Global Human Resource Management

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
• Task complicated by profound differences between
countries in labor markets, culture, legal and
economic systems
 Staffing policy

• Staffing policy
– Selecting individuals with requisite skills to do a particular
job
– Tool for developing and promoting corporate culture
• Types of Staffing Policy
– Ethnocentric
– Polycentric
– Geocentric
 Ethnocentric policy

• Key management positions filled by parent-country nationals

• Best suited to international businesses
• Advantages:
– Overcomes lack of qualified managers in host nation
– Unified culture
– Helps transfer core competencies
• Disadvantages:
– Limit advancement opportunities for host country nationals
– 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
• 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

• 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.
 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
– Inpatriates: expatriates who are citizens of a
foreign country working in the home country of
their multinational employer
 Reasons for expatriate failure
• US multinationals • Japanese Firms
– Inability of spouse to adjust – Inability to cope with
larger overseas
– Manager’s inability to responsibilities
adjust – Difficulties with the new
– Other family problems environment
– Manager’s personal or – Personal or emotional
emotional immaturity problems
– Inability to cope with larger – Lack of technical
overseas responsibilities competence
– Inability of spouse to
adjust.
• European multinationals
• 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, regular foreign postings
– 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
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 issues

Type of Company Payment

How much home-country

Ethnocentric
expatriates should be paid.

Pay can and should be

Polycentric country-specific.
May have to pay its
Geocentric/Transnational 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.
 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
 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