Introduction to International Business
Introduction to International
Business
April 20, 2007
Brian Chen/Sanny Liao
What is “human resource management”?
Definition: human resource management
• refers to the activities and organization carries out to use its human resources effectively
These activities include:
• determining firm’s human resource strategy, staffing, performance evaluation, management development, compensation, and labor relations
Can you think of any instance where one of these may be different across countries?
Firms may pursue different strategies in managing international business
KFC serves rice congee in China
Localization strategy
Microsoft develops most of its products in the U.S. and sells them worldwide
International strategy
McDonald’s standardizes its production process
Global standardization strategy
Catepillar designs its products to use many identical components and invests in a few large-scale component manufacturing facilities to cheaply supply these components; at the same time, Catepillar set up smaller plants in individual markets to augment the final product to suit particular market demands
Transnational strategy
Staffing policies
Def: staffing policy is concerned with the selection of employees for particular jobs.
Types of staffing policies
• Ethnocentric staffing
• Polycentric staffing
• Geocentric staffing
Ethnocentric staffing
All key management positions are filled by parent-country nationals
Pros? Cons?
Good Bad
Provides quality managers when talent is scarce in the host country
Maintains a unified corporate culture
Ensures smoother transfer of uncodifed knowledge (esp. core competencies)
Limits the advancement of host country nationals resentment
Can lead to “cultural myopia”
Polycentric staffing
Recruits host-country nationals to manage subsidiaries while parent-country nationals occupy key positions at corporate headquarters
Pros? Cons?
Good Bad
firm is less likely to suffer from cultural myopia
Less expensive to hire locals than expatriates
Glass ceiling for host country nationals resentment
Gap can form between hostcountry managers and parentcountry managers, the gap may be perpetuated by time
Geocentric staffing
Seeks the best people fro key jobs throughout the organization, regardless of nationality.
Pros? Cons?
Good Bad
Enables the firm to make the best use of its human resources
Enables the firm to build a cadre of international executives who feel at home working in a number of cultures can benefit both from local knowledge and hard-to-transfer firm core competencies
Governments may stipulate that the foreign subsidiaries only hire local citizens
Can be very costly to implement (training and relocation costs can be high)
Placement of managers on international “fast track” may create resentment
Expatriate managers suffer high attrition rates
Why?
• US multinationals
Inability of spouse to adjust
Manager’s inability to adjust
Other family problems
Manager’s personal or emotional maturity
Inability to cope with larger overseas responsibilities
• Japanese multinationals
Inability to cope with larger overseas responsibilities
Difficulties with new environment
Personal or emotional problems
Lack of technical competence
Inability of spouse to adjust
Can be alleviated by careful selection and extensive training
What kind of training should expatriate managers receive?
Cultural training
Language training
Practical training
Repatriate managers should also be trained
Performance Appraisal
If you are on the board of a firm with foreign subsidiaries, what measures of performance would you use?
It is difficult to appraise the performance of foreign managers
• Host-nation managers may be biased by their own cultural frame of reference
• May be biased by distance and by their lack of experience working abroad need to rely on hard data alone, but that is often does not provide a comprehensive picture
Ways to augment performance appraisal
Put more weight on on-site manager’s appraisal than to an off-site manager’s appraisal
Be cognizant of the nationality of the appraising manager
Rely on former expatriates to help reduce bias
Home-office managers should be consulted before foreign on-site managers complete formal termination evaluations limits the bias from cultural misunderstanding.
National differences in compensation
There is a wide gap among executive compensations across various countries
What is appropriate?
• Expatriate Pay
= Base Salary
+ Foreign Service Premium
+ Allowances (hardship, housing, cost of living, education)
+ Differences in tax rates
+ Differences in benefits
International labor relations
Firms need to be cognizant about differences in labor rules across countries
Examples:
• Working hours/week
• Style of management
• Others?
Global Human Resource Management
Exercise
You are executive directors at Wal-Mart, Coca-
Cola, and Wipro, and are planning your international expansion strategy into Russia,
Brazil, and Southeast Asia. How will you staff your senior management positions?
• What strategy do you plan to take?
• What staffing strategy approach would your take? What are the pros and cons of the strategy that you decide upon?
• List the qualities that you seek in your ideal candidate. Draft his/her resume
• How would you propose to evaluate his/her performance?
• What compensation package would you propose?
• Would you provide any special training for the new manager?
