INTERNATIONAL
MANAGEMENT
GLOBAL
Business and People
Management
Professor H. Michael Boyd, Ph.D.
Professor H. Michael Boyd, Ph.D.
Chapter Fourteen
Human Resource Selection
and Development Across
Cultures
McGraw-Hill/Irwin
Copyright © 2012 by The McGraw-Hill Companies, Inc. All Rights Reserved.
The Importance of
International Human Resources
 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
14-6
How Companies Are Responding
to the Economic Crisis
14-7
Sources of Human Resources
 MNCs can use four basic sources for filling
overseas positions
1. 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
14-8
Sources for Human Resources
2.
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
14-9
Sources for Human Resources
3.
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.
 These managers are hired because they have the
necessary expertise for the job
 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

MNCs can subcontract or outsource to take advantage
of lower human resource costs and increased flexibility
14-10
Selection Criteria for
International Assignments
International selection criteria
 Factors used to choose personnel for international
assignments.
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.
14-11
Selection Criteria for
International Assignments

Adaptability

Education

Independence

Knowledge of local language

Self-reliance

Motivation

Physical & emotional health

Support of spouse & children

Age

Leadership

Experience
14-12
Reasons MNCs Look
Abroad for Workforce
14-13
Skills MNCs Seek
Within Countries
14-14
Rank of Criteria
in Expatriate Selection
14-15
Selection Criteria for
International Assignments
 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-to-day
activities
14-16
Activities That Are Important
for Expatriate Spouses
14-17
Selection Criteria for
International Assignments
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?
Does my spouse and family support the decision to go
international?
14-18
Selection Criteria for
International Assignments
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
14-19
Selection Criteria for
International Assignments
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
14-20
Economic Pressures and Trends
in Expat Assignments
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
14-21
International Human Resource
Selection Procedures
 Anticipatory Adjustment
 Training
 Previous experience
 In-country Adjustment
 Individual’s ability to adjust effectively
 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
 Clarity of expatriate’s role in the host management team
 Expatriate’s adjustment to the organizational culture
 Non-work matters
14-22
The Relocation Transition Curve
14-23
Relative Cost of Living
in Selected Cities
14-24
Firing Employees
H. Michael Boyd, Ph.D.
25
14-25
European Labor Cost
H. Michael Boyd, Ph.D.
26
14-26
Compensation
 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?
14-27
Compensation
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,
lump-sum premium
14-28
Compensation
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
14-29
Employer Incentive Practices
Around the World
14-30
Compensation
 Tailoring the compensation package
 Balance-sheet approach
 Ensure the expatriate doesn’t lose money on the assignment
 Complementary 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
14-31
Individual and Host Country
Viewpoints
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
14-32
Repatriation of Expatriates
 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
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
14-33
Repatriation of Expatriates
 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
14-34
Human Resource Management
Practices in Select Countries
14-35
Training in
International Management
 Training
 The process of altering employee behavior and
attitudes in a way that increases the probability of
goal attainment.
 There are four management philosophies on
training
1. Ethnocentric MNC
 Stresses nationalism and often puts home-office people
in charge of key international management positions.
14-36
Training in
International Management
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.
14-37
Training in
International Management
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
14-38
Types of Training Programs
Standardized 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.
14-39
Types of Training Programs
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
14-40
Future Trends
A critical issue for international human
resources in the coming decades is linking
talent management and employee mobility
Another issue is the emergence of crossborder commuters
A third issue is the rise and growth of
emerging markets
14-41
Group Exercise:
The EXPATRIATE
You are an American Executive in the
computer industry.
You currently manage a manufacturing
division for the company in Santa Clara,
California, USA. The division has 1000
employees.
You have been offered the opportunity to
manage the company’s manufacturing division
in Seoul, South Korea. That division also has
1000 employees.
14-43
This is a career development opportunity that you
want. It will enhance your experience and future
career growth.
The company expatriate policy is to select people
for foreign assignments that understand the people
managing differences required for success; and to
financially, and in lifestyle keep them whole while
maintaining competitive compensation and lifestyle.
You must describe the key cultural differences
between the United States and Korea; and:
List how each cultural difference will require a
different treatment of employees (U.S. versus
Korea)
14-44
What are the key cultural
differences in South Korea?
Cultural Factor:
The United
States:
Seoul:
RELIGION
Education
Economics
Politics
Family
Class Structure
Languages
History
Natural Resources/
Geography
14-45
How will you have to manage differently
because of those differences?
1.
2.
3.
4.
5.
6.
7.
.
.
.
.
.
.
.
14-46
COMPENSATION
The company has asked how you should be
compensated in order to make sure you are
kept “whole” and that your compensation is
competitive.
You must present a rationale and specific
amounts and items that you believe you
should receive
14-47
Total Compensation Comparison
Item
US—Your current cost
What you should get in
Seoul
Base Salary
Bonus / Incentive Pay /
stock
Health care
Pension plans
Vacation
Personal time off
Recreation/health
Housing
Transportation
Living Expenses
14-48
INTERNATIONAL MANAGEMENT -- GROUP EXERCISE.
TOTAL COMPENSATION FOR EXPATRIOT EMPLOYEE in KOREA:
Total Compensation for employee if based in the U.S. :
Direct payments
$0
$0
U.S
Korea
$0
$0
Korea
Support for Adjustment at Foreign Assignment
Base Salary (annual - in U.S.)
Home Leave (every 4-8 weeks)
Annual Bonus (in U.S)
Personal Security
Incentive pay / Stock / etc.
Car / Driver
Pension plans
Domestic Help
Vacation
Spouse Employment
Personal time off
Child care Provider
Recreation/health
Language / translation services
Housing
Cultural training
Transportation
Repatriation assistance
Health care
Social Club fees
Tax Reduction / equalization
Imported food and other goods
$0
Home Furnishing Allaowance
Education Allowance
Hardship Premium
Goods and services Differential
Temporary Living Allowance
Assignment completion bonus
Extension Bonus
Help Renting U.S. Home
14-49
14-50