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1 Human Resource Management ELEVENTH EDITION G A R Y D E S S L E R Farzana Chowdhury HRM301 (Sec01) - Spring 2013 Managing Global Human Resources Chapter 17 Part 5 | Employee Relations

HRM301 Dessler 17

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Human Resource Management



Farzana Chowdhury HRM301 (Sec01) -

Spring 2013

Managing Global Human Resources

Chapter 17

Part 5 | Employee Relations

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After studying this chapter, you should be able to:After studying this chapter, you should be able to:

1. List the HR challenges of international business.

2. Illustrate how intercountry differences affect HRM.

3. Discuss the global differences and similarities in HR practices.

4. Explain five ways to improve international assignments through selection.

5. Discuss how to train and maintain international employees.

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HR and the Internationalization of Business

• The Global Challenges Most companies do business abroad. And doing so

presents them with various management challenges.

Firms need to

Coordinate market, product, and production plans on a worldwide basis.

Create organization structures capable of balancing centralized home-office control with adequate local autonomy.

Furthermore, extend HR policies and systems to service staffing needs abroad.

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The Internationalization of Business• Global Staffing Issues:

Companies operating only withing the borders of one country generally have the luxury of dealing with relatively limited set of economic, cultural, and legal variables.

A company operating in multiple units abroad have to take into consideration the laws of each unit when staffing for those unit”

Special candidate selection Overseas assignment Immigration processing Cultural and language orientation and training Compensation administration and payroll processing Tax administration Career planning and development Handling of spouse and dependent matters

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Inter-country Differences Affecting HRM• Cultural factors

Countries widely differ in their cultures, which reflects in their HR practices.

A study of 330 managers from China and US revealed that US managers tend to be most concerned about getting the job done whereas the Chinese mamagers were more concerned with with maintaining a harmonious environment.

Furtheormore, compared to US employees, Mexican workers expect managers to keep their distance rather than to be close, and to be formal than informal.

In any case, cultural factors do influence human resource policies and practices.

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Inter-country Differences Affecting HRM• Economic systems

Difference in economic systems also translates into differences in human resource management policies.

For example, France – though a capitalist society imposes restrictions on employer’s right to diacharge workers and limits the number of hours an employee can work legallu work each week.

Differences in labor costa are also substantial.

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Inter-country Differences Affecting HRM• Legal and industrial relations factors Legal as well as industrial relations factors vary from

country to country. US practice of employment at will does not exist in Europe,

where laying-poff workers are usually expensive. (Work councils)

Codetermination is the rule in Germany and several other countries.

Codetermination means employees have the legal right to a voice in setting company policies.

Workers elect their own representatives to the supervisory board of the employer, and teher is vise-presdent for labor at the top management level

HR policies on most matters in the US is set by the employer, or by the employer in negotiations with the labor unions.

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Intercountry Differences Affecting HRM

International Human Resource



Legal and Industrial Relations Factors


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Global Differences and Similarities in HR Practices• As we have seen in the previous examples,

human resourec practices tend to differ from country to country.

• One lone term study helps to illustrate this. Beginning from 1990s, human resource management

scholars from 13 countries and regions used the Best International Human Resource Management Practice Survey to assess human resource management practices around the world

The result provide us with a snapshot of the differences and similarities in a wide range of countries. We’ll look at some of them:

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Global Differences and Similarities in HR Practices• HR selection procedure

Employers around the world use similar criteria and methods for selecting employees. (personal interview, ability to perform the technical requirements of the job, work experience etc.)

Cultural differences however have some impact across countries. Eg – in Mexico havingteh right connections.

• Purpose of performance appraisal There are more variations in how employers in different

countries use performance appraisal. Eg- Employers in Taiwan, US and Canada rank “to

determine pay” as one of the top 3 reasons of PA

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Global Differences and Similarities in HR Practices

• Purpose of performance appraisal (cont’d) Eg- The main purpose of PA in Mexico and Japan is “to

recognize subordinates”

• Training and development practices The amount of training firms provide varies from country

to country. Training expenditure per employee range from as low as

$241 in Asia (outside Japan), $359 in Japan and $ 724 in US.

Training hours can range from 26 total training hours per employee in Asia upto 49 hours in Europe.

There are usually more similarities than differences across countries.

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Global Differences and Similarities in HR Practices• Use / Importance of pay incentives

Given the communist roots of China and US’s emphasis on pay for performance we would expect that US managers would place more importance on incentives.

However surveys indicate that incentives pay only moderate role in US pay packages, where in China, Japan and Taiwan incentives play a relatively important role.

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How to Implement a Global HR System

• Is it realistic for a company to try to institute a standardized HR management system given the difference in cross-cultural HR practices?

• The answer is yes because study’s result shows that employers may differ on some issues however in general it is not necessary for one firm to to have separate policies for each country.

• They can be successful if they foucs on best practices.

• Best practices for making a global HR system more acceptable to local managers.

• Doing so enable them to develop and implement more or less global HR system around the world.

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How to Implement a Global HR System• Making the global HR system more acceptable• First employees engage in three best practices so

that the global human resource system they eventually develop will be acceptable to their local managers around the world. These best practices include:1. Remember that global systems are more accepted in

truly global organizations. These managers think of themselves as global in scope,

therefore they can easily accept the global imperative for having a more standardized HRMS

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How to Implement a Global HR System• Making the global HR system more acceptable

(cont’d)2. Investigate pressures to differentiate and determine

their legitimacy. Do not try to force a change without finding out whether there may

in fact be any reason for using a more locally appropriate system. Be knowledgeable about local issues and be willing to differentiate where necessary. Then market test the new method.

3. Try to work within the context of a strong corporate culture.

Companies which can create strong corporate culture find it easier to obtain agreement among far-flung employees when it comes to implement standardized practices.

These managers tend to have a strong sense of shared value.

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How to Implement a Global HR System• Develop a more effective global HR system• These companies engage in several best practices

in developing effective worldwide HRMS1. Form global HR networks.

Firm’s HR managers around the should feel that they are not merely local HR managers but a part of a greater whole.

Form global teams to develop new HR systems. Treat local HR managers as equal partners, not just implementers.

2. Remember that it’s more important to standardize ends and competencies than specific methods.

While companies may strive to standardize tools globally, the critical points is to standardize what is assessed but to be flexible in how it is assessed. IBM uses a more or less standardized recruitmenta nd selection process worlwide, but the details such as who conducts the interview or prescreening by phone or in person differs from country to country.

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How to Implement a Global HR System• Implement the global HR system• Finally, in actually implementing the global HR

system, several best practices can help ensure a more effective implementation

1. Remember, “You can’t communicate enough.” There is need for constant contact with the decision makers in

each country, as well as the people who will be implementing and using the system,

2. Dedicate adequate resources for the global HR effort. Head offices must provide adequate resources to help local HR

managers to implement new / additional activities / procedures.

• We will now summarize these best practices for instituting global HR systems

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Summary of Best Practices

Do…• Work within existing local systems – integrate global tools

into local systems.• Create a strong corporate culture.• Create a global network for system development – global

input is critical.• Treat local people as equal partners in system

development• Assess common elements across geographies. Focus on

what to measure and allow flexibility in how to measure.

Source: Ann Marie Ryan et al., “Designing and Implementing Global Staffing Systems: Part 2—Best Practices,” Human Resource Management 42, no. 1 (Spring 2003), p. 93.

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Summary of Best Practices

Do…• Allow for local additions beyond core elements.• Differentiate when necessary.• Train local people to make good decisions about which

tools to use and how to do so.• Communicate, communicate, communicate!• Dedicate resources for global HR efforts.• Know, or have access to someone how knows the legal

requirements in each country.

Source: Ann Marie Ryan et al., “Designing and Implementing Global Staffing Systems: Part 2—Best Practices,” Human Resource Management 42, no. 1 (Spring 2003), p. 93.

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Summary of Best Practices

Don’t…• Try to do everything the same way everywhere.• Yield to every claim that “we’re different” –

make them prove it.• Force a global system on local people.• Use local people just for implementation.• Use the same tools globally, unless you can

show that they really work and are culturally appropriate.

Source: Ann Marie Ryan et al., “Designing and Implementing Global Staffing Systems: Part 2—Best Practices,” Human Resource Management 42, no. 1 (Spring 2003), p. 93.

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Summary of Best Practices

Don’t…• Ignore cultural differences• Let technology drive your system design – you

can’t assume every location has the same level of technology investment and access.

• Assume that “if we build it they will come” – you need to market your tools or system and put change management strategies in place.

Source: Ann Marie Ryan et al., “Designing and Implementing Global Staffing Systems: Part 2—Best Practices,” Human Resource Management 42, no. 1 (Spring 2003), p. 93.

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Staffing the Global Organization




International Staffing Policy

Top Management Values

• Staffing the employer’s global organization is at the heart of international human resource management.

• The process involves identifying and selecting the people who will fill your positions abroad and then placing them in those positions.

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Staffing the Global Organization• International staffing: Home or local?

MNCs employ several typpes of international managers:

Expatriates still represent a minority of multinationals’ managers. Most managerial positions are filled by locals rather than

expatriates in both headquarters or foreign subsidiary operations.

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Staffing the Global Organization• Using Locals – there are several reasons why employers

rely more on local managers to fill their foreing subsidiary’s management ranks Many people don’t want to work for a foreign country. The cost of using expatriates is usually greater. There may be a frear that since expatriates are posted to the foreign

subsidiary for a limited period they may over-emphasize on short-term results than long-term tasks

• Using Expats – there are also several reasons for using expatriates – either home-country or third country nationals Main reason is technical competency – employers often can’t find

local candidates with the required technical qualifications. Multinationals also view successful terms abroad as a required step

in developing top managers. Another reason is control – home country managers are more likely

to apply headquarters’ way of doing things.

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Staffing the Global Organization• Offshoring

Having local employees abroad do jobs that the firm’s domestic employees previously did in-house.

Offshoring is in important inernational staffing issue. Mostly used in manufacturing jobs.

• Issues in offshoring Having an effective supervisory and management

structure in place to manage the workers. Screening and required training for the employees

receive the that they require. Ensuring that compensation policies and working

conditions are satisfactory.

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Staffing the Global Organization• Values and International Staffing PolicyWhat determines whether firms use locals or

expats? Ideally rational reasons like cost and competency will prevail. However, company’s top executives’ valuse also play a role Experts clssify top executives’ values as:

EthnocentricThe notion that home-country attitudes,

management style, knowledge, evaluation criteria, and managers are superior to anything the host country has to offer.

E.g.- At Royal Dutch Shell most financial officers aroudn the world are Dutch nationals.

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Staffing the Global Organization• Values and International Staffing Policy

PolycentricA conscious belief that only the host-country

managers can ever really understand the culture and behavior of the host-country market.

It resuces local cultural misunderstang and also less expensive.

GeocentricThe belief that the firm’s whole management staff

must be scoured on a global basis, on the assumption that the best manager of a specific position anywhere may be in any of the countries in which the firm operates.

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Staffing the Global Organization

• Why Expatriate Assignments FailPersonality

Personal intentionsFamily

Inability of the spouse to adjust Inability to cope with larger overseas responsibility.Lack of cultural skills

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Staffing the Global Organization• Selecting International Managers

The firms use to select managers for their domestic and foreign positions have many similarities.

However foreign assignment are also different. There is the need to cope with collegaues whose culture may be

drastically different, the stress of being alone in a foreign land, complextities and pressures the families will have to confront etc.

Researchers identifies five factors that contribute to success to such assignments Not all are equally important on the foreign assignees’ success– Family situation was generally found to the most important factor– A recent review shows strong support for interpersonal skills and family


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Staffing the Global Organization• Five Factors Important in International

Assignee Success

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Staffing the Global Organization• Selecting International Managers Adaptability screening is sometimes part of the expatriate

screening process. Adaptability screening Often conducted by a psychologist or psychiatrist assesses the

assignee’s (and spouse’s) probable success in handling the foreign transfer. Also alerts about issues the move may involve.

Overseas Assignment Inventory– A test that identifies the characteristics and attitudes international

assignment candidates should have.

Realistic previews The problems to expect in the new job as well as about the cultural

benefits, problems, and idiosyncrasies of the country.

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Training and Maintaining Expatriate Employees

• Careful screening is just the first step in ensuring the foreign assignee’s success.

• The employee may then require special training and the firm will also need special inetrnational human resource management polocies for compensating the firm’s overseas employees and for maintaining healthy labor relations.

• Training Employees on International Assignments There seems to be realtively little or no systematic

selection and training for assignments overseas.

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Training and Maintaining Expatriate Employees• One firm specailized in such programs

prescribes a four-step approach: Level 1: Training focuses in the impact of cultural

differences and on raising the trainees’ awareness of such differences and of their impact on business outcomes.

Level 2: aims at getting participants to undertand how attitudes (both negative and positive) are formed and how they influence behavior.

Level 3: training provides factual knowledge about the target country, and

Level 4: provde skills building in areas like language and adjustment and adaptation skills.

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Training and Maintaining Expatriate Employees• There are several trends in Expatriate Training

and Development: Continuing, in-country cross-cultural training – rather

than providing just predeparture cross-cultural training, more firms are providing continuing , in-country cross cultural training during early stages of an overseas assignment.

Use of returning managers as resources to cultivate the “global mind-sets” of their home-office staff.

Use of software and the Internet for cross-cultural training. E.g. Bridging Cultures is a self-training multimedia package for

people whi will be traveling and/or living overseas.

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Compensating Expatriates

• Determining equitable wage rates imn many countries is no simple matter.

• One of the greatest difficulties in managing multinational compensation is establishing consistent compensation measures between cuntries.

• Some MNCs conduct their own local annual compensation surveys. The employers then use this information for things like annual salary increases and proposed changes in benefits.

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Compensating Expatriates

• The most common approach to formulating expatriate pay is to equalize purchaing power across countries, the technique is known as:

• “Balance Sheet Approach” Home-country groups of expenses—income taxes,

housing, goods and services, and discretionary expenses—are the focus of attention.

The employer estimates what each of these four expenses is in the expatriate’s home country, and what each will be in the host country.

The employer then pays any differences such as additional income taxes or housing expenses.

E.g. – Table 17-2, pg- 711

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Compensating Expatriates• Incentives – firms also use performance based incentives

abroad.• There are various incentives offered to get expatriates to

accept and stay on international assignment. Foreign service premiums

Financial payments over and above regular base pay, and typically range between 10% and 30% of base pay.

Appears as weekly or monthly salary supplements.

Hardship allowances Payments to compensate expatriates for exceptionally hard

living and working conditions at certain foreign locations.

Mobility premiums Lump-sum payments to reward employees for moving from one

assignment to another.

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Appraising Expatriate Managers• Challenges in appraising overseas managers – Several

things complecate the task of appraising an expatriate’s performance:

Determining who should appraise the manager: Local management must have some input, but cultural differences

here may distort the appraisal – host-country boss may evluate a US expatriate in India negatvely is he finds his/her use of participative decision making culturally inappropriate.

On the other hand, home-office managers may be so out of touch that they cannot provide valid appraisals since they are not fully aware of the situation the manager faces locally.

Deciding on which factors to base the appraisal. The procedure may be to use criteria / factors such as profits,

market share etc. However, local factors/ event (such as political instability) may affect the manager’s performance while remaining invisible to home office staff.

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Appraising Expatriate Managers• Suggestions for improving the expatriate

appraisal process1. Stipulate the assignment’s difficulty level, and

adapt the performance criteria to the situation.

2. Weigh the evaluation more toward the on-site manager’s appraisal than toward the home-site manager’s.

3. If the home-office manager does the actual written appraisal, use a former expatriate from the same overseas location for advice.

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Repatriation: Problems and Solutions• ProblemOne of the most confounding and worrisome rfacts about

sending employees abroad is that 40% - 60% of them will probably quit within three years of returning home. Reasons include: Expatriates fear they’re “out of sight, out of mind” No career planning The repatriate and his/her family often have trouble readjusting to

the home lifestyle.

• Solutions Making sure that the expatriate and his or her family don’t feel that

the company has left them adrift. Ensure that expatriates are kept informed of happenings in home

office. Prepare expatriates for next career move in company. Provide formal repatriation services.

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Inter-Country Labor Flow• For centuries, Asians have been going abroad

to work. People from China and India went to work in tin mines

and rubber estates in Malaysia. Others worked in UK, US and other Western countries.

• In recent years, the flow within Asia has increased because of rapid economic growth in Hong Kong, Japan, Malaysia, Singapore, South Korea and Taiwan. Some countries are both exporters and importers of labor.

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Brunei Darussalam• Brunei has a small population. • It depends on foreign workers from neighboring

countries (e.g. Philippines, East Malaysian states of Sabah and Sarawak). Foreign workers need work permits. There is a quota by sector to ensure that foreigners

do not displace locals.

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China• Chinese workers abroad

1. Engineering projects for other governments on basis of international bidding

2. Individuals as arranged by employment agents

• Foreigners in China1. Professionals in areas needed by China

2. Those with permit to work in jobs that cannot be filled by locals

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Hong Kong• Depends on foreign workers and

professionalsSupplementary Labor Scheme monitored by

Labor Advisory Board to allow entry of more foreigners

Admission of Talents Scheme – to allow mainland professionals

Foreign domestic helpers – from Philippines, Thailand and Indonesia

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Indonesia• Many Indonesians work in neighboring

MalaysiaSimilar language and culture

• Government encourages export of workersEase domestic labor surplusForeign exchange earning

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Japan• Foreigners need resident visas to stay

Type A – for working purposes Type B – for recognized partial work Type C – resident status without limitation

• Serious problems of foreigners over-staying after their permits expire

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Malaysia• Both exporter and importer of labor

Import: from Indonesia, Bangladesh, Philippines, Thailand

Export: to Singapore (mainly from Johor), Japan, Taiwan, Middle East

• Government imposes foreign worker levy on employers to control number

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Philippines• Millions work overseas

Middle East, Hong Kong, Singapore and other Asian countries

• POEA – government agency Assists workers to go abroad Pre-employment orientation Pre-departure seminar

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Singapore• Highly dependent on foreign workers

Government controls number by Foreign worker levy Industry-specific quota

Contact Singapore Organization has overseas offices to attract international


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South Korea• Employment of foreign workers is restrictive

Employment is offered in specific industries or professions.

• Immigration law does not allow entry of unskilled workers except as trainees.

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Thailand• Both exporter and importer of labor

Export to Middle East, other Asian countries Wworkers are mostly from Northern provinces

Import from Cambodia, Laos, Myanmar

• Faces problem of illegal workers from neighboring countries

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Vietnam• In 1980s, many Vietnamese worked in Soviet

Bloc countries.• With collapse of USSR, workers now go to

other countries such as Korea and Japan. Recent years, some go to Liberia and Kuwait