Chapter 04

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4 Global Human Resource Management

McGraw-Hill/Irwin Human 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: Laws Business customs Workforce characteristics Political climate

The

most difficult challenge to overcome is the “people challenge”

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Introduction Key

challenges to international effectiveness: Finding suitable candidates Intercultural understanding Career management Employee retention Adjusting to environment Partner dissatisfaction Relocation 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 companies Sometimes 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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Multinational and Global Corporations 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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Multinational and Global Corporations

Three

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

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Multinational and Global Corporations MNCs

generally take an ethnocentric perspective They 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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Multinational and Global Corporations 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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Multinational and Global Corporations 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 support Behavioral rigidity Inability to adapt Poor relational ability Weak stress management skills

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Selecting the Expatriate Manager Factors

associated with expatriate success: Good technical and language skills Strong desire to work overseas Specific knowledge of overseas culture Well-adjusted family situation Complete support of spouse Behavioral flexibility Adaptability and open-mindedness Good relational ability Good stress management skills

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Selecting the Expatriate Manager Success

in domestic operations may have little to do with success overseas Many 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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Selecting the Expatriate Manager The

role of the expatriate’s family should not be underestimated Dual 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 shock Adaptation

Dealing

with culture shock involves: Preparation Language skills Preparing 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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Training the Expatriate Manager 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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Training the Expatriate Manager 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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Training the Expatriate Manager 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 allowances Help with maintaining or selling a current home Transportation differential allowances Educational allowances To combat these Hardship premiums costs, some firms have shifted to using more shortterm 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 organizations Use 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 agreements Parent country laws Host country regulations Ethical behavior challenges The Foreign Corrupt Practices Act of 1977 may also be encountered: (FCPA) makes it illegal Environmental regulation for employees of American corporations may be weaker to offer money or other items to foreign officials “Gift giving” or “greasing” in order to gain an unfair competitive advantage may be common practice 

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Legal and Ethical Climate of GHRM 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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Legal and Ethical Climate of GHRM 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 apartheid Similar dilemmas occur around the globe in developing countries

Resolving

ethical issues is not an easy task

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Legal and Ethical Climate of GHRM 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 laws Less emphasis on written contracts How 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 differ In 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