Chapter Eighteen Global Human Resource Management 18 - Human Resource Management (HRM) • Refers to the activities an organization carries out to use its human resources effectively • Four major tasks of HRM - Staffing policy Management training and development Performance appraisal Compensation policy McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - International Human Resource Management • Strategic role: HRM policies should be congruent with the firm’s strategy and its formal and informal structure and controls • Task complicated by profound differences between countries in labor markets, culture, legal, and economic systems McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - International Human Resource Management McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - Staffing Policy • Staffing policy - Selecting individuals with requisite skills to a particular job - Tool for developing and promoting corporate culture • Types of Staffing Policy - Ethnocentric - Polycentric - Geocentric McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - Ethnocentric Policy • Key management positions filled by parentcountry nationals • Best suited to international businesses • Advantages: - Overcomes lack of qualified managers in host nation - Unified culture - Helps transfer core competencies • Disadvantages: - Produces resentment in host country - Can lead to cultural myopia McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - Polycentric Policy • • • • Host-country nationals manage subsidiaries Parent company nationals hold key headquarter positions Best suited to multi-domestic businesses Advantages: - Alleviates cultural myopia - Inexpensive to implement - Helps 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 McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - Geocentric Policy • Seek best people, regardless of nationality • Best suited to global and trans-national businesses • Advantages: - Enables the firm to make best use of its human resources - Equips executives to work in a number of cultures - Helps build strong unifying culture and informal management network • Disadvantages: - National immigration policies may limit implementation - Expensive to implement due to training and relocation - Compensation structure can be a problem McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 10 Comparison of Staffing Approaches McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 18 Training and Management Development • 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 McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 19 Repatriation of Expatriates • A critical issue in the training and development of expatriate managers is preparing them for reentry into their home country • Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers • Research shows that there is a problem with the repatriation process McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 20 Repatriation of Expatriates 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 McGraw-Hill/Irwin International Business, 6/e 20 30 40 percent 50 60 70 © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 21 Management Development and Strategy • Development programs designed to increase the overall skill levels of managers through: - Ongoing management education - Rotation of managers through a number of jobs within the firm to give broad range of experiences • Used as a strategic tool to build a strong unifying culture and informal management network • Above techniques support transnational and global strategies McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 22 Performance Appraisal • Problems: - Unintentional bias • Host nation biased by cultural frame of reference • Home country biased by distance and lack of experience working abroad • Expatriate managers believe that headquarters unfairly evaluate and under-appreciate them • In a survey of personnel managers in U.S multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 23 Guidelines for Performance Appraisal • More weight should be given to on-site 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 evaluation McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 24 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 McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 25 Compensation in Various Countries McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 26 Expatriate Pay • Typically use balance sheet approach - Equalizes purchasing power to maintain same standard of living across countries - Provides financial incentives to offset qualitative differences between assignment locations McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 27 Components of Expatriate Pay • Base Salary - Same range as a similar position in the home country • Foreign service premium - Extra pay for work outside country of origin • Allowances - Hardship, housing, cost-of-living, and education allowances • Taxation - Firm pays expatriate’s income tax in the host country • Benefits - Level of medical and pension benefits identical overseas McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 28 The Balance Sheet Approach McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 29 International Labor Relations • Key Issue - Degree to which organized labor can limit the choices of an international business • Aims to foster harmony and minimize conflicts between firms and organized labor McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 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 plants - Easy to switch locations if economic conditions warrant - Bargaining power of organized labor is reduced • Attempts to import employment practices and contractual agreements from multinational’s home country McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 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 McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved 18 - 32 Looking Ahead to Chapter 19 • Accounting in the International Business - Country Differences in Accounting Standards National and International Standards Multinational Consolidation and Currency Translation Accounting Aspects of Control Systems McGraw-Hill/Irwin International Business, 6/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved ... problem McGraw -Hill/ Irwin International Business, 6/e © 2007 The McGraw -Hill Companies, Inc., All Rights Reserved 18 - 10 Comparison of Staffing Approaches McGraw -Hill/ Irwin International Business, ... payment McGraw -Hill/ Irwin International Business, 6/e © 2007 The McGraw -Hill Companies, Inc., All Rights Reserved 18 - 25 Compensation in Various Countries McGraw -Hill/ Irwin International Business, ... overseas McGraw -Hill/ Irwin International Business, 6/e © 2007 The McGraw -Hill Companies, Inc., All Rights Reserved 18 - 28 The Balance Sheet Approach McGraw -Hill/ Irwin International Business, 6/e