Chapter 30


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Chapter 30

  2. 2. ANNOTATED OUTLINE 30-2 INTRODUCTION In recent times, the trade barriers between nations have almost disappeared. Communication links have become faster and cheaper. There is convergence of consumer tastes also. The scarce resources of the nations have been moving around freely. In this scenario, companies have realised the importance of expanding their reach throughout the globe, integrating their production, finance, marketing and research activities in a careful way. In a way, this would mean sending and more and more employees overseas on temporary assignments. When sent abroad on such assignments, expatriates face unique problems International Human Resource Management
  3. 3. 30-3 The world is full of stateless corporations International Human Resource Management <ul><li>Nestlé (Switzerland): Nestlé personifies the stateless corporation with 98 per cent of sales and 96 per cent of employees outside the home country. Nestlé’s previous Global CEO was German born H. Maucher, and half of the company's general managers are non-Swiss. Maucher put strong emphasis on hiring local managers who are native to the region and know the local culture. The combination of strong brands and autonomous regional managers has made Nestlé the largest branded food company in Mexico, Chile, Brazil, Thailand, Vietnam & China. The present CEO, Austrian Peter Brabeck - Letmathe, has held important positions all over the world and is leading a totally globalised review and revamp of Nestlé's worldwide operations. </li></ul><ul><li>Cola Cola: Is a multinational corporation that obtains over 80 per cent of its operating income from outside the United States. It operates in 185 markets, has more than 6,50,000 employees, and serves more than 5 billion customers. One of the company's core values is to 'think globally, but act locally.'· </li></ul><ul><li>Other Companies: For example, Colgate-Palmolive Company sells Colgate toothpaste in more than 50 countries. McDonald's sells its burgers in 73 countries. Gilette, Johnson & Johnson earn well over 50 per cent of their profits overseas. Asea Brown Boveri (ABB) has operations throughout the world, having sought or taken minority positions in over 60 firms. </li></ul>
  4. 4. 30-4 Complexities in global operations <ul><li>International operations have: </li></ul><ul><li>More functions </li></ul><ul><li>More heterogeneous functions </li></ul><ul><li>More involvement in the employee's personal life </li></ul><ul><li>Different approaches to management, since the population of expatriates and locals varies </li></ul><ul><li>More complex external influences, such as from societies and governments </li></ul><ul><li>More cultural differences (with completely different languages, foods, values, beliefs and ways of doing things). </li></ul>International Human Resource Management
  5. 5. 30-5 In the new millennium, of course, the traditionally conceived and practiced leadership skills do not seem to produce results. The leadership skills that are required for the newly emerging global economy seem to be somewhat different. International Human Resource Management International Human Resource Management
  6. 6. 30-6 International Human Resource Management Competencies needed by a transnational managers Transnational Skills Transnationally competent managers Traditional international managers Global perspective Understand worldwide business environment from a global perspective Focus on a single foreign country and on managing relationships between headquarters and that country Local responsiveness Learn about many cultures Become an expert in one culture Synergistic learning   Work with and learn from people from many cultures simultaneously  Create a culturally synergistic organisational environment Work with and coach people in each foreign culture separately or sequentially Integrate foreigners into headquarters’ national organisational culture Transition and adaptation Adapt to living in many foreign cultures Adapt to living in a foreign culture Cro ss - cultural interaction Use cross - cultural interaction skills on a daily basis throughout one’s career Use cross cultural interaction skills primarily on foreign assignments Collaboration Interact with foreign colleagues as equals Interact within clearly defined hierarchies of structural and cultural dominance Foreign experience Transportation for career and organisation development Expatriation or impartation primarily to get the job done.    
  7. 7. 30-7 International Human Resource Management International Human Resource Management It is the process of procuring, allocating and effectively utilising human resources in a multinational corporation. Generally speaking, there are three sources of employees for an international assignment: parent country nationals, host country nationals and third country nationals. When compared to domestic HRM, the scope of IHRM is very wide as it has to take care of a number of constituencies
  8. 8. 30-8 International Human Resource Management Model of International HRM
  9. 9. 30-9 Expatriate managers, generally, face a kind of culture shock when they begin their operations in a different cultural setting. The list of barriers that confront them seem to be unending International Human Resource Management Cultural Differences And HRM
  10. 10. 30-10 Puzzles confronting the expatriate manager International Human Resource Management <ul><li>The following questions must be looked into carefully before sending managers on a foreign assignment: </li></ul><ul><li>What is the host country's business culture like? What is the management style? Do I have the skills I will need to handle relationships with my employees? </li></ul><ul><li>Will this assignment be good for my long-term career growth? Can I expect to be promoted when I return? How will I be treated if I do not succeed in my overseas job? </li></ul><ul><li>What is the country like? What are the customs? Will I be able to adjust to the culture? </li></ul><ul><li>Will my family be able to adjust to the new situation? Will my spouse be able to find suitable employment? Will my children be able to adjust to going to school in another country? How good is the educational system there? </li></ul><ul><li>How will we learn enough of the new language to communicate effectively? </li></ul><ul><li>Where will we live? How will the new housing arrangements compare to our current home? What will happen to our current home when we leave for the new assignment? </li></ul><ul><li>What are the tax and other financial issues I will have to address as an expatriate? Who will advise me on these topics? Will the Company pay me in a way that protects my income from high foreign tax rates? </li></ul><ul><li>How will our medical needs be taken care of? </li></ul><ul><li>L. Grant, &quot;That overseas job could derail your career,&quot; Fortune, 14.4.97; S. Taylor R.N. Nappier, &quot;Working in Japan&quot;, Sloan Management Review, Spring 1996) </li></ul>
  11. 11. 30-11 International Human Resource Management <ul><li>Sense of self and space </li></ul><ul><li>Language </li></ul><ul><li>Dress and appearance </li></ul><ul><li>Food, eating habits and perceptual problems </li></ul><ul><li>Time and time consciousness </li></ul><ul><li>Relationships </li></ul><ul><li>Values and norms </li></ul><ul><li>Beliefs and attitudes </li></ul><ul><li>Mental processes and learning </li></ul><ul><li>Work habits and practices </li></ul>Understanding the problems brought by the above complicating factors is very important for an expatriate manager, because a small mistake could lead to grave personal insult and jeopardise important business dealings. Fortunately cultural sensitivity can be learned through various techniques. Cultural Differences And HRM
  12. 12. 30-12 Cross cultural training techniques for expatriate managers International Human Resource Management (a) Documentary programmes: Trainees read about a foreign country's history, culture, institutions, geography, and economics. Videotaped presentations are often used. (b) Culture assimilation: Cultural familiarity is achieved through exposure to a series of simulated intercultural incidents, or typical problem situations. This technique has been used to quickly train those who are given short notice of a foreign assignment. (c) Language instruction: Conversational language skills are taught through a variety of methods. In most multinational companies, executives learn various languages in a routine way, so that they can be useful to the company in case of short-term foreign assignments. (d) Sensitivity training: Experiential exercises teach awareness of the impact of one's actions on others. (e) Field experience: Firsthand exposure to ethnic subcultures in one’s own country or to foreign cultures heightens awareness. (f) Business basics: This covers negotiating cross-culturally, working with various types of clients, making presentations etc. (S. Oden Wald, &quot;A Guide for Global Training&quot;, Training and Development, July 93.)
  13. 13. 30-13 International Human Resource Management Economic Factors And HR Practices Differences in economic systems among countries also translate into inter country differences in HR practices. In free enterprise systems, companies focus on cost cutting, enhancing shareholder value, productivity etc. in socialist systems, the focus shifts to prevention of unemployment, even at the expense of efficiency. In labour surplus and capital hungry economies like India, upholding labour laws, respecting political ideologies, and offering jobs to economically poor and underprivileged sections may occupy the centre stage. These inter-country differences in cultures, economic systems, labour policies, thus, complicate the task of selecting, training and managing employees abroad.
  14. 14. 30-14 <ul><li>International Recruitment </li></ul><ul><li>While hiring executives, global companies are guided by three things; ethnocentrism, polycentrism and geocentrism </li></ul><ul><li>a. Ethnocentrism: it is a cultural attitude marked by the tendency to regard one's own culture as superior to others </li></ul><ul><li>b. Polycentrism: In the polycentric corporation there is a conscious belief that only host country managers can ever really understand the culture and behaviour of the host country market, therefore, the foreign subsidiary should be managed by local people. </li></ul><ul><li>c. Geocentrism: it assumes that management candidates must be searched on a global basis, without favouring anyone. </li></ul>International Human Resource Management Economic Factors And HR Practices
  15. 15. 30-15 International Human Resource Management Reasons for expatriate failures <ul><li>Transfer anxieties: Foreign assignments might have been pushed ahead without adequate preparation and advance planning. The expat might, as result, find the task insurmountable, feel the pressure unbearable and return empty-handed. </li></ul><ul><li>Career problems: A foreign posting creates, for the expatriate a number of career problems (i) being 'out of sight, out of mind' and being bypassed for promotions (ii) the danger of coming home a stranger with few familiar faces to greet his/her arrival (iii) the likelihood of being tempted by the foreign life style and losing the desire to return. </li></ul><ul><li>Personal problems: As Negandhi reported, expatriates may encounter serious adjust problems such as: personal discomfort and uncomfortable living conditions, homesickness; education, medical, health problems of family members; social aloofness, cultural mismatch. </li></ul><ul><li>Other concerns: These include: (i) the foreign posting might be looked at as a short term obligation (ii) the expats performance might be evaluated against a short-term criteria, (iii) the expat may begin to feel the pinch due to lack of continuity in plans empowering him to conduct the show for a reasonable period (iv) business environment of the host country might be too restrictive, unfriendly and even unbearable. </li></ul>
  16. 16. 30-16 <ul><li>International selection </li></ul><ul><li>While selecting executives for international postings, the following things could be kept in mind </li></ul><ul><li>i. General and technical criteria </li></ul><ul><li>ii. Language skills </li></ul><ul><li>iii. Cross cultural suitability </li></ul><ul><li>iv. Motivation for foreign assignment </li></ul><ul><li>v. Family situation </li></ul>International Human Resource Management Economic Factors And HR Practices
  17. 17. 30-17 Expatriate managers : success and failure International Human Resource Management
  18. 18. 30-18 International Human Resource Management In selecting the individual who gets an overseas assignment, organisations must not only consider their ability to do the job but, in addition, must consider their ability to work in a new culture and emotionally handle the stress associated with a new set of cultural concerns <ul><li>International training and development </li></ul><ul><li>Careful selection is only one side of the coin. To ensure success, expatriates require proper orientation, cross cultural training, career counselling etc. </li></ul><ul><li>i. Orientation </li></ul><ul><li>1. cultural briefing </li></ul><ul><li>2. assignment briefing </li></ul><ul><li>3. shipping requirements </li></ul><ul><li>ii. cross cultural training </li></ul><ul><li>iii. career development and counselling </li></ul>Economic Factors And HR Practices
  19. 19. 30-19 International Human Resource Management <ul><li>International compensation </li></ul><ul><li>Compensation practices for international employees are much more complex than tose for domestic employees because many more factors must be considered </li></ul><ul><li>i. Income that the expatriate was getting at HRM </li></ul><ul><li>ii. Additional incentives to be paid on global assignment </li></ul><ul><li>iii. The income of local employees reporting to the expatriate </li></ul>Economic Factors And HR Practices
  20. 20. 30-20 International Human Resource Management <ul><li>International labour relations </li></ul><ul><li>Labour management relations in international companies depend on the peculiar customs, traditions, laws and practices followed in respective countries. Global companies must pay adequate attention to the health, safety and security of their employees also. </li></ul><ul><li>1. The role of unions </li></ul><ul><li>2. Collective bargaining </li></ul><ul><li>3. Labour participation </li></ul><ul><li>4. Employee health </li></ul><ul><li>5. Employee safety </li></ul><ul><li>Repatriation </li></ul><ul><li>1. logistics </li></ul><ul><li>2. readjustment and integration into the community for the employee and his or her family </li></ul>Economic Factors And HR Practices