International Human
Resources Management
The Challenges of Human Resources Management
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1–1
Chapter Objectives
After studying this chapter, you should be able to
LEARNING OUTCOME 1
Explain the economic, political, and cultural factors in
different countries that HR managers need to consider.
LEARNING OUTCOME 2
Identify the types of organizational forms used for
competing internationally.
LEARNING OUTCOME 3
Explain how domestic and international HRM differ.
LEARNING OUTCOME 4
Discuss the staffing process for individuals working internationally.
LEARNING OUTCOME 5
Identify the unique training needs for international assignees
and their local employees.
LEARNING OUTCOME 6
Identify the characteristics of a good international compensation plan.
LEARNING OUTCOME 7
Reconcile the difficulties of home- and host-country
performance appraisals.
LEARNING OUTCOME 8
Explain how labor relations differ around the world.
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The Global Environment
• Global Similarities
1. Free trade
2. Service-based business
3. Integrated technology platforms
• Global Differences




Political and cultural differences
Property rights are poorly protected
Civil unrest
Intellectual property rights have been little protected
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Managing Across Borders
• International corporation
– Domestic firm that uses its
existing capabilities to move
into overseas markets.
• Global corporation
– Firm that has integrated
worldwide operations through
a centralized home office.
• Multinational corporation • Transnational corporation
– Firm that attempts to balance
(MNC)
– Firm with independent
business units operating in
multiple countries.
local responsiveness and
global scale via a network of
specialized operating units.
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Types of Organizations
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Domestic versus International HRM
• Issues in international HRM in helping
employees adapt to a new and different
environment outside their own country:



Relocation
Orientation
Translation services
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Staffing Internationally
• Expatriates, or Home-country Nationals

Employees from the home country who are
on international assignment.
• Host-country Nationals

Employees who are natives of the host country.
• Third-country Nationals

Employees who are natives of a country other
than the home country or the host country.
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Changes in International Staffing over Time
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Recruiting Internationally
• Work Permit, or Visa

Government document granting a foreign individual
the right to seek employment.
• Guest Workers

Foreign workers invited to perform needed labor.
• Apprenticeships

Vocational training programs in skilled trades.
• Transnational Teams

Teams composed of members of multiple nationalities
working on projects that span multiple countries.
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Selecting Employees Internationally
• Selecting employees in a foreign country
environment can be difficult

Get to know the local market and customs in hiring

In India, much of the effective hiring was done through
family ties and friendship networks

To better understand the local market there are a few
things firms can do
– International HR managers should get to know the
universities, technical school’s, and primary schools
in the area
– International HR managers should develop network
in the business and government communities
– International HR managers must understand the
employees of the firm’s competitors
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Selecting Global Managers
• Global Manager

A manager equipped to run an international business
• Skills Categories for Global Managers






Ability to seize strategic opportunities
Ability to manage highly decentralized organizations
Awareness of global issues
Sensitivity to issues of diversity
Competence in interpersonal relations
Community-building skills
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Selecting Global Managers (cont.)
1. Begin with self-selection.
2. Create a candidate pool.
3. Assess core skills.
•
Skills considered critical to an employee’s
success abroad.
4. Assess augmented skills and attributes.
•
Skills helpful in facilitating the efforts of
expatriate managers
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Skills of Expatriate Managers
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Expatriate Selection Criteria
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Causes of Expatriate Assignment Failure
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Expatriate Adjustment Factors
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Training and Development
• Essential training program content to prepare
employees for working internationally:





Language training
Cultural training
Assessing and tracking career development
Managing personal and family life
Repatriation
• Culture shock

Perpetual stress experienced by people who
settle overseas.
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Content of Training Programs
• Those working internationally need to know as
much as possible about:



The country where they are going, that
country’s culture
That country’s culture, and
The history, values, and dynamics of their
own organizations
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Preparing for an International Assignment
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Cultural Training
• Reviewing available information about the host
company: books, magazines, video tapes.
• Conversations with host country natives.
• Sensitivity training to become familiar with
the customs and overcome prejudices.
• Temporary assignments to encourage
shared learning.
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Assessing and Tracking Career Development
• Developmental and Career Advantages of an
International Assignment:

Increases the expatriate’s responsibilities and
influence within the corporation

Provides a set of unique experiences beneficial to
both the individual and the firm

Enhances understanding of the global marketplace

Offers the opportunity to work on a project important
to the organization
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Selected Foreign-Born Executives
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Compensation
• Different countries have different norms for
employee compensation:

Financial (money) incentives versus nonfinancial incentives
(prestige, independence, and influence)

Individual rewards versus collectivist concerns for internal
equity and personal needs

General rule:
– Match the rewards to the values of the local culture—create
a pay plan that supports the overall strategic intent of the
organization but provides enough flexibility to customize
particular policies and programs to meet the needs of
employees in specific locations.
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Compensation of Host-Country Employees
• Hourly wages can vary dramatically from country
to country.
• Pay periods are different.
• Seniority may be an important factor.
• High pay rates can upset local
compensation practices.
• Bonuses, profit-sharing, benefits and paid leave
may be more extensive and legally required.
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Compensation of Host-Country Managers
• Global Compensation System

A centralized pay system whereby host-country
employees are offered a full range of training
programs, benefits, and pay comparable with a firm’s
domestic employees but adjusted for local differences
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Compensation of Expatriate Managers
• An effective international compensation program must:
1. Provide an incentive to leave the United States
2. Allow for maintaining an American standard of living
3. Provide for security in countries that are politically unstable or present
personal dangers
4. Include provisions for good health care
5. Reimburse the foreign taxes the employee is likely to have to pay (in
addition to having to pay domestic taxes) and help him or her with tax
forms and filing
6. Provide for the education of the employee’s children abroad, if necessary
7. Allow for maintaining relationships with family, friends, and business
associates via trips home and other communication technologies
8. Facilitate the expatriate’s reentry home
9. Be in writing
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Compensation of Expatriate Managers (cont.)
• Home-Based Pay

Pay based on an expatriate’s home country’s
compensation practices
• Balance-Sheet Approach

A compensation system designed to match the
purchasing power in a person’s home country
1. Calculate base pay
2. Figure cost-of-living allowance (COLA)
3. Add incentive premiums
4. Add assistance programs
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Compensation of Expatriate Managers (cont.)
• Split Pay

A system whereby expatriates are given a portion of
their pay in the local currency to cover their day-to-day
expenses and a portion of their pay in their home
currency to safeguard their earnings from changes in
inflation or foreign exchange rates
• Host-Based Pay

Expatriate pay is comparable to that earned by
employees in a host country to which the expatriate
is assigned.
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Compensation of Expatriate Managers (cont.)
• Localization


Adapting pay and other compensation benefits
to match that of a particular country
Reduces resentment among local staff members
if they are earning significantly less.
• Other Issues



Adequacy of medical care
Personal security
Compensation policies of competitors
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Performance Appraisal
• Who Should Appraise Performance?


Home-country evaluations
Host-country evaluations
• Home versus Host-Country Evaluations

Local managers with daily contact with the person are more likely to
have an accurate picture of his or her performance.
• Performance Criteria – five steps:
1. Defining the assignment’s objectives.
2. Agreeing on the quantifiable measurements for the assignment.
3. Developing an equation that converts qualitative behavior into
quantifiable measurements.
4. Evaluating the expatriate’s performance against these measurements.
5. Calculating the ROI. This can be a complex cost accounting or a simple
calculation to see if the expatriate covered the cost of keeping them on
assignment.
•
Providing Feedback
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36
The Labor Environment Worldwide
• International Differences in Unions:






The level at which bargaining takes place
(national, industry, or workplace)
The degree of centralization of
union-management relations
The scope of bargaining (parties and issues)
The degree to which government intervenes
The degree of unionization and union strength
The political affiliations of unions
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Collective Bargaining in Other Countries
• Collective Bargaining in Other Countries

When we look at other countries, wefind that the
process can vary widely, especially with regard to
the role of government.
• International Labor Organizations


The most active of the international union
organizations has been the International Trade
Union Confederation (ITUC), which has its
headquarters in Brussels.
Another active and influential organization is the
International Labour Organization (ILO), a specialized
agency of the United Nations created in 1919.
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Labor Participation in Management
• Labor Participation in Management



In many European countries, provisions for employee
representation are established by law.
A higher form of worker participation in management is
found in Germany, where representation of labor on
the board of directors of a company is required by law.
This arrangement is known as codetermination
• Each of these differences makes managing
human resources in an international context
more challenging.
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Key Terms
•
•
•
•
•
•
•
•
•
•
•
•
•
•
augmented skills
balance sheet approach
codetermination
core skills
cultural environment
culture shock
expatriates, or home-country
nationals
failure rate
global compensation system
global corporation
global manager
guest workers
home-based pay
•
•
•
•
•
•
•
•
•
•
•
•
host-based pay
host country
host-country nationals
international corporation
localization
multinational corporation
(MNC)
repatriation
split pay
third-country nationals
transnational corporation
transnational teams
work permit, or visa
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36
Chapter 15 - Learning Outcomes
Learning Outcome Statements
Related Outcomes from Body of the Text
1
Explain the economic, political, and cultural factors in
different countries that HR managers need to
consider.
What environmental factors should Quiznos consider in its move to Kuwait? How do
economics, politics, and culture impact the way Quiznos manages its employees in Kuwait?
2
Identify the types of organizational forms used for
competing internationally.
If you were a global HR manager, you would want to make sure your HR practices match the
structure of the organization. What is the ideal organizational structure in a global
environment?
3
Explain how domestic and international HRM differ.
What is the best way to make HR practices transnational?
4
Discuss the staffing process for individuals working
internationally.
Why would PepsiCo want to send as few U.S.-based managers as possible to run operations
in Peru?
5
Identify the unique training needs for international
assignees and their local employees.
If you were going to send a new manager to South Korea, what specific types of training would
you provide her before she left?
6
Identify the characteristics of a good international
compensation plan.
Should compensation packages be equal across the world, or should they be adapted to the
local cultures and economies?
7
Reconcile the difficulties of home- and host-country
performance appraisals.
Assume you are working for GE in Afghanistan. The power often goes out in your building,
business deals take longer than in the United States, and you experience a great amount of
stress due to the unstable political environment. Would you want your performance to be
assessed in relation to the difficulty of doing business in Afghanistan?
8
Explain how labor relations differ around the world.
Do you think there should be some international standard for labor rights? If so, what should
that standard be and how should it be enforced?
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41 of 41
36