Chapter 04

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4

GlobalHuman Resource

Management

McGraw-Hill/IrwinHuman Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

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Introduction

Integration of the world’s economies and business globalization continues unabated International trade is growing more rapidly than

world output Foreign direct investment (FDI) flows are increasing The number of cross-border, inter-firm agreements

has risen dramatically Social, economic, and political developments

throughout the world changed the way global business is conducted

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Introduction

The external environment greatly influences HRM activities Each country has its own:

LawsBusiness customsWorkforce characteristicsPolitical climate

The most difficult challenge to overcome is the “people challenge”

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Introduction

Key challenges to international effectiveness:Finding suitable candidatesIntercultural understandingCareer managementEmployee retentionAdjusting to environmentPartner dissatisfactionRelocation reluctance

Global human resource management has the same functions as domestic HRM, plus unique aspects

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Introduction

Organizations expand beyond domestic boundaries to achieve: Satisfied employees Competitive products and services New or broader markets New, more efficient manufacturing technology Large, inexpensive labor forces

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Introduction

Maquiladoras are Mexican assembly plants used by international companiesSometimes called “twin plants” Most owned by American,

Japanese, and Korean manufacturers Savings outweigh extra shipping costs After a slowdown in recent years, the maquiladora

industry is showing strong growth

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Introduction

Mexico is not the only area popular with American firms, nor is inexpensive labor the only driving force Intel built a manufacturing facility in Ireland in

exchange for a guaranteed tax break

Foreign direct investment in developed countries has decreased since 2001 Developing countries are seeing increases in foreign

direct investment

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The Cultural Nature of Global HRM

Cultural differences between nations can influence the effectiveness of HRM policies and practices HRM must be congruent with the cultural orientation

of the workers

Hefstede says cultures vary in five dimensions: Individualism versus collectivism Power distance Avoidance of uncertainty Masculinity Long-term versus short-term orientation

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The Concept of “Fit” in Global HRM

“Fit” is the degree to which HRM policies are congruent with the:Strategic plan of the organization Work-related values of the foreign

culture

Internal fit: making sure HRM policies facilitate the work values and motivation of employees

External fit: the degree to which HRM matches the context in which the organization is operating

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Multinational and Global Corporations

Multinational corporations (MNCs) are usually in the early stages of an international strategy Operations in many nations, but each is a separate

enterprise Each enterprise adapts products to the local culture Most control remains with the home office or with

an expatriate from the home country Most employees and managers are from the home

country (polycentric staffing)

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Global corporations (GC) are structured so that national boundaries disappear The best people are hired, regardless of national

origin (geocentric staffing) Subsidiaries are not limited to serving the local

culture The national affiliation of an employee becomes less

important than his/her area of expertise

GHRM in the 21st century will be challenging for both MNCs and GCs

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Three sources of employees for an international assignment: Host country nationals (HCNs)Parent country nationals (PCNs)Third country nationals (TCNs)

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MNCs generally take an ethnocentric perspectiveThey use HRM policies from home with minor

adaptations They believe key personnel should be PCNs

Ethnocentricity is strong in many foreign organizations conducting business in the U.S.Nearly every executive in Japanese-owned businesses

in the U.S. is a Japanese national

The geocentric organization ignores national boundaries for staffing overseas operations

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The biggest HR challenge facing any globally oriented corporation is finding competent managers An expatriate manager (PCN) comes from the

corporation’s home nation Relocation can be troublesome, regardless of the

managers country of origin The challenge is to capitalize on the diversity of a

global workforce without suppressing cultural heritage

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The biggest mistake global organizations make is:Assuming there is “one best way” to structure HRM

policies and practices

There are 120 critical differences between Japanese and American workplace norms These differences impact issues related to:

Feedback and performance evaluation methods Lines of authority Information management

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The Expatriate Manager in the MNC

Managing the expatriate’s adjustment process is a primary focus of GHRM The difficulty of this task has increased because:

Sales and production shifted closer to markets There is higher use of host country and third

country management There is a concurrent increase in the number of

“inpats” Both inpats and expats can have a difficult time

adapting to their new surroundings

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The Expatriate Manager in the MNC

80 percent of all middle- to large-size companies use expatriates Many companies are not effectively selecting and

preparing employees for overseas assignments American expatriates fail more often than their

Japanese and European counterparts Only 57 percent of companies provide cross-cultural

training

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Selecting the Expatriate Manager

Factors associated with expatriate failure: Uncertain technical competency Weak language skills Unsure about going overseas Family problems Low spouse supportBehavioral rigidityInability to adaptPoor relational abilityWeak stress management skills

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Factors associated with expatriate success: Good technical and language skillsStrong desire to work overseasSpecific knowledge of overseas cultureWell-adjusted family situationComplete support of spouseBehavioral flexibilityAdaptability and open-mindednessGood relational abilityGood stress management skills

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Success in domestic operations may have little to do with success overseasMany expatriates believe too little attention is paid to

other critical factors during the selection process

Expatriate selection should focus on the manager’s: Self-image Normal way of interacting

with others Perceptual orientation

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The role of the expatriate’s family should not be underestimatedDual career marriages are another difficult issue

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Culture Shock

Exposure to a foreign culture can produce a predictable series of reactions: A period of fascination Culture shockAdaptation

Dealing with culture shock involves:PreparationLanguage skillsPreparing the host country personnel who will work

with the expatriate

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Training the Expatriate Manager

Intercultural training improves the odds for success on an overseas assignment According to Tung, two things determine the training

an expatriate should receive: Level of contact the person will have with the host

culture Degree of dissimilarity between the home and host

cultures

Self-awareness is an important aspect of successfully preparing for an international assignment

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The second phase of training occurs at the host country site Language training continues Mentoring relationships may

be established Local support groups may

help the entire family Getting involved with daily

experiences as soon as possible

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The final phase occurs when the manager prepares to return to the parent country (repatriation) Repatriation can result in more culture shock than

was experienced while overseas Repatriates are more likely to leave the parent

company than their domestic counterparts Many returning managers feel they have lost ground

in terms of career advancement

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To help managers deal with such issues: Actively plan how the international assignment will

fit with the manager’s career aspirations Identify prospective international managers early in

their careers Treat every new hire as a prospective global

employee

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Compensating the Expatriate Manager

A middle- to upper-level expatriate can cost two to three times more than a domestic manager This is often due to the compensation practices of

multinational organizations

The balance-sheet approach ensures that the expatriate maintains a similar standard of living “Extras” are often provided as an incentive Foreign service premiums adjust the expatriate’s base

salary for the inconvenience the assignment causes

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Compensating the Expatriate Manager

The cost of living in foreign cities can be very high Expatriates usually receive a cost-of-living premium

to offset these differences, plus optional: Home furnishings and maintenance allowancesHelp with maintaining or selling a current home Transportation differential allowances Educational allowances Hardship premiums To combat these

costs, some firms have shifted to using more short-term assignees

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Host Country Nationals and the GNC

Global corporations use fewer expatriates HCNs have greater cultural sensitivity and better

understand local employees’ motivations and needs More companies are giving key managerial positions

in their foreign operations to HCNs and TCNs

Careful recruitment, selection, and training can reduce or eliminate many problems with HCNs Expatriates must learn to be more culturally sensitive Host country managers must learn to accept greater

responsibility

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Host Country Nationals and the GNC

When an organization recruits HCNs: Its HRM policies must be more flexible It must strive for a reasonable fit between HRM

policies and cultural values

Suggestions that can help: Use the same methods/sources as host country

organizationsUse a recruiting liaison Write job ads consistent with local custom and jargon Allow HCNs to use native language during

interviews

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Global Corporate Boards of Directors

Boards of directors of most American corporations have been slow to include foreign members A survey of 589 America businesses found a global

representative on these boards: 24 percent of manufacturing firms 14 percent of financial firms 9 percent of other, non-financial firms

European companies are progressing more quickly Nestlé, Unilever, Fiat, and Volvo all have global

representation on their boards

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Legal and Ethical Climate of GHRM

International business is conducted in a maze of:International trade agreementsParent country lawsHost country regulations

Ethical behavior challenges may also be encountered:Environmental regulation

may be weaker “Gift giving” or “greasing”

may be common practice

The Foreign Corrupt Practices Act of 1977 (FCPA) makes it illegal for employees of American corporations to offer money or other items to foreign officials in order to gain an unfair competitive advantage

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Regulations regarding employment discrimination vary from country to country The U.S. has some of the more stringent

anti-discrimination laws Many countries have not created this kind of

enforcement The Civil Rights Act of 1991

applies to the overseas operations of American corporations

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Ethical dilemmas between profits and the preservation of basic human rights may also exist Example: The clash between business, morality, and

politics that occurred in South Africa during apartheidSimilar dilemmas occur around the globe in

developing countries

Resolving ethical issues is not an easy task

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The first African American on the board of General Motors proposed his Sullivan Principles: Non-segregation in all work facilities Equal and fair employment practices for all Equal pay for all employees performing equal work Training programs to prepare blacks and other

nonwhites for supervisory and technical jobs Increasing the number of blacks and other nonwhite

minorities in management Improving the quality of employees’ lives outside of

the work environment

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Labor Relations & the International Corp.

Labor relations issues that may arise in the international environment:Unions Labor lawsLess emphasis on written contractsHow much participation employees

are entitled to in HRM policies

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Labor Relations & the International Corp.

Employee participation is guaranteed in Germany South Korea’s giant industrial firms, the chaebol,

control every aspect of worker’s lives

Government business regulations may differIn Singapore, annual wage adjustments are set by a

national council and strikes are nearly impossible

There is no simple solution to the labor relations problems with which MNCs and GCs are confronted Labor has been trying to establish global labor

organizations

Documents

Chapter 04