chapter fourteen
Human Resource Selection and
Development Across Cultures
McGraw-Hill/Irwin
Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
Chapter Outline
• Sources of human resources
• Selecting managers for overseas
assignments
• Compensation
• Repatriation
14-2
Sources of Human Resources
•
•
•
•
•
Home country nationals
Host country nationals
Third-country nationals
Inpatriates
Offshore outsourcing
14-3
Home-country Nationals
• Are citizens of the country where the MNC is
headquartered but live & work elsewhere
• Often used
– To start up operations (most common reason)
– To provide technical expertise
– To help the MNC maintain financial control over
the operation
– In top management positions
– to give promising home-country managers
international experience
14-4
Host-country Nationals
• Citizens of the country where they live & work
• They are familiar with the culture and know the
language
• They can often do a better job than home-country
nationals
• They are less expensive than home-country personnel
• Host-country governments often prefer use of hostcountry nationals and some require it
• Hiring them is good public relations
• U. S. companies tend to rely heavily on host-country
nationals
14-5
Third-country Nationals
• People who are citizens of neither the home
country or the host country
– Example: A Mexican, employed by an American
company, working in Argentina
– The employee's native country and the country
where he works are often in the same geographic
region
14-6
Advantages of Third-Country Nationals
• They often require less compensation than homecountry nationals
• If they are from the same geographic region as the
host country and also know the company's culture,
they can often achieve objectives better than other
types of managers
• Have cross-cultural skills
• Provide a global or transnational image
14-7
Inpatriates
• Persons who work in the home country and
are citizens of a different country
• Advantages of inpatriates
– Help to develop global core competencies
– Provide diversity and an international perspective
in the home office
– Improve career opportunities for company
managers who are not from the home country
14-8
Expatriate
• Any person who lives and works outside the
country of which he/she is a citizen
• Includes home-country nationals, thirdcountry nationals, and inpatriates
• In most cases, expatriates must have work
visas from the government of the country
where they live and work
– Citizens of one EU country can live and work in
other EU countries (There are some restrictions
on citizens of new EU member countries.)
14-9
Offshore Outsourcing
Home Country Perspective
• Buying goods or services from a firm in one country for
use in another
• Can significantly reduce overhead & labor costs
• Quality and timeliness are sometimes problems
• Can create public relations problems in the home
country
– Job losses in the home country
– Abuse of foreign workers by overseas contractors
• Liability issues from unsafe products
14-10
Outsourcing: Corporate Viewpoint
Looking Abroad for a Workforce
14-11
Skills MNCs Seek Within Countries
14-12
Selecting Managers
for Overseas Assignments
• Overview of selection criteria
• Adaptability to cultural change
• Willingness to take an overseas
assignment
• Selection procedures
14-13
Criteria for Selecting Managers
for International Assignments

Adaptability

Education

Independence


Self-reliance
Knowledge of local
language

Motivation

Support of spouse &
children

Leadership



Physical & emotional
health
Age
Experience
14-14
Expatriate Selection Criteria
14-15
Adaptability to Cultural Change
• Work experiences with cultures other than
one’s own
• Previous overseas travel
• Knowledge of foreign languages
• Recent immigration background or heritage
• Ability to integrate with different people,
cultures, and types of business organizations
14-16
Adaptability to Cultural Change (2)
• Ability to sense and accurately evaluate
events in the host country
• Ability to solve problems within different
frameworks and perspectives
• Sensitivity to differences of culture, politics,
religion, and ethics
• Flexibility in managing operations on a
continuous basis despite lack of assistance
and gaps in information
14-17
Willingness to Take an
Overseas Assignment
• Unmarried employees are more willing
than other groups to work overseas.
• Married employees with teenage children
are usually the least willing to work
overseas.
• Employees with prior international
experience are more likely to accept an
overseas assignment.
14-18
Willingness to Take an
Overseas Assignment (2)
• People who are most committed to their
careers are more likely to work overseas
• Careers and attitudes of spouses have a
significant impact on employee
willingness to work overseas.
• Employee and spouse perceptions of
company support are crucial to
employee willingness to work overseas.
14-19
Selection Procedures
• Both technical competence and adaptability should be
considered
• Interviews are a common selection tool.
– Both the employee and the spouse may be
interviewed
– Home-country and host-country interviewers may
be used
• Psychological testing of the employee
– Used less often than interviews
– Many managers believe that interviews are more
effective than testing.
14-20
Compensation
• Compensation overview
• Compensation details
• Compensation approaches
14-21
Common Elements of
Compensation Packages
• Compensating expatriates can be
difficult because there are many
variables to consider
• Most compensation packages are
designed around four common elements:
• Allowances
Taxes
•
Base Salary
Benefits
14-22
Compensation Details
Base Salary
• Base salary: the amount of money that an
expatriate would receive for doing the same
job in the home country
– Used as a basis to establish salary in the host
country
– Salary may be paid in home country currency, host
country currency, or a combination of the two
14-23
Compensation Details
Benefits
• Benefits: a substantial portion of expatriate
compensation
– Is the home country or the host country responsible
for the expatriate's social security benefits?
– Should home-country benefits programs be
available to host-country nationals?
14-24
Compensation Details
Allowances
• Allowances
– Relocation allowance
– Cost-of-living allowances are paid when the
employee must incur extra costs that he
would not pay in the home country
• Examples: housing allowance, and the costs of
private schools for the employee's children
– Hardship allowance: Often paid to
employees who work in a country with
difficult living conditions
14-25
Compensation Details
Allowances (2)
• Allowances (continued)
– Foreign service premium
• In the past, a foreign-service premium was often
a monthly payment that continued as long as the
employee worked overseas
• Many firms have eliminated the ongoing foreignservice premium.
• Today, a one-time, lump sum foreign service
premium is often paid at the start of the
overseas assignment to provide cash for
immediate expenses.
14-26
Compensation Details
Taxes
• Taxes
– An expatriate may be required to pay
income taxes to both the host country and
his/her native country
– The company compensates the employee
for the extra amount of tax
14-27
Compensation Details Summary
The cost of an expatriate employee =
salary costs
+ benefit costs
+ allowance costs
+ tax costs
14-28
Compensation Approaches
• The compensation package must be costeffective and should be seen as fair
• Balance-sheet approach: ensure that the
expatriate does not lose money from the
foreign assignment
• Negotiation approach: Negotiate
compensation with each employee
• Localization: Pay the expatriate a salary
comparable to local nationals
14-29
Compensation Approaches (2)
• Lump sum method: give expatriate a pre-determined
amount of money. Employee decides how to spend it.
• Cafeteria approach: Offer the employee a choice
among various compensation options, with a limit on
total costs
• Regional system: Set up a compensation system for
all expatriates who are assigned to a particular region
14-30
Repatriation of Expatriates
• Reasons for returning home
• Readjustment problems
• Transition strategies
14-31
Repatriation of Expatriates
• Reasons for returning to the home country
– Most expatriates return home when their agreed-on
tour of duty is over
– Some want their children educated in a homecountry school
– Some are not happy in the overseas assignment
– Some return early because they failed to do a good
job
14-32
Repatriation of Expatriates (2)
• Readjustment problems
– “Out of sight, out of mind” syndrome: the expatriate
may not have been considered for jobs that he/she
could do well
– Organizational changes may have:
• eliminated the jobs for which the expatriate is
well-qualified
• reduced the importance of the expatriate's
position or department
– The new job may be seen as a demotion.
14-33
Repatriation of Expatriates (3)
• Readjustment problems
– Technological advances may have made the
expatriate's skills obsolete
– The former expatriate may not have an opportunity
to use skills gained abroad.
– The former expatriate's salary and benefits may be
lower than they were abroad.
– The former expatriate has to readjust to homecountry culture and adjust to a new job
14-34
Effectiveness of Returning
Expatriates
14-35
Repatriation of Expatriates (4)
• Transition strategies: Help smooth the adjustment from
an overseas to a home-country assignment
– Repatriation agreement: addresses the concerns of
the individual and the company before the foreign
assignment begins.
– Keep the expat involved in home office
communication and projects during the foreign
assignment.
– Appoint a higher-level manager as a career mentor
for the expatriate (helps to avoid "out of sight, out of
mind" problem).
14-36