Copyright © 2014 by the McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

CHAPTER 15 MANAGING HUMAN

RESOURCES GLOBALLYFU

NDAMENTALS OF

HUMAN RESOURCE

MANAGEMENT

5TH ED

ITION

BY R.A. N

OE, J.R. H

OLLENBEC

K, B.

GERHART, AND P.M

. WRIGHT

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Need to Know

1. How the growth in international business activity affects HRM.

2. Factors that influence HRM in international markets.

3. Differences among countries affect HR planning at organizations with international operations.

4. How companies select and train HR in a global labor market.

5. Challenges related to compensating employees from other countries.

6. How employers prepare managers for international assignments and for their return home.

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HRM in a Global Environment

• Environment in which organizations operate is rapidly becoming a global one.

• Foreign countries can provide a business with new markets.

• Companies set up operations overseas because of lower labor costs.

• Technology makes it easier for companies to spread work around the globe.

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As companies in U.S. and Britain cut software jobs and outsource to other countries in order to drive down costs, countries such as India continue to see employment rise.

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HRM in a Global Environment

Global activities are simplified and encouraged by trade agreements among nations.

Increase and change demands on HRM. Organizations need employees who understand

customers and suppliers in foreign countries. Organizations need to understand laws and customs

that apply to employees in other countries.

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Employees in an International Workforce Parent-country national – employee who

was born and works in the country in which an organization’s headquarters is located.

Host-country national – employee who is a citizen of the country (other than parent country) in which an organization operates a facility.

Third-country national – employee who is a citizen of a country that is neither the parent country nor the host country of the employer.

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Employees in an International Workforce When organizations operate overseas, they hire a

combination of parent-country nationals, host-country nationals, or third-country nationals.

Expatriates – employees assigned to work in another country.

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Figure 15.1: Levels of Global Participation

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Employers in the Global Marketplace

International organization – sets up one or a few facilities in one or a few foreign countries.

Multinational company – builds facilities in a number of different countries in an effort to minimize production and distribution costs.

Global organization – chooses to locate a facility based on the ability to effectively, efficiently, and flexibly produce a product or service using cultural differences as an advantage.

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Test Your Knowledge

Hans works for a company who’s headquartered in France and has foreign operations in Germany, only. Hans is a citizen of the Netherlands. Which of the following is most likely true?

a) Hans works for a domestic company and is from the parent country.

b) Hans works for a multinational company and is from the host country.

c) Hans works for a global company and is from a third country.

d) Hans works for an international company and is from a third country.

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Transnational HRM System

Transnational HRM system:makes decisions from a global perspectiveincludes managers from many countriesbased on ideas contributed by people representing a variety of cultures

•Decisions that are the outcome of a transnational HRM system balance uniformity with flexibility.

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Factors Affecting HRM inInternational Markets

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Culture

Culture – a community’s set of shared assumptions about how the world works and what ideals are worth striving for. greatly affect a country’s laws. influences what people value, so it affects people’s economic systems

and efforts to invest in education. determines effectiveness HRM practices.

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Hofstede’s Five Dimensions of Culture

1. Individualism/Collectivism Describes the strength of the relation between an individual and other individuals in the society.

2. Power Distance Concerns the way the culture deals with unequal distribution of power and defines the amount of inequality that is normal.

3. Uncertainty Avoidance Describes how cultures handle the fact that the future is unpredictable.

4. Masculinity/Femininity The emphasis a culture places on practices or qualities that have traditionally been considered masculine or feminine.

5. Long-term/Short-term Orientation

Suggests whether the focus of cultural values is on the future (long term) or the past and present (short term).

In Taiwan, a country that is high in collectivism, coworkers consider themselves more as group members instead of individuals.

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Culture

Organizations must prepare managers to recognize and handle cultural differences.

Recruit managers with knowledge of other culturesProvide training

•For expatriate assignments, organizations may need to conduct an extensive selection process to identify individuals who can adapt to new environments.

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Education and Skill Levels

• Companies with foreign operations locate in countries where they can find suitable employees.

• Education and skill levels of a country’s labor force affect how and extent to which companies want to operate there.

• In countries with a poorly educated population, companies will limit their activities to low-skill, low-wage jobs.

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Economic System

• Economic system provides many incentives or disincentives for developing the value of the labor force.

• In developed countries with great wealth, labor costs are relatively high, impacting compensation recruiting and selection decisions.

• Income tax differences between countries make pay structures more complicated when they cross national boundaries.

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Political-Legal System

• Country’s laws often dictate requirements for HRM practices: training, compensation, hiring, firing, and layoffs.

• An organization that expands internationally must gain expertise in the host country’s legal requirements and ways of dealing with its legal system.

• Organizations will hire one or more host-country nationals to help in the process.

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HR Planning in a Global Economy

• HR planning involves decisions about where and how many employees are needed for each international facility.

• Decisions about where to locate include considerations such as cost and availability of qualified workers which must be weighed against financial and operational requirements.

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Criteria for Selection of Employees for Foreign Assignments

1. Competency in employee’s area of expertise2. Ability to communicate verbally and nonverbally

in the foreign country3. Flexibility, tolerance of ambiguity, and sensitivity

to cultural differences4. Motivation to succeed and enjoyment of

challenges5. Willingness to learn about the foreign country’s

culture, language, and customs6. Support from family members

Qualities associated with success in foreign assignments are the ability to communicate in the foreign country, flexibility, enjoying a challenging situation, and support from family members.

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Figure 15.2: Emotional Cycle Associated with a Foreign Assignment

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Test Your Knowledge

• Rachel, an expatriate working in Japan is feeling very uncomfortable in her surroundings. She often feels as if she has said the wrong thing. Rachel is most likely in which emotional stage of expatriation:a) Honeymoonb) Culture shockc) Learningd) Adjustment

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Training and Developing aGlobal Workforce• Training and development programs

should be effective for all participating employees, regardless of their country of origin.

• When organizations hire employees to work in a foreign country or transfer them to another country, the employer needs to provide employees with training in how to handle challenges associated with working in a foreign country.

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Table 15.1: Effects of Culture on Training Design

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Test Your Knowledge

• Employees from a high-power distance culture would feel most comfortable in a training class that:a) Involved several group activities with

classmatesb) The teacher was the expert and

responded definitively to all questionsc) The teacher acted as a facilitator of group

discussiond) None of the above

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Delivering Training in Other Countries

1. Know your goals.2. Consider international differences among trainees

when developing the training plan.3. Keep an eye on quality.4. Be clear about standards for confidentiality and

intellectual property.5. Know local laws that affect training programs.

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Foreign Assignments

• Would you consider taking a foreign assignment for a 6 months to 1 year duration?

A = Yes B = No

• Before you took on a foreign assignment, what would you want to know?

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Cross-Cultural Preparation

• Training to prepare employees and their family members for an assignment in a foreign country.

• Covers all three phases of an international assignment:1. Preparation for departure2. The assignment itself3. Preparation for the return home

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Performance Management AcrossNational BoundariesWhen establishing performance management methods in other countries, consider:

Legal requirementsLocal business practices

National cultures

Differences may include:

Which behaviors are rated

How and the extent to which performance is measured

Who performs the rating

How feedback is required

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Compensating an International WorkforceMarket pay structures can differ substantially across countries in terms of both pay level and relative worth of jobs.•Dilemma for global companies:

Should pay levels and differences reflect what workers are used to in their own countries?

Should pay levels and differences reflect the earnings of colleagues in the country of the facility, or earnings at the company headquarters?

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Figure 15.3: Earnings in Selected Occupations in Three Countries

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Compensating an International Workforce • Compensation decisions affect a company’s costs

and ability to compete.• Challenge of competing with organizations in low-

wage countries can be very difficult.• Decisions about benefits must take into account

the laws of each country involved, as well as employees’ expectations and values in those countries.

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Figure 15.4: Average Hours Worked in Selected Countries

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International Labor Relations

• Labor relations on an international scale involves differences in laws, attitudes, economic systems, and negotiation styles.

• Organizations establish overall policies and goals for labor relations, overseeing labor agreements, and monitoring labor performance.

• Day-to-day decisions about labor relations are usually handled by each foreign subsidiary.

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Managing Expatriates:Selecting Expatriate ManagersExpatriate managers need technical competence in the area of operations.Adaptation requires abilities to :1. maintain a positive self-image and feeling of well-being2. foster relationships with host-country nationals3. perceive and evaluate the host country’s environment

accurately

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Assessing Candidates for Overseas Assignments

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Managing Expatriates: Preparing Expatriates•Pre-assignment site visit•Job orientation•Country orientation•Culture orientation•Language training•Compensation / benefits / taxes counseling

•Housing counseling•Health care / schools / shopping / recreation counseling•Counseling by returning expatriates•Local sponsorship from host country

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Figure 15.5: Impressions ofAmericans: Comments by Visitors to U.S.

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Compensating Expatriates

Balance sheet approach – adjusts manager’s compensation so that it gives the manager same standard of living as in the home country plus extra pay for inconvenience of locating overseas.

involves an effort by the global organization to ensure that its expatriates are “made whole.”

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Figure 15.6: Balance Sheet for Determining Expatriate Compensation

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Priciest Cities

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Compensating Expatriates

After setting total pay, organization divides this amount into four components of total pay package:

1. Base salary2. Tax equalization allowance3. Benefits4. Allowances

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Figure 15.7: International Assignment Allowance Form

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Helping Expatriates Return Home

Repatriation – process of preparing expatriates to return home from foreign assignment.

1. Communication: expatriate receives information and recognizes changes at home while abroad

2. Validation: giving expatriate recognition for overseas service when this person returns home.

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Summary

• More companies are entering international markets by exporting and operating foreign facilities.

• Organizations need employees who understand customers, suppliers, local laws and customs in other countries and able to adapt their plans to local situations.

• Organizations may hire a combination of parent-country, host-country, and third-country nationals.

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Summary

• Another influence on international HRM is the foreign country’s political-legal system.

• A country’s economic system, as well as the government’s involvement in the economy, is a strong factor determining HRM practices.

• HR planning involves decisions about where and how many employees are needed for each international facility.

• Most foreign operations positions are filled with host-country nationals.

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Summary

• Organization must prepare the manager selected for an overseas assignment.

• Cross-cultural training for the assignment as well as preparation for repatriation after the assignment are critical success factors.

• Communication of changes at home and validation of a job well done abroad help expatriate through repatriation process.