CURRENT PRACTICES IN INTERNATIONAL HUMAN

RESOURCE MANAGEMENT

Presented By:-Diploo Konwar

The management of human resources in global corporations.

The management of expatriate employees.

The comparison of human resource management practices in a variety of different Countries.

IHRM

Parent-Countr

y Nation

al (PCN)

Host-Countr

y Nation

al (HCN)

Third-Countr

y Nation

al (TCN)

TYPES OF GLOBAL EMPLOYEES

• Parent country nationals (PCNs) are residents of the international business’s home country who are transferred to one of its foreign operations.

ADVANTAGES:• Organizational control and Coordination

is maintained and facilitated.

PCN’S

• Promising managers are given international experience. PCNs may be the best people for the job because of special skills and experiences

• There is assurance that subsidiary will comply with company objectives, policies.

DISADVANTAGES:• The promotional opportunities of HCNs are

limited• Adaptation to host country may take a long time.• PCNs may impose on inappropriate HQ style• Compensation for PCNs and HCNs may differ.

CONT.…

• Host country nationals (HCNs) are residents of the host country, and are the most common choice for mid-level and lower-level jobs.

ADVANTAGES:

• Employing HCNs is popular because they are already familiar with local laws, culture, and economic conditions

• HCNs may be cheaper than PCNs because a firm can avoid the costs such as relocation expenses that are associated with PCNs.

• Government policy may dictate hiring of HCNs• Morale among HCNs may improve as they see career

potential.

HCN’S

• HCN may not be familiar with the firm’s corporate culture nor its business practices.

• Control and coordination of HQ may be impeded.

• HCNs have limited career opportunity outside the subsidiary

• Hiring HCNs limits opportunities for PCNs to gain foreign experience

• Hiring HCNs could encourage a federation of national rather than global units

DISADVANTAGES

• Third country nationals (TCNs) are citizens of neither the firm’s home country nor of the host country.

• TCNs are most likely to employed in upper-level or technical positions.

• TCNs and PCNs are collectively known as expatriates (people working and residing in countries other than their native country).

TCN’S

ADVANTAGES:

• Salary and benefit requirements may be lower than for PCNs.• TCNs may be better informed than PCNs about host country environment

DISADVANTAGES:• Transfers must consider possible national animosities(e.g,India and Pakistan)• The host government may resent hiring TCNs• TCNs may not want to return to their own countries after assignment.

TCN’S

Ethnocentric All key managerial positions are filled by parent-

country nationals.

Consistent with international strategy

Disadvantage: cultural myopia

The cultural differences & environmental differences will be huge and expatriates may not be able to cope up with. Thus resulting in costly management mistakes.

e.g., Procter & Gamble – Associate with higher incidence of IHRM problems

TYPES OF INTERNATIONAL STAFFING POLICIES

Polycentric Key positions are filled with HCN’s

Host country nationals manage subsidairies

Consistent with multidomestic strategy

Disadvantage: create a gap between home and host operations

Geocentric or global Best managers are recruited from within or outside the company regardless of nationality, TCN’s – used by European MNC’s, transpatriates, some U.S. companies (Philips, Heinz, Unilever, IBM)

Help build an informal management network

Disadvantage: may be subject to the immigration policies

TYPES OF INTERNATIONAL STAFFING POLICIES

Regiocentric

Recruiting on a regional basis.

For example, a U.S. based firm could create three regions;

Europe, the Americas, and Asia-pacific.

European staff would be transferred throughout the European

region (say a Briton to Germany, a French national to Belgium,

and a German to Spain).

Eg:Ford Motor Company.

Disadvantage: produce federalism at a regional rather than a country basis and constrain the organization from taking a global stance.

TYPES OF INTERNATIONAL STAFFING POLICIES

Korean MNC's Hyundai, Samsung , Indian MNC's TCS, Infosys, Wipro. US MNC's GE, Citi corp, Exxon appoint a home country nationals to lead the foreign subsidiary. (Ethnocentric approach) US MNC's P&G, Pepsi, Coca cola. Indian MNCs Ranbaxy appoint a host country executive along with a home country executive to support or vice-versa (polycentric approach)

EXAMPLES

Nestle, Unilever, HP, Nortel. Appoint the best person for the job irrespective of the nationality (Meritocracy approach) This again suffers from problems similar to that of ethnocentric approach. Intel, Microsoft, Oracle, Sun Microsystems. Appoint the best host country national who has worked in the home country or at the headquarters. Electrolux (the vacuum cleaner company) has for many years attempted to recruit and develop a group of international managers from diverse countries. These people constitute a mobile base of managers who are used in a variety of facilities as the need arises.

EXAMPLES

The selection process in international firms is particularly important because of the high cost of expatriate failure.

Expatriate failure is the early return of an expatriate manager to his or her country because of an inability to perform in the overseas assignment.

The cost of expatriate failure ranges between $40,000-$250,000.

Expatriate failure rates may be as high as 20-50 percent in many U.S. companies, higher than for either European or Japanese companies.

EXPATRIATE FAILURE

REASONS FOR EXPATRIATE FAILURE

US FIRMS

•Inability of spouse to adjust•Manager’s inability to adjust•Other family problems•Manager's personal or emotional immaturity.•Inability to cope with larger overseas responsibilities

JAPANESE FIRMS

•Inability to cope with larger overseas responsibilities•Difficulties with the new environment•Personal or emotional problems•Lack of technical competence•Inability of spouse to adjust

European Multinationals

•Inability of spouse to adjust

• Averaged $250,000 per early return

• Direct costs:

- Airfares

- Associated relocation expenses

- Salary and benefits

- Training and development

COSTS OF EXPATRIATE FAILURE

Costs vary according to:

• Level of position • Country of destination• Exchange rates• Whether ‘failed’ manager

is replaced by another expatriate

• Damaged relationships with key stakeholders in the foreign location

• Negative effects on local staff • Poor labor relations • Negative effects on expatriate

concerned• Family relationships may be affected• Loss of market share

INDIRECT COSTS OF EXPATRIATE FAILURE

• Firms are now beginning to pay more attention to repatriation--bringing a manager back home after a foreign assignment has been completed.

• Individuals that successfully adapted to the foreign environment may experience culture shock upon returning to their own country.

• Regarding “non-cultural” issues leading to success or failure overseas, managers tend to be more successful in foreign assignments when 5 conditions are met:

They can freely decide whether or not to accept a foreign assignment

They have a realistic understanding of the new job and assignment

STEPS FOR REDUCING EXPATRIATE FAILURES

They have a realistic expectation of a repatriation assignmentThey have a mentor in the parent firm who will look out for their careersThere is a clear link between the foreign assignment and the manager’s long-term career path.

STEPS FOR REDUCING EXPATRIATE FAILURES

• A cost-of-living allowance may be given to managers to offset differences in the cost-of-living in the home and host countries. • A hardship premium (also known as a foreign service premium) may be paid to mangers who accept assignments in relatively unattractive locations. •Special benefits packages that may be provided to expatriate managers include housing, education, medical treatment, travel to the home country, and club memberships

STEPS FOR REDUCING EXPATRIATE FAILURES

• The three most important factors in implementing strategy are structure, culture and leadership.• Key factor within a good culture is the careful screening and selection of new employees. This is done by teaching the human relations department to compare the values of the prospective employee to those of the company and only choosing those candidates that fit the structure of the organization and will uphold the values in every aspect of business for J&J.• J&J is a global company and global issues cannot be solved by regional managers, it takes not only regional executives but executives from all aspects of the business because any decision will effect the organization as a whole and no just the specific SBU.

JOHNSON & JOHNSON IHRM STRATEGY

• Screening the applicant’s background• Testing ability to adapt to new culture and environment• Investigate family situation• Assess the capacity of the manager to adjust in the said culture• Use psychological tests to investigate the overall personality of the candidate• Use of database to track international managers• Use of international graduate program• Using assessment centre

SELECTION TECHNIQUES

• Coca-Cola, perceived as the quintessential global corporation, is one of the most successful multinational enterprises. Although headquartered in Atlanta, the company has the privilege to establish its headquarters anywhere, coca cola considers itself as a “multi local” company i.e. it presents the brand with a “local-face” in nearly 200 country where it does business thereby deriving 80% of its operating income from businesses outside united states. Its philosophy “ think globally ,act locally” captures the essence of coca-cola’s cross border management mentality

GLOBAL HRM AT COCA COLA

Coca-cola manages its global operations through 25 operating divisions that are organized under 6 regional groups.

The corporate HRM function is charged with providing the glue that binds these various divisionsand groups into the coca-cola family in two main ways:

1. By propagating a common human resource philosophy within the company; and

2. by developing a group of internationally minded mid-level executives for future senior management responsibility.

Coca-Cola tries to staff its operations with local personnel. However, expatriates are needed in the system for two main reasons.

- To fill a need for a specific set of skills that might not exist at a particular location.

- To improve the employee's own skill base.

GLOBAL HRM AT COCA COLA

•  The corporate hrm group has about 500 high level managers involved in its global service programme. Of the 500 participants in the programme, about 200 move each year. To ease the costs of transfer for these employees, coca cola gives those in its global service programme a US based compensation package. They are paid according to the US benchmarks irrespective of the prevailing benchmarks of the country they are located in.

• An ultimate goal of this programme is to build a cadre of internationally minded executives from which the future senior managers of coca-cola will be drawn.

GLOBAL HRM AT COCA COLA