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Lecture 1 to Lecture 10

Copyright

Muhammad Faisol Chowdhury

Senior Lecturer, School of Business

North South University

Email: [email protected]

HRM 460

INTERNATIONAL HUMAN

RESOURCE MANAGEMENT

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mailto:[email protected]:[email protected]:[email protected]

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Lecture 1 - Globalization

Lecture 2 - Internationalization of Firms

Lecture 3 - Internationalization of Cultures

Lecture 4 - Internationalization of Management Systems

Lecture 5 - International Human Resource Management

Lecture 6 - Global Employee Acquisition

Lecture 7 - Global Performance Management

Lecture 8 - Global Employee Development

Lecture 9 - Expatriate Remuneration Management

Lecture 10 - International Industrial Relations

CONTENT

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... has it been a true meaning of economic liberalization ...

1. GLOBALIZATION

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CONCEPT OF GLOBALIZATION

Economic

Political

Cultural

Technological

Global relationship of economy,politics, culture and technology.

Process in which nationalcultures, national economies andnational borders are dissolving.

Integration of national economiesinto international economy

through trade, FDI, capital flow,

migration, knowledge &technology sharing.

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TAPESTRY OF GLOBALIZATION

Stone Age /Prehistoric people

2.5 millionyears ago

Hunters /Gatherers

900,000 B.C.

EarlyCivilization

14,000 B.C.

Rise of Empires

5,000 B.C.

IslamicGolden Age

500 A.D.

Proto-Globalization

ModernGlobalization

1200 A.D. 1900

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REASONS OF GLOBALIZATION

Globalization

Food,shelter,security

Curiosity, trade

Discovery, trade,conquer

Histo

ricStage EarlyStage

ModernStage Middle

Stage

Power, knowledge,economic growth,

lifestyle, crime, etc.

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THEORY OF GLOBALIZATION

Internationalization

Human Capital

Technology

Migration

Politics

Economy

Occupation

Environment

Global People

Global Production

Global Market

Global Politics

Global Finance

Globalization

Global Organization

Global Ecology

Causes Effects

Global Communication

Business

Global Consciousness

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GLOBALIZATION & INTERNATIONAL MANAGEMENT

Globalization

GlobalEffect

RegionalEffect

National

Effect

OrganizationalEffect

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GLOBALIZATION & INTERCHANGEABLE CONCEPTS


Liberalization

Universalization

Westernization

Modernization

Globalization

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EFFECTS OF GLOBALIZATION

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Increased free trade between nations.

Increased FDI in developing nations bydeveloped countries.

Greater corporate flexibility in crossborder operations.

Global mass media, speed oftransportation, technology, knowledgesharing, tie the countries and theirpeople together.

Spread of democratic ideals, standardsfrom superior nations tounderdeveloped and developingnations.

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BENEFITS OF GLOBALIZATION

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Greater interdependency among the

countries.

Reduction of likelihood of economicturmoil, war, international crime, threats.

Increased in environmental protection.

Organizational development, expansionand sustainability.

Employment growth, labor movement,international management.

Economic stability.


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Globalization has made it possible to make leaders around the world sit togetherto discuss economic, political, environmental, demographical, security issues.

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CRITICISM OF GLOBALIZATION

Protest against G-8 meeting inGermany, 2010

Confusing concept.

Exaggerated or not unprecedented.

Its nonsense to talk about a world of 6.5billion people becoming a monoculture.

Rising inequality between rich and poor isthe inevitable result of market forces.

Market forces give the rich power to addfurther to their wealth.

MNCs invest in poor countries to exploit andaccess their cheap labor, natural resources

to ensure greater profit.

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Antiglobalization movement against IMF and EU, Greece, 2010

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Antiglobalization movement against G-20 Toronto Summit, Canada, 2010

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GLOBALIZATION OR AMERICANIZATION

Starbucks in Seoul, KoreaMcDonalds in Israel

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2. INTERNATIONALIZATION OF FIRMS

... how big is an MNC ...

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MNC & INTERNATIONALIZATION

The growth of MNCs is without doubt one of the driving forces of the process ofinternationalization

MNCA firm in which the coordination of production without using market

exchange takes the firm across national boundaries through FDI

HSBC headquarter in London

InternationalizationAdopting business practice for non-native environment, specially in other

nations and cultures.

The process of doing business in more than one geographic reasons foreconomic gain.

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GROWTH OF MNC

MNC

Legal ownershipof operations in

at least twocountries

Control ofproductive

operations in atleast twocountries

Oil, Gas, EnergyMineral & Mining

FMCGAutomotiveElectronics

Finance, BanksTelecommunications

MediaMedical

EducationReal Estate

Consultancy

Sectors

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GROWTH OF MNC

Stage 1

The firms market isexclusively domestic

Stage 2

The firm extends its marketinternationally but retains itsproduction in home country

Stage 3The firm physically movessome of its operations to

another country

Stage 4The firm become full-fledged

MNC with assembly &production facilities in

several countries

Stage 5The most advanced stage ofinternationalization where

firms become transnationalcorporations.

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GROWTH OF MNC

37 of the worlds largest economicentities are MNCs.

Very big MNCs have budgets thatexceed some countrys GDP.

MNCs account for around two-third of total international trade.

MNCs can have powerful influenceand control in local andinternational economies, relations,

cultures, environment andlifestyles.

MNCs have a considerableinfluence on political issues andgovernments policies.

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MOTIVATIONS FOR INTERNATIONALIZATION

Revenue: USD 19 billion

Asset: USD 14.4 billion

Employees: 34,400

Origin: USA

Turnover: Euro 2 billion

Revenue: Euro 2,053 million

Employees: 9,469

Origin: Italy

How does Nike generate USD 19 billion by employing only 34,400 employees?

How does Benetton control 6000 stores in 120 countries without owning any of thestores?

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MOTIVATIONS FOR INTERNATIONALIZATION


Search for raw

materials

Lure of cheaplabor

Product lifecycle model

(Vernons PLC)

Easylegislations &

regulationsCompetitiveadvantages

Organization

ProfitGrowth

Sustainability

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FIRMS GOING GLOBAL

Firm

Acquisition

FDI

Joint Venture

Merger

Outsource

Wholly OwnedSubsidiary

Franchise

License

StrategicAlliance

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The concept of MNCs is unfounded anduntenable.

Reasons of expansions(internationalization) - exploitation or

utilization?

MNCs are not liable in law forenvironmental damage arising from theoperations of subcontractors.

MNCs are not responsible for cases ofdiscrimination in employment that occurin their subcontractors.

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MNC - INEVITABLE ISSUES

In 2005 Canadian gas company Nikosnegligence caused huge environmental

damage in Magurchhara Gas Field,Tengratila, Sylhet

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Majority of the worlds disastrous accidentsare caused by MNCs

2010 Deepwater Horizon Oil Spill caused by BP left thousands ofwildlife killed with great environmental damage

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Many MNCs have become sointernationalized that they havedetached themselves from theirhome business system.

A countrys competitive position isnot primarily determined bynational firms but rather by globalones.

Competitive advantage concept.MNCs shift to whichever part of theworld promises the highest return.

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3. INTERNATIONALIZATION OF CULTURES

... a collective programming of mind ...

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ANALYTICAL CATEGORIES OF CULTURAL ANALYSIS

CulturalPerspective

InstitutionalPerspective

Low context theories whichare considered asappropriate in culturalcontext.

These theories are:economic utilities, personalmotivation, informationexchange, etc.

Management and businesshave different institutionalfoundations acrosscountries.

These institutions are: state,the legal system, thefinancial system, etc.

Organization

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DEFINITION OF CULTURE

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Culture is the full range oflearned human behaviorpatterns.

Culture is the collective

programming of the mind.

Culture is the learned andshared ways of thinking anddoing, found among membersof a society. It is measuredthrough commonality of values

and practices. E.g. eating,dressing, greetings, teaching,etc.

DEFINITION OF CULTURE

Culture is the habit of being pleased withthe best and knowing why.

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CULTURAL ICEBERG

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CULTURAL ICEBERG

Visibl

e

Invisibl

e

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VISIBLE DIMENSIONS OF CULTURE

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Language -6,000 languages in the world.Some countries have one official

language: KSA. Some countries havemore than one official language: Canada.Some countries have no officiallanguage: USA.

Time Orientation -

Monochronic - Doing one task at atime. Precise time table is maintained.Punctuality is very important. Evenmilliseconds count. Time is money.

Example: USA.

Polychronic - Doing several tasks at atime. Culture is more focused onrelationship, rather than watching theclock. Multiple tasks are schedules onsame time. Example: Bangladesh.

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Japan - money

Brazil - insult

UK, USA - ok

Russia - zero

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Space -Personal space, proximity,distance and individual comfortable zone.

Middle Easterners / South Americans aremore comfortable in close proximity thanAmericans, British and Australians.

Normal distance to Americans is closeproximity to Chinese.

Religion - Impacts on culture, beliefs,

rituals, vacations, eating habits, ethics,morality, behavior, etc.

Islamic banking system.

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INVISIBLE DIMENSIONS OF CULTURE

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Power Distance (PDI)

Uncertainty Avoidance (UAI)

Individualism & Collectivism (IDV)

Masculinity & Femininity (MAS)

Long Time Orientations (LTO)

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Geert Hofstede is Professor Emeritus, UniversityMaastricht, Netherlands

Hofstedes Cultural Dimensions Theory

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HOFSTEDES CULTURAL DIMENSIONS THEORY

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HOFSTEDES CULTURAL DIMENSIONS THEORY

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GLOBE Cultural Dimensions Theory byJavidan & Dastmalchian 2009

1. Performance Orientation -refers to the extent to which an organization orsociety encourages and rewards group members for performance improvementand excellence.

2.Assertiveness Orientation -the degree to which individuals in organizations orsocieties are assertive, confrontational and aggressive in social relationship.

3.Future Orientation -the degree to which individuals in organizations orsocieties engage in future-oriented behaviors like planning, investing, delayinggratification.

4.Humane Orientation -the degree to which individuals in organizations orsocieties encourage and reward individuals for being fair, altruistic, friendly,generous, caring and kind to others.

5.Collectivism (institutional) -reflects the degree to which organizational andsocietal institutional practices encourage and reward collective distribution ofresources and collective actions.

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GLOBE CULTURAL DIMENSION THEORY

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Criteria High Low

Performance

Orientation

Singapore, Hong Kong, New Zealand (emphasise

training & development)

Russia, Argentina, Greece

(family connections, backgrounds)

Assertiveness

Orientation

Austria, Spain, Greece (can do attitude, morecompetitive in business)

New Zealand, Sweden, Japan (more sympathy for weak,more emphasise on harmony, loyalty)

Future

Orientation

Singapore, Switzerland, Canada (loner time-horizon in decision making & more systematicplanning)

Russia, Argentina, Poland (less systematic planning,more preference for opportunistic behaviours & actions)

HumaneOrientation

Malaysia, Philippines, Indonesia(society /organisation reward people who are fair, altruistic,friendly, generous, kind)

Germany, Spain, Singapore(emphasise more on power,material possessions, self enhancement, independence)

Collectivism

(Institutional)

Singapore, South Korea, Japan(emphasise groupharmony, cooperation and reward)

Greece, Hungary, Argentina(emphasise autonomy,individual freedom, self-interest & reward)

Collectivism

(Cultural)

Iran, India, China(being loyal towards the familyand expressing pride of it)

Denmark, Sweden, New Zealand(people do not feelobliged towards their family members, friends)

GenderEgalitarianism

Hungary, Denmark, Sweden(minimizes genderrole difference)

South Korea, China, Egypt(higher status for men andrelatively fewer women empowerment)

Power Distance Russia, Thailand, Spain(distinguish betweenthose with power & status and those without)

Denmark, Netherlands(less differentiation betweenthose in power & status and those without)

UncertaintyAvoidance

Switzerland, Sweden, Denmark (value rules,orderliness, consistency, structured lifestyle)

Russia, Hungary, Bolivia(strong tolerance for ambiguity,uncertainty, less structured lives & rules)

GLOBE CULTURAL DIMENSION THEORY

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ORGANIZATIONAL CULTURE

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ORGANIZATIONAL CULTURE

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4. INTERNATIONALIZATION OF MANAGEMENT SYSTEMS

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... management transition because of organizational transition ...

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INTERNATIONALIZATION OF FIRMS

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1920 - 1950 (multinational form)

Collection of subsidiaries that managetheir local business with minimal directionfrom HQ.

Little influence on corporate rules, policy,procedure.

Mainly financial flows (capital out,

dividend back).

Decentralization and polycentric.


HQ

LocationA

LocationB

LocationC

LocationD

LocationE

LocationF

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1950 - 1980 (global form)

Tight operational infrastructure withstrategic decisions.

Direct supervision and control.

Tight financial control (capital out,dividends back).

Less trade barriers and economicdevelopment.

Knowledge, resource sharing.

Centralized and ethnocentric.


HQ

LocationA

LocationB

LocationC

LocationD

LocationE

LocationF

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1980 - onwards (transnational form)

Medium operational supervision andcontrol.

Skill, knowledge sharing and learningculture at global level.

Integrated network of subsidiaries, eachof which possesses a distinct role.

Localization and decentralization.

Geocentric and regiocentric.


HQ

LocationA

LocationB

LocationC

LocationD

LocationE

LocationF

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TYPES OF INTERNATIONAL BUSINESS

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TYPES OF INTERNATIONAL BUSINESS

International Business

Export & Import

Licensing

Franchising

FDI Merger

Acquisition

Joint Venture

Strategic AllianceWholly Owned Subsidiary

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TOP TEN MERGER & ACQUISITIONS

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TOP TEN MERGER & ACQUISITIONS

No. Year Purchaser Purchased USD

1 2008 Bank of America Merrill Lynch 50 billion

2 2008 Tata Motors Jaguar & Land Rover 2.3 billion

3 2006 AT&T BellSouth 72 billion

4 2004 Sanofi Synthelabo SA Aventis SA 60 billion

5 2004 JP Morgan Chase Bank One Corp. 58 billion

6 2004 Royal Dutch Petroleum Shell Transport & Trading 75 billion

7 2003 Pfizer Pharmacia Corporation 55 billion

8 2001 Comcast AT&T Internet 72 billion

9 2000 Glaxo Wellcome Plc SmithKline Beecham 76 billion

10 2000 AOL Time Warner 164 billion

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TYPES OF EMPLOYEES

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TYPES OF EMPLOYEES

Employee

ExpatriatesLocals

Home /ParentCountryNational

(PCN)

Host CountryNational(HCN)Third Country

National

(TCN)

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INTERNATIONAL STAFFING POLICY

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INTERNATIONAL STAFFING POLICY

Ethnocentrism(home)

Polycentrism(host)

Geocentrism(global)

Regiocentrism(particular continent)

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GLOBAL PRODUCT DIVISION

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Structure whereseparate division areeach responsible for

a line of productssold around the

world

CEO

Marketing Finance Production HR

Product A Product B Product C

EuropeAsia Africa

Germany

Marketing HR

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GLOBAL GEOGRAPHIC DIVISION

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Structure whereseparate division areeach responsible for

all operations inspecific locations

CEO


Asia Europe Africa

Germany

Product A Product CProduct B

Marketing HR

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MATRIX DIVISION

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Structure where

complex operationsrequire a hybridstructure with

elements of bothproduct and

geographic divisions

CEO


Asia Africa Europe

Germany

Product A

Product C

Product BMarketing HR

Product B

Libya

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IHRM ISSUES

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IHRM ISSUES

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IHRM ISSUES

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5. INTERNATIONAL HUMAN RESOURCE MANAGEMENT

... growing issues and increased complexities ...

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CONCEPT OF IHRM

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IHRM is when HRM is practiced byMNCs.

Management of people in multi-country context.

It is the process of procuring,allocating and effectively utilizingHR in an MNC.

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CONCEPT OF IHRM

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Cross-cultural Management Approach -examination of human behavior withinorganizations from an international perspective.

Comparative IR & HR -describe, compare, contrast and analyze HRM and IRsystems in various countries.

HRM in MNCs -explore the HR implication that the process of internationalizationhas for the HR policies and activities.

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The field of IHRM is characterized by three broad approaches

Why do we need IHRM?

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COMPARISON & CONTRAST OF HRM & IHRM

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Encompasses more functions

Has more heterogenous functions

Involves constantly changing perspectives

Requires more involvement in employeespersonal lives and families

Is influenced by more external sources

Involves a greater level of risk than typicalHRM

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When compared and contrasted with HRM, IHRM -

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CHALLENGES OF IHRM

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Why

foreignassignments

fail

Career blockage

Culture shock Family problems

Getting rid oftroublesome employee

Lack of pre-departurecross-cultural training

Overemphasis ontechnical qualifications

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ADDITIONAL ACTIVITIES OF IHRM

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Acquisition - strategic recruitment & selection of international and local

candidates.

Career Management -relocation, repatriation, promotion, termination, etc.

Development - cross-cultural, language, diversity, ethics, technical, psychological,behavioral, communication, labor or technology intensive, training.

Maintenance -personnel management, accommodation, transport, food & health,medical, education, family, leisure, entertainment, religion, security, etc.

Remuneration - equity balance, payment structure & type, market rate, economy

societal issues, etc.

Others -currency rate & fluctuations, foreign HR & IR policies, practices, labor law,etc.

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MYTHS OF IHRM

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There is a universal approach to management.

People can acquire multicultural behaviors without outside help.

A good local manager is also a good international manager.

There are common characteristics shared by all successful international managers.

There are no impediments to mobility.

Employees always dream to become an expatriate.

Previous foreign exposure is the most important factor for future foreign posting.

There are little or no differences between HRM and IHRM.

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6. GLOBAL EMPLOYEE ACQUISITION

... right person in the right place ...

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STRATEGIC ACQUISITION

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Recruitment is an extremely significant issue in

IHRM.

A failed expatriate assignment can be acatastrophic waste of money and time.

Most companies tend to use informal / generic

recruitment & selection program.

Researches suggest that, total cost of movingan US expatriate to the UK for two years isaround USD 1 million!

Cost of selecting a third country national iseven higher.

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STRATEGIC ACQUISITION

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Given parent company a bad image.

Causes friction with host countryemployees.

Reduce profits and incurs hugefinancial and non-financial loss.

Gives a new business venture a badstart.

Employee dissatisfaction.

Other problems.

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Acquiring a wrong person for a foreign assignment can cause numerous problems

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INFORMAL ACQUISITION PROCESS

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Personal reference / contacts.

Selecting candidates based onmanagers judgement.

Seniority, commitment, efficiency etc.become the main consideration.

Peers feeling about a candidatessuitability.

Previous foreign mission experience.

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Most companies tend to use informal / generic recruitment & selection program

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STRATEGIC ACQUISITION PROCESS

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Tests and examinations

International staffing policy

Formal recruitment and selectioncriteria

Ethical and legal requirements

Other challenges

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Formal methods of hiring expatriates, instead of being more reliable than informalmethods, are not entirely problem free

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Interviews

Background check

Reference check

Selection tests

Assessment centers - adaptabilityscreening

Tests and Examinations

International Staffing Policy

Ethnocentric & Polycentric

Geocentric & Regiocentric

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Ethical & Legal Requirement

Diversity Management

Cross-cultural suitability

Minority and disadvantaged group

EEO, AA, Anti-discrimination

Other local and international legal

issues, immigration, migration,cost of labor, etc.

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Elite Race -mentality possessed bytop executives to prefer PCNs insubsidiary. British males in Britishfirms all over the world.

Discrimination -despite advances inEEO, AA, women and ethnicminorities are still discriminatedagainst international management.

Misconception about females -

unambitious / overambitious, splitloyalties, societal acceptance,vulnerability, unavailability forpregnancy, have trouble fitting in,etc.

Other Challenges

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REPATRIATION

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The activity of bringing the expatriate back to thehome country.

When an expatriate returns to the home countryafter completing the foreign assignment.

Re-entry into the home country presents newchallenges as the repatriate copes with what hasbeen termed re-entry shock or reverse culturalshock.

Repatriation can be fantastic or traumatic.

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20 to 40 percent repatriates leave the organization shortly after returning home.

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CHALLENGES OF REPATRIATION

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Repatriation

Change inculture & self

attributes

Problem ofadjusting with

people &culture

Poororganizationalplanning onrepatriation

Change instatus & pay

Self &partners

career anxiety

Societalfactors

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REPATRIATION PROGRAM

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Preparation, physical relocation and transition information (what the company willhelp with).

Financial and tax assistance (including benefit and tax changes, loss of overseasallowances).

Reentry position and career path assistance.

Reverse culture shock (including family disorientation).

Childrens education, healthcare.

Workplace changes (corporate culture, structure, etc.)

Stress management, Employee Assistance Program (EAP)

Help in establishing networking and forming new social contacts.

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Choose your career wisely

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7. GLOBAL PERFORMANCE MANAGEMENT

... troubleshooting performance problems ...

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COMPONENTS OF INTERNATIONAL PMS

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MNCs Internationalization

Strategies & Goals

Subsidiary Goals

Job Analysis

Job Goals &

Standards

Performance

Appraisal

Individuals (PCN, HCN, TCN)

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PERFORMANCE MANAGEMENT CONSTRAINTS

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Betterment of the whole company is more important than one subsidiary partsshort-term profit.

Example: Banglalink by Orascom Telecom Ltd. in Bangladesh.

Orascom enters into a Bangladesh market through establishment ofBanglalink (BL) where its main global competitor GrameenPhone(GP) hasdominant position.

The objective of entering is to challenge GPs cash flow, customer database,etc. with aggressive pricing policies, promotion campaign, although BLmight face continuous loss initially.

Through this strategy, BL remains in loss for 6 years, but ultimately, by tyingup the GPs resources, it makes higher return in another market or in theparent company Orascom.

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Whole versus Part

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PERFORMANCE MANAGEMENT CONSTRAINTS

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Separation by Time and Distance

Judgements concerning the congruence between the MNC and local subsidiaryactivities are further complicated by several issues:

Example:

Physical distance and time zone differences among countries

Isolated locations

Infrequency of contact between head office and subsidiary

Cost of reporting system

Lack of face-to-face conversation

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CHALLENGES OF PERFORMANCE MEASUREMENT

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PerformanceMeasurement

Mistakes

Unclear Standards

Halo Effect

Central Tendency

Leniency

Strictness

Biased View

Who is theAppraiser?

PerformanceFeedback

360 degree

MBO

Process Evaluation

Outcome Evaluation

How to set KPIand benchmark?

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PERFORMANCE APPRAISAL CONSIDERATIONS

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The remuneration package

The assignment

Duties & responsibilities

Support from the head office

Job context

Cultural adjustment

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When attempting performance appraisal, it is important to consider the impact of

the following variables and their relationship

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8. GLOBAL EMPLOYEE DEVELOPMENT

... no one is born as a skilled manager ...

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DEVELOPING INTERNATIONAL MANAGERIAL ROLE

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Home-based Manager -who has a central focus on different markets andplayers.

Multicultural Team Member -who work on a series of international projects.

Internationally Mobile Managers -who undertake frequent but short visits tonumerous overseas locations while remaining loyal to the parent culture.

Specialist Non-management -roles that involve international activity or transferof knowledge through trainings.

Expatriates -who carry the parent organizational culture and undertake lengthyassignments representing the parent in host countries.

Transnational Managers -who move across borders on behalf of theorganization, but who are relatively detached from any organizationalheadquarters.

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TRAINING & DEVELOPMENT DESIGN

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T & D NeedAnalysis

Corporate Objectives & Goal

Linking T & D with HR deliverables

Short TermTraining

Long TermDevelopment

T & DReview

T & DOutcome

Acquisition

KPI

Benchmark

PMS

Connectionof thought &

action

Career

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EMPLOYEE TRAINING PROCESS

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GLOBAL TRAINING APPROACHES

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Information-giving Approach - less than a week and merely providesindispensable briefings and a little language training.

Affective Approach -one to four weeks focuses on psychological andmanagerial skills development

Impression Approach -one to two months, preparing for long assignments withgreater authority and responsibilities through field experiences, extendedlanguage training, etc.

Decompression Approach - training programs for repatriates to help them copewith reverse culture shock.

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GLOBAL TRAINING TYPES

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Cross-cultural training

Job related technical training

Developing attitude, managing power,negotiation skill

Factual knowledge about the country,field experience

Language, adjustment, adaptation,sensitivity

Leadership competency

Preliminary visit to host country

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TRAINING METHODS

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Common Training Techniques -

On-the-job

Job instruction

Lecture series, seminars

Coaching and mentoring

Case study, role-play

Management games

Virtual tours, E-learning

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EMPLOYEE DEVELOPMENT PROGRAM

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Common Development Programs -

Action learning

Group leadership development

Job rotation

Succession planning

University programs, courses

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FINAL CONSIDERATIONS

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Understanding the organizational context within which the internationalmanager operates.

Rapid changes in company fortunes as a consequence of globalization leadstowards shorter, uncertain, multi-country career with higher risks andchallenges.

Expatriate training and development sensitize candidates for internationalassignments, thus, before embarking on such a program, organization mustfind:

Is training & development the solution to the problem / challenge?

Are the goals of training clear and realistic?

Are T & D a good investment?

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9. EXPATRIATE REMUNERATION MANAGEMENT

... its not always about the money, or is it ...

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BASIC UNDERSTANDING

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Total Package ofCompensation / Remuneration / Reward

Basic Pay Incentives Benefits

standard basesalary or wage

any rewardfor good

performance

legal entitlement

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INTERNATIONAL PAY COMPLEXITIES

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Expatriate Remuneration

CurrencyRate

Currency TaxationPay

Determinants

PerformancePay

MembershipPay

Benefits,Incentives

CentralizedPay

DecentralizedPay

Open /Secret Pay

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Highest Paid CEOs

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According to UNDP report, the assets of the worlds 358 billionairesexceeded the combined incomes of 45% of the worlds population.

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Highest Paid CEOs

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Tim CookApple Inc.

US $ 378 million

Gregory B. Maffei

Liberty Media Corp.

US $ 87.1 million

Larry EllisonOracle

US $ 68.6 million

Ray R. Irani

Occidental Petroleum Corp.

US $ 52.2 million

Carol BartzYahoo Inc.

US $ 44.6 million

BBC & The Wall Street Journal Survey of CEO Compensation 2011 (top 5)

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PAY INEQUALITY

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Fall of socialism.

Explosion of MNCs.

Male dominance in earlyMNC development.

Resurgence of the USA asa super power.

Less female participationin foreign assignments.

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FACTORS DETERMINING PAY EQUITY

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Market rates of pay Research and published

surveys

Suggestions by HRMConsultants

Business network

General marketmonitoring andintelligence

Job evaluation

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EXPATRIATE REMUNERATION COMPONENTS

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Base Salary

Allowances /

Foreign ServicePremiums

Housing

Education

SpouseAssistance

RelocationHomeLeave

HardshipAllowance

Mobility

Medical /Health

COLA

Going Rate

BalanceSheet

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BASE SALARY DETERMINATION

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When the base salary of the expatriate is linked to the host country salaryindustry / market practice.

Salary is determined based on selected survey comparisons with:

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Going Rate Approach (Market Rate Approach)

LocalNationals

Expatriatesof same

Nationality

Expatriatesof all

Nationality

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BASE SALARY DETERMINATION

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Most common approach used by MNCs.

Formulates expatriate pay to equalize purchasing power across home and hostcountries.

Providing expatriates same standard of living in host country, which they wouldhave had in home country.

Four expenses are given focus to find the differences between home and hostcountry. Employer pays the difference.

Balance Sheet Approach (Build Up Approach)

Housing

Income Tax

Goods & Services

Discretionary Expenses

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EXPATRIATE TAXATION

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Tax Equalization -ensures that the expatriate does not suffer a loss or windfallgain because of differences between home and host country tax obligations.

Example: expatriate is taxed at the home country tax rate irrespective of thehost country tax rate.

Tax Protection -ensures that the expatriate does not suffer a loss in spendableincome because of higher host country tax.

Example:reimbursing the expatriate if the actual host country tax exceeds thehypothetical home country tax obligation.

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STRUCTURING GLOBAL REMUNERATION

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Global Philosophy Framework -understanding how each pay component helpsachieving organizational goal.

Gap Analysis -identifying if existing pay system supports strategic aims or not. Systematize Pay System -standardization of job descriptions, job requirements,

performance expectations for similar jobs worldwide.

Adapt Pay Policy -review global pay policy, analyze local pay practice, then finetuning firms global pay policies so they make sense for each location.

Review -periodical assessment of the implemented pay system.

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Strategic Considerations

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STRUCTURING GLOBAL REMUNERATION

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Equity theory

Cost of living index

Organizations principles

Explicit add-on incentives Effort - reward maximization

Manpower supply - demand scenario

Centralized / decentralized pay system

International and local laws and regulations

Communicate remuneration policy to employee and spouse

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General Considerations

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10. INTERNATIONAL INDUSTRIAL RELATION

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... does HRM replace the need of ER ...

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INDUSTRIAL RELATIONS COMPONENTS

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IndustrialRelations

EmployersAssociations Workers Unions Government

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INDUSTRIAL RELATIONS BARGAINING

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Individual Bargaining

Employers offer Employees demand

Individual Agreement

Negotiation /Conflict Resolution

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Individual Bargaining

EmployeesEmployer

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E t i B i i

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Enterprise Bargaining

Employers offer All workers demand

Negotiation /Conflict Resolution

Workers representative /union leader

Employers representative /HR manager

Third Party Involvement /Negotiator / Arbitrator

Enterprise Agreement

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Labor Unions

Anti Unions

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C ll ti B i i

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Collective Bargaining

Offer of the all employers ofan industry

Offer of the all workers of anindustry

Negotiation /

Arbitration /Conciliation

Apex Trade UnionApex Employers

Association

Government / IndustrialTribunal / Labor Court

Collective Agreement

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C ll ti B i i

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Collective Bargaining

EmployersAssociation Labor Union

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UNION MEMBERSHIP IN THE USA

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UNION MEMBERSHIP IN THE UK

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Number of union members

Percentage of union membership

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UNION MEMBERSHIP IN AUSTRALIA

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UNION MEMBERSHIP IN JAPAN

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UNION MEMBERSHIP IN THE WORLD

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GLOBAL TRADE UNION MEMBERSHIP TREND

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Why?

Declining

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REASONS OF TRADE UNION DECLINATION

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Female Participation

Immigration / Migration

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REASONS OF TRADE UNION DECLINATION

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Political / Managerial Prerogative Corruption by Unions

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HR or ER

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Is HRM replacing the need of ER and trade unions?

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Thank you

May Allah help us broaden our mind to acquire true knowledge

Muhammad Faisol Chowdhury

[email protected]

Documents

HRM 460 Lecture 1 - 10