Global Human Resource Management

Global Human Resource Management Submitted by; Aditi Verma Alya Veronica Anand Kumar Anil Agarwal Global Human Resource Management

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Global Human Resource Management is a process concerned broadly with recruiting of persons, training them and putting them to the most productive usage. It is also concerned with maintaining of congenial international industrial relations. It is the essential prerequisite for the success of the international firm owning to its complexities.

Global Human Resource Management

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Global Human Resource Management • Global human resource management (GHRM) -- the • •

planning, selection, training, employment, and evaluation of employees for global operations. GHR managers serve in an advisory or support role to line managers by providing guidelines, searching, training, and evaluating employees. How a firm recruits, trains, and places skilled personnel in its worldwide value chains sets it apart from competition. The combined knowledge, skills, and experiences of employees are distinctive and provide myriad advantages to the firm’s operations worldwide. Global Human Resource Management

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Global Human Resource Management

• Four major tasks of HRM – – – –

Staffing policy Management training and development Performance appraisal Compensation policy

• Strategic role: HRM policies should be

congruent with the firm’s strategy and its 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: – 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 Helps transfer core competencies

• 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: estimate = 3X the expatriate’s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

• 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 Manager’s inability to adjust Other family problems Manager’s personal or emotional immaturity – Inability to cope with larger overseas responsibilities

• European •

multinationals Inability of spouse to adjust

– Inability to cope with larger overseas responsibilities – Difficulties with the new environment – Personal or emotional problems – Lack of technical competence – Inability of spouse to adjust

Four Attributes that Predict Success Self-Orientation Possessing high self-esteem, self-confidence and mental wellbeing

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 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 – 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

• 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 and Strategy • Development programs designed to increase the overall skill levels of managers through: – –

Ongoing 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 evaluate and under-appreciate 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 on-site • •

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 evaluation

The need for a broader perspective

Greater involvement in the Employees’ personal lives

New HR responsibilities Complexity of Global Human Resource Management

Managing the mix of expatriates And locals

External influences of Nation and culture

Great Risk exposure

Differences between Domestic and Global HRM 1.

New HR responsibilities. Several activities that are not necessarily encountered in the domestic market include: international taxation, international relocation and orientation, administrative services for expatriates, host government relation

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The need for a broader, international perspective in compensation policy. At any one time, the HR manager is responsible for a mix of PCNs, HCNs, and TCNs who are nationals of numerous countries. Establishing a fair and comparable compensation scale, regardless of nationality, is one of the challenges in a large MNE.

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Greater involvement in the employees’ personal lives. The HR professionals are concerned about welfare of the expatriates and their families for such matters as: housing arrangements, health care, schooling of children, safety, and security as well as proper compensation in view of higher cost of living around the world.

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Differences between Domestic and Global HRM •

Managing the mix of expatriates versus locals. Organizations must be staffed in each national location with personnel from the home country, the host country, or third countries. The mix of staff depends upon several factors, including the international experience of the firm, cost-of-living in the foreign location, and availability of qualified local staff.

3. Greater risk exposure. When employee productivity falls below acceptable

levels or an expatriate returns prematurely from an international assignment, the consequences are even more pronounced in IB.

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Exposure to political risk and terrorism may require an increased compensation package and security arrangements for the employee and his/her family.

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External influences of the government and national culture. External to the firm is the broader context of the host country environment. Especially notable is the influence of the government and national culture. Global Human Resource Management

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Employee Characteristics Which Facilitate International Effectiveness

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Technical Competence Self-Reliance Adaptability Interpersonal Skills Leadership Ability Physical and emotional health Spouse and dependents prepared for living

Culture Shock • A leading cause of expatriate failure is culture shock -- the

confusion and anxiety, often akin to mental depression, that can result from living in a foreign culture for an extended period.

• Culture shock may affect family members as well. • As many as 1/3 of foreign assignments end prematurely due to expatriate failure. It is particularly high among employees assigned to culturally dissimilar countries.

• Regular exercise, relaxation techniques, or keeping a

detailed journal of experiences, will help employees deal with culture shock. It can also be reduced through advance preparation, training, and by developing a deep interest in the new surroundings. 20

Challenges of Global Human Resource Management

• Recruiting, managing, and retaining human resources at a firm •

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with global operations are especially challenging. Take the global organization of Siemens, the German MNE. In 2005, Siemens had 460,800 employees in some 190 countries. It employed 290,500 throughout Europe, 100,600 in the Americas, 58,000 in the Asia-Pacific region, and 11,900 in Africa, the Middle East, and Russia. Like Siemens, firms such as Volkswagen, Hutchison Whampoa, Nestle, IBM, Anglo American, Unilever, Wal-Mart, Deutsche Post, McDonald’s, Matsushita, and Mittal Steel have more than 150,000 employees working outside of their home country. Management grapples with a wide range of challenges in hiring and managing workers within the distinctive cultural and legal frameworks that govern employee practices around the world. Global Human Resource Management

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Charting Global Careers for Employees • Successful firms give high-potential employees adequate

opportunity to gain experience not just in their home country but at HQ and in other countries as well.

• This broadens the pool of global talent for managerial positions and visibly shows top management’s commitment to global strategy.

• At Unilever, employees cannot advance very far in the firm without

substantial international experience. Managers are rotated through various jobs and locations around the world, especially early in their careers.

• Unilever maintains a global talent pool -- a searchable database of employees profiling their international skill set and potential for supporting the firm’s global aspirations. HR managers search the database for the right recruit regardless of where he/she may be located. 22