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Chapter 12 International Human Resource Management  Human Resource Management Human resource management (HRM) refers to the activities an organization carries out to utilize its human resources effectively These activities include ✓determining the firm's human resource strategy ✓staffin...

Chapter 12 International Human Resource Management  Human Resource Management Human resource management (HRM) refers to the activities an organization carries out to utilize its human resources effectively These activities include ✓determining the firm's human resource strategy ✓staffing ✓performance evaluation ✓management development ✓compensation ✓labor relations Firms need to ensure there is a fit between their human resources practices and strategy 18-2  Human Resource Management HRM is more difficult in international companies because of ✓Environmental differences ✓Strategic contingencies ✓Organizational challenges 18-3  Staffing Policy A firm’s staffing policy is concerned with the selection of employees who have the skills required to perform a particular job There are three main approaches to staffing policy within international businesses 1. The ethnocentric approach 2. The polycentric approach 3. The geocentric approach 18-4  Ethnocentric Staffing Policy The ethnocentric approach to staffing fills key management positions with parent-country nationals Advantages: Alleviate a shortage of qualified personnel - there is a lack of qualified individuals in the host country to fill senior management positions Can infuse subsidiaries with the corporate culture and help control local decisions Value can be created by transferring special know-how or core competencies to a foreign operation via parent country nationals Disadvantages: Relocating home-country managers is expensive Give the business a “foreign” image 18-5  Polycentric Staffing Policy The polycentric approach recruits host country nationals to manage subsidiaries in their own country, and parent country nationals for positions at headquarters Advantages: Can minimize cultural myopia – host country managers familiar with the local business environment. Less expensive to implement than an ethnocentric policy - eliminates the high cost of relocating expatriate managers Disadvantages: A multinational company may grow to resemble a collection of national businesses - can hamper the development of a global corporate culture. A gap can form between host country managers and parent country managers - reduces integration and knowledge sharing 18-6  Geocentric Staffing Policy The geocentric approach seeks the best people, regardless of nationality for key jobs and manage operations abroad Advantages: Enables the firm to make the best use of its human resources Develops global managers who can easily adjust to any business environment Remove nationalistic barriers among managers within a subsidiary or between subsidiaries in different nations. Disadvantages: Can be limited by immigration laws Costly to implement - training and relocation costs These individuals command high salaries 18-7  Recruiting Human Resources Recruitment is the process of identifying and attracting qualified applicants for vacant positions. ✓ Current employees ✓ Recent college graduates ✓ Local managerial talent ✓ Non-managerial workers 18-8  Selecting Human Resource Selection of human resources involves screening and hiring the best-qualified applicants with the greatest performance potential. ✓Ability to bridge cultural differences is key ✓Expatriates must adapt to new ways of life ✓Assess cultural sensitivity of job candidates 18-9  Expatriate Failure Firms using an ethnocentric or geocentric staffing strategy will have expatriate managers Expatriate failure is the premature return of an expatriate manager to the home country. A manager’s premature return home due to poor performance U.S. firms have higher expatriate failure rates than either European or Japanese firms each expatriate failure can cost between $250,000 and $1 million between 16 and 40% of all American expatriates in developed countries fail and almost 70% of Americans assigned to developing countries fail 18-10  Cultural Shock and Reverse Cultural Shock Cultural Shock - Psychological process affecting people living abroad that is characterized by homesickness, irritability, confusion, aggravation, and depression. Cultural training programs for employees sent abroad may lessen the effects of culture shock. Reverse culture shock is the psychological process of re- adapting to one’s home culture. Values and behavior that once seemed natural in the home country now seem strange. Company may offer reorientation programs and career- counseling sessions to help expatriates to deal with reserve cultural shock. 18-11  Managing Expatriates Repatriation the process of reintegrating the expatriate into the home country upon completion of the foreign assignment Can pose problems ✓Work ✓Financial ✓Social The challenge is to find the right job for the returning manager. 18-12 Cultural Training 18-13  Compensation Two key issues on compensation 1. How to adjust compensation to reflect differences in economic circumstances and compensation practices 2. How to pay expatriate managers 18-14  National Differences In Compensation Currently, there are substantial differences in executive compensation across countries a top U.S. executive made an average of $525,923 in the 2005-2006 period, compared to $237,697 in Japan, and $158,146 in Taiwan Question: Should pay be equalized across countries? Many firms have recently moved toward a compensation structure that is based on global standards especially important in firms with a geocentric staffing policy But, most firms still set pay according to the prevailing standards in each country 18-15 How Should Expatriates Be Paid? Most firms use the balance sheet approach - equalizes purchasing power across countries so employees have the same living standard in their foreign posting as at home. A compensation package has five components 1. Base salary - normally in the same range as the base salary for a similar position in the home country can be paid either in the home currency or in the local currency 2. Foreign service premium - extra pay the expatriate receives for working outside his country of origin generally offered as an incentive to accept foreign assignments 18-16  How Should Expatriates Be Paid? 3. Various allowances - hardship, housing, cost-of-living, education 4. Tax differentials - may have to pay income tax to both the home country and the host-country governments if the host country does not have a reciprocal tax treaty with the expatriate’s home country company usually covers extra tax assessments when a reciprocal tax treaty is not in force, the firm typically pays the expatriate’s income tax in the host country 5. Benefits – many firms provide the same level of medical and pension benefits abroad that employees receive at home 18-17  International Labor Relations Question: Can organized labor limit the choices available to an international business? Labor unions can limit a firm's ability to pursue a transnational or global strategy HRM needs to foster harmony and minimize conflict between management and organized labor 18-18  The Concerns of Organized Labor Organized labor is concerned that 1. Multinationals can counter union bargaining power by threatening to move production to another country 2. Multinationals will farm out only low-skilled jobs to foreign plants making it easier to switch production locations 3. Multinationals will import employment practices and contractual agreements from their home countries and reduce the influence of unions 18-19