Chapter
Global Human Resource Management
18
Case: Molex
World’s second largest manufacturer of electronic components 50 manufacturing plants, 21 countries
HRM viewed as most localized of all the functions
Hires experienced , educated foreign nationals in the US for foreign postings
Moves people around the world In house management development programs
Human resource management (HRM)
Refers to the activities an organization carries out to use its human resources effectively
Four major tasks of HRM Staffing policy Management training and development Performance appraisal Compensation policy
International human resource management
Strategic role: HRM policies should be congruent with the firm’s strategy and it’s formal and informal structure and controls
Right People, Right Place, Right Time Task complicated by profound differences between
countries in labor markets, culture, legal and economic systems
Strategy, structure and control systems
Staffing policy
Staffing policy Selecting individuals with requisite skills to do a
particular job Tool for developing and promoting corporate culture View People as Resource ($in profit out)
Types of Staffing Policy Ethnocentric Polycentric Geocentric
Ethnocentric policy
Key management positions filled by parent-country nationals
Advantages: Overcomes lack of qualified managers in host nation Unified culture Helps transfer core competencies (and skills back)
Disadvantages: Produces resentment in host country Can lead to cultural myopia
Polycentric policy
Host-country nationals manage subsidiaries Parent company nationals hold key headquarter
positions Best suited to multi-domestic businesses Advantages:
Alleviates cultural myopia. Inexpensive to implement Helps transfer core competencies
Disadvantages: Limits opportunity to gain experience of host-country
nationals outside their own country. Can create gap between home-and host-country
operations
Geocentric policy
Seek best people, regardless of nationality not always possible
Best suited to Global and trans-national businesses Advantages:
Enables the firm to make best use of its human resources Equips executives to work in a number of cultures Helps build strong unifying culture and informal
management network Disadvantages:
National immigration policies may limit implementation Expensive to implement due to training and relocation Compensation structure can be a problem.
Comparison of staffing approaches
The expatriate problem
Expatriate: citizens of one country working in another Expatriate failure: premature return of the
expatriate manager to his/her home country Cost of failure is high: estimate = 3X the expatriate’s
annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)
Inpatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer
Expatriate failure rates
Reasons for expatriate failure
US multinationals 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
European multinationals Inability of spouse to adjust
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.
Expatriate selection
Reduce expatriate failure rates by improving selection procedures
An executive’s domestic performance does not (necessarily) equate his/her overseas performance potential
Employees need to be selected not solely on technical expertise but also on cross-cultural fluency
Four attributes that predict success
Self-Orientation Possessing high self-esteem, self-confidence and mental well-being
Others-Orientation Ability to develop relationships with host-country nationals Willingness to communicate
Perceptual Ability The ability to understand why people of other countries behave the
way they do Being nonjudgmental and being flexible in management style
Cultural Toughness Relationship between country of assignment and the expatriate’s
adjustment to it
Training and management development
Training: Obtaining skills for a particular foreign posting Cultural training : Seeks to foster an appreciation of the
host-country’s culture Language training : Can improve expatriate’s
effectiveness, aids in relating more easily to foreign culture and fosters a better firm image
Practical training: Ease into day-to-day life of the host country
Training & management development continued
Development: Broader concept involving developing manager’s skills over his or her career with the firm
Several foreign postings over a number of years Attend management education programs at regular
intervals
Repatriation of expatriates
Didn’t know what position they hold upon return.
Firm vague about return, role and career progression.
Took lower level job.
Leave firm within one year.
Leave firm within three years
10 20 30 40 50 60 70percent
Management development & strategy
Development programs designed to increase the overall skill levels of managers through: On going management education Rotation of managers through a number of jobs within
the firm to give broad range of experiences
Used as a strategic tool to build a strong unifying culture and informal management network
Above techniques support transnational and global strategies
Performance appraisal
Problems: Unintentional bias
Host-nation biased by cultural frame of reference Home-country biased by distance and lack of
experience working abroad
Expatriate managers believe that headquarters unfairly evaluates and under appreciates them
In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment either detrimental or immaterial to one’s career.
Guidelines for performance appraisal
More weight should be given to onsite manager’s evaluation as they are able to recognize the soft variables
Expatriate who worked in same location should assist home-office manager with evaluation
If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal the terminal evaluation
Compensation
Two issues: Pay executives in different countries according to the
standards in each country?
or
Equalize pay on a global basis?
Method of payment
Compensation for four positions in 26 countries
National differences in compensation
CEO HR Director Accountant Mfg. Employee
Argentina $860,704 $326,874 $63, 948 $17, 884
Canada 742,228 188, 070 44,866 36,289
Germany 421,622 189,785 61,375 36,934
Taiwan 179,486 102,491 30,652 11,924
United Kingdom
719,665 268,302 107,839 28,874
United States 1,403,899 306,181 66,377 44,680
Table 18.4 b
National differences in CEO pay for midsize companies
Fig 18.1
Compensation issues
Type of Company Payment
EthnocentricHow much home-country
expatriates should be paid.
PolycentricPay can and should be
country-specific.
Geocentric/TransnationalMay have to pay its
international cadre of managers the same.
Expatriate pay
Typically use balance sheet approach Equalizes purchasing power to maintain same
standard of living across countries Provides financial incentives to offset qualitative
differences between assignment locations. Pay for Schools, health care, etc.
Components of expatriate pay
Base Salary Same range as a similar position in the home country
Foreign service premium Extra pay for work outside country of origin
Allowances Hardship, housing, cost-of-living and education
allowances Taxation
Firm pays expatriate’s income tax in the host country Benefits
Level of medical and pension benefits identical overseas
The balance sheet
Fig 18.2
International labor relations
Key Issue Degree to which organized labor can limit the choices of
an international business
Aims to foster harmony and minimize conflicts between firms and organized labor
Concerns of organized labor
Multinational can counter union bargaining power with threats to move production to another country
Multinational will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants Easy to switch locations if economic conditions warrant Bargaining power of organized labor is reduced
Attempts to import employment practices and contractual agreements from multinationals home country
Strategy of organized labor
Attempts to establish international labor organizations
Lobby for national legislation to restrict multinationals
Attempts to achieve international regulations on multinationals through such organizations as the United Nations
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