ch 19 class notes u4 Int business

Staffing Policy

The Ethnocentric Approach. Key management positions are filled by parent-country nationals (expatriates). Companies use this policy because:

• The firm may believe the host country lacks qualified individuals to fill senior management positions.

• Firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture.

• Firm may believe that the best way to transfer core competencies is to transfer parent-country nationals who know that competency to the foreign operation.

Staffing Policy

The Ethnocentric Approach limitations

• Limits advancement opportunities for host-country nationals.

• Results in resentment, lower productivity, and increased turnover in that group.

• Can lead to cultural myopia.

Staffing Policy

The Polycentric Approach.

• Host-country nationals are recruited to manage subsidiaries, while parent-country nationals occupy key positions at corporate headquarters.

• A firm is less likely to have cultural myopia.

• May be less expensive than an ethnocentric approach.

Limitations:

• Host-country nationals have limited opportunities to gain experience outside their own country and thus cannot progress beyond senior positions in their own subsidiary.

• Can lead to a lack of integration between corporate headquarters and foreign subsidiaries.

Staffing Policy

The Geocentric Approach.

• Seeks the best people for key organizational jobs, regardless of nationality (across all countries). Third Country Nationals

• Makes best use of firm’s human resources.

• Builds a cadre of international executives who feel at home working in many cultures.

• Firms can create value from the pursuit of experience curve and location economies and the multidirectional transfer of core competencies.

• Tends to reduce cultural myopia and to enhance local responsiveness.

• Can be expensive to implement.

Staffing Policy

Inpatriates.

• A subset of expatriates who are citizens of a foreign country working in the home country of their multinational employer.

Staffing Policy

Expatriate Failure Rates.

• Results in premature return from a foreign posting and high resignation rates.

•  High costs.

• Reasons for U.S. manager’s failure (Tung): 

1.  Inability of spouse to adjust (language differences = hard to make friends

2. Manager’s inability to adjust.

1. Other family problems

2. Manager’s personal or emotional maturity.

3. Inability to cope with larger overseas responsibilities.

Staffing Policy

Expatriate Selection.

• Reduce expatriate failures by improving selection procedures.

• Four dimensions that predict success (Mendenhall and Oddou):

• Self-orientation.

• Others-orientation.

• Perceptual ability.

• Cultural toughness.

Training and Management Development

Training versus Development 

Training gives expatriate managers skills for the foreign posting. 

Development is intended to develop the manager’s skills over his or her career with the firm.

• New emphasis on general management development programs.

• Now seen as strategic tool.

Training and Management Development

Training for Expatriate Managers 

Cultural Training.

• Seeks to foster an appreciation for the host country’s culture, history, politics, economy, religion, and social and business practices.

• Familiarization trip to the host country to ease culture shock. 

Language Training

•  Exclusive reliance on English diminishes an expatriate manager’s ability to interact with host-country nationals.

• Willingness to communicate in language of host country improves effectiveness.

Training and Management Development

Training for Expatriate Managers continued 

Practical Training.

• Aimed at helping expatriate manager and family ease themselves into day-to-day life in the host country.

• Support network of friends; often an expatriate community.

Training and Management Development

Repatriation of Expatriates 

Should be seen as the final link in integrated process.

• They often face challenges at the home organization, including not having a job that uses their new skills.HRM should develop good programs for reintegrating expatriates back into work life within their home-country organization.

Training and Management Development

Management Development and Strategy

• Ongoing management education.

• Rotations of managers through number of jobs within the firm to give them varied experiences.

• Increasingly used as a strategic tool.

• Helps build informal management network in firm.

Compensation

Expatriate Pay 

Balance sheet approach.

• Includes base salary, a foreign service premium, allowances of various types, tax differentials, and benefits.

• Attempts to provide expatriates with the same standard of living in their host countries as they enjoy at home plus a financial inducement.

Compensation

Expatriate Pay continued 

Base Salary.

• Same range as the base salary for a similar position in the home country.

• Normally paid in either the home-country currency or in the local currency. 

Foreign Service Premium

• Extra pay the expatriate receives for working outside their country of origin.

• Inducement to accept foreign postings.

Compensation

Expatriate Pay continued Allowances:

• Hardship.

• Housing.

• Cost of living

• Education. 

Taxation. 

• May have to pay income tax to both home- and host-country governments. 

Benefits.

• Same level of medical and pension benefits abroad as at home.

International Labor Relations

The Concerns of Organized Labor

• The company can counter its bargaining power with the power to move production to another country.

• The company will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants.

• Attempts to import employment practices and contractual agreements from its home country may reduce its power.

The chart illustrates the role of Human Resources (HR) in shaping an organization's architecture. HR is responsible for key elements including structure, processes, people, incentives and controls, and culture. These elements are interconnected, influencing each other. For example, the structure impacts processes, which in turn affect people. Incentives and controls also play a role in shaping people's behavior and the overall culture. HR's influence ensures these elements work together effectively to achieve organizational goals.

The chart compares different staffing approaches used in international business.

*   Ethnocentric: This approach uses parent-country nationals. It overcomes the lack of qualified managers in the host nation, unifies culture, and helps transfer core competencies. However, it can produce resentment in the host country and lead to cultural myopia.

*   Polycentric: This approach uses host-country nationals. It alleviates cultural myopia and is inexpensive to implement. However, it limits career mobility and isolates headquarters from foreign subsidiaries.

*   Geocentric: This approach uses the best person for the job, regardless of nationality. It uses human resources efficiently and helps build strong culture and informal management networks. However, national immigration policies may limit implementation, and it can be expensive.

The chart illustrates the balance sheet approach to expatriate pay. It breaks down the components of an expatriate's compensation, comparing the home-country salary with the costs associated with the assignment. The chart includes elements like income taxes, housing, goods and services, and reserves. It also shows additional costs paid by the company, such as assignment location costs and premiums and incentives, to ensure the person maintains the same purchasing power as in their home country.