international human
resource management
and labor relations
international business, 5th edition
chapter 18
Chapter main elements
• the Strategic Role of International HRM
• Staffing Policy
• Training and mgt development
• Performance appraisal
• Compensation
• International labor relations
20-2
The strategic role of HRM
• Research says that profitability
requires a strong fit between HR
practices and strategy.
• Look at figure 19.1 you find that
people are in the center. The culture
and the incentive systems are very
much related.
20-3
The strategic role of HRM
• Competitive advantage can be
obtained through people.
• People need to be selected
developed and trained, and
retained. This is the strategic role of
the HRM and to align this with the
enterprise strategy.
20-4
The strategic role of HRM
• How do we align strategy with
HRM?
• Localization strategy must be
aligned with quality HRM strategy.
• Global strategy – experience curve
and location economies.
20-5
• Transnational strategy- requires
different alignment.
The strategic role of HRM
• Transnational strategy requires
strong corporate culture and
informal mgt network for
transmitting information and
knowledge within the org.
20-6
Staffing policy
• Some times called recruitment
policy: the selection of employees
for a particular job.
• But staffing policy can also manage
the corporate culture- norms and
value system. Strong corporate
culture can help implement the
strategy of the firm.
20-7
Staffing policy
• At GE candidates are accepted
according to their behavioural
styles, beliefs, and value system
that are consistent with GE.
• Some researchers find that you can
bring ordinary people but the smart
thing is in managing them to get an
extraordinary outcomes.
20-8
Types of staffing policy
1- the ethnocentric approach: home country
nationals.
Why
1- lack of qualified individuals at host country.
2- a way to keep a unified corporate culture
20-9
Types of staffing policy
• 3- transferring core competencies to a foreign
operation which requires transferring parent
country nationals. Example, transferring Mkt
competencies. Tacit knowledge cannot be
transferred.
• Some countries like the expatriates for their
know-how and think that they could me more
professional than locals
20-10
Types of staffing policy
• 2- the polycentric approach- requires host
country nationals to be recruited to manage
subsidiaries.
This approach is less expensive and avoids
cultural misunderstandings.
More adaptive and responsive to local needs and
culture.
Drawback: the gap between home and host
country managers in language and
competencies.
20-11
Types of staffing policy
• Drawback of Polycentric approach:
the gap between home and host
country managers in language and
competencies.
• This approach is good for a
localization strategy. Not any other
strategy.
20-12
Types of staffing policy
• The third approach: Geocentric:
seeks the best people for key jobs
throughout the organization
regardless of nationality. See the
opening case. Good for global
standardisation and transnational
strategies.
20-13
Types of staffing policy
• Geocentric seems to be most attractive strategy.
• Tata Group US and UK managers.
• Sony in 2005 hired Howard Stringer a former president of
CBS.
• One study: 24% of the top 100-250 managers in US
companies are from outside US
• European companies: 40% from outside Europe.
• Can you apply this approach here in KSA.
• Which approach is available. You can add this in your
project. See table 18.1
20-14
Types of staffing policy
• Look at expatriate failure rates in
Figure 18.2
• Fail to adjust, family, weather,
culture....etc.
• Is it a selection failure?
• Cost of return expatriates is high.
20-15
Types of staffing policy
To solve the above problem:
Be extra careful in selection.
Four dimensions to predict success in foreign posting.
1. Self-orientation- adjust the self
2. Others-orientation- adjust with others- social dimension.
3. Perceptual ability- understand that others are different.
4. Cultural toughness – related to the toughness of the
posting and the posting is culture-related. Working
conditions in India are different than Canada for example.
20-16
Types of staffing policy
• Do you have a global mindset?
If so this means you can adjust.
Open to the world?
In the selection stage, we have to test
managers ability to have this global mind
set. Selecting people just based on their
technical expertise is not adequate.
20-17
Second Training and Mgt
development
• Training for expatriate managers
1.Cultural training
2.Language training
3.Practical training
Repatriation- prepare for re-entry into
their home-country org.
20-18
Second Training and Mgt
development
• Mgt development and strategy.
• Very important for the transnational
strategy and the need for local
responsiveness.
20-19
Performance Appraisals
• You need to be very careful in evaluating
expatriates performance
Don't ask employees for help in India!
It will affect your evaluation.
Bias is a big problem
Performance evaluation must be objective
with clear guidelines and criteria.
20-20
Compensation
• National differences
• Expatriate pay
20-21
International labour relations
• Organized labour
• The strategy
• Approaches to labour relations
20-22
Chapter Objectives 2
• Discuss how international firms conduct
performance appraisals and determine
compensation for their expatriate
managers
• Analyze retention and turnover issues in
international business
• Explain basic human resource issues
involving nonmanagerial employees
20-23
Human Resource Management
• HRM is
the set of activities directed
at
attracting,
developing,
and
maintaining the effective workforce
necessary
to
achieve
a
firm’s objectives.
• This chapter deals with HRM activities
as they primarily apply to managers in
the company with international
operations.
20-24
•
HRM is more difficult for the international
company than for domestic companies.
•
Differences in cultural, legal, economic,
..etc are responsible for that.
•
These forces may force companies to
customize its hrm. practices.
international business, 5th edition
IHRM process 2
•
Research indicates that there is positive
relationship between HRM processes and
performance.
•
HRM strategy should be designed in a
way that promotes overall corporate
strategy and business strategies.
•
For instance, if the company is using a
cost leadership strategy it may shift
production to a low-cost labor country.
international business, 5th edition
Strategic Significance of
HRM
Figure 20.1 The International Human
Resource Management Process
HRM’s Strategic Content
Recruitment and Selection
Training and Development
Performance Appraisal
Compensation and Benefits
Labor Relations
20-27
Contribution to Organizational Effectiveness
•
Staffing is related to the process by
which the company assigns the most
appropriate candidate.
•
Strategic and developmental issues
are more important for managerial
employees whereas cultural and legal
conditions may be of greater
importance
for
nonmanagerial
workers.
international business, 5th edition
International Staffing Needs
International Staffing Needs
Managerial/Executive
employees
Nonmanagerial
employees
20-29
•
Type of the organization structure
depends on level of international
involvement.
•
For instance, the company is likely to
have an export department at the
beginning. The manager is likely to be
a citizen of the home country.
•
As the firm grows it is likely to have
an international division. Then global
organization.
international business, 5th edition
Scope of
Internationalization
Scope of Internationalization
Export department
International division
Global organization
20-31
Centralization versus
Decentralization of Control
• Firms can use centralized or decentralized
approach
• Centralized firms
– Favor home country managers
– Most common amongst international division
form
• Decentralized firms
– Favor host country managers
– Most common amongst multidomestic firms
20-32
Staffing Philosophy
Parent
country nationals
(PCN)
Host country
Nationals
(HCN)
20-33
Third country
Nationals
(TNC)
PCNs
• Are residents of the international
business’s home country who are
transferred to one of its foreign
operations.
20-34
Advantage of the PNCs
• Communications and coordination
with corporate headquarters is
typically facilitated when PCNs are
employed because they normally
share a common culture and
education background with
headquarters’ staff.
20-35
Disadvantage of PCNs
• PCNs may, however, lack knowledge of
local laws, culture, economic conditions,
social structure, and political processes.
Moreover, they may be expensive to
relocate and maintain in the host country.
In addition, because a host country may
impose restrictions on the number of
employees that can be transferred, a
company may not have the freedom to
hire whom it wants.
20-36
HCNs
• Host country nationals (HCNs)
are residents of the host country,
and are the most common choice
for mid-level and lower-level jobs.
But they also appear in managerial
and professional positions.
20-37
Advantage of HCNs
• Employing HCNs is popular because they are
already familiar with local laws, culture, and
economic conditions.
• HCNs may be cheaper than PCNs because a
firm can avoid the costs such as relocation
expenses that are associated with PCNs.
20-38
Disadvantage of HCNs
• because an HCN may not be
familiar with the firm’s corporate
culture nor its business practices, a
company could lose out on
opportunities.
20-39
TCNs
• Third country nationals (TCNs) are
citizens of neither the firm’s home
country nor of the host country.
• TCNs are most likely to be employed in
upper-level or technical positions.
• TCNs and PCNs are collectively known
as expatriates (people working and
residing in countries other than their
native country).
20-40
Strategies for Staffing
• Ethnocentric staffing model : It fills all
key management positions with home-country
nationals.
• Polycentric staffing model: HCNs are
used upon the belief that HCNs know the local
market best.
• Geocentric staffing model: firms that
want to hire the most qualified person for the
job, regardless of the individual’s nationality.
20-41
•
The firm must define the business skills
necessary to do the job.
•
Skills can be divided into two types:
those needed to do the job and those
needed to work in a foreign market.
•
The technical skill is an example of the
first and adaptation is an example of the
second.
international business, 5th edition
Recruitment and Selection
Figure 20.2 Necessary Skills and Abilities
for International Managers
Skills and Abilities
Necessary to Do
the Job
Skills and Abilities
Necessary to Work
in a Foreign Location
•Technical
•Functional
•Managerial
•Adaptability
•Location-specific skills
•Personal characteristics
Improved Chances of Succeeding in
an International Job Assignment
20-43
•
Once skills are determined a pool of
qualified applicants should be
developed to select from.
•
Companies may recruit those who
have previous experience in the firm
or somewhere else.
•
Or the company may recruit new
college graduates and prepare them
for overseas assignments.
international business, 5th edition
Recruitment of Managers
Recruitment of Managers
Experienced
Managers
Experienced managers can
be recruited from within the firm
itself or from other firms
20-45
.
Younger
Managers
Hiring graduates with the intention of
sending them abroad in the future.
•
Once the pool is developed we must
decide which persons from the pool are
qualified.
•
Most promising
have/be
candidates
tend
•
Managerial
Adaptive.
•
Appropriate training(education,knowledge..etc)
•
Adaptability of new situations
competence,
Appropriate
to
training,
international business, 5th edition
Selection
•
Selection is important because failure is
costly.
•
Expatriate failure is the early return of the
expatriate mangers to the home country.
•
Expatriate failure is caused by:
•
Inability of the manager or the spouse
to adjust to the new life.
•
Lack of motivation and interest in the
foreign assignment.
international business, 5th edition
Selection 2
•
Expatriates may
culture shock.
•
It is the frustration that results when
having to learn and cope with a
vast array of cultural cues and
expectations.
•
When the manager is brought back
home after a foreign assignment is
completed(repatriation) he might
experience a reverse culture shock.
experience
a
international business, 5th edition
Expatriation and Repatriation
issues
Figure 20.3 Phases in Acculturation
Honeymoon
Disillusionment
Adaptation
Biculturalism
20-49
Honeymoon Phase
• New culture seems exotic and
stimulating
• Excitement of working in new
environment makes employee
overestimate ease of adjusting
• Lasts for first few days or months
20-50
Disillusionment Phase
• Differences between new and old
environments are blown out of
proportion
• Challenges of everyday living
• Many stay stuck in this phase
20-51
Adaptation Phase
• Employee begins to understand
patterns of new culture
• Gains language competence
• Adjusts to everyday living
20-52
Biculturalism
• Anxiety has ended
• Employee gains confidence in ability
to function productively in new
culture
• Repatriation may be difficult
20-53
Overseas Success
• Likelihood of managers being successful at
overseas assignment increases if the
managers
– Can freely choose whether to accept or reject the
assignment
– Have been given a realistic preview of the job and
assignment
– Have been given a realistic expectation of what
their repatriation assignment will be
– Have a mentor back home who will guard their
interests and provide support
– See a clear link between the expatriate assignment
and their long-term career path
20-54
•
To be competitive firms should provide
prevailing compensation packages for
their managers.
•
The packages usually include salary and
non-salary items.
•
Factors that determine compensation
include:
•
Supply and demand forces.
•
Standard of living
•
Occupational stutas
•
Regulations and taxes
international business, 5th edition
Compensation
•
MNCs find it necessary to provide expatriate
managers with compensation that makes up
the differences in currency valuation,
standard of living..etc.
•
This adjustment is important when a
manager is transferred from low-cost country
or location to high-cost location.
•
In addition to the base salary other
allowances
or
components
of
the
compensation package are included(next
slide).
international business, 5th edition
Compensation 2
Compensation Packages
Cost-of-living allowance
may be given to managers to offset differences
in the cost of living in the home and host countries.
Hardship premium
may be paid to mangers that accept assignments
in relatively unattractive locations.
Tax equalization system
means of ensuring that the expatriate’s after-tax
income in the host country is similar to what the person’s
after-tax income would be in the home country.
20-57