or-
Physicians and hospital do not
meet western standards.
Make contingency money
available to fly expatriate to
closest country with Western
style health care)
Employees will need higher
salaries to pay school tuition.
+5
Payment might need to be
paid in $US rather than local
currency (functions as a
bonus…as inflation increases,
$$ become more valuable).
Creates a perceived hardship;
may
require
additional
compensation to attract an
appropriate employee.
Clearly a hardship condition;
employee will expect higher
pay. Arrangements should be
made for off-shore banking,
access to cash and unusual
repatriation expenses.
=
3
Family life
There are no English language
schools for children—children
of expatriates will need to
attend private boarding schools.
Target country currency is
unstable. Currency may inflate
by as much as 20% per month.
2
Inflation
4
Infrastructu
re
The expatriate will not be able
to have his or her own phone or
TV.
1
Political
risk
Assigned country faces the risk
of political upheaval.
+10
+10
+50
Directions:
Divide the class into small teams. Ask each team to perform the following tasks:
1. Rank order the issues from 1 to 5 (number 1 being the most important). There will be some
variation here, though political risk should rank the highest.
2. Assume that each employee has a base salary equal to their US compensation of $80,000. You
may add from 0% to 50% to that as a supplement for each item on the list.
Note that in the above example, inflation can be handled without increasing the salary.
Answer the following discussion questions as a larger group:
1. What will be the effect of each on compensation? The students should come up with examples
for how each issue is likely to increase the compensation.
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2. How much did you need to increase compensation overall to satisfy the expected needs of
your expatriate workers? In the above example, 75%.
3. What problems might this level of compensation create? Might make your firm less competitive.
Might create difficulties with national employees in the host country who are making just the base
salary. Might create difficulties when you try to repatriate an employee back to U.S. wages.
Application Case Incident: “Boss, I Think We Have a Problem”
1. Based on the chapter and case incident, compile a list of 10 international HR mistakes Mr.
Fisher has made so far. Among his mistakes: Fisher has not properly identified candidates; cultural
sensitivity, interpersonal skills and flexibility have not been included as required job skills; there is no
system in place to assess candidates for proper skills; the company does not have realistic cost
projects for cross-border operations; the company has not determined whether it would be cost effect
to have an expatriate manager; there are no assignment letters documenting the scope of the job;
there is no international compensation system in place; the company has not taken into account
differences in foreign expenses; the company has not taken into account foreign taxes; there is no
formal relocation assistance program in place; the company has not considered the importance of
family support; there is no cultural orientation program in place for expatriate mangers or their family
members; among others.
2. How would you have gone about hiring a European sales manager? Why? I would have
investigated the market to determine the appropriate level of compensation and benefits. Expatriate
compensation packages should consider tax equalization clauses or other measures for dealing with
differing costs of living. The company should also have retained consul on European labor laws/
practices. The location of the office should be carefully selected for favorable labor and tax laws. Like
Fisher, I would have wanted a large pool of potential applicants, but given Fisher’s inexperience, he
may have benefited from the use of an outside agency (search firm). Finally, Fisher’s stereotypes of
European managers may have clouded his judgment with his existing pool of applicants.
3. What would you do now if you were Mr. Fisher? Fisher needs to seek legal consul in regard to his
labor situation. He is likely in the wrong. In which case, he will need to reinstate the employees and
apologize. He will in all likelihood need to start over and find an appropriate sales manager with
knowledge of the local culture and business practices.
Continuing Case: LearnInMotion.com
Going Abroad
1. What do you see as the main HR-related implications and challenges we face as a result of
opening the operation in London? The students will not only need toincorporate their learnings
from this chapter to answer this question, they should also include their learnings from all the
chapters in the text to come up of the main HR-related implications and challenges
LearnInMotion.com will face as a result of opening the London operation.
2. How should we go about choosing the person who will be the permanent manager for the new
operation? Should we hire someone locally, or use one of the people from our existing
operation? Why?
The students should used the information in the chapter on selecting
international managers. The students are likely to differ in their choices as to which type of
international manager they would suggest for the London operation; just look for them to justify their
responses.
3. Based upon any resources available to you, including the Internet, tell us what we need to
know about the comparative cost of living of London and New York, including housing and
transportation, as well as comparative salaries. The students should use their learnings from
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chapters 11, 12, and 13, and the Internet sources presented in those chapters to formulate their
response to this question.
4.
Write a short position paper on the subject: “a list of the HR-related things we need to do in
sending our three people abroad.” The students should include information presented in chapters
one through fifteen, in addition to the information presented in this chapter, to develop their list of HRrelated things LearnInMotion.com needs to do in sending their three employees to London.
International HRM
PART-ENDING VIDEO CASE
Samuel LaFayette was sent to Paris with his family to head up a new
Focus Pointe office. Samuel and his family had a great amount of
difficulty acclimating themselves to their new environment, and after six
months returned to New York. Samuel must now meet with his HR
representatives to discuss what went wrong, and to also address his
current employment situation, as his position in New York had been filled
while he was in Paris. This segment focuses on how HR can best select
and prepare candidates for an international assignment.
For full video case and discussion questions, please visit the Faculty
Resource section of the Dessler Companion Web Site at:
http://www.prenhall.com/dessler
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CHAPTER 16 POWERPOINTS
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