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INTERNATIONAL HRM
18-1
Case: Molex
World’s second largest manufacturer of electronic components50 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 worldIn house management development programs
18-2
Human resource management (HRM)
Refers to the activities an organization carries out to use its human resources effectively
Four major tasks of HRM Staffing policyManagement training and developmentPerformance appraisal Compensation policy
18-3
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 TimeTask complicated by profound differences
between countries in labor markets, culture, legal and economic systems
18-4
Strategy, structure and control systems
18-5
Staffing policy
Staffing policySelecting individuals with requisite skills to do a
particular jobTool for developing and promoting corporate
cultureView People as Resource ($in profit out)
Types of Staffing PolicyEthnocentricPolycentricGeocentric
18-6
Ethnocentric policy
Key management positions filled by parent-country nationals
Advantages:Overcomes lack of qualified managers in host
nationUnified cultureHelps transfer core competencies (and skills
back)Disadvantages:
Produces resentment in host countryCan lead to cultural myopia
18-7
Polycentric policyHost-country nationals manage subsidiariesParent company nationals hold key
headquarter positionsBest suited to multi-domestic businessesAdvantages:
Alleviates cultural myopia.Inexpensive to implementHelps 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
18-8
Geocentric policy
Seek best people, regardless of nationalitynot always possible
Best suited to Global and trans-national businesses
Advantages:Enables the firm to make best use of its human resourcesEquips executives to work in a number of culturesHelps build strong unifying culture and informal
management networkDisadvantages:
National immigration policies may limit implementationExpensive to implement due to training and relocationCompensation structure can be a problem.
18-9
Comparison of staffing approaches
18-10
The expatriate problem
Expatriate: citizens of one country working in anotherExpatriate 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
18-11
Expatriate failure rates
18-12
Reasons for expatriate failureUS multinationals
Inability of spouse to adjust
Manager’s inability to adjust
Other family problemsManager’s personal or
emotional immaturityInability to cope with
larger overseas responsibilities
European multinationalsInability of spouse to adjust
Japanese FirmsInability to cope
with larger overseas responsibilities
Difficulties with the new environment
Personal or emotional problems
Lack of technical competence
Inability of spouse to adjust.
18-13
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
18-14
Four attributes that predict successSelf-Orientation
Possessing high self-esteem, self-confidence and mental well-being
Others-OrientationAbility to develop relationships with host-country nationalsWillingness to communicate
Perceptual AbilityThe ability to understand why people of other countries
behave the way they doBeing nonjudgmental and being flexible in management style
Cultural ToughnessRelationship between country of assignment and the
expatriate’s adjustment to it
18-15
Training and management development
Training: Obtaining skills for a particular foreign postingCultural training : Seeks to foster an
appreciation of the host-country’s cultureLanguage 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
18-16
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
18-17
18-18
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
Management development & strategy
Development programs designed to increase the overall skill levels of managers through:On going management educationRotation of managers through a number of jobs
within the firm to give broad range of experiencesUsed as a strategic tool to build a strong
unifying culture and informal management network
Above techniques support transnational and global strategies
18-19
Performance appraisal
Problems:Unintentional bias
Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience
working abroadExpatriate managers believe that headquarters
unfairly evaluates and under appreciates themIn a survey of personnel managers in U.S.
multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career.
18-20
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
18-21
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
18-22
Compensation for four positions in 26 countries
18-23
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
18-24
Table 18.4 b
National differences in CEO pay for midsize companies
18-25
Fig 18.1
Compensation issues
Type of Company Payment
Ethnocentric How 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.
18-26
Expatriate pay
Typically use balance sheet approachEqualizes 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.
18-27
Components of expatriate pay Base Salary
Same range as a similar position in the home countryForeign service premium
Extra pay for work outside country of originAllowances
Hardship, housing, cost-of-living and education allowances
TaxationFirm pays expatriate’s income tax in the host country
BenefitsLevel of medical and pension benefits identical
overseas
18-28
The balance sheet
18-29
International labor relations
Key IssueDegree to which organized labor can limit the
choices of an international businessAims to foster harmony and minimize
conflicts between firms and organized labor
18-30
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 plantsEasy to switch locations if economic conditions
warrantBargaining power of organized labor is reduced
Attempts to import employment practices and contractual agreements from multinationals home country
18-31
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
18-32