Chapter 15 International Human Resources Management

Copyright © 2004 South-Western. All rights reserved.
PowerPoint Presentation by Charlie Cook

Copyright © 2004 South-
Western. All rights reserved. 15–2
Objectives
After studying this chapter, you should be able to:
1. Identify the types of organizational forms used for
competing internationally.
2. Explain how domestic and international HRM differ.
3. Discuss the staffing process for individuals working
internationally.
4. Identify the unique training needs for international
assignees.
5. Reconcile the difficulties of home-country and host-
country performance appraisals.

Objectives (cont’d)
After studying this chapter, you should be able to:
6. Identify the characteristics of a good international
compensation plan.
7. Explain the major differences between U.S. and
European labor relations.

Increasing Importance of
Global Human Resource Understanding
InternationalInternational
Mergers andMergers and
AcquisitionsAcquisitions
InternationalInternational
Mergers andMergers and
AcquisitionsAcquisitions
Importance of
Global Human
Resources
Management
Importance of
Global Human
Resources
Management
Foreign HumanForeign Human
ResourcesResources
Foreign HumanForeign Human
ResourcesResources
GlobalGlobal
CompetitionCompetition
GlobalGlobal
CompetitionCompetition
Market AccessMarket Access
OpportunitiesOpportunities
Market AccessMarket Access
OpportunitiesOpportunities
Presentation Slide 15–1

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 Organizations
Figure 15.1
GLOBALGLOBAL
Views the world as a singleViews the world as a single
market; operations aremarket; operations are
controlled centrally fromcontrolled centrally from
the corporate office.the corporate office.
GLOBALGLOBAL
Views the world as a singleViews the world as a single
market; operations aremarket; operations are
controlled centrally fromcontrolled centrally from
the corporate office.the corporate office.
TRANSNATIONALTRANSNATIONAL
Specialized facilities permitSpecialized facilities permit
local responsiveness;local responsiveness;
complex coordinationcomplex coordination
mechanisms providemechanisms provide
global integration.global integration.
TRANSNATIONALTRANSNATIONAL
Specialized facilities permitSpecialized facilities permit
local responsiveness;local responsiveness;
complex coordinationcomplex coordination
mechanisms providemechanisms provide
global integration.global integration.
MULTINATIONALMULTINATIONAL
Several subsidiariesSeveral subsidiaries
operating as stand-aloneoperating as stand-alone
business units in multiplebusiness units in multiple
countries.countries.
MULTINATIONALMULTINATIONAL
Several subsidiariesSeveral subsidiaries
operating as stand-aloneoperating as stand-alone
business units in multiplebusiness units in multiple
countries.countries.
INTERNATIONALINTERNATIONAL
Uses existing capabilitiesUses existing capabilities
to expand into foreignto expand into foreign
markets.markets.
INTERNATIONALINTERNATIONAL
Uses existing capabilitiesUses existing capabilities
to expand into foreignto expand into foreign
markets.markets.
LOCAL RESPONSIVENESS
Low High
GLOBALEFFICIENCY
LowHigh

Top Ten Global Companies
Figure 15.2
MARKET VALUE
COMPANY HEADQUARTERS (MILLIONS USD)
1. General Electric United States $309,462
2. Microsoft United States 275,701
3. Exxon Mobil United States 271,228
4. Wal-Mart Stores United States 240,907
5. Citigroup United States 223,040
6. Pfizer United States 216,777
7. BP Britain 192,116
8. Johnson & Johnson United States 186,942
9. Intel United States 184,667
10. American International Group United States 174,986
Source: Business Week Global 1000.

How International Companies
Affect the World Economy
• 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 Economies
Closely partnered nations such as the European
Union have developed into strong competitors.
Promotes job growth in trading nations.
• Cultural environment
The 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
Figure 15.3

Cultural
Environment of
International
Business
Figure 15.4
Values/Ideologies
• Work ethic
• Time orientation
• Individualism/
collectivism
• Risk propensity
• Achievement
Social Structure
• Kinship/family
• Mobility
• Nationalism
• Urbanization
• Social stratification
• Paternalism/
materialism
Communication
• Language(s)
• Dialects
• Nonverbal
• Media
• Technology
Education/
Human Capital
• Primary/
secondary
• Vocational
• Professional
• Literacy
Religious Beliefs
• Denominations
• Totems/taboos
• Rituals
• Holy days

Domestic versus International HRM
• Issues in international HRM in helping
employees adapt to a new and different
environment outside their own country:
Relocation
Orientation
Objective
Translation services

HR Strategy
Development
HRM 2
Source: Nancy Wong, “Mark Your
Calendar! Important Tasks for
International HR,” Workforce 79,
no. 4 (April 2000): 72–74.

International Staffing
• Expatriates, or Home-country Nationals
Employees from the home country who are on
international assignment.
• Host-country Nationals
Employees who are natives of the host country.
• Third-country Nationals
Employees who are natives of a country other than
the home country or the host country.

Advantages in Sources of Overseas Managers
• Host-country
Nationals
 Less cost
 Preference of
host-country
governments
 Intimate
knowledge of
environment
and culture
 Language
facility
• Home-country
Nationals
(Expatriates)
 Talent available
within company
 Greater control
 Company
experience
 Mobility
 Experience
provided to
corporate
executives
Figure 15.5
• Third-country
Nationals
 Broad
experience
 International
outlook
 Multilingualism

Changes in International Staffing over Time
Figure 15.6

Overseas Recruitment Issues
• Work Permit, or Work Certificate
Government document granting a foreign individual
the right to seek employment.
• Guest Workers
Foreign workers invited to perform needed labor.
• Transnational teams
Teams composed of members of multiple
nationalities working on projects that span multiple
countries.

Selecting Expatriates
• Begin with self-selection.
• Create a candidate pool.
• Assess core skills.
• Assess augmented skills and attributes.

Measured Expatriate Characteristics
• Core Skills
Skills that are considered
critical to an employee’s
success abroad.
• Augmented Skills
Skills that are helpful in
facilitating the efforts of
expatriate managers.
• Failure rate
Percentage of expatriates who
do not perform satisfactorily.

Expatriate
Selection
Criteria
Figure 15.7

Causes of Expatriate Assignment Failure
Figure 15.8
Why Do Expats Fail?
Family adjustment Poor performance
Lifestyle issues Other opportunities arise
Work adjustment Business reasons
Bad selection Repatriation issues

Skills Of Expatriate Managers
• Core Skills
Experience
Decision making
Resourcefulness
Adaptability
Cultural sensitivity
Team building
Maturity
• Augmented Skills
Computer skills
Negotiation skills
Strategic thinking
Delegation skills
Change management
HRM 3

Boosting ROI of Expatriates
• 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 17
Figure 15.9
Major initiatives planned to improve assignment return on
investment (ROI):
Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.

Training and Development
• Global Manager
A manager equipped to run an international business.
• Skills of a Global Manager
Ability 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

Training Programs for International
Managers
• Essential training program content to prepare
employees for working internationally:
Language training
Cultural training
Assessing and tracking career development
Managing personal and family life
• Culture shock
Perpetual stress experienced by people who settle
overseas.

Preparing for an International Assignment
1. Social and business etiquette
2. History and folklore
3. Current affairs, including
relations between the host
country and the
4. United States
5. Cultural values and priorities
6. Geography, especially its major
cities
7. Sources of pride and great
achievements of the culture
8. Religion and the role of religion
in daily life
9. Political structure and current
players
10.Practical matters such as
currency, transportation, time
zones, hours of business
11.The language
Figure 15.10
To prepare for an international assignment, one should
become acquainted with the following aspects of the host
country:

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.

A Synthesis
of Country
Clusters
Figure 15.11
Source: Simcha Ronen and Oded Shenkar,
“Clustering Countries on Attitudinal Dimensions:
A Review and Synthesis,” Academy of
Management Review 10, no. 3 (July 1985): 435–54.
Copyright Academy of Management Review.
Reprinted with permission of the Academy of
Management Review and the authors; permission
conveyed through the Copyright Clearance Center,
Inc.

Selected Foreign-Born Executives
Figure 15.12
COUNTRY OF
COMPANY—TITLE NAME ORIGIN
Alcoa—President & CEO Alain Belda Morocco*
A-Med—Founder Walid Aboul-Hosn Lebanon
American International Underwriters— Martin J. Sullivan United Kingdom
President & CEO
Aramark—Chairman & CEO Joseph Neubauer Israel
Baker & McKenzie—Chairman Christine Lagarde France
Becton Dickinson—Chairman & CEO Clateo Castellini Italy
Case Corporation—Chairman & CEO Jean-Pierre Rosso France
Computer Associates—Chairman & CEO Charles Wang Taiwan
eBay—Founder & Chairman Pierre Omidyar France
Eli Lilly and Company—President & COO Sidney Taurel Morocco
Source: Denis Lyons and Spencer Stuart, “International CEOs on the Rise,” Chief Executive 152 (February 2000): 51–53.

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.

Performance Appraisal of International
Managers
• Who Should Appraise Performance?
Home-country evaluations
Host-country evaluations
• Adjusting Performance Criteria
Augmenting job duties
Individual learning
Organizational learning
• Providing Feedback
Debriefing interview

Forces Driving Global Pay
• Cultural Preferences
 Importance of status
 Role of individual vs.
organization vs. government
 Equality vs. disparity
 Achievement vs.
relationships
• Economic Conditions
 Size of economy
 Types of industries, natural
resources
 Inflation, unemployment
 Protectionism vs. open
market
• Personal Preferences
 Attitudes toward risk
 Quality of life vs. work
 Short- vs. long-term
 Competitiveness vs.
solidarity
• Social Constraints
 Income tax rates, social
costs
 Laws and regulations
 Collective bargaining,
worker participation
 Skills, education of work
force
Figure 15.13
Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!”
Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.

Hourly Wages*
in Different Countries
Figure 15.14
*Hourly compensation
costs in U.S. dollars for
production workers in
manufacturing
Source:
Department
of Labor.
COUNTRYCOUNTRY $/HOUR$/HOUR
GermanyGermany 23.8423.84
NorwayNorway 23.1323.13
SwitzerlandSwitzerland 21.8421.84
BelgiumBelgium 21.0421.04
United StatesUnited States 20.3220.32
JapanJapan 19.5919.59
SwedenSweden 18.3518.35
BritainBritain 16.1416.14
FranceFrance 15.8815.88
CanadaCanada 15.6415.64
ItalyItaly 13.7613.76
Hong KongHong Kong 13.5313.53
IsraelIsrael 13.5313.53
AustraliaAustralia 13.1513.15
SpainSpain 10.8810.88
KoreaKorea 8.098.09
TaiwanTaiwan 5.705.70
BrazilBrazil 3.023.02
MexicoMexico 2.302.30
Sri LankaSri Lanka 0.480.48
COUNTRYCOUNTRY $/HOUR$/HOUR
GermanyGermany 23.8423.84
NorwayNorway 23.1323.13
SwitzerlandSwitzerland 21.8421.84
BelgiumBelgium 21.0421.04
United StatesUnited States 20.3220.32
JapanJapan 19.5919.59
SwedenSweden 18.3518.35
BritainBritain 16.1416.14
FranceFrance 15.8815.88
CanadaCanada 15.6415.64
ItalyItaly 13.7613.76
Hong KongHong Kong 13.5313.53
IsraelIsrael 13.5313.53
AustraliaAustralia 13.1513.15
SpainSpain 10.8810.88
KoreaKorea 8.098.09
TaiwanTaiwan 5.705.70
BrazilBrazil 3.023.02
MexicoMexico 2.302.30
Sri LankaSri Lanka 0.480.48

Compensation of Expatriate Managers
• To be effective, an international compensation
program must:
Provide an incentive to leave the United States.
Allow for maintaining a U.S. standard of living.
Facilitate reentry into the United States.
Provide for the education of children.
Allow for maintaining relationships with family, friends,
and business associates.

Expatriate Compensation Programs
• 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 relocation
assistance programs

International Organizations and Labor
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
The degree to which government intervenes
The degree of unionization.

Chapter 15 International Human Resources Management

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Chapter 15 International Human Resources Management