Post on 04-Jun-2018
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International HRM
Staffing, Training, andCompensation for Global
Operations
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[In the new millennium], the caliber of
the people will be the only sourceof competitive advantage.
Allan Halcrow, Personnel Journal
Of the top 100 UK firms surveyed byCendant International AssignmentServices, 63 reported failed foreign
assignments.- www.expat.FT.com
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2006 Prentice Hall
The International Human Resource
Management Process
HRMs Strategic Content
Recruitment and Selection
Training and Development
Performance Appraisal
Compensation and Benefits
Labor Relations
Contribution to Organizational Effectiveness
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Staffing Philosophies for Global
Operations
Firms using an ethnocentric staffing approach fill keymanagerial positions with people from headquarters thatis, parent-country nationals (PCNs).
Reasons :
Familiar with firms goal, product, tech, policies &
culture Protecting company interest
Lack of specialized knowledge workers in the localmarket
Close coordination with HQ
Problems: Lack of motivation among the local workers-less
opportunity & development
Poor Adaptation by the expatriate
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Staffing Philosophies for Global
Operations
In a polycentric staffing approach, local managers host-country managers (HCNs) are hired to fill key positions intheir own country.
Reasons :
specialized local market knowledge- language, policy Less expensive
Legal requirements of the host country,
political contacts
Problems:
Autonomous subsidiaries
Less experienced
Conflict of loyalties
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Staffing Philosophies for Global
Operations
In the global staffing approach, the bestmanagers are recruited from within or outsideof the company, regardless of nationality.
In a regiocentricstaffing approach, recruitingis done on a regional basis say within LatinAmerica for a position in Chile.
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Staffing Philosophies for Global
Operations
Reasons:
Greater pool of qualified candidate
Expert
Integrated global enterprise
Have global mindset
Bilingual/ multilingual skillusually bring orecultural flexibility and adaptability to thesituation
Problem: Costly
Difficult to find willing candidate
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IHRM Orientations and
Multinational Strategies
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Three Employee Categories at an
MNE
Host-country nationals (HCNs) -- citizens of thecountry where the subsidiary or affiliate is located.HCNs make up the largest proportion of theemployees that the firm hires abroad.The firmslaborforce in manufacturing, assembly, basic service
activities, clerical work, and other non-managerialfunctions largely consists of HCNs.
Parent-country nationals(PCNs)-- also known ashome-country nationals, PCNs are citizens of thecountry where the MNE is headquartered.
Third-country nationals(TCNs) --employees whoare citizens of countries other than the home or hostcountry. Most TCNs work in management andpossess special knowledge or skills.
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Expatriates In a global organization, it is very common for
employees to move across national boundaries to takeup responsibilities that others cannot fulfill. Theseemployees on international assignments are traditionallycalled expatriates.
An expatriate is an employee who is assigned to workand reside in a foreign country for an extended period,usually a year or longer.
Note that any one of the three categories of employeescan be considered an expatriate depending on thelocation of the assignment.
E.g., a HCN who is transferred into parent countryoperations also resides outside of his or her homecountry.
While expatriates comprise only a small percentage ofthe workforce in most MNEs, they perform criticalfunctions abroad, such as managing a subsidiary.
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Selection: Necessary Skills and
Abilities for International Managers
Skills and Abilities
Necessary to Do
The JobTechnical
Functional
Managerial
Skills and Abilities
Necessary to Work
in a ForeignLocationAdaptability
Location-specific skills
Personal characteristics
Improved Chances of Succeeding in
An International Job Assignment
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Problems with Expatriation
Selection based on headquarters criteria ratherthan assignment needs
Inadequate preparation, training, and orientationprior to assignment
Alienation or lack of support from headquarters
Inability to adapt to local culture and workingenvironment
Problems with spouse and children pooradaptation, family unhappiness
Insufficient compensation and financial support
Poor programs for career support andrepatriation
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Cross-Cultural Training: Culture
Shock
Culture shock is a state of disorientation andanxiety about not knowing how to behave inan unfamiliar culture. The cause of cultureshock is the trauma people experience in newand different cultures, where they lose thefamiliar signs and cues that they had used tointeract in daily life and where they mustlearn to cope with a vast array of new culturalcues and expectations.
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Phases in Acculturation
Honeymoon
Disillusionment
Adaptation
Biculturalism
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Honeymoon Phase
New culture seems exotic and stimulating
Excitement of working in new environmentmakes employee overestimate ease of
adjusting Lasts for first few days or months
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Disillusionment Phase
Differences between new and oldenvironments are blown out of proportion
Challenges of everyday living
Many stay stuck in this phase
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Adaptation Phase
Employee begins to understand patterns ofnew culture
Gains language competence
Adjusts to everyday living
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Biculturalism
Anxiety has ended
Employee gains confidence in ability tofunction productively in new culture
Repatriation may be difficult
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Cross-Cultural Training: Culture
Shock
Honeymoonwhen positive attitudes and expectations,excitement, and a tourist feeling prevail
Irritation and hostility the crisis stage when culturaldifferences result in problems at work, at home, and indaily living
Gradual adjustmenta period of recovery in which thepatient gradually becomes able to understand andpredict patterns of behavior, use the language, and dealwith daily activities, and the family starts to accept theirnew life
Biculturalism the stage at which the manager andfamily members grow to accept and appreciate localpeople and practices and are able to function effectivelyin two cultures
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Cross-Cultural Training: Sub-Culture
Shock
Subculture shock occurs when a manager istransferred to another part of the countrywhere there are cultural differences essentially from what she or he perceives tobe amajorityculture to aminorityone.
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Training Techniques
Area studies,that is, documentary programsabout the countrys geography, economics,sociopolitical history, and so forth
Culture assimilators, which expose trainees to thekinds of situations they are likely to encounterthat are critical to successful interactions
Language training
Sensitivity training
Field experiencesexposure to people fromother cultures within the trainees own country
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Training Host-Country Nationals
Continuous training and development of HCNs andTCNs for management positions is an important factorfor long-term success of the multinational corporation
Ongoing development will facilitate the transition to
an indigenization policy The company will have a well-trained management
staff with broad international experience
Training to facilitate e-business adoption is taking on
increasing importance Training in information and communication
technologies is particularly critical for firms in neweconomy and emerging markets
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Compensating Expatriates
Compensation is a crucial link betweenstrategy and its successful implementation
Must be a fit between compensation and the
goals of the firm Maintaining an appropriate compensation
package is more complex than it wouldseem
Little variation in typical salary but there is awide variation in net spendable income
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Compensating Expatriates
SalaryLocal salary buying power and currencytranslation, as compared with home salary;bonuses or incentives for dislocation
Taxes Equalize any differential effects on taxes
as a result of the assignment
AllowancesRelocation expenses; cost-of-livingadjustments; housing allowance for assignmentand allowance to maintaining house at home;
trips home for family; private education forchildren
BenefitsHealth insurance; stock options
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Compensating Expatriates
A number of variable apply including local marketfactors and pay scales, government involvementin benefits, unions, and the cost of living must allbe considered
Eastern Europeans spend 35% to 40% of theirdisposable income on food and utilities
East European managers must have cash forabout 65% to 80% of their base pay
US managers must have cash of about 40%
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http://www.mercer.com/costoflivingpr#City_rankings
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Compensation Approach
There is two compensation approaches:
The going rate approach: host country salarystructure is followed.
The balance sheet approach: Home countrysalary structure is followed.
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2006 Prentice Hall 9-31
Figure 20.5 An Expatriate Balance Sheet
U.S. Domestic Base Salary
Taxes Consumption Savings
Foreign and
Excess U.S. Taxes
Paid by company
Excess Foreign Costs
Paid by company
Foreign Service
Premium/ Hardship
Added by company
U.S. Levels
U.S. SpendableIncome
U.S. Hypothetical
Housing and Utilities
U.S. Auto Purchase
U.S. Hypothetical
Tax and
Social Security
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Repatriation Return of the expatriate to home country following
completion of a lengthy foreign assignment.
Like expatriation, repatriation requires advancepreparation. Unless managed well, the expatriate is likelyto encounter problems upon returning home.
Some returning employees find their internationalexperience is not valued, and they may be placed in lesseror ill-suited positions than what they held abroad.
Some expatriates report financial difficulties uponreturning, such as inflated housing prices or cuts in pay.Many experience reverse culture shock, readjustment toparent-country culture.
For the employee and family members who have spentseveral years abroad, psychological readjustment to life inthe home country can be stressful.