Asean Integration lecture
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Transcript of Asean Integration lecture
ASEAN Economic Community
Brunei LaosCambodia Singapore*Indonesia* Philippines* Malaysia* Thailand*Myanmar Viet Nam
3 PILLARS OF THE ASEAN COMMUNITY
ASEAN POLITICAL SECURITY COMMUNITY
ASEAN ECONOMIC COMMUNITY
ASEAN SOCIO-CULTURAL COMMUNITY
An ASEAN single Market and Production Base
Where there will be FREE FLOW:
GOODS
SERVICES
HUMAN CAPITAL (Skilled Labor)
CAPITAL INVESTMENTS
INFORMATION
Fast Growing Region The region consists of 10 countries, a significant consumer market of 620 million people,
estimated GDP growth of 5% in 2013. It is forecast to slow slightly to 4.7% in 2014.
ASEAN Charter is self-imposed roadmap for economic integration. The ASEAN Economic Community (AEC) is scheduled to achieve its integration goals by 2015, from the original 2020.
WHAT IS COMPETITIVENESS ?( WEF 2013)
Set of INSTITUTIONS, POLICIES, and FACTORS that determines the level of productivity of a country which sets the sustainable level of prosperity earned by an economy.
PRODUCTIVITY determines the rate of return from physical, human, or technological investments in an economy
The WEF Human Capital report has 9 indicators for talent:
1. Country capacity to attract talent2. Country capacity to retain talent3. Ease of finding skilled employees4. Pay related to productivity5. Capacity for innovation6. Index of Economic Complexity7. Firm level technology absorption8. Scientific and technical journal articles (per 1k people)9. Median age of the working population
Based on the World Economic Forum’s Human Capital Report 2013
Comparative Country Rankings on Talent:Philippines vs. ASEAN
Except for 2 indicators, the Philippines consistently ranked in the bottom half of ASEAN countries!
Country capacity to attract talent Last (8th) in SEA!
Country capacity to retain talent 7th in SEA
Ease of finding skilled employees 4th in SEA
Pay related to productivity Last (8th) in SEA!
Capacity for innovation 5th in SEA
Index of Economic Complexity 4th in SEA
Firm level technology absorption 3rd in SEA
Scientific and technical journal articles (per 1k people)
5th in SEA
Median age of the working population 6th in SEA
International Human Resource Management
the process of managing people in international settings
Scyllion defined IHRM as “the HRM issues and problems arising fro the internationalization of business, and the HRM strategies, policies and practices which firms pursue in response to the internationalization process.
IHRM is the management of HR in business operations in at least two nations.
Differences Between IHRM & Domestic HRM
IHRM Domestic HRM
Address a broad range of HRM activities
Address narrow range of HRM activities
HR issues relate to employees belonging to more than one nationality
HR issues relate to employees belonging to single nationality
Greater involvement of HR manager in the personal life of employees.
Limited involvement of HR manager in the personal life of employees
Differences Between IHRM & Domestic HRM
IHRM Domestic HRM
Greater exposure to risks in international assignments
Has to manage several external factors such as government regulations of foreign country
Changes in emphasis as the workforce mix of expatriates and locals vary
Limited risks in domestic assignments
Limited external factors to deal with
Reasons for Growing Interest in IHRM
Globalization of business
Effective HRM is determinant of success in international business
Movement to network organizations from traditional hierarchical structures
Significant role in implementation and control of strategies
Types of International Organizations
International Corporations
Multinational Corporations
Global Corporations
Transnational Corporations
International Corporations
Domestic firms that builds on its existing capabilities to penetrate overseas market
Example: Honda, General Electric, P & G
Multinational Corporations
MNCs have operating units (subsidiaries) located in foreign countries
Subsidiaries function as autonomous units
Decisions made by people from a wider range of cultures
Least-cost and standardized products and services
Worldwide lines of business
Values of the headquarters
Examples: Shell, Philips, Xerox
Global Corporations
Maintains control over its worldwide operations (subsidiaries) through a centralized home office
They treat the entire world as a single market
Example: Matsuhita
Transnational Corporations
Global competition
Identical products are distributed worldwide
Research and development
Firms become less hierarchically structured
Provides autonomy to independent country operations but bring these operations into an integrated whole through networked structure.
They combine the local responsiveness of an MNC and the efficiency of a global corporation
Transnational human resource strategies are being developed
Example: Ford and Unilever
Hofstede’s Dimensions
Individualism vs. Collectivism
Power Distance
Uncertainty Avoidance
Masculinity vs. Femininity
Long-term Orientation
Differences
Language (e.g. spoken, written, body)
Different labor laws
Different political climate
Different stages of technological advancement
Different values and attitudes e.g. time, achievement, risk-taking
Roles of religion e.g. sacred objects, prayer, taboos, holidays, holidays, etc
Educational level attained
Social organizations e.g. social institutions, authority structure, interest groups, interest groups, status systems
IHRM Practices
International staffing
Pre-departure training for international assignments
Repatriation
Performance management in international assignments
Compensation issues in international assignments
Human Resource Planning
Involves decisions about where and how many employees are needed for each international facility
Decisions about where to locate include considerations such as cost and availability of qualified workers
Considerations must be weighed against financial and operational requirements
Other location decision involves outsourcing
International Staffing
A selection program for international assignments involves assessing prospective candidates on certain criteria thought to be associated with assignment effectiveness.
In order to have successful program there needs to be broad range of prospective candidates from which to choose criteria effectiveness and valid procedures
Criteria for Selection of Employees for Foreign Assignments
Competency in employee’s area of expertise
Ability to communicate verbally and non-verbally in the foreign country
Flexibility, tolerance of ambiguity, and sensitivity to cultural differences
Motivation to succeed and enjoyment of challenges
Willingness to learn about the foreign country’s culture, language, and customs
Support from family members
Competencies
Competencies Competencies
Empathy Communication skills
Feasibility Tolerance to differences
Patience Humor
Openness Resourcefulness
Reliability Sensitivity
Confidence Teaching skills
Emotional Stability Ability to handle alcohol
Competencies
Competencies Competencies
Curiosity Adaptability
Positive regard for others Tolerance for ambiguity
Acceptance of assignment Language skills
Desire to be abroad Interest in host culture
Non-ethnocentrism Professional/technical competence
High motivation Relational abilities
Courtesy Family situation
International Staffing
Refers to the process of selecting employees for staffing international operations of an MNC
MNC can be staffed using three different sources:
- Home Country or Parent Country National (PCN)
- Host Country Nationals (HCN)
- Third Country Nationals (TCN)
PNC
Employees of an organization who are citizens of the country in which the headquarters of the company is located
Advantages & Disadvantages of Using PNCs
Advantages Disadvantages
Familiarity with home office, goals, practices
Easy organizational control and coordination
International exposure to promising managers
PNCs special skills & experiences
Difficulty in adapting to foreign country
Excessive cost of selecting, training & maintaining expatriates
Promotional opportunities limited for HCNs
May try to impose inappropriate HQ style
Compensation differences for HCNs & PCNs
HCN
Employees of an organization who are the citizens of the country in which the foreign subsidiary is located
Advantages & Disadvantages of Using HCNs
Advantages Disadvantages
Familiarity with the situation in host-country
Lower hiring costs Locals motivated due to
promotional opportunities Responds well to localization of
subsidiary’s operations No language barrier HCNs stay longer in positions
Difficulty in exercising effective control over the subsidiary’s operations
Communication problems with home office personnel
No opportunity for home country’s nationals to gain international experience
Limited career opportunity outside the subsidiary
TCN
Employees of an organization who are the citizens of the country other than the country where the organization is headquartered and the country that is hosting the subsidiary
Advantages & Disadvantages of TCNs
Advantages Disadvantages
Salary and benefit requirements lower than that of PCNs
May be better informed about host country environment
Truly international managers
Host country government may resent hiring TCNs
May not return to their country after assignment
Host country’s sensitivity with respect to nationals of specific countries
Ethnocentric Approach
Foreign subsidiary has little autonomy. All strategic decisions are made at the headquarters. PCNs staff key positions at quarters as well as the foreign subsidiary
Appropriate during early phases
Centralized HR
Pay based on local market for employees; home country for PCNs
Polycentric Approach
Staff foreign subsidiaries of the firm with HCNs and headquarters consist of PNCs
PNCs occupy key positions at corporate HQ
Decentralized HR
Pay based on local market
Training given added importance
Regiocentric Approach
Variation of staffing policy to suit particular geographic areas
Provides “stepping stone” for a firm wishing to move from an ethnocentric or polycentric approach to a geocentric approach
Geocentric Approach
Staff may be PNCs, HCNs or TNCs
Ability and not nationality is the key to staffing
Compensation based on value-added
Training and development emphasized
Underlying principle of a global corporation
Pre-departure Training for International Assignments
To make it easier for the employee to assume job responsibilities and be effective in the foreign country as soon as possible
To facilitate cultural adaptation as quickly and as effectively as possible
Four Elements of Training & Development Program
Language Training
Cross-cultural Training
Managing Personal & Family Life
Management Development & Strategy
HCN Training
Gaining knowledge about parent organization
Technical know-how specific to organization
Role of the subsidiary in the MNC
General awareness of the parent country cultural norms
Delivering Training in Other Countries
Clarify what overseas training is supposed to achieve
Consider international differences among trainees when developing the training plan
Overseas trainers should meet same quality standards as training at headquarters
Be clear about standards for confidentiality and intellectual property
Know local laws that affect training programs
Performance Management in International Assignments
Performance is the combination of several factors:
Compensation package
Task assigned to the expatriate
Headquarter’s support
Environment
Cultural assignment
International Performance Management
Constraints while operating in host countries need to be considered
Physical distance, time differences & cost of reporting system add to the complexity
Performance Management Across National Boundaries
When establishing performance management methods in other countries, organizations have to consider:
Legal requirements
Local business practices
National cultures
Performance Management Across National Boundaries
Differences may include:
Which behaviors are rated
How and the extent to which performance is measured
Who performs the rating
How feedback is required
International Compensation
Devising an appropriate strategy to compensate expatriates
Minimizing difference in pay between parent, host & third country nationals
Issues relating to the re-entry of expatriates into the home country
Compensating International Workforce
Market pay structures differ substantially across countries in terms of both pay level and the relative worth of jobs
This creates a dilemma for global companies:
Should pay levels and differences reflect what workers are used in their own countries?
Should pay levels and differences reflect the earnings of colleagues in the country of the facility, or earnings at the company quarters?
Compensating International Workforce
Compensation decisions affect a company’s costs and ability to compete
Challenge of competing with organizations in low-wage countries can be very difficult
Decisions about benefits must take into account the laws of each country involved, as well as employees’ expectations and values in those countries
Compensating Managers in International Assignments
Components of expatriate compensation
Home leave and travel allowances
Children’s education allowance
Currency differential payments
Relocation allowance
Housing allowance
Cost of living adjustment
Payment to protect negative tax consequences
Expatriation premium
International Labor Relations
Labor relations on an international scale involves differences in laws, attitudes, economic systems, and differences in negotiation styles
Organizations establish overall policies and goals for labor relations, overseeing labor agreements, and monitoring labor performance
The day-to-day decisions about labor relations are usually handled by each foreign subsidiary
International Industrial Relations
Handling industrial relations problems in a subsidiary
Attitude of parent company towards unions in a subsidiary
Expatriate Failure
Premature return of expatriates to their home country
Reasons:
Inability to adjust to host country culture leads to culture shock
Personal and emotional problems
Difficulties with the environment
Inability to cope with larger international responsibilities
Other family reasons
Repatriation
It is the process of bringing an expatriate home after he/she has completed the international assignment
Can cause re-entry shock or reverse culture shock
Reasons:
1. Posting period over
2. Children’s education
3. Not happy with overseas assignment
4. Failure to do a good job
Major Complaints of Repatriation
Loss of status
Loss of autonomy
Lack of recognition of the value of the experience
Lack of career direction
Strategies for Successful Repatriation
A strategic purpose for repatriation
A team to aid the expatriate
Home country information sources
Training and preparation for the return
Support for expatriate and family
Repatriation
Organizations can follow three practices:
Create knowledge and develop global leadership skills
Ensure that candidates have cross-cultural skills to match their technical abilities
Prepare people to make the transition back to their home offices
Changes in Emphasis
Need for PCNs and TCNs decrease as more trained locals become available
Resources reallocated to selection, training & management
Questions for HR Professionals
Do we have a strategy for becoming an international firm?
What type of managers will we need to be successful?
How can I find out about the way HRM is conducted in other countries (laws, trade unions, labor market)
What will be the impact of cultural norms on our HR policies?
How will we choose whether to send expatriates or use local employees?
How do we move people to different locations?
How do we manage transfer of knowledge across borders.
Effective IHRM Implementation
Ascertain the current and intended nature of international operations in the organization.
Determine the extent to which HR policies and practices should be standardized or localized in accordance with overall organizational strategy
Assess the extent to which local cultural, social, political, economic and legal factors will impinge on any attempts to apply standard HR policies if integration is a key factor in organizational strategy
Ensure a computerized database of global human resources is used if integration is desired
Work with senior management team to identify the competencies required to achieve global organizational objectives
Effective IHRM Implementation
Work with national HR and line managers to formulate IHR policies and practices which will embed a transnational mindset in the organization
Conclusion
As organizations have gone global in their operations, the impact of cultural differences as well as workforce issues have caught the attention of the HR managers. As the world becomes boundary less, the ability to work in cross cultural environment becomes a valuable asset for any executive.
Understanding, managing, and even exploiting these cultural differences could well spell the difference between success and failure in several business situations.