International business 7e chapter 18


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  • There are four major tasks of HRM: Staffing policy Management training and development Performance appraisal Compensation policy
  • As shown in in this figure, people are the linchpin of a firm’s organization architecture. For a firm to outperform its rivals in the global marketplace, it must have the right people in the right postings. Those people must be trained appropriately so that they have the skill sets required to perform their jobs effectively, and so that they behave in a manner that is congruent with the desired culture of the firm. Their compensation packages must create incentives for them to take actions that are consistent with the strategy of the firm, and the performance appraisal system the firm uses must measure the behavior that the firm wants to encourage. As indicated in Figure 18.1, the human resource function, through its staffing, training, compensation, and performance appraisal activities, has a critical impact upon the people, culture, incentive, and control system elements of the firm’s organization architecture (performance appraisal systems are part of the control systems in an enterprise). Thus, human resource professionals have a critically important strategic role.
  • The answer is a.
  • The answer is a.
  • The answer is b.
  • Management Focus: Managing Expatriates at Royal Dutch/Shell Summary This feature examines how Royal Dutch/Shell, a global petroleum company employing over 100,000 people manages its expatriates. The international mobility of its workforce is an important part of Shell’s overall philosophy. However, in the early 1990s, the company found that it was having an increasingly difficult time recruiting personnel for foreign postings. Suggested Discussion Questions 1. Shell’s commitment to the success of its foreign assignments is demonstrated by its efforts to uncover expatriate concerns. Discuss the results of Shell’s survey to its present and past expatriates and families. How do these results compare to the results of other studies exploring expatriate failure? Discussion Points: Shell discovered that there were five key issues that were important to its expatriates. First, the division of families that occurred when children were sent to boarding schools while their parents were on foreign assignments, second, the harm done to a spouse’s career during the foreign assignment, third, the lack of consideration for a spouse during the expatriate assignment process, fourth, the failure to provide adequate relocation assistance, and fifth, health issues. Students should recognize the similarities between the results of this study and the results of other studies that have found difficulties with the spouse and family’s ability to adapt to be a central reason for expatriate failure. 2. Shell has implemented several changes to its expatriate program including providing education assistance to families with children, and establishing a Spouse Employment Center to help locate employment opportunities. In your opinion, will these programs “solve” Shell’s problems, or is there still more to be done? Discussion Points: Most students will suggest that Shell’s programs are a good start to ensuring the success of its expatriate program. They may also note that Shell may well be ahead of the game in even thinking about the situation. Expatriate failure can be very costly for companies, and so taking steps to ensure that expatriates are successful is an important component in a firm’s international strategy, especially for a company like Shell that relies heavily on expatriates. Another Perspective: To learn more about Shell, go to the company’s web site at { }.
  • The answer is c.
  • The answer is d.
  • Repatriation should be seen as the final link in an integrated, circular process that selects, trains, sends, and brings home expatriate managers.
  • Management Focus: Monsanto's Repatriation Program Summary This feature describes Monsanto’s repatriation program for its expatriate managers. The program is very sophisticated, and is designed to provide a supportive environment for the company’s managers who are returning from overseas assignments. The feature describes the details of the repatriation program, which is a model program for the repatriation of expatriate managers. Suggested Discussion Questions 1. How does Monsanto’s repatriation program provide an incentive for high-potential managers to accept overseas assignments? Discussion Points: One question that managers often have when accepting a foreign assignment is how the assignment will help their career. At Monsanto, foreign assignments are clearly linked to business objectives allowing managers to understand what the assignment means to their future. In addition, managers are explicitly told about their position in the firm once the assignment is over, eliminating questions over how the manager might fit in when the foreign assignment ends. Students will note that these steps will help alleviate some of the stress that may come with accepting a foreign assignment. 2. According to the feature, after they return home, Monsanto’s expatriate managers are given the opportunity to showcase their experience to their peers, subordinates, and superiors, in special information exchange. Why is this important? What function does this serve in the repatriation process? Discussion Points: Students will probably recognize that Monsanto’s program allows expatriates to “show their stuff” to the home country staff. This can help avoid the problem of “out of sight, out of mind” that can make it difficult for expatriates to fit back into the headquarters. The program also allows home country staff to identify new ways the expatriate might be able to fit into the home country structure. Students will probably also note the program offers home country staff the opportunity to learn from the expatriate’s experiences. 3. How does Monsanto’s repatriation program help an expatriate manager adjust his personal life to returning home? Is this an important component of a firm’s repatriation program? Discussion Points: Studies show that expatriates go through reverse culture shock when they return home. By ensuring that expatriates have a clearly defined role at their job, the adjustment to being home can be easier. Monsanto believes that because personal matters can affect job performance, making an investment in this area benefits the firm. Another Perspective: Explore the company’s web site at { }.
  • Two issues are raised in every discussion of compensation practices in an international business. One is how compensation should be adjusted to reflect national differences in economic circumstances and compensation practices. The other issue is how expatriate managers should be paid. From a strategic perspective, the important point is that whatever compensation system is used, it should reward managers for taking actions that are consistent with the strategy of the enterprise.
  • Management Focus: Global Compensation Practices at McDonald’s Summary This feature explores McDonald’s efforts to create a compensation and performance appraisal system that takes into account differences between markers, yet is still considered equitable by employees. Suggested Discussion Questions 1. What makes McDonald’s new compensation and performance appraisal systems popular with employees? How important was it to include managers in the development of the new systems? Do you see any problems with the new systems? Discussion Points: McDonald’s new compensation and performance appraisal systems were developed in conjunction with managers from around the world. Many students will probably agree that this approach gives managers ownership in the new system, and therefore, there will be a greater effort put forth to ensure its success. Because it is a loosely based system designed to allow local managers the chance to customize it to local market conditions, students will probably suggest that it is more likely to succeed than a a more standardized approach. 2. Would a system like the one implemented at McDonald’s work in other companies? Discussion Points: There are several advantages to the new system at McDonald’s that could probably be replicated in other firms. The new system was developed using input from both headquarters and local managers, it allows headquarters to choose key areas to focus on, yet allows local managers to fine-tune the selection, and it links performance of the region to employee compensation. Most students will probably suggest that a similar type of program could be successful at many types of companies. Another Perspective: To learn more about McDonald’s foreign operations, go to the company’s web site { } and click on the foreign locations.
  • Note that home-country outlays for the employee are designated as income taxes, housing expenses, expenditures for goods and services (food, clothing, entertainment, etc.), and reserves (savings, pension contributions, etc.). The balance sheet approach attempts to provide expatriates with the same standard of living in their host countries as they enjoy at home plus a financial inducement (i.e., premium, incentive) for accepting an overseas assignment
  • The answer is a.
  • International business 7e chapter 18

    1. 1. InternationalBusiness 7eby Charles W.L. HillMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
    2. 2. Chapter 18Global Human ResourceManagement
    3. 3. 18-3IntroductionHuman resource management (HRM) refers to theactivities an organization carries out to utilize its humanresources effectivelyThese activities include:determining the firms human resource strategystaffingperformance evaluationmanagement developmentcompensationlabor relations
    4. 4. 18-4IntroductionHRM can help the firm reduce the costs of value creationand add value by better serving customer needsHRM is more complex in an international businessbecause of differences between countries in labor markets,culture, legal systems, economic systems, and so onHRM must also determine when to use expatriatemanagers (citizens of one country working abroad), whoshould be sent on foreign assignments, how they should becompensated, how they should be trained, and how theyshould be reoriented when they return home
    5. 5. 18-5The Strategic Role Of International HRMFirms need to ensure there is a fit between their humanresources practices and strategyIn order to carry out a strategy effectively, employeesneed the right training, an appropriate compensationpackage, and a good performance appraisal system
    6. 6. 18-6The Strategic Role Of International HRMFigure 18.1: The Role of Human Resources in ShapingOrganizational Architecture
    7. 7. 18-7Staffing PolicyA firm’s staffing policy is concerned with the selection ofemployees who have the skills required to perform aparticular jobA staffing policy can be a tool for developing anpromoting the firm’s corporate culture (the organization’snorms and value system)A strong corporate culture can help the firm implement itsstrategy
    8. 8. 18-8Types Of Staffing PolicyThere are three main approaches to staffing policy withininternational businesses:1. the ethnocentric approach2. the polycentric approach3. the geocentric approach
    9. 9. 18-9Classroom Performance SystemThe three types of staffing approaches for internationalfirms include all of the following excepta) Transnationalb) Ethnocentricc) Geocentricd) Polycentric
    10. 10. 18-10Types Of Staffing Policy1. The ethnocentric approach to staffing policy fills keymanagement positions with parent-country nationalsIt makes sense for firms with an international strategyFirms that pursue an ethnocentric policy believe that:there is a lack of qualified individuals in the host countryto fill senior management positionsit is the best way to maintain a unified corporate culturevalue can be created by transferring core competenciesto a foreign operation via parent country nationals
    11. 11. 18-11Types Of Staffing PolicyThe ethnocentric staffing policy is no longer popular withmost firms because:it limits advancement opportunities for host countrynationalsit can lead to "cultural myopia"
    12. 12. 18-12Types Of Staffing Policy2. The polycentric staffing policy recruits host countrynationals to manage subsidiaries in their own country, andparent country nationals for positions at headquartersIt makes sense for firms pursuing a localization strategyThe polycentric approach:can minimize cultural myopiamay be less expensive to implement than an ethnocentricpolicy
    13. 13. 18-13Types Of Staffing PolicyThere are two disadvantages to the polycentric approach:host country nationals have limited opportunities to gainexperience outside their own country and thus cannotprogress beyond senior positions in their own subsidiaries.a gap can form between host country managers andparent country managers
    14. 14. 18-14Types Of Staffing Policy3. The geocentric staffing policy seeks the best people,regardless of nationality for key jobsThis approach is consistent with building a strongunifying culture and informal management networkIt makes sense for firms pursuing either a global ortransnational strategyImmigration policies of national governments may limitthe ability of a firm to pursue this policy
    15. 15. 18-15Types Of Staffing PolicyThe geocentric approach:enables the firm to make the best use of its humanresourcesbuilds a cadre of international executives who feel athome working in a number of different culturescan be limited by immigration lawsis costly to implement
    16. 16. 18-16Types Of Staffing PolicyTable 18.1: Comparison of Staffing Approaches
    17. 17. 18-17Classroom Performance SystemFirms using _______ fill all key management positions withparent-country nationals.a) An ethnocentric staffing policyb) A geocentric staffing policyc) A polycentric staffing policyd) A transcentric staffing policy
    18. 18. 18-18Classroom Performance SystemWhen a firm wants to pursue a transnational strategy, a_________ approach to staffing makes sense.a) Ethnocentricb) Geocentricc) Polycentricd) Transcentric
    19. 19. 18-19Expatriate ManagersExpatriate failure is the premature return of an expatriatemanager to his or her home countryBetween 16 and 40 percent of all American expatriates indeveloped countries fail to complete their assignments, andalmost 70 percent of Americans assigned to developingcountries return home earlyEach expatriate failure can cost between $250,000 and$1 million
    20. 20. 18-20Expatriate ManagersTable 18.2: Expatriate Failure Rates
    21. 21. 18-21Expatriate ManagersResearch shows the main reasons for expatriate failure forU.S. multinationals are:the inability of an expatriates spouse to adapt theinability of the employee to adjustthe manager’s inability to adjustother family-related reasonsthe manager’s personal or emotional maturitythe manager’s inability to cope with larger overseasresponsibilities
    22. 22. 18-22Expatriate ManagersFor European firms, only one reason was found toconsistently explain expatriate failure:the inability of the manager’s spouse to adjust to a newenvironmentFor Japanese firms, the reasons for failure are:the inability to cope with larger overseas responsibilitydifficulties with the new environmentpersonal or emotional problemsa lack of technical competencethe inability of spouse to adjust
    23. 23. 18-23Classroom Performance SystemThe most common reason for expatriate failure isa) The manager’s inability to adjustb) The manager’s emotional or personal maturityc) The inability of the spouse to adjustd) The manager’s lack of technical competence
    24. 24. 18-24Expatriate ManagersFirms can reduce expatriate failure through improvedselection proceduresFour dimensions that predict expatriate success are:1. self-orientation - the expatriates self-esteem, self-confidence, and mental well-being2. others-orientation - the ability to interact effectively withhost-country nationals3. perceptual ability - the ability to understand why peopleof other countries behave the way they do4. cultural toughness – the ability to adjust to the posting
    25. 25. 18-25Classroom Performance SystemWhich of the following does not help predict success in aforeign positing?a) Others-orientationb) Cultural toughnessc) Perceptual abilityd) Technical expertise
    26. 26. 18-26The Global MindsetA global mindset may be the fundamental attribute of aglobal managerA global mindset is often acquired early in life from afamily that is bicultural, lives in foreign countries, or learnsforeign languages as a regular part of family life
    27. 27. 18-27Training And Management DevelopmentTraining focuses upon preparing the manager for aspecific jobManagement development is concerned with developingthe skills of the manager over his or her career with the firmHistorically, most firms focus more on training than onmanagement development
    28. 28. 18-28Training For Expatriate ManagersCultural training (seeks to foster an appreciation for thehost countrys culture), language training (an exclusivereliance on English diminishes an expatriate managersability to interact with host country nationals), and practicaltraining (helps the expatriate manager and her family easethemselves into day-to-day life in the host country) have allhelp reduce expatriate failureYet, according to one study only about 30 percent ofmanagers sent on one- to five-year expatriate assignmentsreceived training before their departure
    29. 29. 18-29Repatriation Of ExpatriatesPreparing and developing expatriate managers forreentry into their home country organization is an importantpart of training and developmentHRM needs to develop good programs for re-integratingexpatriates back into work life within their home countryorganization once their foreign assignment is over, and forutilizing the knowledge they acquired while abroad
    30. 30. 18-30Management Development And StrategyManagement development programs increase the overallskill levels of managers by:ongoing management educationrotations of managers through jobs within the firm to givethem varied experiencesManagement development is often used as a strategictool to build a strong unifying culture and informalmanagement network, both of which are supportive of atransnational and global strategy
    31. 31. 18-31Performance AppraisalPerformance appraisal systems are part of the firm’scontrol systemEvaluating expatriates can be especially complex
    32. 32. 18-32Performance Appraisal ProblemsTypically, both host nation managers and home officemanagers evaluate the performance of expatriatemanagersBoth types of managers are subject to unintentional biasHome country managers tend to rely on hard data whenevaluating expatriates, while host country managers can bebiased towards their own frame of reference
    33. 33. 18-33Guidelines For Performance AppraisalTo reduce bias in performance appraisal:most expatriates believe more weight should be given toan on-site managers appraisal than to an off-sitemanagers appraisala former expatriate who has served in the same locationcould be involved in the appraisal process to help reducebiaswhen foreign on-site mangers write performanceevaluations, home office managers should be consultedbefore an on-site manager completes a formal terminationevaluation
    34. 34. 18-34CompensationFirms face two key issues on compensation:1. how to adjust compensation to reflect differences ineconomic circumstances and compensation practices2. how to pay expatriate managers
    35. 35. 18-35National Differences In CompensationThere are substantial differences in executivecompensation across countriesIn the U.S., a top HR executive made an average of$525,923 in the 2005-2006 period, compared to $237,697in Japan, and just $158,146 in TaiwanFirms have to decide whether to pay executives indifferent countries according to the prevailing standards ineach country, or equalize pay on a global basisThe is an especially challenging issue in firms withgeocentric staffing policiesMany firms have recently moved toward a compensationstructure that is based on global standards
    36. 36. 18-36Expatriate PayMost firms use the balance sheet approach to payThis equalizes purchasing power across countries soemployees have the same living standard in their foreignposting as at homeAn expatriate’s compensation package is made up of:1. base salary2. a foreign service premium3. various allowances4. tax differentials5. benefits
    37. 37. 18-37Expatriate Pay1. Base SalaryAn expatriate’s base salary is normally in the same rangeas the base salary for a similar position in the home countryBase salary can be paid wither in the home currency or inthe local currency2. Foreign Service PremiumA foreign service premium is extra pay the expatriatereceives for working outside his or her country of originIt is generally offered as an incentive to accept foreignassignments
    38. 38. 18-38Expatriate Pay3. AllowancesExpatriate compensation package often include :hardship allowanceshousing allowancescost-of-living allowanceseducation allowances
    39. 39. 18-39Expatriate Pay4. TaxationThe expatriate may have to pay income tax to both thehome country and the host-country governments if the hostcountry does not have a reciprocal tax treaty with theexpatriate’s home country5. BenefitsMany firms provide the same level of medical andpension benefits abroad that they received at home
    40. 40. 18-40International Labor RelationsThe key issue in international labor relations is thedegree to which organized labor is able to limit the choicesavailable to an international businessA firms ability to pursue a transnational or global strategycan be significantly constrained by the actions of laborunionsHRM needs to foster harmony and minimize conflictbetween the firm and organized labor
    41. 41. 18-41The Concerns Of Organized LaborThe bargaining power of unions comes from their abilityto threaten to disrupt production by striking or protestingHowever, organized labor is concerned that:multinationals can counter union bargaining power bythreatening to move production to another countrymultinationals will farm out only low-skilled jobs to foreignplants making it easier to switch production locationsmultinationals will import employment practices andcontractual agreements from their home countries andreduce the influence of unions
    42. 42. 18-42The Strategy Of Organized LaborOrganized labor has responded to the increased bargainingpower of multinational corporations by:trying to set-up their own international organizationslobbying for national legislation to restrict multinationalstrying to achieve regulations of multinationals throughinternational organization such as the United NationsHowever, these efforts have had only limited success
    43. 43. 18-43Approaches To Labor RelationsIn the past, labor relations have usually beendecentralized to individual subsidiariesToday, many firms are centralizing labor relations inorder to enhance the bargaining power of the multinationalvis-à-vis organized laborMany firms are recognizing that the way in which work isorganized within a plant can be a major source ofcompetitive advantage
    44. 44. 18-44Classroom Performance SystemWhich of the following is not a response by labor to theincreased bargaining power of multinationals?a) Establishing global unionsb) Setting-up their own international organizationsc) Lobbying for national legislation to restrict multinationalsd) Trying to achieve regulations of multinationals throughinternational organization such as the United Nations