Chapter 16: Managing Human Resources Globally

HRM in a global environment

The environment in which organizations operate is rapidly becoming a global one, entering international markets

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

Employees in an international workforce

Parent country: the country in which the organization’s headquarters is located

• Parent-country nationals — from the country where the organization’s headquarters is located

Host country: a country (other than the parent country) in which an organization operates a facility

• Host-country nationals — employees who are citizens of the host country

Third country: a country that is neither the parent or host country and may be a source of labor or finances

• Third-country nations — employees neither from the parent or host country

Expatriates (expats) — employees assigned to work in another country

Employers in the global marketplace

Domestic marketplace — Most organizations begin by serving customers and clients within a domestic marketplace, even so are affected by issues related to the global economy due to immigrant workers

International organization — An organization that sets up one or a few facilities in one or a few foreign countries

Multinational organization — Go overseas on a broader scale and builds facilities in a number of different countries 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 (may have multiple headquarters)

Transnational HRM system

HRM system that makes decisions from a global perspective, includes managers from many countries, and is based on ideas contributed by people representing a variety of cultures

Factors affecting HRM in international markets

Organizations operating in more than one country must recognize that the countries differ in many factors:

• Culture

• Education

• Economic systems

• Political-legal systems

International HRM factor: Culture

Culture is a community’s set of shared assumptions about how the world works and what ideals are worth striving for

Consists of 6 dimensions:

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

2. Power distance concerns the way the culture deals with unequal distributions of power and what inequality is ‘normal’

3. Uncertainty avoidance describes how cultures handle the fact that the future is unpredictable—high avoidance prefers structured situations and low avoidance take each day at a time

4. Masculinity/femininity is the emphasis on masculine qualities (achievements, money-making, competition, assertiveness) vs feminine qualities (relationships, service, care for the weak, environmental conservation)

5. Long-term/short-term orientation whether cultural values are geared towards the long term or the past and present

6. Indulgence/restraint is the extent to which a culture controls the desire to pursue enjoyment and fun

International HRM factor: Education

Countries differ in the degree to which their labor markets include people with education and skills of value to employers

International HRM factor: Economic systems

The system may be capitalist or socialist. The government’s involvement in the country’s economy, such as through taxes and price controls, has a strong effect on HRM practices

International HRM factor: Political-legal systems

The political-legal system arises to a large degree from the culture in which it exists, so laws and regulations reflect cultural values

HR planning in a global economy

As organizations consider decisions about their level of international activity, HR professionals should provide information about the relevant human resource issues, such as local market pay rates and labor laws

Decisions about where and how many employees are needed for each international facility

Some countries limit employers’ ability to lay off workers, so organizations would be less likely to staff for peak periods

Other countries allow employers more flexibility in meeting HR needs

Selecting employees in a global labor market

Criteria that should be considered in foreign assignments

• Competency in area of expertise

• Communication ability

• Cross-cultural suitability

• Family support

Factors most associated with success in foreign assignments

1. Comfort of the employee’s spouse and family

2. Extroverted (outgoing), agreeable (cooperating and tolerant), and conscientious (dependable and achievement oriented)

Emotional stages associated with a foreign assignment

1. Honeymoon: Initial fascination and euphoria as the employee enjoys the novelty of the new culture

2. Culture shock: The disillusionment and discomfort that occurs during the process of adjusting to a new culture and its norms, values, and perspectives

3. Recovery: If employees persist and continue learning about their host country’s culture, they can recover from shock and develop a greater understanding and a social network

4. Adjustment: Finally, the employee’s language skills and comfort increase and they reach a stage where they accept and enjoy the host country’s culture

Training a global workforce

Training and development programs should be effective for all participating employees, regardless of country of origin (Follow same process as Ch 7)

When choosing training techniques, strategies, and media, organizations need to consider differences among trainees (language, education, culture, etc.)

Effects of culture on training design

Individualism: High individualism cultures expect participation in exercises and questioning to be determined by status in the company or culture

Uncertainty avoidance: High uncertainty avoidance expects formal instruction environments with less tolerance for impromptu styles

Masculinity: Low in masculinity values relationships with fellow trainees

Power distance: High in power distance expects trainers to be experts and controlling the session

Time orientation: Long-term oriented cultures will have trainees who are more likely to accept development plans and assignments

Cross-cultural preparation

Training to prepare employees and their family members for an assignment in a foreign country consisting of three phases

1. Preparation for departure — Language instruction and an orientation to the foreign country’s culture

2. Assignment — The actual assignment, which is some combination of a formal program and mentoring relationship to provide ongoing further info about the foreign country’s culture

3. Return home — Providing information about the employee’s community and home-country workplace, and providing future development to aid retention

Performance management across national boundaries

Important to consider legal and cultural differences when managing performance

• Scoring behaviors like smiling, making eye contact may not translate to other cultures

• In rapidly changing regions, performance plans may update more often

• U.S. employees are more used to direct feedback while other countries may expect positive feedback before discussing improvements

Compensating an international workforce

Pay structure issues

• Pay at the parent country or host country rate?

• Average hourly labor costs in industrialized countries are far higher than newly industrialized countries

• Labor costs may be outweighed by other factors, such as transportation costs or access to resources and customers

• Cultural and legal differences also affect pay structure
  

Pay packages for foreign assignments

• Base salary

• Benefits

• Tax equalization

• Allowances

  • Cost of living

  • Housing

  • Education

  • Relocation

  • Foreign service inducement

  • Hardship premium

Balance sheet approach

Adjusting the expatriate manager’s compensation so that it gives the manager the same standard of living as in the home country plus extra pay for the inconvenience of locating overseas

1. Begins with purchasing power of compensation for the equivalent job in the manager’s own country

2. Then it is compared with the cost of the same expenses in the foreign country

3. Finally, the expatriate receives additional purchasing power from premiums and incentives

Divides amount into the four components of a total pay package:

1. Base salary

2. Tax equalization allowance — companies have different systems for taxing incomes and it varies across countries

3. Benefits — pension and health care plan differences and acceptance across borders

4. Allowances to make a foreign assignment more attractive — cost of living allowances make up the differences in expenses for day-to-day needs; housing allowances ensure the expat can maintain the same standard of living; education allowances reimburse expatriates who need to pay tuition for their children to attend English-accommodating schools; relocation allowances cover the expenses of moving to the foreign country

Repatriation

The process of preparing expatriates to return home from a foreign assignment

• Possibility of reverse culture shock

• Activities that support repatriation:

  • Communication (throughout assignment)

  • Validation (recognizing international experience)