Chapter 17: Global Human Resource Management Chapter 17 Global Human Resource Management...

Chapter 17: Global Human Resource Management

Chapter 17

Global Human Resource Management

International Business

Oded Shenkar and Yadong Luo


Do You Know?

• Some basic stages that Multinational Enterprises go through to staff themselves?

• What the reasons are for assigning an expatriate to foreign branches and/or subsidiaries?

• That the rate of success for expatriates is tied to their abilities, openness, and training?

• What some of the basic parts of expatriate compensation are?

• How working for subsidiary versus working for an international joint venture differs for the expatriate?


BP Amoco

• BP Amoco, originally British Petroleum, acquired Standard Oil of Ohio between 1976 and 1987. After that, it acquired Atlantic Richfield.

• With the acquisitions, it established • BP-Amoco as a world power in oil

development, exploration, refining, and distribution.

• In order to give itself sufficient expertise in world affairs, the company undertook the mission of internationalizing the Board of Directors, based in London. To date, the Board consists of 10 non-Brits, and 14 Brits.


International Human Resources (IHRM)

• International Human Resources Management is the procurement, allocation, utilization, and motivation of human resources in the international arena.

• With quality and conflict among the top issues for international managers, firms deal with multiculturalism, dispersion, international taxation, relocation, and foreign culture orientation in selecting and developing expatriate managers.


Strategic IHRM

• Strategic IHRM is defined as “human resources, management issues, functions and policies and practices that result from the strategic activities of the Multinational Enterprise and in impact it has on the international concerns and goals of that organization.


Strategic IHRM

Strategic IHRM has three main orientations: • The Adaptive System – that seeks to imitate

local HRM practices • The Exportive System – that seeks to

replicate the HRM system of the home country in host country, affiliates, partners, and subsidiaries

• The Integrative System – that seeks to emphasize global integration while permitting some local variation


Strategic IHRM

Exhibit 17-1: Model of strategic international human resource management (SIHRM)


Staffing the MNE

• Staffing the Multinational Enterprise is a difficult endeavor.

• Firms must deal with gaining a global orientation in the Board of Directors, the rank and file of the company, and deal with a number of country specific issues.


Staffing the MNE: The Board

• Firms seeking a global orientation frequently start with the Board.

• By doing this, they gain needed international insight into markets, customer demands, and country specific business issues.

• Firms typically start with nationals who have international experience, and then move on to foreign nationals.

• Representation is an important issue as firms seek true expertise in the international market.


Staffing the MNE: Rank Terms

• PCN – Parent Company Nationals

• HCN – Host Country National

• TCN – Third Country National


Staffing the MNE: The Ranks

Staffing the Multinational Enterprise’s employees is also a difficult endeavor. Firms go through stages where they use:

• Ethnocentric Staffing – PCNs almost exclusively

• Polycentric Staffing – HCN in key positions • Regiocentric Staffing – Regional basis • Geocentric Staffing – TCN, HCN, PCN equal

status


Staffing the MNE: The Ranks

Exhibit 17-3: Hourly compensation costs in U.S. dollars for production workers in manufacturing, 2001


Staffing the MNE: Issues

• Adjustment Of/To Corporate Policies

• Variations In Employment Markets And Labor Policies

• HCN Adjusting To Higher Productivity Requirements

• Finding Skilled HCN

• Very High Turnover


The Expatriate Workforce

• The Expatriate Workforce is small in comparison with total Multinational Enterprise employment, less than 1% of total employment.

• The numbers are growing as more companies are pursuing global objectives.


The Expatriate Workforce: Terms

• Traditional Expatriate, older and experienced, selected for experience and knowledge

• International Cadre, individuals who move from one assignment to another

• Permanent Expatriate, employees who are permanently assigned to overseas locations

• Young Expatriate, needs experience, is sent for rotating assignments

• Temporary Expatriate, goes on short assignments

…/…


The Expatriate Workforce: Terms

• Expatriate Trainee, placed abroad for management experience as part of Multinational Enterprise initiation

• Virtual Expatriate, the expatriate who takes on foreign assignments while staying in the home office


The Expatriate Workforce: Pro

• There are advantages to using expatriates.

• Frequently, locals are not ready to take the responsibility.

• Expatriates contribute essential knowledge and corporate history.

• Expatriates serve as a mechanism for performance control, and transmit corporate culture and goals.


The Expatriate Workforce: Con

• There are disadvantages to using expatriates.

• There is a disincentive to the local workforce whose promotion is blocked and who earn poor wages.

• Expatriates can rob a company of skill development, insight development, and initiative of locals. Expatriates also have a high risk of failure.


Expatriate Failure

• Failure is frequent. It occurs when the assignee returns prematurely or when performance does not meet expectations.

• Rates range from 15% to 80%. The highest failure rate is for United States nationals.


Failure Costs

• The costs for failure are substantial, ranging from $55,000 to $150,000 per failure in direct costs.

• The real cost if higher as it includes cost of selection and replacement, training, preparation, moving, lost revenue, lost reputation, lost opportunity, and lost future value.


Failure Reasons

• The reasons for failure are legion.

• They include spouse unhappiness, inability to adjust, immaturity, inability to cope with responsibility, stress, lack of technical competence.

• Lack of motivation is also a problem.

• Dual career families are frequently hurt in the expatriate assignment.


Expatriate Selection

A firm needs to select on: • Feedback Seeking Behavior• Feedback Using Behavior• Adventure Seeking Behavior• Seek Learning• Open To Criticism• Flexibility • Cultural Sensitivity• Business Knowledge• Courage• Motivational Ability• Integrity• Insight• Commitment• Risk Taking



Successful expatriates need three sets of skills: • Personal Skills, stress orientation,

reinforcement needs, substitution, physical mobility, technical competence, dealing with alienation, isolation, realistic expectations

• People Skills, relational abilities, willingness to communicate, non-verbal communication, respect for others, empathy

• Perception Skills, flexible attribution, open mindedness, and judgment suspension processes



• You could also look for realistic expectations, open-mindedness, respect for others’ beliefs, trust in people, tolerance, locus of control, flexibility, patience, social adaptability, initiative, risk-taking, sense of humor, and spouse support


Expatriate Preparation

• Preparation is essential to expatriate success.

• The U-curve theory states that expatriates go through four stages of adjustment: the honeymoon, culture shock, adjustment, and mastery.

• Effective preparation can speed the expatriate through the stages.


Expatriate Training

Training for expatriates has several stages:

• Practical Information - on living conditions in host country

• Area Studies – information of the macro environment

• Cultural Awareness Information


Expatriate Compensation

• Research suggests that the compensation package should reduce expenses while enhancing commitment to the employer, job satisfaction, and willingness to relocate internationally.



Typical for expatriate compensation: • Salary, with deferment options • Benefits, like insurances to cover health and

other risks • Housing, which can be very expensive. • Service Allowances And Premiums,

including education allowances, home leave, relocation, transportation, automobiles, security, inconveniences

• Tax Equalization, to compensate when host country tax policies hurt the expatriate



Exhibit 17-7: Adoption of U.S.-style compensation by foreign firms in the United States


HRM Problems in Foreign Affiliates

• Staff Friction• Blocked Promotion• Exile Syndrome• Split Loyalties• Compensation Gaps• Blocked Communication• Limited Delegation• Screening Of Information• Unfamiliarity


Repatriation

• Repatriation represents a major adjustment for the expatriate.

• Many firms do not provide a guarantee of reassignment prior to departure, and most don’t know what their next assignment will be.

• Those reassigned frequently feel their employer does not make effective use of their foreign experience. Most firms do not provide spouse career counseling or other forms of family repatriation assistance.

• Many expatriates leave within 1 year of repatriation


Preparing for an Assignment in a Foreign Affiliate

Exhibit 17-9: Management education requirements in two types of foreign affiliates

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