Global Human Resources Update 2.26.07

Globalization of Human ResourcesGlobalization of Human Resources

Mike Fischer and Nicole HerodMike Fischer and Nicole Herod


Key Human Resource TopicsKey Human Resource Topics

•HR Roles and PracticesHR Roles and Practices

•Corporate CulturesCorporate Cultures

•Foreign assignments Foreign assignments

•Expatriate / Employee TrainingExpatriate / Employee Training

•Short term assignmentsShort term assignments

•ConclusionConclusion


GlobalizationGlobalization is a term describing is a term describing the increasing interdependence, the increasing interdependence, integration and interaction among integration and interaction among people, companies and corporations people, companies and corporations in various locations around the world. in various locations around the world. This refers to an interaction of This refers to an interaction of economic, trade, social, technological, economic, trade, social, technological, cultural and political relationships. cultural and political relationships.

http://en.wikipedia.org/wiki/Globalizationhttp://en.wikipedia.org/wiki/Globalization


GlobalizationGlobalization : : Early ExamplesEarly Examples• The Mongol Empire and integration of the The Mongol Empire and integration of the

Silk Road (1206-1405).Silk Road (1206-1405). • Colonization and trade by the Spanish & Colonization and trade by the Spanish &

Portuguese Empires of the 16Portuguese Empires of the 16thth and 17 and 17thth centuries.centuries.

• In 1602, the first Multinational was In 1602, the first Multinational was established in the Netherlands; the Dutch established in the Netherlands; the Dutch East India Company. It was also the first East India Company. It was also the first company to issue stock.company to issue stock.

http://en.wikipedia.org/wiki/Globalization

Globalization of Human ResourcesGlobalization of Human Resources• The First Era of Globalization in the The First Era of Globalization in the

1800’s was a result of rapid growth in 1800’s was a result of rapid growth in trade and investment by European trade and investment by European imperial powers and later the U.S.imperial powers and later the U.S.

• Post WWII Globalization has been driven Post WWII Globalization has been driven by advances in technology, cost by advances in technology, cost reduction and trade negotiations.reduction and trade negotiations.

• Critics of Globalism state that it a process Critics of Globalism state that it a process generated by corporate interests and generated by corporate interests and neglect of the poor and working classes, neglect of the poor and working classes, as well as a source of concern relative to as well as a source of concern relative to environmental issues.environmental issues.



GlobalizationGlobalization in modern terms was in modern terms was first used as early as 1944 but did not first used as early as 1944 but did not become popular in a business or become popular in a business or economic context until an 1983 economic context until an 1983 article published in the Harvard article published in the Harvard Business Journal titled “Globalization Business Journal titled “Globalization of Markets,” by economist of Markets,” by economist Theodore Theodore Levitt.Levitt.


Globalization of Human ResourcesGlobalization of Human Resources Multi-National Enterprises (MNE)Multi-National Enterprises (MNE)

• EthnocentricEthnocentric HR resembles the home countryHR resembles the home country

• PolycentricPolycentric HR practices conform to host countryHR practices conform to host country

• Geocentric Geocentric Adhere to worldwide standardAdhere to worldwide standard

Schneider, S. & Tung, R. (Winter, 2001). Schneider, S. & Tung, R. (Winter, 2001). Introduction to the international human resource management special issue. Journal of World Business, 36, 341-346., 36, 341-346.

Globalization of Human ResourcesGlobalization of Human Resources HR tasks for when establishing HR tasks for when establishing

Multi-National operationsMulti-National operations• Create and staff Sales and Marketing Create and staff Sales and Marketing

groups for foreign operationsgroups for foreign operations• Shift jobs and or employees to locations Shift jobs and or employees to locations

with low cost labor, natural resources or with low cost labor, natural resources or competitioncompetition

• When locating, consider population When locating, consider population centers, costs, skills and health issuescenters, costs, skills and health issues

Jackson, S. E. & Schuler, R. S. (2006). Jackson, S. E. & Schuler, R. S. (2006). Managing Human Resources. Managing Human Resources. Mason, Ohio: Thomson South-WesternMason, Ohio: Thomson South-Western

Globalization of Human ResourcesGlobalization of Human Resources HR Global Strategic RolesHR Global Strategic Roles

• Developing key personnelDeveloping key personnel• Increasing organizational performanceIncreasing organizational performance• EstablishingEstablishing globalglobal competenciescompetencies• Establishing corporate “best practices”Establishing corporate “best practices”• Aligning compensation and business Aligning compensation and business

strategystrategy• Enabling change on a global scaleEnabling change on a global scale• Reinforcing corporateReinforcing corporate cultureculture whilewhile

integrating cultural differencesintegrating cultural differences


Globalization of Human ResourcesGlobalization of Human Resources HR Global Administrative HR Global Administrative

RolesRoles•Typically adapt to local Typically adapt to local

practicespractices Vacation timeVacation time BenefitsBenefits Gender compositionGender composition TrainingTraining CompensationCompensation Executive bonus Executive bonus

Rosenzweig, P. M. & Nohria, N. (Summer, 1994), Influences on human resource management Rosenzweig, P. M. & Nohria, N. (Summer, 1994), Influences on human resource management practices in multinational corporations. practices in multinational corporations. Journal of International Business StudiesJournal of International Business Studies, 25, 229-252., 25, 229-252.

Globalization of Human ResourcesGlobalization of Human Resources Communization of HR PracticesCommunization of HR Practices

• Dependent uponDependent upon Level of EmbeddednessLevel of Embeddedness

•Affiliate ageAffiliate age•Affiliate sizeAffiliate size•Local resource dependencyLocal resource dependency•Union representationUnion representation•Regulatory and other local pressuresRegulatory and other local pressures


Globalization of Human ResourcesGlobalization of Human Resources Communization of HR PracticesCommunization of HR Practices

• Dependent uponDependent upon Flow of resources between parentFlow of resources between parent

• Capitol, information, technical expertiseCapitol, information, technical expertise Culture of the parentCulture of the parent

• With more difference, the more likely to With more difference, the more likely to adopt local practicesadopt local practices

Level of international experienceLevel of international experience• More cosmopolitan attitudeMore cosmopolitan attitude


Globalization of Human ResourcesGlobalization of Human Resources Challenges to communizationChallenges to communization

• If HR values & practices align with the If HR values & practices align with the host country’s, employees perform betterhost country’s, employees perform better

• Employee selection processes vary Employee selection processes vary greatlygreatly

• Motivation factors varyMotivation factors vary• Empowerment to make decisions is not Empowerment to make decisions is not

desired in some countriesdesired in some countries• Geographic barriersGeographic barriers• Language barriersLanguage barriers• Cultural barriersCultural barriers

Govindarajan, V. & Gupta, A. K. (Summer, 2001) Building an effective global business team.

MIT Sloan Management Review , 42, 63.

Globalization of Human ResourcesGlobalization of Human Resources HR realities for MNEsHR realities for MNEs

• Finding qualified candidates can be Finding qualified candidates can be challenging due to poor job seeking skillschallenging due to poor job seeking skills

• Management of foreign nationals requires Management of foreign nationals requires making an effort to understand the making an effort to understand the culture of originculture of origin

• Little information may be available about Little information may be available about working in the host countryworking in the host country

• Requires a change in how human Requires a change in how human resources are managedresources are managed


Globalization of Human ResourcesGlobalization of Human Resources HR realities for MNEsHR realities for MNEs

•ExpansionExpansion Labor force in developing nations Labor force in developing nations will expand by 700 million by will expand by 700 million by 20102010


Globalization of Human ResourcesGlobalization of Human Resources• Compensation PoliciesCompensation Policies

• Prevailing wages for technical Prevailing wages for technical professionals in developing countries professionals in developing countries are often 50-75% less than in the USare often 50-75% less than in the US

• Basic objectives are the same as in Basic objectives are the same as in domestic contextdomestic context

• Should attract and retain employees in Should attract and retain employees in areas of greatest need and opportunityareas of greatest need and opportunity

• Balancing internal and external pay Balancing internal and external pay equity is especially challengingequity is especially challenging


Globalization of Human ResourcesGlobalization of Human Resources Corporate CultureCorporate Culture

• Establish and communicate a clear Establish and communicate a clear mission statement with input from all mission statement with input from all locationslocations

• Develop a consistent management style Develop a consistent management style & structure& structure

• Establish common business processesEstablish common business processes• Allow local identities to exist within the Allow local identities to exist within the

context of the corporate culturecontext of the corporate culture


Globalization of Human ResourcesGlobalization of Human Resources Cultural differences pose challenges Cultural differences pose challenges

to developing a Corporate Cultureto developing a Corporate Culture• Can have large effect on differing Can have large effect on differing

managerial philosophies or managerial philosophies or organizational structureorganizational structure

• Inhibit trustInhibit trust• Reflect and incorporate local valuesReflect and incorporate local values• Shape employee expectationsShape employee expectations• Influence employee treatmentInfluence employee treatment• Integral to how work is designedIntegral to how work is designed


Globalization of Human ResourcesGlobalization of Human Resources Western vs. Eastern NormsWestern vs. Eastern Norms

• Individualistic (Western)Individualistic (Western) Values resourcefulness and self Values resourcefulness and self

motivationmotivation AssertiveAssertive DirectDirect

• Collective (Eastern)Collective (Eastern) Value group effortValue group effort Require direction from managementRequire direction from management Relationship prevails over the taskRelationship prevails over the task RespectfulRespectful

Kim, P. (Summer, 1999) Kim, P. (Summer, 1999) Globalization of human resource management: A cross-cultural perspective for the public sector. Public Personnel Management, 28, 227., 28, 227.

Globalization of Human ResourcesGlobalization of Human Resources Key HR Corporate Culture Key HR Corporate Culture

ChallengesChallenges

• Reinforcing corporateReinforcing corporate culture is one of culture is one of the most difficult due to competing the most difficult due to competing interests of corporate structure and local interests of corporate structure and local culture or lawsculture or laws

Globalization of Human ResourcesGlobalization of Human Resources Foreign AssignmentsForeign Assignments

• Durations range from months to yearsDurations range from months to years• Often used to develop global skills and Often used to develop global skills and

mindsets of key promotable personnel mindsets of key promotable personnel and leadership developmentand leadership development

• Provides knowledge transferProvides knowledge transfer• Operational understanding of foreign Operational understanding of foreign

divisions rules, regulations, business divisions rules, regulations, business practices, market realities, etc.practices, market realities, etc.

• Helps achieve integrationHelps achieve integration


Globalization of Human ResourcesGlobalization of Human Resources Foreign AssignmentsForeign Assignments

• Often costs several times an expatriates Often costs several times an expatriates annual salary due to training, relocation annual salary due to training, relocation and support of families and and support of families and normalization of living expenses to normalization of living expenses to achieve standard of living parity achieve standard of living parity

• Costs often include housing food, Costs often include housing food, clothing transportation, medical clothing transportation, medical expenses and tax equalization amongst expenses and tax equalization amongst many othersmany others


Globalization of Human ResourcesGlobalization of Human Resources Expatriate AssignmentsExpatriate Assignments

• The investment for expatriates can be well The investment for expatriates can be well over a million dollars per familyover a million dollars per family

• Cost’s include transfers of the family, cost of Cost’s include transfers of the family, cost of living, housing allowances, language living, housing allowances, language instruction, work and resident permits.instruction, work and resident permits.

• It is well worth the company spending the It is well worth the company spending the money because the employer has a vested money because the employer has a vested interest in retaining the global talent of the interest in retaining the global talent of the companycompany

• If the assignment is a failure there is also cost If the assignment is a failure there is also cost incurred in moving the family home and much incurred in moving the family home and much more difficult measures such as lost more difficult measures such as lost productivity, lost sales, and lost production.productivity, lost sales, and lost production.

http://www.expatica.com/actual/article.asp?subchannel_id=157&story_id=12994www.relosearch.com

Globalization of Human ResourcesGlobalization of Human Resources Expatriate TrainingExpatriate Training

• Language and cross-cultural training for Language and cross-cultural training for the family as well as the employeesthe family as well as the employees ValuesValues CustomsCustoms TraditionsTraditions Business practicesBusiness practices HierarchiesHierarchies Gender RolesGender Roles Social / Business etiquetteSocial / Business etiquette


Globalization of Human ResourcesGlobalization of Human Resources Expatriate TrainingExpatriate Training

• Many families state that no matter how Many families state that no matter how much training they received, there were much training they received, there were still not prepared enough for the cultural still not prepared enough for the cultural differencesdifferences

• Many expatriates find that no matter Many expatriates find that no matter how much training and experience they how much training and experience they now have this move will hurt their now have this move will hurt their careercareer

http://www.expatica.com/actual/article.asp?subchannel_id=157&story_id=12994

Globalization of Human ResourcesGlobalization of Human Resources Short-Term AssignmentsShort-Term Assignments

• Short-term assignments can be as short Short-term assignments can be as short as one month but in some cases as long as one month but in some cases as long as one yearas one year

• In a short-term assignment the family In a short-term assignment the family does not get moveddoes not get moved

• Many of the assignments are treated as Many of the assignments are treated as “extended business trips” or normal “extended business trips” or normal business travelbusiness travel

• The employee on a short-term The employee on a short-term assignment will be paid their normal assignment will be paid their normal U.S. wagesU.S. wages

www.relohomesearch.com/Article.aspx?ArticleID=46

Globalization of Human ResourcesGlobalization of Human Resources Short-Term AssignmentsShort-Term Assignments

• One of the benefits of short-term assignments One of the benefits of short-term assignments is that company will only have to rent an is that company will only have to rent an apartment or a hotel room compared to having apartment or a hotel room compared to having to move all household furnishingto move all household furnishing

• The employee on a short-term assignment will The employee on a short-term assignment will be paid their normal U.S. wages and will as a be paid their normal U.S. wages and will as a normal trip submit expense reports and keep normal trip submit expense reports and keep up their bills and property from their home up their bills and property from their home countrycountry

• A short-term assignment is beneficial to a A short-term assignment is beneficial to a corporation for the amount of money they will corporation for the amount of money they will savesave

• Many companies look to send their good Many companies look to send their good people abroad but not the people that will people abroad but not the people that will someday become CEOsomeday become CEO

www.relohomesearch.com/Article.aspx?ArticleID=46

Globalization of Human ResourcesGlobalization of Human Resources RepatriationRepatriation

• Prepare on front endPrepare on front end• Establish clear goals checklist Establish clear goals checklist • Establish scheduled communicationEstablish scheduled communication• Effective debriefing programEffective debriefing program• Integrate international experienceIntegrate international experience• Make practical use of skillsMake practical use of skills• Best measure of effectiveness is Best measure of effectiveness is

whether repatriated employee stays whether repatriated employee stays with the companywith the company

Ettorre, B. (April, 1993). A brave new world: Managing international careers. Management Review,

82, 10-16.

Globalization of Human ResourcesGlobalization of Human Resources ConclusionConclusion

• Globalization and consolidation will Globalization and consolidation will continue to grow as corporations look to continue to grow as corporations look to maximize efficiency and profitsmaximize efficiency and profits

• HR is key to enabling change on a global HR is key to enabling change on a global scalescale

• HR needs to establish clear defined HR needs to establish clear defined policies for managing multi-national policies for managing multi-national operations and their employeesoperations and their employees

• HR practices and procedures are critical HR practices and procedures are critical for developing a successful global for developing a successful global corporate strategy and structurecorporate strategy and structure

Documents

Global Human Resources Update 2.26.07