Global Business and International Human Resource Management


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Global Business and International Human Resource Management (IHRM)

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Global Business and International Human Resource Management

  1. 1. Global Business & IHRM
  2. 2. First Things First : Definitions Globalization Though it is difficult to provide a thoroughly foolproof definition, the concept can be roughly defined as : ● “the cross-border integration of business” , ● or as Gary Dessler puts it* “the tendency of firms to extend their sales, ownership, and/or manufacturing to new markets abroad”. ● For an in-depth approach, globalization might as well be depicted as  : “  an integration of economy, finance, trade, and communications from a worldwide perspective, in order to establish a successful economy on a global basis.” Thus globalisation is often seen through the sole economic lens, as having given rise to some kind of “global marketplace” or “single world market”. Indeed, its yet preponderant economic dimension results from the economic interdependence of countries , through the free circulation of goods, services, the transfer of technology and flow of capital, across and beyond international borders. But more than this, the “big picture” is the genesis of a “global village” , the nest of nexus, enabled by pervasive social and cultural interactions 2 and IT speedways. *Human Ressource Management- 13th Edition- Gary Dessler.
  3. 3. First Things First : Definitions HRM & IHRM HRM : Gary Dessler* defines Human Resource Management as : ● The policies and practices involved in carrying out “the people” or human resource aspects of a management position, including recruiting, screening, training, rewarding, and appraising. ● Besides, Human Capital is “the knowledge, education, training, skills, and expertise of a firm's workers”. As G. Dessler* has it “with the globalization of the world economy, even small firms are discovering that success depends on marketing and managing abroad”. International Human resource Management (IHRM) is a set of human resource processes and state-of-the-art knowledge enabling a firm to spread and manage overseas activities. ● Managing human resources internationally (expatriates, local workers, and third country workers) creates challenges, first coming from the sometimes vast distance involved. ● But the bigger issue is coping with the cultural, political, legal, and econonmic differences among countries*, while preserving consistency with overall corporate policies. *Human Ressource Management- 13th Edition- Gary Dessler. 3
  4. 4. Global Mobility : a Changing landscape In the midst of the world crisis, global mobility has evolved : ● ● From a “check-the-box” costly exercise (simply “keeping up with the corporate Joneses” and nonetheless competitors on foreign markets can turn out to be very costly), to a key enabler of business and development strategy. To help avoid mismatches between investment and the prospective return (ROI), companies have created a wide range of global mobility policies. Corporate strategic issues range from : ● coordinating operations on markets and business units, ● to balancing the antagonist internationalization strategies of convergence-divergence (home-office control vs local autonomy), ● and implementing suitable and most convenient HRM practices on a worlwide basis. 4
  5. 5. IHRM Challenges Managing “human resources in different cultures, economies, and legal systems presents some challenges. However, when well done, HR management pays dividends”.* As a matter of fact, firms cannot afford to mismanage such issues as: ● Legal ● Political ● Economic ● Cultural ● Ethical ● or labor-related differences among “target countries”. *Factors Affecting Global HR Management- 5
  6. 6. IHRM : a matter of contingency To put it simply, “Like country, like contingency ” ● ● ● Economic systems vary from market (US), to planned (North Corea), and mixed economies (China), while “managing globally also requires monitoring political risks” (e.g. nationalization in Venezuela)*, and labor-law systems must be paid great attention (minimum wages, working hours, termination of employment, German Codetermination). Whatever works in one country can prove counterproductive, or even illegal elsewhere. When misaddressed, cultural differences result in destroying shareholder value, and ethics concerns can reveal thorny problem, and should materialize into healthy global policies on topics like “bribery, Sarbane-Oxley, harassment and discrimination”*. *Human Ressource Management- 13th Edition- Gary Dessler. 6
  7. 7. IHRM : the Coping Issue There is no escaping the conclusion that : ● ● for a global firm, pursuing multiple goals , survival means becoming as diverse as the environment (i.e. “internal requisite variety”), and as an adaptive system, a firm constantly creates solutions in accordance with its turbulent environment, to ensure survival. Of course, some differences arise between HRM and IHRM, whose international dimension implies to cope with: 1) the deployment of knowledge, i.e. getting the right skills and savvy wherever needed, 2) the dissemination of innovation and best practices regardless of their origin, 3) talent management on a global basis, detection and retention. 7
  8. 8. The IHRM Process 1 Planning 2 Staffing 3 Selecting 4 Training 5 6 7 8 9 Compensation Repatriation Impatriation Employee Multicultural Relations Environment The IHRM process enables to manage effectively a global workforce. 8
  9. 9. IHRM Process Step #1 : Planning Planning (step 1) depends on : ● ● ● the needs of the business unit, and the mission of the assignees (mid-term role, commuting etc), but some other considerations must also be dealt with, such as labor country contingency (e.g. Danwei or Chinese “job for life” mentality). 9
  10. 10. IHRM Process Step #2 : Staffing Staffing (step 2) policies depend on top management's values and orientation. ● While “offshoring means having local employees abroad do jobs that the firm's domestic employees previously did in-house”, firms deciding to hire locals or expatriates abroad gives rise to 3 other staffing patterns : ● Ethnocentric practices are corporation-oriented, as “the firm fills key management jobs with parent-country nationals” (for unified corporate culture, tighter control,and faster transfer of core competencies).” ● Polycentric - oriented firms staff their foreign subsidiairies with host-country nationals, and home-office with parent-country nationals” (for workforce cost control and reduction of cultural misunderstandings). ● Geocentric firms are competence-oriented and hire the fitting employees whatever their origins. International workforce thus can be dispatched into 4 categories : Parent-Country Nationals (PCNs), Host-Country Nationals (HCNs), Third-Country Nationals (TCNs), and offshoring locals. 10
  11. 11. IHRM Process Step #3 : Selection Selection (step 3) involves testing would-be assignees “for traits that predict success in working abroad”(G.Dessler). Feedback has helped identify 5 success factors in a foreign assignment : ”job knowledge and motivation, relational skills, flexibility-adaptability, extra-cultural openness, and family situation”*. ● Applicants can then be selected upon a set of criteria depending on technical ability, job requirements, and professional maturity for one thing (using tools like previous performance appraisals, job description, people reviews etc), ● but also soft skills : crosscultural suitability, emotional intelligence, language abilities, interpersonal , teamwork and leadership skills, without mentioning family situation. ● Selecting can then start with realistic previews, aimed at facilitating “self-selection to enable expatriate candidates to decide for themselves if the assignments” are suitable for them. ● As for adaptability screening , it aims at “assessing the assignee’s (and spouse’s) probable success in handling the foreign transfer and to alert them to [tricky] issues”, the best-known tool being Prudential Relocation's Overseas Assignment Inventory (OAI)**. ● *Human Ressource Management- 13th Edition- Gary Dessler. **Overseas Assignment Inventory available at : 11
  12. 12. IHRM Process Step #4 : Training Training concerns expats and families ( to prevent spouse rejection risk, or family culture shock), as well as HCNs (Host Country Nationals unaccustomed to the corporate culture of their foreign employer). ● ● Expatriate training may comprise pre-departure and incountry crosscultural and language training to help expats and families reduce stress and pressure by cultivating a global mindset (intellectual, psychological, and social resources) and provide them with suitable coping strategies. Some firms even develop “global buddy” programs. When entering an MNC (multinational company), HCNs also need some training more particularly focused on PCN cultural background, history, norms, vision and missions, technological and savvy transfer, together with subsidiary accountability fields and specific goals and challenges. 12
  13. 13. IHRM Process Step #5 : Compensation The Compensation (step 6) “ordeal” consists in : ● ● ● ● balancing attractiveness (attracting talents) and effectiveness (manageable costs), cost-of-living differences and the risk of percieved inequities (lowering discrepancies between locals and expats). The IHRM compensation requirements or objectives : ● ● ● ● ● system meets 5 corporate attracting talents, building a consistent corporate-wide pay system, being cost-effective, avoiding discrepancies in pay between PCNs-HCNs-TCNs, matching compensation with “the stage of life cycle”. Then comes the 5-step process of creating a global pay system : ● ● ● ● ● set the framework by formulating strategic goals and identify the actionable behaviors required by executives in the pursuit of these goals, identify gaps in the existing compensation and reward system, systematize pay systems worlwide, adapt global policies to local conditions, and conduct pay practice assessments to fine-tune 13 the firm's policy.
  14. 14. IHRM Process Step #6 : Compensation Cont'd ● ● ● To handle the problem of overall consistency and equity, firms “pay a similar base salary company-wide, and then add on various allowances according to individual market conditions” so that all in all, expat compensation comprises 5 components including : salary, benefits, allowances, incentives, and tax equalization or protection. Firms usually pay performance incentives using overall corporate performance criteria , and various “incentives” to encourage employees to take foreign assignments ( foreign service premiums, hardship allowances, mobility premiums). 14
  15. 15. IHRM Process Step #6 : Compensation Cont'd Compensation varies approaches, namely : ● ● ● ● ● according to 5 different the balance sheet, the going-rate approaches, the lump sum method, the cafeteria and the regional systems. The balance-sheet approach, the most common , is : ● ● ● a technique which consists in formulating expatriate pay by equalizing purchasing power across countries, the basic idea being : expatriates should enjoy the same standard of living they would enjoy at home. The firm estimates the 4 groups of expenses it comprises (i.e. income taxes, housing, goods and services, discretionary expenses) in the expat's home and host countries and then pays any differences (e.g. additional income taxes , or housing expenses). 15
  16. 16. IHRM Step #6+7 : Re - & Impatriation Repatriation (step 6) is reportedly the “forgotten phase of the expatriation cycle”, and it is not always appropriately dealt with. ● The responsibility of a successful repatriation experience resides in the co-action of HRM, the expat's manager, and the expats themselves (self-management). ● A reversed culture shock is sometimes experienced, the cocooning practices aimed at expats are over, the skills developed abroad may not serve back to the home-office, and the expat has been “out of the loop” for some time. ● For all these reasons it is important for the expat to keep in touch with home office, stay in the loop, maintain a certain level of communication while abroad, ● and the firm may also set up specific missions to enable expat feedback and expat skill transfer, to make sure the investment made will not be lost in relocation. Some companies also forge mentor programs. There is no dealing with repatriation without mentioning impatriation practices (step 7) resulting from the firms' will to acquire foreign talents, technical experts, specific knowledge or savvy (remember the famous “brain drain”). 16
  17. 17. IHRM Process Step #8 : Labor relations Firms with subsidiaries abroad face substantial differences in labor relations practices among countries and regions. Where unions are still influential (e.g. Europe) labor relations management and collective bargaining must be effective, and firms have to deal with four issues : ● ● ● ● Centralization : industry-wide collective bargaining vs enterprise or plant level bargaining Employer organization : employers are also unionorganized and active in collective bargaining Union recognition : representativity of small unions Content and scope of bargaining : despite industrywide agreements, individual employers are free to institute more generous terms. 17
  18. 18. IHRM Process Step #9 : Multicultural Environment Last but not least (step 9) in a multicultural environment : ● ● “managers need to understand cultural differences and adjust their styles, communications, and rewards to fit within each culture”. Talent and crosscultural management skills, together with the creation of a corporate “culture mix” is certainly the key to convenient HR policies and best practices. 18
  19. 19. Global Leadership Capabilities There is no escaping globalization, and to attain global leadership, executives need to acquire foundational global leadership capabilities : Global Leadership Training Communication Culture Leadership * Global Meetings * Global Presentations * Global negociations * Global virtual communications * Doing business globally * Cultural orientations @ work * Leading global teams * International assignment * Leading global teams * Communicating & collaborating effectively across culture * Valuing diversity & practicing inclusion After Berlitz Global leadership Training illustration from Berlitz Global leadership Training 19
  20. 20. Global Leadership Mindset Universal Leadership Competencies (Campbell) Context-specific Competencies ● ● ● Role competencies Culture specific competencies Language ● Context Specific Competencies Personal & Family ● ● ● ● ● ● ● ● Learning Mindset Tolerance of ambiguity Expectations Cultural curiosity Coping Skills Networking Marriage & family culture Energy & Health Universal Leadership Competencies ● ● ● ● Global Mindset Personal & Family ● ● ● ● ● Developmental Experiences ● ● ● ● ● ● Vision Management Empowerment Diplomacy Feedback Entrepreneurialism Personal Style Personal energy Multicultural Awareness Developmental Experiences Multicultural Learning Distance influence Influence without authority Dealing with Complexity Multicultural relationship building Matrix Influence 20 Source : Advances In Global Leadership Issues @
  21. 21. Bibliography Human Ressource Management Gary Dessler