Human Resource Management
(HRM)
• Refers to the activities an organization carries out to use its human resources effectively
•
Four major tasks of HRM
Staffing policy
Management training and development
Performance appraisal
Compensation policy
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• Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls
•
Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems
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• Staffing policy
Selecting individuals with requisite skills to do a particular job
Tool for developing and promoting corporate culture
•
Types of Staffing Policy
Ethnocentric
Polycentric
Geocentric
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•
Key management positions filled by parent-country nationals
•
Best suited to international businesses
•
Advantages:
Overcomes lack of qualified managers in host nation
Unified culture
Helps transfer core competencies
•
Disadvantages:
Produces resentment in host country
Can lead to cultural myopia
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• Host-country nationals manage subsidiaries
•
Parent company nationals hold key headquarter positions
• Best suited to multi-domestic businesses
• Advantages:
Alleviates cultural myopia
Inexpensive to implement
Helps transfer core competencies
• Disadvantages:
Limits opportunity to gain experience of host country nationals outside their own country
Can create gap between home and host country operations
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• Seek best people, regardless of nationality
•
Best suited to global and trans-national businesses
• Advantages:
Enables the firm to make best use of its human resources
Equips executives to work in a number of cultures
Helps build strong unifying culture and informal management network
•
Disadvantages:
National immigration policies may limit implementation
Expensive to implement due to training and relocation
Compensation structure can be a problem
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• Expatriate: citizens of one country working in another
Expatriate failure: premature return of the expatriate manager to his/her home country
• Cost of failure is high: estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)
•
Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer
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• US multinationals
Inability of spouse to adjust
Manager’s inability to adjust
Other family problems
Manager’s personal or emotional immaturity
Inability to cope with larger overseas responsibilities
• European multinationals
• Inability of spouse to adjust
• Japanese Firms
Inability to cope with larger overseas responsibilities
Difficulties with the new environment
Personal or emotional problems
Lack of technical competence
Inability of spouse to adjust
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• Reduce expatriate failure rates by improving selection procedures
• An executive’s domestic performance does not
(necessarily) equate to his/her overseas performance potential
• Employees need to be selected not solely on technical expertise, but also on cross-cultural fluency
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• Self-Orientation
Possessing high self-esteem, self-confidence and mental well-being
• Others-Orientation
Ability to develop relationships with host country nationals
Willingness to communicate
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• Perceptual Ability
The ability to understand why people of other countries behave the way they do
Being nonjudgmental and flexible in management style
•
Cultural Toughness
Relationship between country of assignment and the expatriate’s adjustment to it
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• Training: Obtaining skills for a particular foreign posting
Cultural training: Seeks to foster an appreciation of the host country’s culture
Language training: Can improve expatriate’s effectiveness, aids in relating more easily to foreign culture, and fosters a better firm image
Practical training: Ease into day-to-day life of the host country
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• Development: Broader concept involving developing manager’s skills over his or her career with the firm
Several foreign postings over a number of years
Attend management education programs at regular intervals
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• A critical issue in the training and development of expatriate managers is preparing them for reentry into their home country
•
Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers
•
Research shows that there is a problem with the repatriation process
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Repatriation of Expatriates
Didn’t know what position they hold upon return.
Firm vague about return, role and career progression .
Took lower level job.
Leave firm within one year.
Leave firm within three years
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10 20 30 40 50 60 70 percent
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• Development programs designed to increase the overall skill levels of managers through:
Ongoing management education
Rotation of managers through a number of jobs within the firm to give broad range of experiences
• Used as a strategic tool to build a strong unifying culture and informal management network
•
Above techniques support transnational and global strategies
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• Problems:
Unintentional bias
• Host nation biased by cultural frame of reference
• Home country biased by distance and lack of experience working abroad
•
Expatriate managers believe that headquarters unfairly evaluate and under-appreciate them
•
In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career
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• More weight should be given to on-site manager’s evaluation as they are able to recognize the soft variables
•
Expatriate who worked in same location should assist home-office manager with evaluation
•
If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal evaluation
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• Two issues:
Pay executives in different countries according to the standards in each country or equalize pay on a global basis
Method of payment
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Compensation in Various
Countries
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• Typically use balance sheet approach
Equalizes purchasing power to maintain same standard of living across countries
Provides financial incentives to offset qualitative differences between assignment locations
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• Base Salary
Same range as a similar position in the home country
•
Foreign service premium
Extra pay for work outside country of origin
•
Allowances
Hardship, housing, cost-of-living, and education allowances
•
Taxation
Firm pays expatriate’s income tax in the host country
•
Benefits
Level of medical and pension benefits identical overseas
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• Key Issue
Degree to which organized labor can limit the choices of an international business
• Aims to foster harmony and minimize conflicts between firms and organized labor
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• Multinational can counter union bargaining power with threats to move production to another country
•
Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants
Easy to switch locations if economic conditions warrant
Bargaining power of organized labor is reduced
• Attempts to import employment practices and contractual agreements from multinational’s home country
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• Attempts to establish international labor organizations
• Lobby for national legislation to restrict multinationals
• Attempts to achieve international regulations on multinationals through such organizations as the
United Nations
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