Globalization has increased the complexity of business and human resource management. As markets globalize, companies must adapt to operating across borders and cultures. This introduces challenges like cultural differences between countries and varying legal standards. As a result, human resource management must also adapt, such as considering local labor laws and cultural norms when staffing, training, and compensating employees internationally. Companies must choose between using parent country, host country, or third country nationals for global roles, each with advantages and disadvantages. Outsourcing and offshoring are also alternatives to direct international expansion.

1. Chapter 14:
Global Issues
for Human
Resource
Managers

2. Globalization of Business and
HRM
• The major factor increasing the complexity
of the environment is the globalization of
markets.
• There are significant cultural differences
between countries and regions.
• In many cases, there are multiple cultures
in a single country. All of this makes global
business more challenging.
2Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

3. Reasons for Business
Globalization
• Businesses must adapt and capitalize on
technology that transcends distance and
culture. They must also allow goods,
people, and ideas to cross borders around
the world.
• Increase Business: If large corporations
want to grow, they have to globalize.
• The Global Village: Refers to companies
conducting business worldwide without
boundaries
3Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

4. Exhibit 14-1: Major Trade Agreements
4Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

5. Declining Trade Barriers and the
World Trade Organization (WTO)
• The World Economy
– Becoming mutually beneficial and
essential for economic vitality to expand
global trading partnerships.
– During the last 50 years, technology has
dissolved barriers to world trade.
5Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

6. Declining Trade Barriers and the
World Trade Organization (WTO)
• Declining Barriers of Distance and
Culture
– Communication to most parts of the world
today is instantaneous.
– Individuals can travel from one part of the
world to another within a day.
6Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

7. The Rise of Trade Blocs
• Trade Blocs
– Groups of countries that form associations
to facilitate movement of goods across
national borders.
– Allow low-cost (sometimes free) passage
of goods between member nations.
7Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

8. The Rise of Trade Blocs
• Companies design facilities and
component plants to overcome trade
barriers.
• If a domestic firm is competing against
a global firm, economies of scale that
favor the global firm will create a
strategic advantage.
8Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

9. Is HRM Different in Global
Firms?
• The more a business moves toward
corporate globalization, the more
complex its HRM needs.
• Employees need to alter perceptions of
HRM as it relates to the following
dimensions:
– Staffing – Home country, host country, or
third-party employees require different
sourcing, training, and compensation.
9Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

10. Is HRM Different in Global
Firms?
– Training – Orientation, culture and religion,
language assimilation, and management
infrastructure need training modifications.
– Employee and Labor Relations – Differing
country labor laws require HR to be aware
of the variations.
– Compensation – Local wage trends and
currency valuations require scrutiny
standards of pay equity and fair
distribution of benefits and pay incentives.
10Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

11. Legal, Ethical, and Cultural
Issues
• Legal, ethical, and especially cultural
issues also have to be examined by
companies considering global operations.
• International Labor Laws
– Employment and labor laws in different
countries are highly complex.
– An organization will need to do significant
research before moving any operations into
another country to avoid violating that
country’s labor laws.
11Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

12. U.S. Law
• According to the EEOC, employees working in
the United States or its territories are protected
by EEO laws.
• U.S. citizens who are employed outside the
United States by a U.S. employer or a foreign
company controlled by a U.S. employer are
protected by Title VII, ADEA, and ADA.
• If an employee is a U.S. citizen and employed
by a foreign company in a country outside the
United States, the laws of that country would
apply, and he or she would not be protected by
U.S. EEO laws.
12Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

13. Corruption and Bribery
in Foreign Countries
• Many foreign countries accept
corruption and bribery as common
business practices.
• To comply with U.S. business practices,
the 1977 Foreign Corrupt Practices Act
was instituted to bar U.S.-based or
U.S.-listed companies from bribing
foreign officials in exchange for
business.
13Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

14. National Culture
– Parochialism: Narrow-minded world view
with an inability to recognize individual
differences.
– People who have lived in only one culture
may not realize there are alternative
options as it relates to values, beliefs, and
culture.
14Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

15. Hofstede’s Model of Culture
• Geert Hofstede was an HR executive
for IBM in the 1960s. As a trained
psychologist, he developed a model of
culture that addresses five primary
dimensions widely used today.
• See Exhibit 14-2 on page 358.
15Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

16. Hofstede’s Dimensions of
Culture
• Power-Distance – Low Versus High
• Individualism Versus Collectivism
• Masculinity Versus Femininity
• Uncertainty Avoidance – High Versus
Low
• Long-Term Orientation Versus Short-
Term Orientation
16Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

17. Skills and Traits for Global
Managers
• International assignments require deeper
analysis of how skills and traits can be
adapted to a worldwide environment.
• Companies may require previous
international experience for employees
taking international postings. Having such
experience will help alleviate any “culture”
shock.
• Developing cultural awareness and sense
of language will enable international
employees to cultivate cultural currency.
17Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

18. Staffing Choices: Home, Host,
or Third-Country Employees
• Three traditional options for staffing
international assignments:
– Parent (Home) Country Nationals –
Employees who work for organization in
country where organization is headquartered
– Host-Country Nationals – Employees who
live in a different country where a work
assignment takes place
– Third-Country Nationals – Employees with
skill sets needed for international assignments
but are not citizens of either home or host
country
18Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

19. Advantages of Parent (Home)
Country Nationals
• Generally have a better understanding
of the organization, strategy, structure,
and culture of the business.
• Allows managers to gain international
experience
• More effective communication with
parent-country management
19Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

20. Disadvantages of Parent
(Home) Country Nationals
• Language differences may be a
problem.
• Compensation may be more of a
problem than with host-country
nationals.
• Country culture may create barriers to
success for employee and family.
20Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

21. Advantages of Host-Country
Nationals
• Minimizes language and culture
problems
• Compensation generally easier and
based on local pay scale
• Less expensive than moving someone
to the country
• Better understanding of local business
laws, culture, and customs
21Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

22. Disadvantages of Host-
Country Nationals
• Company culture and ways of doing
business may create problems.
• May create more problems
communicating with the parent office
• Loyalty to the country may outweigh
loyalty to the company.
22Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

23. Advantages of Third-Country
Nationals
• Can hire the best talent from wherever
they are located
• May be less expensive than either
parent or host-country managers
• May be more advantageous than
parent country managers due to similar
culture and/or language with host
23Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

24. Disadvantages of Third-
Country Nationals
• Still may have company culture and
business process issues
• Host-country government may create
barriers to third-party managers.
• Income and other tax rules can be
complex.
24Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

25. Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.
Exhibit 14-3: Advantages and Disadvantages of
Parent, Host, and Third-country Nationals
25
Source: Dörrenbächer, C., Gammelgaard, J., McDonald, F., Stephan, A., & Tüselmann, H. (2013). Staffing foreign subsidiaries with parent
country nationals or host country nationals? Insights from European subsidiaries (No. 74). Working Papers of the Institute of Management Berlin
at the Berlin School of Economics and Law (HWR Berlin

26. Outsourcing as an Alternative
to International Expansion
• Outsourcing – Process of hiring another
organization to do work that was previously
done within host organization.
• Offshoring – Associated with outsourcing
assigned to a particular country
– Companies, such as Nike, do not own
manufacturing facilities and outsources, so they
often offshore all of their products.
• Onshoring – Process of shuttering operations
in other countries and bringing work back to
home country to stimulate employment.
26Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

27. Developing and Managing
Global Human Resources
• To achieve HR success on a global
scale, companies must select right
individuals, train appropriately, and
support with resources
• International assignments need
different considerations
– Recruiting and selecting internationally
• Negotiating assignments
• Tax consequences
• Relocation expenses
27Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

28. Expatriate Training and
Preparation
• Expatriates: Employees who leave
home country to work in another
country
• Costs of training and preparing
expatriates are high, with no guarantee
that employees who achieve success
domestically will prosper elsewhere.
28Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

29. Expatriate Training and
Preparation
• Cultural Training
– Preparing employees for expatriate
assignments will primarily be a training
process in cross-cultural training.
– Culture shock can occur when we move
from one culture to another.
• Communication Training
– Expatriates require language training and
other communication types (verbal,
nonverbal and symbolic).
29Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

30. Exhibit 14-4: Culture Shock
30Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

31. Repatriation After Foreign
Assignments
• A series of steps need to occur to get
an expatriate back into the home
country work routine:
– Reentry training
– Job training into a position commensurate
with the employee’s level of expertise
– Mentoring assistance
– A show of appreciation for the employee’s
international service
31Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

32. Compensating Your Global
Workforce
• Pay, benefits, and incentives take different
dynamics for a global workforce.
• Considerations include cost of living
adjustments and pay differentials. These
alternatives should be considered:
– Balance sheet approach
– Split-pay approach
– Negotiation approach
– Localization approach
– Lump sum option
32Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

33. Incentives in Global Firms
• Effective global leaders are a vital asset
that can offer a competitive advantage
within organizations today.
• In some emerging-market countries,
variable pay is a higher proportion of
overall compensation than in most
developed markets.
• However, in other countries, variable pay
still has negative connotations, especially
as an individual incentive.
33Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

34. Benefit Programs Around the
World
• Benefit programs must adapt to the part of
the world in which employees work and
live.
• Some countries mandate certain benefits
that are not required in other countries,
and we have no choice but to offer them.
• In other cases, the living conditions may
be such that different benefit packages
just make sense.
34Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

35. Trends and Issues in HRM
• Globalization of Business Is a Trend
– 59% of 1,200 CEOs in a survey said they plan
to increase the number of their international
assignments as part of their HR strategy.
• The Worldwide Labor Environment
– Brazil’s labor regulations tend to favor the
employee over the employer and provide
strong protection for unions.
– South Korea’s laws concerning labor relations
are similar to those in the United States.
35Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.