GHRM Final Exam

secondment (how MNE staff their foreign operations)

the assignee remains employed by the HQ and is “loaned” to work for the firm’s foreign subsidiaries (traditional expatriates)

transfer of employment (how MNE staff their foreign operations)

the employee is terminated in the home country and is then rehired by a different employer in the host country

dual employment (how MNE staff their foreign operations)

the employee maintains more than one employment relationship, thus working for two or more employers with what is referred to as “split” payroll

global employment company (GEC) or professional employer organization (PEO) (how MNE staff their foreign operations)

enables employers to hire a foreign workforce through an existing foreign company; an MNE can “get up and running” quickly, without having to create their own subsidiaries with all the necessary organizational infrastructure

internal recruiting sources

reduce labor costs, is valued by members, and enhances reputation; but they limit the size and quality of the pool, and encourage infighting and inbreeding

MNEs need to find candidates with high [ ]

receptivity to international careers

an important challenge for MNEs is to develop an [ ]

employer reputation—the evaluation by potential candidates of an organization as a desirable place of work and to seek international experience

another challenge is to manage [ ] that occur when employers cannot find workers with the needed competencies

talent shortages; occur in countries during times of economic boom, as well as in times of economic uncertainty

for area expertise, hire [ ] nationals

local

for product expertise, hire [ ] nationals

HQ

when are third country nationals (TCNs) used?

in areas where there is a shortage of people with the skills the firm needs or relatively free movement of people from one country to another

training

activities designed to develop or improve employee job skills

development

the development of managers and executives (or the preparation of employees to become managers and/or executives)

which teams will be more effective? culturally homogenous teams or heterogenous teams?

well managed heterogenous teams perform better (highlighting the importance of diversity training)

which leadership styles are used to develop followers into leaders and are strongly endorsed across cultures?

charismatic/transformational leadership styles

how do you identify high-potential leaders?

• elite cohort

• elite political

• functional approach

• managed development

what is the core set of global attributes?

• inquisitiveness (curiosity)

• perspective (how leaders look at the world)

• character (emotional connection and unwavering integrity)

• savvy (exceptional business and organizational savvy)

global mindset

knowing how to live and work across cultures (way of being, rather than a set of skills—ability to scan the world from a broad perspective, always looking for unexpected trends that may constitute a threat or an opportunity to achieve objectives)

adult third culture kids (ATCKs)

had early international experiences or experiences from growing up in and living outside the country of one’s citizenship as a child; possess distinct characteristics that are different than that of their peers without early international experiences

international remuneration

deals with the complex C&B structure of the MNE in various locations and subsidiaries; more complex than domestic compensation because salary levels and benefit provision differ significantly among the various countries

international assignment compensation

deals with the C&B of globally mobile employees—or those who cross borders as part of their employment with the MNE, as short-term assignees or long-term expatriates

what are the two components of global remuneration?

1. developing an overall strategy of how an MNE pays its employees (a common set of principles on which the organization bases its reward strategy)

2. taking consideration of the external constraints placed by the various countries in which the MNE operates (i.e., cultural and company practices, laws, and tax systems)

global reward strategy

• tend to opt for global standardization, while the specific C&B practices are localized

• lead, lag, or be at market equivalence

international remuneration issues and challenges

• comparability: peer equivalencies for jobs in the various countries and subsidiaries (e.g., “manager” has different meanings or connotations; eligible benefits)

• cultural values for rewards: acceptability of compensation (e.g., performance-driven or entitlement-oriented; variable versus fixed pay)

• salary-benefit ratios: the balance of salary versus benefits differs by country as a result of cultural practices, labor relations, and local laws and regulations

• sunshine rules and how countries express salaries (confidential or disclosed? quoted in net or gross amounts? weekly, monthly, or annual terms? 13th or 14th month payments?)

use of an HQ scale (international compensation)

worldwide salary levels are established at HQ with differentials for each subsidiary according to their differing costs of living; used for managerial and executive-level positions

local geography (international compensation)

employees are paid on a local scale; used for the broader employee base, excluding executive and globally mobile employees

global base, with affiliate differentials (international compensation)

achieves equal pay for equal work; used when there is a global labor market for the type of talent sought (e.g., software engineers, nurses, designers)

generally, [ ] employees are paid on an HQ scale, whereas [ ] employees are paid on a local scale

higher, lower; potential problems with in-country pay gap (between the highest and lowest paid employees) and gap in executive compensation of senior managers (between countries)

equity compensation

grant stock options and restricted stock to overseas employees; gives young companies an effective way to attract talent, at little cost, and the opportunity to share prospective wealth created by the growth of the company with critical employees

employee stock ownership plans (ESOP)

gives employees shares of company stock (in a bonus or profit-sharing plan) for performance; the benefit is usually redeemable by employees when they leave the company

employee stock purchase plans (ESPP)

gives employees an opportunity to purchase company stock, usually through payroll deduction and at discounted price

stock options

gives employees an option or the right to buy stock in the future at today’s price

stock appreciation rights (SAR)

gives the employees the right to receive the monetary gain from the increase in the stock’s value

what are two significant components of the problem of comparability?

1. maintaining comparability in salaries and benefits to similar employees in other firms and to peers within the firm for employees transferring from one country to another

2. maintaining competitive and equitable salaries and benefits among various operations of the organization

negotiation/ad hoc (approach to IA compensation)

• used at the early stage of “going international”

• generally not much of a search; firm does whatever it takes to get the person relocated and pays whatever costs arise (the person and the assignment are important)

balance sheet (approach to IA compensation)

• emerges out of the need to develop a more standardized approach

• minimizes total C&B losses or gains as a result of the IA—requires adjustments

ways to determine the base of the balance sheet approach (upon which to add adjustments and incentives)

• home-country salary (primary base for the home-country-based balance sheet)

• HQ salary (international standard based on HQ levels of compensation)

• regional salary

• host-country salary (uses destination salaries in the host location)

• the better of home or host approach (net-to-net)

localization (approach to IA compensation)

• used to address problems of high cost and perceived inequity among staff in foreign subsidiaries

• paid comparably to local nationals and no equalizers are provided

• usually in their early careers and eager for learning-driven IAs; seek employment abroad for a relatively long-term

lump sum (approach to IA compensation)

• emerged out of the concern that balance sheet intrudes too heavily into IAs’ lifestyle decisions

• a single payment, made at the start of the relocation process, to the transferring IA to cover all the expenses

• let the IA determine how to spend it

cafeteria (approach to IA compensation)

• used for very high salaried executives; provides a set of choices of benefits

• helps reduce taxes (e.g., company car, insurance, housing, etc.)

regional systems (approach to IA compensation)

generally used to maintain equity within a region

global systems (approach to IA compensation)

there is a global labor market for specialized occupations and for executives

tax strategies (for expatriate income)

• laissez-faire

• tax equalization (the firm withholds a hypothetical tax from the IA’s income and then pays all actual taxes in the home and host countries)

  • the taxes that the IA must pay are equalized between home and host countries

• tax protection (the IA pays both the home and host taxes, but the hypothetical tax is compared to the actual taxes)

  • the employer protects the IA against higher taxes

• ad hoc (e.g., tax reimbursement, international premium, cost-of-living adjustments, etc.)

traditional western perspective on performance management

setting performance expectations, regular monitoring, providing feedback, periodic performance appraisal, employee input, developmental and career guidance, reward, etc.

how has performance management shifted from the traditional perspective?

greater accountability of employee performance, use of more objective measures, multiple raters, ongoing coaching and development

international employee performance management system

a designed, implemented, and evaluated intervention of an MNE for the purpose of managing the performance of its global workforce so that performance at all levels contributes to the attainment of strategic global objectives and results in overall MNE desired performance

six sigma training

as part of GE’s performance appraisal, GE penalizes the lowest 20% of its performers; demonstrates the concept of convergence

crossvergence

applying a relatively similar appraisal concept but adapting the process to align with cultural characteristics; more likely to produce favorable results

performance criteria and cultural fit

• low power distance: narrowly defined, task-related competencies and a result orientation

• high power distance: broadly defined, interpersonal competencies and a process orientation

methods of performance appraisal and cultural fit

• low power distance: multiple assessors, formal, systematic, and objective assessment

• high power distance: single assessor, top-down, informal, and subjective assessment

performance feedback and cultural fit

• specific, low context cultures: explicit, direct confrontational feedback

• diffuse, high context cultures: subtle, indirect, and non-confrontational feedback

exportative strategy

develop the PM system in the home country and transfer it to foreign units (mcdonalds)

adaptive strategy

develop unique PM and practices in each foreign unit (nestle)

integrative

combine local PM practices with those within the region and around the world (unilever)

IPM is about addressing [ ] company strategy at the [ ] local individual level

upstream (company-wide strategy-type decision-making at the HQ, favoring convergence); downstream (flow of these decisions to the local level, favoring divergence and localization)

contrast effect

evaluate people or objects by comparing them with characteristics of exceptional performance of a few top performers

how to improve the effectiveness of the IPM system

• relevance to job content and situational requirements (content validity)

• acceptability of evaluation criteria and process to evaluators and rates (face validity)

• sensitivity to cultural and international business realities (dimensional and contextual realities)

• practicality in ease of use of the evaluation system

home country managers

• may lack knowledge of local circumstances or of local culture and their impacts on the IA’s performance

• achieving equivalent results to a comparable unit or manager in the home country is required

host country managers

• most familiar with the IA’s performance within the local situation and environmental factors

• may be affected by their own cultural backgrounds and biases

360 review

use of multiple reviewers

which activities are referred to as support services in HR?

• HR information system (including maintaining records on employees and employee programs)

• HR planning (including employee forecasts, career plans for managers, and succession planning for executives)

• job analysis and the writing of job descriptions

• job evaluations and wage surveys