Global Human Resource Management

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Case: Molex

World’s second largest manufacturer of electronic components 50 manufacturing plants, 21 countries

HRM viewed as most localized of all the functions

Hires experienced , educated foreign nationals in the US for foreign postings

Moves people around the world In house management development programs

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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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International human resource management

Strategic role: HRM policies should be congruent with the firm’s strategy and it’s formal and informal structure and controls

Right People, Right Place, Right Time Task complicated by profound differences between

countries in labor markets, culture, legal and economic systems

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Strategy, structure and control systems

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Staffing policy

Staffing policy Selecting individuals with requisite skills to do a

particular job Tool for developing and promoting corporate culture View People as Resource ($in profit out)

Types of Staffing Policy Ethnocentric Polycentric Geocentric

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Ethnocentric policy

Key management positions filled by parent-country nationals

Advantages: Overcomes lack of qualified managers in host nation Unified culture Helps transfer core competencies (and skills back)

Disadvantages: Produces resentment in host country Can lead to cultural myopia

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Polycentric policy

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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Geocentric policy

Seek best people, regardless of nationality not always possible

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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Comparison of staffing approaches

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The expatriate problem

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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Expatriate failure rates

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Reasons for expatriate failure

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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Expatriate selection

Reduce expatriate failure rates by improving selection procedures

An executive’s domestic performance does not (necessarily) equate 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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Four attributes that predict success

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

Perceptual Ability The ability to understand why people of other countries behave the

way they do Being nonjudgmental and being flexible in management style

Cultural Toughness Relationship between country of assignment and the expatriate’s

adjustment to it

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Training and management development

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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Training & management development continued

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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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

10 20 30 40 50 60 70percent

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Management development & strategy

Development programs designed to increase the overall skill levels of managers through: On going 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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Performance appraisal

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 evaluates and under appreciates 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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Guidelines for performance appraisal

More weight should be given to onsite 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 the terminal evaluation

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Compensation

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 for four positions in 26 countries

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National differences in compensation

CEO HR Director Accountant Mfg. Employee

Argentina $860,704 $326,874 $63, 948 $17, 884

Canada 742,228 188, 070 44,866 36,289

Germany 421,622 189,785 61,375 36,934

Taiwan 179,486 102,491 30,652 11,924

United Kingdom

719,665 268,302 107,839 28,874

United States 1,403,899 306,181 66,377 44,680

Table 18.4 b

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National differences in CEO pay for midsize companies

Fig 18.1

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Compensation issues

Type of Company Payment

EthnocentricHow much home-country

expatriates should be paid.

PolycentricPay can and should be

country-specific.

Geocentric/TransnationalMay have to pay its

international cadre of managers the same.

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Expatriate pay

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. Pay for Schools, health care, etc.

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Components of expatriate pay

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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The balance sheet

Fig 18.2

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International labor relations

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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Concerns of organized labor

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 multinationals home country

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Strategy of organized labor

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