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McGraw-Hill/Irwin International Management 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

International Management

Phatak, Bhagat, and Kashlak

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McGraw-Hill/Irwin International Management 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

Chapter 16

International Human ResourcesManagement

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Learning Objectives

Understand the various approaches that multinational and globalorganizations undertake for managing and staffing subsidiariesin various parts of the world.

Distinguish between various functions of international humanresources management.Identify the various strategies for selecting staff for foreignassignments.

Explain how training programs prepare managers for overseasassignments.Understand the various schemes for compensation and benefitsused by multinational and global organizations.

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Learning Objectives (contd.)

Identify the issues inherent in repatriation, and whymultinational and global companies need to address issuesconcerning managers returning from overseas assignments.

Understand that labor relations practices differ in each country,and how these differences affect multinational and globalcompanies.

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Chapter Topics

What is International Human Resources Management?Managing and Staffing SubsidiariesMajor IHRM functions

Selecting ExpatriatesManaging ExpatriatesInternational Human Resource Management and CompetitiveAdvantage

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Functions of International Human ResourcesManagement

1. Management of human resources in globalcorporations, including issues of expatriationand repatriation

2. Implementing corporate global strategy byadapting appropriate human resourcesmanagement practices in different national,economic, and cultural environments

3. Adopting labor relation practices in eachsubsidiary that matches local requirements

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Major Approaches to Managing and StaffingSubsidiaries

EthnocentricThe company uses the approach developed in the home country, andthe values, attitudes, practices, and priorities of headquarters determinethe human resources policies and practices

PolycentricThe company considers the needs of the local subsidiary whenformulating human resources policies and practices

RegiocentricThe company considers needs of an entire region when developing

human resources policies and practicesGlobal or Geocentric

The companys priority is the optimal use of all resources, includinghuman resources, and local or regional considerations are notconsidered important for the success of the corporate strategy

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Factors to be Considered in the UltimateSelection of a IHRM Approach

1. National concerns2. Economic concerns3. Technological concerns4. Organizational concerns5. Cultural concerns

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Ex. 16-1: Strategic Approach, Organizational Concerns, andIHRM Approach

Aspects of the Enterprise Ethnocentric Polycentric

Primary strategic orientation/stage International Multidomestic

Perpetuation (recruiting, staffing,development)

People of home country developedfor key positions everywhere in theworld

People of local nationalitydeveloped for key positions in theirown country

Complexity of organization Complex in home country, simplein subsidiaries

Varied and independent

Authority; decision-making High in headquarters Relatively low in headquarters

Evaluation and control Home standards applied to peopleand performance

Determined locally

Rewards High in headquarters; low insubsidiaries

Wide variation; can be high or lowrewards for subsidiary performance

Communication; information flow High volume of orders, commands,advice to subsidiaries

Little to and from headquarters;little among subsidiaries

Geographic identification Nationality of owner Nationality of host country

Orientation

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Ex. 16-1(contd.)

Aspects of the Enterprise Regiocentric GlobalPrimary strategic orientation/stage Regional Transnational

Perpetuation (recruiting, staffing,development)

Regional people developed for key positions anywhere in the region

Best people everywhere in theworld developed for key positionseverywhere in the world

Complexity of organization Highly interdependent on aregional basis

Global Web: complex,independent, worldwidealliances/network

Authority; decision-making High regional headquarters and/orhigh collaboration amongsubsidiaries

Collaboration of headquarters andsubsidiaries around the world

Evaluation and control Determined regionally Globally integrated

Rewards Rewards for contribution toregional objectives

Rewards to international and localexecutives for reaching local andworldwide objectives based onglobal company goals

Communication; information flow Little to and from corporate HQ, but may be high to and fromregional HQ and among countries

Horizontal; network relations

Geographic identification Regional company Truly global co., but glocal

Orientation

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Major IHRM Functions

1. Recruitment and selection2. Performance evaluation3. Compensation and benefits4. Training and development5. Labor relationsAlso, management of expatriateworkers

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Terms Used in IHRM

Recruitment is the process of attracting a pool of qualifiedapplicants for available positionsSelection is the process of choosing qualified applicants fromthe available candidates and ensuring that the skills, knowledge,and abilities of the selected employees match the requirementsof the positionsPerformance Evaluation is the process of appraisingemployees job performance

The Compensation and Benefit function of HRM is designedto develop uniform salary systems and other forms ofremuneration, such as health insurance, pension funds, vacation,and sick pay

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Terms Used in IHRM (contd.)

The Training and Development function involves planning foreffective learning processes, organizational development, andcareer development

The Labor Relations function is designed to assist managersand workers determine their relationships within the workplace

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Classifying Employees

1. Parent country national (PCN): thenationality of the employee is the same as thatof the headquarters of the global organization

2. Host country national (HCN): the

employees nationality is the same as that ofthe subsidiary3. Third country national (TCN): The

employees nationality is neither that of theheadquarters or of the local subsidiary

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Ex. 16-2: Impact of Culture on Training and Development Practices

United States/Canada East AsiaHRD Roles Trainer and trainee are equals;

trainees can and do challengetrainer, trainer can be informaland casual

Trainees have great respect fortrainer who should behave, dress,and relate in a highly professional,formal manner

Analysis and Design Trainer determines objectiveswith input from trainees and theirmanagers, trainees openly stateneeds and want to achieve successthrough learning

Trainer should know whattrainees need, admitting needsmight represent loss of face totrainees

Development and Delivery Programs should be practical andrelevant, using a variety ofmethodologies with lecturing timelimited

Materials should be orderly, wellorganized and unambiguous,trainees most accustomed tolecture, note taking, and limitedquestioning

Administration and Environment Hold training in comfortable,economical location, traineeselection based on perceivedneeds of organization andindividual

Quality of program may be judgedon the basis of quality of locationand training materials, ceremonieswith dignitaries, certificates,

plaques, and speeches taken assigns of value of program

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Ex. 16-2 (contd.)

Middle East/North Africa Latin America

HRD Roles Trainer highly respected, traineeswant respect and friendly relationship, formality is important

Preference for a decisive, clear,charismatic leader as trainer,trainees like to be identified withand loyal to a successful leader

Analysis and Design Difficult to identify needs becauseit is improper to speak of othersfaults, design must include time forsocializing, relationship building,and prayers

Difficult to get trainees to exposeweaknesses and faults, designshould include time for socializing

Development and Delivery Need adequate opportunity fortrainer and trainees to interact, relyon verbal rather than writtendemonstrations of knowledgeacquired, avoid paper exercises androle playing

Educational system relies onlecture and has more theoreticalemphasis, training should bedelivered in the local language

Administration and Environment The learning process should be permeated with flourishes andceremonies, program should not bescheduled during Ramadan, themonth of fasting

Value/importance judged bylocation, which dignitaries invitedfor the ceremonies, and academicaffiliation of trainer, time isflexible: beginning or ending at acertain time not important

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Ex. 16-3: Union Membership in Selected Countries

Country Percentage of UnionMembership

Year

ArgentinaBrazilCanadaChileChinaCosta RicaEgyptFranceGermanyGreeceItalyJapan

MalaysiaMexico

New ZealandSpainUnited StatesZimbabwe

28%13-30% (estimated)

29.5%12.3%92%15%50%

8-10%39.5%30%15%

24.2%

9.1%25-30%34.3%11%

15.8%17%

199319931993199319931993199219931992199319921993

199219911993199219921993

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Ex. 16-4: Effects of Culture Shock on Adjustment

6

5.5

2.5

2

0

7

0-2 3-4 4-6 6-9 10-12 13-24 25-36 46-48 49+Time in Months

D e g r e e o f

A d j u s

t m e n

t

Honeymoon

Culture Shock

Adjustment

Mastery

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Types of Compensation Systems

Headquarters Salary SystemHeadquarters pay scale plus differentials. The salary for thesame job at headquarters determines the base salary of thehome country national. The differential can be a positiveaddition to an expatriates salary, or it can be a negativeallowance to account for the extra benefits that might beassociated with the particular overseas placement

Citizenship Salary System

The managers salary is based on the standard for the countryof his or her citizenship or native residence. An appropriatedifferential is then added, based on comparative factors

between the two countries

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Suggestions for Policies for Managing Dual-Career Expatriates

Frequent visitation trips of the family or the expatriate to preventthe pain of separation from becoming too intenseGenerous allowance for long distance telephone calls and other

costs of communicationSeek employment opportunities for the spouse within thecompany or in the local area, if the spouse is willing to quit hisor her job in the home country to be with the married partner

Making connections with other global companies foremployment of spouses

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Repatriation

Repatriation is the term given to the returnof the home country manager.

Reasons for repatriation:

The time of the overseas assignment is up Childrens education Unhappy with the assignment Family unhappiness

Failure

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Key Terms and Concepts

International human resources managementEthnocentric staffing approachPolycentric staffing approach

Regiocentric staffing approachGeocentric staffing approachPerformance evaluationExpatriateRepatriationCulture shock