International bussiness the challenge of global competition 11e chapter 20

chapter twenty Human Resource Management McGraw-Hill/Irwin International Business, 11/e Copyright © 2008 The McGraw-Hill Companies, Inc All rights reserved Learning Objectives  Discuss the importance of creating a company “global mindset”  Explain the relationship between competitive strategies (international, multidomestic, regional, and transnational) and international HR management approaches (ethnocentric, polycentric, regiocentric, and global)  Compare home country, host country, and third country nationals as IC executives  Explain the difficulties of finding qualified executives for international companies (ICs) and the importance of foreign language knowledge 20-3 Learning Objectives  Explain what an expatriate is and the challenges of and opportunities of an expat position  Discuss the increasing importance of accommodating the trailing spouse of an expatriate executive  Identify some of the complications of compensation packages for expatriate executives 20-4 The Global Mindset • Expatriate – A person living outside citizenship country • Global Mind-set – A mind-set that combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity 20-5 International HRM Approaches • Ethnocentric – Hiring and promoting employees on the basis of parent company’s home country frame of reference • Polycentric – Hiring and promoting employees on the basis of specific local context of the subsidiary 20-6 International HRM Approaches • Regiocentric – Hiring and promoting employees on the basis of the specific regional context of the subsidiary • Geocentric – Hiring and promoting employees on the basis of ability and experience without considering race or citizenship 20-7 Strategic Approach, Organizational Concerns, and the International Human Resource Management Approach to Be Used 20-8 Recruitment, Selection and Training • Parent Country National (PCNs) or Home Country National - Study of language and culture • Host Country National (HCN) – Hired in the host country • Third Country National 20-9 Recruitment, Selection and Training • Third Country National (TCN) – May accept lower wages and benefits than will employees from the home country – May also come from a culture similar to that of the host country – May have worked for another unit of the IC and be familiar with policies, procedures and people – Common approach in developing countries – May not be welcome by host country – May come from an international agency – Greater use as companies take geocentric view 20-10 Expatriates • Family – Nine of ten expatriate failures family-related – Unhappy spouses major reason for early return – Company losing a “million-dollar corporatetraining investment” in executive 20-11 Language Training • Language Trap – International business person speaks only home language – English language has become lingua franca – Chinese new “hot” language to know 20-12 Expatriate Services • Health care programs to assist companies and expatriates with – Claims administration – Language – Translations – Currency conversions – Service standardization – www.ExpatExpert.com – www.branchor.com 20-13 Expatriate Services • Banking services – Online, 24-hour assistance • Training – Culture and language • House hunting, utilities hook up, grocery and hardware shopping, long-distance care for relatives, schools, organizations, and cultural items 20-14 Compensation Salaries  Paying home country nationals the same salaries as their domestic counterparts permits worldwide consistency bonuses  Increasing use of third country nationals- often treated like PCNs  Trend to pay HCNs same base 20-15 Total compensation Costs for Sending an Expatriate American Manager to Russia 20-16 Allowances • Housing Allowance – Permits executive to live at same standard as at home • Cost-of-Living Allowance – Based on differences in price of food, utilities, transportation, entertainment, clothing, personal services, and medical expenses as compared to home • Allowances for Tax Differentials – Ensures expatriates will not have less after-tax pay at home 20-17 Allowances • Education Allowances – Insures children receive education equal to that at home • Moving and Orientation Allowances – Household effects and language instruction 20-18 Ranking of 50 Cities from Most to Least Expensive, 2006 20-19 Bonuses • Bonuses – Expatriate employee compensation payments in addition to base salary and allowances because of hardship, inconvenience, or danger – Bonuses include • Overseas premiums • Contract termination payments • Home leave reimbursement 20-20 Compensation Packages • For expatriate employees, packages incorporate many types of payments or reimbursements and must take into consideration exchange rates and inflation 20-21 Hardship Differential Pay Premiums for Selected Cities and Countries, 2006 20-22 Compensation Packages Can Be Complicated • Allowances and percentage of base salary are usually paid in host country currency – Percentage usually 65 to 75 percent, with remainder banked where employee directs • What Exchange Rate? – Must be chosen – More difficult in countries with exchange controls and nonconvertible currencies 20-23 Compensation of Third Country Nationals • Trend toward applying the same compensation plan to third country nationals as home country expatriates • Problems can arise in – The calculation of income tax differential when American expatriate compared with expatriate from another country – Home leave bonus 20-24 International Status • Entitles expatriate employee to allowances and bonuses applicable to the place of residence and employment • Perks – Compensate executives while minimizing taxes • Private pension plan • Retirement payment • Life Insurance • Hidden slush funds (can be illegal) • Club membership • Company house • Foreign affiliate directorship 20-25 ... employees on the basis of parent company’s home country frame of reference • Polycentric – Hiring and promoting employees on the basis of specific local context of the subsidiary 20- 6 International. .. importance of accommodating the trailing spouse of an expatriate executive  Identify some of the complications of compensation packages for expatriate executives 20- 4 The Global Mindset • Expatriate... importance of foreign language knowledge 20- 3 Learning Objectives  Explain what an expatriate is and the challenges of and opportunities of an expat position  Discuss the increasing importance of accommodating