Managing Global Human Resources

Managing Global Human Resources

中国经济管理大学

ANNOTATED OUTLINE

I. HR and the Internationalization of Business

International Business and Its Impact on Managing – Due to the European Market unification, the introduction of the Euro currency, the opening of Eastern Europe, and the rapid development of demand in Asia and other areas of the world, large and small firms are finding their success depends on their ability to market and manage overseas.

A. The Manager’s Global Challenges – include deployment, knowledge, and innovation dissemination, and identifying and developing talent on a global basis.  Complicating these decisions are the cultural, political, legal, and economic differences among countries and their peoples. 

B. How Intercountry Differences Affect HRM – A company operating multiple units abroad does not have the luxury of dealing with a relatively limited set of economic, cultural, and legal variables.

1. Cultural Factors – Countries differ widely in their cultures, which are the basic values to which their citizens adhere.  Cultural differences from country to country necessitate corresponding differences in management practices among a company’s subsidiaries, because local cultural norms can undermine employer’s attempts to have uniform codes of conduct.

2. Economic Systems – Differences in economic systems translate into differences in HR practices.  Differences in labor costs are substantial.

3. Legal, Political, and Industrial Relations Factors – vary dramatically from country to country.  In many European countries, work councils replace the informal or union-based worker-management mediations typical in U.S. firms.  In Germany and several other countries, codetermination is the rule where employees have the legal right to a voice in setting company policies.

4. Ethics and Codes of Conduct – Employers should have set policies on things like discrimination, harassment, bribery, and Sarbanes-Oxley.

5. HR Abroad: The European Union (EU) – refers to the unification of separate European countries in the 1990s into a common market for goods, services, capital, and labor. EU directives are binding on all member countries, which necessitate adjustments to both EU directives and individual country laws. Variances in HR practices affect minimum EU wages, working hours, and employee representation.

6. HR Abroad: China – There are relatively scarce employment services and an active union movement in China. The ownership of the firm affects how these issues need to be handled. Sporadic labor shortages are fairly widespread. Employees tend to gravitate toward employers that can provide the best career advancement training and opportunities. Employees are primarily selected on the basis of their resume and an interview. The need to save face and avoid confrontation can make employee appraisal very sensitive. Compensation issues also exist.

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NOTES Educational Materials to Use

II. Staffing the Global Organization

A. International Staffing:  Home or Local? – Multinational companies (MNCs) employ several types of international managers.  Locals are citizens of the countries where they are working.  Expatriates (“expats”) are non-citizens of the countries in which they are working.  Home-country nationals are citizens of the country in which the multinational company has its headquarters.  Third-country nationals are citizens of a country other than the parent or the host country.  More flexible expatriate assignments involving no formal relocation, are becoming more popular, and are aided by technological advances.

B. Offshoring – Having local employees abroad do jobs that the firm’s domestic employees previously did in-house—is growing by leaps and bounds.  The idea of offshoring jobs is very controversial.  In the 1980s and 1990s, it was mostly manufacturing jobs that employers shipped overseas.  

C. Management Values and International Staffing Policy – Ethnocentric-run firms would staff foreign subsidiaries with parent-country nationals because they believe that home country attitudes, management styles, and knowledge are superior to the host country.  Polycentric-run firms would staff foreign subsidiaries with host-country nationals because they are the only ones that can really understand the culture and the behavior of the host country market.  Geocentric-run firms would staff foreign subsidiaries with the best people for key jobs regardless of nationality because they believe that the best manager for any specific position anywhere on the globe may be in any of the countries in which the firm operates.

D. Selecting Expatriate Managers – is similar to selecting domestic managers, but firms need to determine whether managers for international assignments can cope internationally.  

1. Adaptability screening, often conducted by a psychologist or psychiatrist, is aimed at assessing the assignee’s and family’s probable success in handling the foreign transfer.

The New Workforce:  Sending Women Managers Abroad – Many managers assume that women don’t want to work abroad.  In fact, this survey found that women do want international assignments.  Employers tend to assume that women posted abroad are more likely to become crime victims.  However, most of the surveyed women expats said that safety was no more an issue with women than it was with men.  Fear of cultural prejudices against women is another common issue.  Here, there’s no doubt that in some cultures women have to follow different rules than do their male counterparts.  But even here, as one expat said, “Even in the more harsh cultures, once they recognize that the women can do the job, once your competence has been demonstrated, it becomes less of a problem.”

E. Making Expatriate Assignments Successful – International assignments fail for various reasons including: personality, the person’s intentions, and non-work factors. Family pressures are frequent. Three things help the adjustment: language fluency, having preschool age children rather than school-age or no children, and a strong bond between spouse and ex-pat partner.  

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NOTES Educational Materials to Use

III. Training and Maintaining Expatriate Employees

A.  Orienting and Training Employees on International Assignment – Some claim there is generally little or no systematic selection and training for assignments overseas. A four-step approach is recommended: 1) focus on the impact of cultural differences, and on raising trainees’ awareness of such differences and their impact on business outcomes; 2) get participants to understand how attitudes (positive and negative) are formed and how they influence behavior; 3) provide factual knowledge about the target country; and 4) provide skill building in areas like language, adjustment, and adaptation skills.

1. Trends in Expatriate Training – More firms are providing continuing, in-country cross-cultural training during the early stages of a person’s overseas assignment; employers are returning managers as resources to cultivate the “global mindsets” of the rest of their home office staff; there is increased use of software and the Internet for cross-cultural training.  

B.  Compensating Expatriates – presents some tricky problems due to the question of whether or not to maintain companywide pay scales and policies.

1. The Balance Sheet Approach – This common approach to expatriate pay refers to equalizing purchasing power across countries.

2. Incentives – Many firms offer overseas managers long-term incentives that are tied more closely to performance at the foreign subsidiary level.

When You’re on Your Own – Establishing a Global Pay System – There are five phases in a successful program: defining the global philosophy framework, systematizing the job structure framework, formulating the rewards framework, instituting the talent management framework, and ongoing program assessment.

C. Appraising Expatriate Managers – can be improved by: 

1. Stipulating the assignment’s difficulty level; 

2. Weighing the evaluation more toward the on-site manager’s appraisal than toward the home-site manager’s distant perceptions of the employee’s performance. 

3. Modifying the normal performance criteria used for that particular position to fit the overseas position.  These differences can be in many different areas.

D.  International Labor Relations – While union membership may be dropping in the U.S., it is still relatively high abroad. European unions are influential.

Know Your Employment Law:  The Equal Employment Opportunity Responsibilities of Multinational Employers – U.S. employers doing business abroad, or foreign firms doing business in the United States or its territories, have wide-ranging responsibilities to their employees under U.S. equal employment opportunity laws, including Title VII, the ADEA, and the ADA.

E. Terrorism, Safety, and Global HR – New federal anti-terrorism laws are affecting an employer’s ability to import and export workers.

1. Taking Protective Measures – Many firms retain crisis management team services. Firms face resistance from employees who are reluctant to accept foreign assignments. Kidnappings have been on the rise.

2. Kidnapping and Ransom (K&R) Insurance – The insurance itself typically covers several costs associated with kidnappings, abductions, or extortion attempts.  These costs might include, for instance, hiring a crisis team, the actual cost of the ransom payment to the kidnappers or extortionists, ensuring the ransom money in case it’s lost in transit, legal expenses, and employee death or dismemberment.

F. Repatriation:  Problems and Solutions – Some common repatriation problems are: they often fear that out of sight is out of mind; returning expatriates are assigned to mediocre or makeshift jobs; returnees are taken aback when the trappings of the overseas job are lost upon return; the expatriate’s former colleagues have been promoted while he/she was gone; and the expatriate’s family may go through culture shock.  Some possible solutions are: written repatriation agreements; assign a sponsor; provide career counseling; keep communications open; and develop reorientation programs.

Improving Productivity Through  HRIS:  Taking the HRIS Global – As a company grows relying on manual HR systems to manage activities like worldwide safety, benefits administration, payroll, and succession planning becomes unwieldy.  For global firms, it makes particular sense to expand the firm’s human resource information systems abroad.

IV. Global Differences and Similarities in HR Practices

A. Personnel Selection Procedures – Employers around the world tend to use similar criteria and methods for selecting employees.  As in the United States, employers around the world usually rank “personal interviews,” “the person’s ability to perform the technical requirements of the job,” and “proven work experiences in a similar job” at or near the top of the criteria or methods they use.

B. The Purpose of the Performance Appraisal – There tends to be more variation in how employers in different countries use the results of performance appraisals.  “To recognize subordinates” was a main purpose for appraisals in Japan and Mexico.

C. Training and Development Practices – there are usually more similarities than differences across countries.  In particular, employers just about everywhere rank “to improve technical abilities” as the main purpose for providing employees with training.  The amount of training firms provide does vary substantially from country to country.

When You’re on Your Own, HR for Line Managers and Entrepreneurs:  Comparing Small Businesses, HR Practices in the United States and China – Researchers have identified many differences between HR for small businesses in China from those in the United States.  Differences are significant in the areas of:  job analysis, performance appraisal practices, and actual pay practices.

D. The Use of Pay Incentives – there are great variations in the use of incentive pay.  Some communist countries actually use more incentive pay than the U.S.

V. How to Implement a Global HR System

A. Developing a More Effective Global HR System

1. Form global HR networks.

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

B. Making the Global HR System More Acceptable

1. Remember global systems are more accepted in truly global organizations.

2. Investigate pressures to differentiate and determine their legitimacy.

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

C. Implementing the Global HR System

1. Remember, “You can’t communicate enough.”

2. Dedicate adequate resources for the global HR effort.

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NOTES Educational Materials to Use

DISCUSSION QUESTIONS

1. You are the president of a small business.  What are some of the ways you expect being involved internationally will affect your business?  Being involved internationally can affect virtually every aspect of your business.  It can affect the growth of your business due to additional markets, it can affect costs of doing business, and it can affect every aspect of HRM as outlined in the chapter.

2. What are some of the specific uniquely international activities an international HR manager typically engages in?  1) Formulating and implementing HR policies and activities in the home-office of a multinational company.  This HRM manager would engage in selecting, training, and transferring parent-company personnel abroad and formulating HR policies for the firm as a whole and for its foreign operations.  2) Conducting HR activities in the foreign subsidiary of an MNC is another form.  Again, local HR practices are often based on the parent firm's HR policies, fine-tuned for local country practices. 

3. What intercountry differences affect HRM?  Give several examples of how each may specifically affect HRM.  1) Cultural Factors – U.S. managers may be most concerned with getting the job done.  Chinese managers may be most concerned with maintaining a harmonious environment.  And Hispanic managers may be more concerned with establishing trusting, friendship relationships.  2) Economic Factors – U.S. economic systems tend to favor policies that value productivity while more socialistic countries like Sweden would favor policies that prevent unemployment.  3) Labor Cost Factors – Mexican labor costs (low) can allow inefficiencies of labor, while German labor costs (high) might require a focus on efficiency.  4) Industrial Relations Factors – German law requires that workers have a vote in setting policies while in Japan the employees do not have a say, but the government may have a say in establishing policies.  5) The European Community – The EC will gradually reduce the differences between member countries. 

4. You are the HR manager of a firm that is about to send its first employees overseas to staff a new subsidiary.  Your boss, the president, asks you why such assignments fail, and what you plan to do to avoid such failures.  How do you respond?  Estimates say that 20% to 25% of all overseas assignments fail.  Reasons include:  inability of spouse to adjust, managers' inability to adjust, other family problems, and managers' inability to cope with responsibility.  We will need to select a manager that displays: adaptability and flexibility, cultural toughness, self-orientation, others-orientation, perceptual ability, and has a family with adaptability. 

5. What special training do overseas candidates need?  In what ways is such training similar to and different from traditional diversity training?  It is suggested that a four-step training approach be taken:  1) training focused on the impact of cultural differences and their impact on business outcomes; 2) training focused on attitudes that are aimed at getting participants to understand how attitudes (both positive and negative) are formed and how they influence behavior; 3) training focused on factual knowledge about the target country; and 4) skill building in areas like language and adjustment and adaptation skills.  This training is different from traditional diversity training in the last two steps, which are not normally part of diversity training.  In addition, traditional training and development is needed as with any other manager. 

6. How does appraising an expatriate's performance differ from appraising that of a home-office manager?  How would you avoid some of the unique problems of appraising the expatriate's performance? A major difficulty is:  Who actually appraises the performance? (Cultural differences could affect it)  There are five suggestions:  1) Stipulate the assignment's difficulty level; 2) Weight the evaluation towards the on-site manager's appraisal; 3) Have a former expatriate advise the home-site manager in his or her evaluation; 4) Modify the normal performance criteria to fit the position and characteristics of the locale; 5) Attempt to give credit for insights, not just measurable criteria. 

7. As an HR manager, what program would you establish to reduce repatriation problems of returning expatriates?  The programs listed in the chapter give a good summarization of the types of programs and activities that should be established to assure a smooth repatriation.

INDIVIDUAL AND GROUP ACTIVITIES

1. Working individually or in groups, outline an expatriation and repatriation plan for your professor, who your school is sending to Bulgaria to teach HR for the next three years.   In developing their expatriation and repatriation plan, the students should use Internet resources to find information on various cultural, economic, and legal factors that could affect their professor.  They should include a description of the type of training program their professor should take prior to leaving for Bulgaria, the pay structure while on the international assignment, and particulars for how the repatriation plan will work for the professor’s return.

2. Give three specific examples of multinational corporations in your area.  Check the library or Internet or with each firm to determine in what countries these firms have operations and explain the nature of some of their operations, and whatever you can find out about their international HR policies.  The examples will vary according to what companies have operations in your area.  This can be an exciting opportunity for students to find out more about companies and what they are doing beyond your immediate geographic area.

3. Choose three traits useful for selecting international assignees, and create a straightforward test (not pencil and paper) to screen candidates for these traits.  There are an infinite number of responses that you might get to this question.  First, make sure that the traits either are on the list in the chapter, or are reasonable and logical traits that would be useful.  Second, assure that the tests that the students develop are ones that will actually identify the presence of these traits.

4. Use a library or Internet source to determine the relative cost of living in five countries as of this year, and explain the implications of such differences for drafting a pay plan for managers being sent to each country.  The most common approach is to equalize purchasing power across countries, a technique known as the balance sheet approach.  The basic idea is that each expatriate should enjoy the same standard of living he or she would have had at home.

5. The HRCI “Test Specifications” appendix at the end of this book lists the knowledge someone studying for the HRCI certification exam needs to have in each area of human resource management (such as in Strategic Management, Workforce Planning, and Human Resource Development).  In groups of four to five students, do four things:  (1) review that appendix now; (2) identify the material in this chapter that relates to the required knowledge the appendix lists; (3) write four-multiple choice exam questions on this material that you believe would be suitable for inclusion in the HRCI exam; and (4) if time permits, have someone from your team post your team’s questions in front of the class, so the students in other teams can take each other’s exam questions.  The material from this chapter that is applicable to the HRCI certification exam would include:  The HR challenges of international business, how intercountry differences affect HRM, global differences and similarities in HR practice, how to implement a global HR system, staffing the global organization, and training and maintaining expatriate employees.

6.  An issue of HR Magazine contained an article titled “Aftershocks of War,” which said that soldiers returning to their jobs from Iraq would likely require HR’s assistance in coping with “delayed emotional trauma.”  The term “delayed emotional trauma” refers to the personality changes such as anger, anxiety, or irritability and associated problems such as tardiness or absenteeism that exposure to the traumatic events of war sometimes trigger in returning veterans.  Assume you are the HR manager for the employer of John Smith, who is returning to work next week after one year in Iraq.  Based on what you read in this chapter, what steps would you take to help ensure that John’s reintegration into your workforce goes as smoothly as possible?  There are several suggestions in the section “Repatriation:  Problems and Solutions.”  At minimum, you should arrange for a sponsor/mentor, career counseling, and a reorientation program.   You need to also make sure that there are clear and open doors for him to communicate with you.  It would be a good idea to have some counseling available as well.

EXPERIENTIAL EXERCISES & CASES

Experiential Exercise: A Taxing Problem for Expatriate Employees

This exercise forces students to think realistically about the compensation problems with expatriate employees.  The rankings will vary, but students should be prepared to defend their rankings with reason and logic.  Similarly, while the described “effects on compensation” may vary, they should be reasonable and logical.  When discussing the problems that the higher level of compensation might create, do not forget: 1) jealousy of other employees, 2) problems of adjustment when repatriation occurs, and 3) whether even this level will be adequate to entice employees to take the foreign assignments.

Application Case Incident: “Boss, I Think We Have a Problem” 

1. Based on the chapter and case incident, compile a list of 10 international HR mistakes Mr. Fisher has made so far.  Among his mistakes: Fisher has not properly identified candidates; cultural sensitivity, interpersonal skills, and flexibility have not been included as required job skills; there is no system in place to assess candidates for proper skills; the company does not have realistic cost projects for cross-border operations; the company has not determined whether it would be cost effect to have an expatriate manager; there are no assignment letters documenting the scope of the job; there is no international compensation system in place; the company has not taken into account differences in foreign expenses; the company has not taken into account foreign taxes; there is no formal relocation assistance program in place; the company has not considered the importance of family support; there is no cultural orientation program in place for expatriate managers or their family members; among others.

2. How would you have gone about hiring a European sales manager?  Why?  I would have investigated the market to determine the appropriate level of compensation and benefits.  Expatriate compensation packages should consider tax equalization clauses or other measures for dealing with differing costs of living.  The company should also have retained counsel on European labor laws/practices. The location of the office should be carefully selected for favorable labor and tax laws. Like Fisher, I would have wanted a large pool of potential applicants, but given Fisher’s inexperience, he may have benefited from the use of an outside agency (search firm). Finally, Fisher’s stereotypes of European managers may have clouded his judgment with his existing pool of applicants.

3. What would you do now if you were Mr. Fisher? Fisher needs to seek legal counsel in regard to his labor situation. He is likely in the wrong, in which case, he will need to reinstate the employees and apologize. He will in all likelihood need to start over and find an appropriate sales manager with knowledge of the local culture and business practices.

Continuing Case: Carter Cleaning Company – Going Abroad

1. Assuming they began by opening just one or two stores in Mexico, what do you see as the main HR-related challenges he and Jennifer would have to address?  The students will not only need to incorporate their learnings from this chapter to answer this question, they should also include information from all the chapters in the text to come up with the main HR-related implications and challenges Carter Cleaning Company will face as a result of opening the Mexican stores.

2. How would you go about choosing a manager for a new Mexican store if you were Jack or Jennifer? For instance, would you hire someone locally or send someone from one of your existing stores? Why?  The students should use the information in the chapter on selecting international managers.  The students are likely to differ in their choices as to which type of international manager they would suggest for the London operation; just look for them to justify their responses.

3. The cost of living in Mexico is substantially below that of where Carter is now located: How would you go about developing a pay plan for your new manager if you decided to send an expatriate to Mexico?  The students should use information from chapters 11, 12, and 13, and the Internet sources presented in those chapters to formulate their response to this question.

4. Present a detailed explanation of the factors you would look for in your candidate for expatriate manager to run the stores in Mexico.  The students should include information presented in chapters 1 through 15, in addition to the information presented in this chapter, to develop their list of HR-related things Carter Cleaning Company needs to do in selecting their expatriate employee for Mexico. 

Translating Strategy into HR Policies and Practices Case: The Hotel Paris

Managing Global Human Resources – In this case Lisa Cruz, the HR manager, has turned her attention to developing the HR policies her company needs to be able to more effectively do business internationally.

1. Provide a one-page summary of what individual hotel managers should know in order to make it more likely incoming employees from abroad, like those in the Hotel Paris’ management development program, will adapt to their new surroundings.

Hotel managers need to know all the issues facing ex-pats, and be prepared to assess the job fit and other items required to make a foreign assignment successful. Figure 17-1 will be helpful in developing answers.

2. In previous chapters you recommended various human resource practices Hotel Paris should use. Choose one of these, and explain why you believe they could take this program abroad, and how you suggest they do so.

Answers will vary widely. Instructors should look for solid, text-based justification of answers given.

3. Choose one Hotel Paris human resources practice that you believe is essential to the company achieving its high-quality-service goal, and explain how you would implement that practice in the firm’s various hotels worldwide.

Answers will vary widely. Instructors should look for solid, text-based justification of answers given.

KEY TERMS

codetermination Employees have the legal right to a voice in setting company policies.

expatriates (expats) Non-citizens of the countries in which they are working.

home country nationals Citizens of the country in which the multinational company has its headquarters.

third country nationals Citizens of a country other than the parent or the host country. 

 ethnocentric The notion that home-country attitudes, management style, knowledge, evaluation criteria, and managers are superior to anything the host country has to offer.

polycentric A conscious belief that only the host-country managers can ever really understand the culture and behavior of the host-country market.

geocentric The 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.

adaptability screening A process that aims to assess the assignee’s (and spouse’s) probable success in handling a foreign transfer.

foreign service premiums Financial payments over and above regular base pay, typically ranging between 10% and 30% of base pay.

hardship allowances Compensate expatriates for exceptionally hard living and working conditions at certain locations.

mobility premiums Typically, lump-sum payments to reward employees for moving from one assignment to another.

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