chapter understanding chapter 17 global human resource management

This chapter explores the role of human resource management HRM in international business, which is mainly focused on strategic components such as staffing, performance evaluation, manag

SCHOOL OF ADVANCED EDUCATION

Subject : International and Comparative Management

Class : Advanced International Business 63A

Lecturer : Daniel Degravel, Ph.D

Group Student Name : Pham Le Hong An - 11210266

Vu Huy Binh - 11210971 Pham Nhat Linh - 11213392 Hoang Gia Minh - 11213802 Nguyen Hoang Nhi - 11214556

Nguyen Cam Nhung — - 11214624

Vo Hoang Tan - 11219209

Hanoi, 2023

TABLE OF CONTENTS

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TABLE OF FIGURES

Figure 1 The Role of human resources in shaping orgam1zational arelhitecture 2 Figure 2 Comparison of staffing approaches cc ccc n1 111111111111 6 Figure 3 Comparison of living standard

INTRODUCTION

Human resource management (HRM) 1s a critical function in any organization, and its significance becomes even more pronounced in the context of international business In the face of global competition and the need to adapt to diverse cultural and legal frameworks, HRM plays a vital role in ensuring the success of multinational corporations HRM is responsible for developing and implementing policies and practices that enable organizations to attract, retain, and develop a diverse and talented workforce According to a report by Deloitte, the role of HRM in international business has evolved significantly in recent years This chapter explores the role of human resource management (HRM) in international business, which is mainly focused on strategic components such as staffing, performance evaluation, management development, compensation, and labor relations In other words, HRM plays a crucial role in helping companies achieve their strategic goals of reducing costs of value creation and adding value by better-serving customers

Furthermore, the evolution of International Business Machines' HRM strategy highlights the need for HRM integration into strategy, as it is more complex in multinational companies HRM must adapt to local circumstances, address expatriate management concerns, and ensure effective debriefing and reorientation

Four major tasks of HRM are as well examined, including staffing policy, management training, performance appraisal, and compensation policy The chapter also discusses international labor relations and the relationship between a firm's management

of labor relations and its overall strategy

CONTENT

1 Strategic Role of Global HRM: Managing a Global Workforce

Human Resources is responsible for these aspects of organizational architecture

Figure 1 The Role of human resources in shaping organizational architecture The organizational architecture of a company is based on its people, who must be taught, rewarded, and assessed to surpass competition They must have the essential talents, be aligned with the firm's culture, and be driven by remuneration packages and performance rating systems

Human resource management experts play a critical strategic role in designing a company's organizational architecture, including policies on personnel, training, remuneration, and performance evaluation They mold these aspects so that they are in line with the enterprise's plan, allowing the company to effectively implement its

strategy

Superior human resource management may result in increased productivity and a competitive edge in the global economy However, to obtain significant performance advantages, many worldwide organizations must strengthen their HRM function HRM policies, such as hiring, management development, and remuneration practices, must be aligned with the firm's goal to be successful Employee selection, managerial development, performance assessment, and remuneration policies all play important roles

in plan implementation

2 Staffing Policy

2.1 Definition

Staffing policy is a critical aspect of human resource management (HRM) in international business It involves selecting individuals who have the necessary skills and experience for a particular job, as well as aligning their behavioral styles, beliefs, and value systems with the company's culture The concept of cultural fit is essential in international business, where companies operate in diverse cultural contexts Companies that prioritize cultural fit in their staffing policies tend to have a more cohesive and productive workforce Such organizations place a high value on hiring individuals who share the company's core values and beliefs, as well as those who can adapt to the local culture and work effectively with colleagues from diverse backgrounds Moreover, staffing policies can also be used as a tool for developing and promoting the desired corporate culture of the firm Companies can prioritize hiring individuals who demonstrate behaviors and attitudes that align with the organization's values and norms This can help to reinforce the desired culture and promote a sense of shared purpose among employees (Brewster, Sparrow, & Vernon, 2007)

In conclusion, staffing policy is a critical component of HRM in international business The selection of employees based on skills and cultural fit is essential for Improving performance and fostering a cohesive and productive workforce Moreover, companies can use staffing policies to promote the desired corporate culture and values, which can contribute to long-term success in international markets

2.2 Types of Staffing Policies

In international business, companies must decide on a staffing policy that aligns with their strategic objectives and cultural context The three primary staffing approaches identified by research are ethnocentric, polycentric, and geocentric

2.2.1, The ethnocentric approach

The ethnocentric approach involves selecting employees from the company's home country to fill key positions in foreign subsidiaries This approach is often used by companies with a strong corporate culture and a desire to maintain control over operations globally However, it can lead to cultural clashes and limit the development of local talent This staffing approach is within the multinational enterprise in which all key- management positions are filled by parent-country nationals Firms pursue this staffing approach for three reasons

Firstly, the firm may believe the host country lacks qualified individuals to fill senior management positions, this often occurs when the firm has operations in less developed countries Secondly, the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture Thirdly, if the firm is trying to create value by transferring core competencies, the best way to do this is to transfer to parent-country nationals who know those competencies already

2.2.2 The polycentric approach

The polycentric approach involves hiring local employees to fill key positions in foreign subsidiaries This approach is often used by companies that prioritize local responsiveness and cultural sensitivity A staffing policy in a multinational enterprise in which host country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters

The geocentric approach to staffing in international business has several advantages, including a reduced risk of cultural myopia and lower costs associated with expatriate assignments However, this approach also has some drawbacks, such as limitations on the career progression of host-country nationals and difficulties m coordinating global operations

One of the key advantages of the geocentric approach is that it reduces the risk of cultural myopia, which is a narrow-minded view of the world that is based on one's cultural assumptions By selecting the best candidates for key positions regardless of their nationality, companies can benefit from a diverse workforce that brings different perspectives and ideas to the table This can lead to higher levels of innovation, creativity, and problem-solving Another advantage of the geocentric approach is that it can be less expensive to implement than traditional expatriate assignments By hiring local employees for key positions, companies can save on the costs associated with relocating expatriates and provide them with housing, schooling, and other benefits This can result

in significant cost savings for the company (Caligiuri & Di Santo, 2020) However, the geocentric approach also has some drawbacks One potential issue is that host-country nationals may have limited opportunities for career progression beyond senior positions

in their subsidiaries This can lead to frustration and a lack of motivation among local employees, who may feel that they are not being given equal opportunities for advancement (Brewster, Sparrow, & Vernon, 2007)

2.2.3 The geocentric approach

The geocentric approach is where the best people are sought for key jobs throughout a multinational enterprise, regardless of nationality The geocentric approach involves selecting the best candidates for key positions regardless of their nationality This policy has several advantages, enabling the firm to utilize the use of its human resources, building a cadre of international executives who feel at home working in many cultures, and reducing cultural myopia also enhancing local responsiveness Furthermore, this approach is often used by companies that prioritize global integration and a diverse workforce As a result, the geocentric approach can lead to higher levels of innovation, better coordination across global operations, and a more diverse and talented workforce However, several problems limit the firm’s ability to pursue a geocentric policy First and foremost, implementing a geocentric staffing model that prioritizes local hires can be both costly and complex One of the primary challenges associated with this approach is the need to provide training and relocation assistance for managers who are transferred from country to country These costs can quickly add up, particularly if the company is operating in multiple countries or regions In addition, implementing a standardized compensation structure that includes an international base pay level rather than national levels in each country can also be challenging While this approach can help

to reduce costs and simplify the management of compensation across different locations,

it may also lead to resentment among local employees who feel that they are being paid less than their international counterparts Furthermore, the higher pay enjoyed by managers placed on the international fast track can also be a source of tension and conflict within a firm This is particularly true in cases where local employees feel that they are being passed over for promotions or opportunities in favor of international hires,

or where they perceive that international hires are receiving preferential treatment To address these challenges, organizations must adopt a holistic approach to managing their global workforce This may involve developing a comprehensive talent management strategy that takes into account the needs and preferences of both local and international employees, while also balancing the costs and benefits of different staffing models

In conclusion, while geocentric staffing models that prioritize local hires can help organizations to meet the employment requirements of host countries, they can also be costly and complex to implement To overcome these challenges, organizations must adopt a strategic and holistic approach to managing their global workforce, taking into account the needs and preferences of both local and international employees By doing

so, they can build a more productive and engaged workforce, while also maintaining their competitive edge in the global marketplace

Ethnocentric International Overcomes lack of qualified Produces resentment in

managers in host nation host country Unifies culture Can lead to cultural myopia Helps transfer core

competencies Polycentric Localization Alleviates cultural myopia Limits career mobility

Inexpensive to implement Isolates headquarters from

foreign subsidiaries Geocentric Global Uses human resources National immigration

standardization and efficiently policies may limit

transnational implementation

Helps build strong culture and informal management Expensive networks

Figure 2 Comparison of staffing approaches 2.3 Expatriate Managers

According to Matic et al (2016), expatriate managers could be defined as “those who are not residents of the country where they are working but are employed because of their specialized operational abilities or due to their knowledge of the employing organization” Expatriates are a subset of expatriates who are nationals of another country and who work in the country where their multinational employer 1s headquartered The expatriates are all citizens of the home country who are sent abroad under an ethnocentric agenda The expatriates do not necessarily need to be citizens of their native country because the geocentric method does not base transfer choices on nationality The premature return of expatriate management to his or her home country is known as an expatriate failure, and it is a major problem in the literature on international staffing 2.3.1 Expatriate Failure Rates

Expatnate failure rates cause early returns and high resignation rates, which have a significant financial impact The average cost per failure, according to estimates, can be three times the expat's annual wage plus relocation costs American ex-pats continue to work abroad in substantial numbers, yet they are viewed as ineffective According to Tung's research, American multinationals fail at a higher rate than their peers i Europe

and Japan Failure of U.S managers can be attributed to a variety of factors, such as the incapacity of the manager's spouse and manager to adapt, family issues, lack of emotional/personal maturity, and managing obligations abroad Recent research, however, points to enhancements in the hiring and training procedures Family issues, manager adjustments, and spouse issues continue to be the main reasons why expatriates fail The manager's inability to adapt is a result of cultural skills and a lack of them, whereas spouse adjustment problems are caused by things like isolation and a lack of job possibilities Some managers have turned down abroad assignments due to worries about the spouse's potential career influence

2.3.2 Expatriate Selection

To lower failure rates, expatriate selection processes can be enhanced Self- orientation, others' orientation, perceptive ability, and cultural hardiness are the four variables that Mendenhall and Oddou found to be predictive of success in international postings Self-orientation entails having a high sense of self-worth, confidence, and a range of interests The emphasis of others' orientation is on good communication and a willingness to interact with locals Understanding foreign behaviors and having cultural empathy are examples of perceptual ability Cultural toughness is the capacity to fit into strange and unsettling societies Foreigners may have additional difficulties in some postings, such as those in non-Western cultures and settings where men predominate

2.3.3 Global Mindset

A global manager is thought to possess a global mindset, which is characterized by cognitive complexity and openness to the outside world These managers are adept at navigating complexity and ambiguity According to research, the average person's perspective on the world is likely to change dramatically during the next 20 years These qualities might develop because of early exposure to intercultural experiences, bilingualism, or expatriate life However, technical proficiency frequently takes precedence over cross-cultural fluency in selection procedures Given the prevalence of dual-career families and the requirement to balance career objectives, consideration of the spouse's capacity for adjustment is also essential in the selection of expatriates

3 Training and Management Development

Training and management development are key components of effective global human resource management (HRM) practices

O To ensure that workers have the ability to function well in a variety of cultural and language settings, training is important in a global business scenario

0 Management development is the process of preparing staff members for potential management positions within the company

3.1 Training for Expatriate Managers can help the manager avoid the main problem: the inability to adjust to a foreign environment

Cultural training: helps to build respect for the host country’s culture, and reduce the possibility of culture shock

Language training: being able to communicate only in English may lower the potential mteractions with host country officials Enthusiasm for using the native language will boost the effectiveness and create a good image of the company im that country

Practical training: helps expatriate managers and family to get used to life in a different country The quality of work will get better if they can feel familiar with the native routine

3.2 Repatriation of expatriates is the final link in the integrated process as it helps managers to become well-prepared before coming back to their home

Solution For remtegrating expatriates into work life imside their home-country organization, HRM should create effective initiatives

3.3 Management Development and Strategy

Through education and job rotations, management development programs aim to raise the skill levels of managers to boost the effectiveness and caliber of the company's management resources