Chapter 15

Copyright © 2008 by Nelson, a division of Thomson Copyright © 2008 by Nelson, a division of Thomson Canada Limited.Canada Limited.All rights reserved.All rights reserved.

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Monica Belcourt, York University and Monica Belcourt, York University and

Charlie Cook, The University of West AlabamaCharlie Cook, The University of West Alabama

Managing Human ResourcesManaging Human ResourcesBelcourt * Bohlander Belcourt * Bohlander ** SnellSnell 55thth Canadian edition Canadian edition

International HumanInternational HumanResources Resources ManagementManagement

Copyright © 2008 by Nelson, a division of Thomson Canada Ltd. 15–2

ObjectivesAfter studying this chapter, you should be able to:

1. Identify the types of organizational forms used for competing internationally.

2. Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider.

3. Explain how domestic and international HRM differ.

4. Discuss the staffing process for individuals working internationally.

5. Identify the unique training needs for international assignees and their employees.


Objectives (cont’d)After studying this chapter, you should be able to:

6. Identify the characteristics of a good international compensation plan.

7. Reconcile the difficulties of home- and host-country performance appraisals.

8. Explain how labour relations differ around the world.


Increasing Importance of Global Human Resource Understanding

International International Mergers and Mergers and AcquisitionsAcquisitions

International International Mergers and Mergers and AcquisitionsAcquisitions

Importance of Global Human Resources Management

Importance of Global Human Resources Management

Foreign Human Foreign Human ResourcesResources

Foreign Human Foreign Human ResourcesResources

Global Global CompetitionCompetition

Global Global CompetitionCompetition

Market Access Market Access OpportunitiesOpportunities

Market Access Market Access OpportunitiesOpportunities


Managing Across Borders

• International corporation Domestic firm that uses its

existing capabilities to move into overseas markets.

• Multinational corporation (MNC) Firm with independent

business units operating in multiple countries.

• Global corporation Firm that has integrated

worldwide operations through a centralized home office.

• Transnational corporation Firm that attempts to

balance local responsiveness and global scale via a network of specialized operating units.


Types of OrganizationsTypes of Organizations

Figure 15.1


Top International CompaniesTop International Companies

1. General Electric $286.10

2. Microsoft 263.99

3. ExxonMobil 244.93

4. Pfizer 244.89

5. Wal-Mart Stores 232.22

6. Citigroup 210.86

7. Johnson & Johnson 161.36

8. Royal Dutch/Shell Group 158.48

9. BP 153.24

10. AIG 150.97

MARKET VALUE

(BILLIONS OF U.S. DOLLARS)

Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.

Figure 15.2


Top International Companies (cont’d)Top International Companies (cont’d)

SALES


1. Wal-Mart Stores $244.52

2. ExxonMobil 204.51

3. General Motors 184.21

4. Royal Dutch/Shell 179.43

5. BP 178.72

6. Ford Motor 162.59

7. DaimlerChrysler 156.84

8. Toyota Motor 134.23

9. General Electric 131.70

10. Allianz 126.80


Figure 15.2


Top International Companies (cont’d)Top International Companies (cont’d)

PROFITS


1. Citigroup $15.32

2. General Electric 15.13

3. Altria Group 11.10

4. ExxonMobil 11.01

5. Royal Dutch/Shell 9.42

6. Bank of America 9.25

7. Pfizer 9.18

8. Wal-Mart Stores 8.04

9. Toyota Motor 7.90

10. Microsoft 7.83


Figure 15.2


How International Companies Affect the World Economy

• Their production and distribution extend beyond national boundaries, making it easier to transfer technology.

• They have direct investments in many countries, affecting the balance of payments.

• They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism.


How Does the Global Environment Influence Management?

• Unified EconomiesClosely partnered nations such as the European

Union (EU) have developed into strong competitors.Promotes job growth in trading nations.

• Cultural environmentThe communication patterns, religion, values and

ideologies, education, and social structure of a host country influence how HR is conducted in that country.


The Nations of the European

Union

The Nations of the European

Union


Cultural Environment of International BusinessCultural Environment of International Business

Figure 15.3


Domestic versus International HRM

• Issues in international HRM in helping employees adapt to a new and different environment outside their own country:RelocationOrientationObjectiveTranslation services


International Staffing

• Expatriates, or Home-country NationalsEmployees from the home country who are on

international assignment.

• Host-country NationalsEmployees who are natives of the host country.

• Third-country NationalsEmployees who are natives of a country other than

the home country or the host country.


Changes in International Staffing over TimeChanges in International Staffing over Time

Figure 15.4


Hiring Host-Country Nationals

• Three main advantages:1. Hiring local citizens is generally less costly than

relocating expatriates.

2. Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally.

3. Most customers want to do business with companies they perceive to be local versus foreign.


Recruiting Internationally

• Work Permit, or VisaGovernment document granting a foreign individual

the right to seek employment.

• Guest WorkersForeign workers invited to perform needed labour.

• ApprenticeshipsVocational training programs in skilled trades.

• Transnational TeamsTeams composed of members of multiple

nationalities working on projects that span multiple countries.


Selecting Global Managers

• Global manager A manager equipped to run an international business

• Skills CategoriesAbility to seize strategic opportunities

Ability to manage highly decentralized organizations

Awareness of global issues

Sensitivity to issues of diversity

Competence in interpersonal relations

Skill in building community


Selecting Global Managers

1. Begin with self-selection.

2. Create a candidate pool.

3. Assess core skills.

4. Assess augmented skills and attributes.


Highlights in HRM

Skills of Expatriate Managers

CORE SKILLS AUGMENTED SKILLSExperience Technical skillsDecision making Negotiation skillsResourcefulness Strategic thinkingAdaptability Delegation skillsCultural sensitivity Change managementTeam buildingMaturity

Highlights 15.4


Measured Expatriate Characteristics

• Core SkillsSkills that are considered

critical to an employee’s success abroad.

• Augmented SkillsSkills that are helpful in

facilitating the efforts of expatriate managers.

• Failure ratePercentage of expatriates who

do not perform satisfactorily.


Comparison of Advantages in Sources of Overseas ManagersComparison of Advantages in Sources of Overseas Managers

HOST-COUNTRY HOME-COUNTRY NATIONALS THIRD-COUNTRYNATIONALS (EXPATRIATES) NATIONALS

Less costly Talent available within company Broad experience

Preferred by host-country Greater control International outlook governments

Intimate knowledge of Company experience Multilingualismenvironment and culture

Language facility Mobility

Experience provided to corporateexecutives

Figure 15.6


Expatriate Selection CriteriaExpatriate Selection Criteria

Figure 15.7


Causes of Expatriate Assignment FailureCauses of Expatriate Assignment Failure

• Family adjustment• Lifestyle issues• Work adjustment• Bad selection• Poor performance• Other opportunities arise• Business reasons• Repatriation issues

Figure 15.8


Training and Development

• Essential training program content to prepare employees for working internationally: Language trainingCultural trainingAssessing and tracking career developmentManaging personal and family lifeRepatriation

• Culture shockPerpetual stress experienced by people who settle

overseas


Preparing for an International AssignmentPreparing for an International Assignment

1. Social and business etiquette

2. History and folklore

3. Current affairs, including relations between the host country and Canada

4. Cultural values and priorities

5. Geography, especially its major cities

6. Sources of pride and great achievements of the culture

7. Religion and the role of religion in daily life

8. Political structure and current players

9. Practical matters such as currency, transportation, time zones, hours of business

10. The language

To prepare for an international assignment, one should become acquainted with the following aspects of the host country:

Figure 15.9


Training Methods

• Reviewing available information about the host company: books, magazines, video tapes.

• Conversations with host country natives.

• Sensitivity training to become familiar with the customs and overcome prejudices.

• Temporary assignments to encourage shared learning.


Highlights in HRM

Stressors and Coping Responses in the Developmental Stages of Expatriate Executives

PRIMARYSTRESSOR RESPONSE

Expatriate selection Cross-cultural unreadiness.

Assignment acceptance Unrealistic evaluation of stressors to come.Hurried time frame.

Pre- and post-arrival Ignorance of cultural training differences.

Arrival Cultural shock.Stressor reevaluation.Feelings of lack of fit and differential treatment.

Novice Cultural blunders or inadequacy of coping responses.Ambiguity owing to inability to decipher meaning of situations.

Transitional Rejection of host or parent culture.

Mastery Frustration with inability to perform boundary spanning role.Bothered by living with a cultural paradox.

Repatriation Disappointment with unfulfilled expectations.Sense of isolation.Loss of autonomy.

Source: J. Sanchez, P. Spector, and C. Cooper, “Adapting to a Boundaryless World: A Developmental Expatriate Model,” Academy of Management Executive 14, no. 2 (May 2000): 96–106.

Highlights 15.5


Returning from an Overseas Assignment• Repatriation

The process of an employee transitioning home from an international assignment. Throw a “welcome home” party.

Offer counseling to ease the transition.

Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated.

Get feedback from the employee and the family about how well the organization handled the repatriation process.


Compensation

• Different countries have different norms for employee compensation.Financial (money) incentives versus nonfinancial

incentives (prestige, independence, and influence) Individual rewards versus collectivist concerns for

internal equity and personal needsGeneral rule: match the rewards to the values of the

local culture—create a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of employees in specific locations.


Forces Driving Global PayForces Driving Global Pay

CULTURAL PREFERENCESImportance of statusRole of individual vs. organizationvs. governmentEquality vs. disparityAchievement vs. relationships

PERSONAL PREFERENCESAttitudes toward riskQuality of life vs. workShort- vs. long-termCompetitiveness vs. solidarity

ECONOMIC CONDITIONSSize of economyTypes of industries, natural resourcesInflation, unemploymentProtectionism vs. open market

SOCIAL CONSTRAINTSIncome tax rates, social costsLaws and regulationsCollective bargaining, workerparticipationSkills, education of workforce

Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!” Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.

Figure 15.11


Compensation of Host-Country Employees• Hourly wages vary dramatically from country to

country.• Pay periods are different.• Seniority may be an important factor.• High pay rates can upset local compensation

practices.• Bonuses, profit-sharing, benefits and paid leave

may be more extensive and legally required.


Hourly Wages in Different Countries*Hourly Wages in Different Countries*

Norway 31.55Germany (former West) 31.25 Switzerland 27.87 Belgium 27.73 Sweden 25.18 United States 21.97 France 21.13 Britain 20.37 Japan 20.09 Australia 20.05 Canada 19.28 Italy 18.35 Spain 14.96 Israel 11.73 Korea 10.28 Portugal 6.23 Taiwan 5.84 Brazil 2.67 Mexico 2.48 China 0.63 Sri Lanka 0.49

COUNTRY $/HOUR

*Hourly compensation costs in U.S. dollars for production workers in manufacturing.

Source: U.S. Department of Labor, Bureau of Labor Statistics, November 2004.

Figure 15.12


Compensation of Expatriate Managers

• Provide an incentive to leave Canada

• Allow for maintaining a N.A. standard of living

• Provide for security in countries that are politically unstable or present personal dangers

• Include provisions for good healthcare

• Provide for the education of children

• Consider foreign taxes the employee is likely to have to pay (in addition to domestic taxes) and help with tax forms and filing

• Allow for maintaining relationships with family, friends, and business associates.

• Facilitate reentry home• Be in writing


Expatriate Compensation Systems

• Home-Based Pay Pay based on an expatriate’s home country’s

compensation practices

• Balance-Sheet Approach A compensation system designed to match the

purchasing power in a person’s home country

1. Calculate base pay

2. Figure cost-of-living allowance (COLA)

3. Add incentive premiums

4. Add assistance programs


Expatriate Compensation Systems (cont’d)• Host-Based Pay

Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned

• LocalizationAdapting pay and other compensation benefits to

match that of a particular country

• Other IssuesAdequacy of medical carePersonal securityEducation


Performance Appraisal of International Managers

• Who Should Appraise Performance?Home-country evaluationsHost-country evaluations

• Adjusting Performance CriteriaAugmenting job duties Individual learningOrganizational learning

• Providing FeedbackDebriefing interview


Boosting ROI of ExpatriatesBoosting ROI of Expatriates

Major initiatives planned to improve assignment return on investment (ROI):

Better candidate selection 32%

Career-planning skills 26

Communicating objectives 24

Assignment preparation 20

Monitoring program 17

Cross-cultural training 10

Developing or expanding intranet 7

Communication/recognition 6

Web-based cultural training 5

Mandating destination support 4

Other 17Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.

Business Case


International Organizations and Labour Relations• International Differences in Unions

The level at which bargaining takes place (national, industry, or workplace)

The degree of centralization of union-management relations

The scope of bargaining (parties and issues)

The degree to which government intervenes

The degree of unionization and union strength.


Key Terms

• augmented skills• balance-sheet approach• codetermination• core skills• cultural environment• culture shock• expatriates, or home-country

nationals• failure rate• global corporation• global manager• guest workers

• home-based pay• host-based pay• host country• host-country nationals• international corporation• localization• multinational corporation

(MNC)• repatriation• third-country nationals• transnational corporation• transnational teams• work permit, or visa

Chapter 15

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