2. Learning Objectives 1 of 2
LO 19-1 Summarize the strategic role of human resource management in
international business.
LO 19-2 Identify the pros and cons of different approaches to staffing policy in
international business.
LO 19-3 Explain why managers may fail to thrive in foreign postings.
LO 19-4 Recognize how management development and training programs can
increase the value of human capital in the international business firm.
2
3. Learning Objectives 2 of 2
LO 19-5 Explain how and why performance appraisal systems might
vary across nations.
LO 19-6 Understand how and why compensation systems might vary
across nations.
LO 19-7 Understand how organized labor can influence strategic
choices in international business firms.
3
4. Introduction
Human Resource Management (HRM)
● Human resource strategy
● Staffing
○ Expatriate managers
● Performance evaluation
● Management development
● Compensation
● Labor relations
5. “
Strategic Role of Global HRM:
Managing a Global Workforce
5
Learning Objective 19-1 Summarize the strategic role of human
resource management in international business.
HRM
● Strong link with profitability
● Has a critical impact on the people, culture,
incentive, and control system elements of the
firm’s organizational architecture
● Tends to be weak in multinational
organizations
6. Figure 19.1 The role of human resources in
shaping organizational architecture
6
7. Staffing Policy 1 of 9
Learning Objective 19-2 Identify the pros and cons of different approaches to staffing
policy in international business.
Staffing Policy
▪ Selecting individuals who have the skills required to do
particular jobs
▪ Tool for developing and promoting the desired corporate
culture of the firm
7
8. Staffing Policy 2 of 9
8
Types of Staffing Policies
● Ethnocentric
○ All key management positions are filled by parent-country
nationals.
○ Companies use this policy because:
■ A firm may believe the host country lacks qualified
individuals to fill senior management positions.
■ A firm may see an ethnocentric staffing policy as the best
way to maintain a unified corporate culture.
■ A firm may believe that the best way to transfer core
competencies is to transfer parent-country nationals who
have knowledge of that competency to the foreign
operation.
9. Staffing Policy 3 of 9
Types of Staffing Policies continued
▪ Ethnocentric continued
▫ Limits advancement opportunities for host-country
nationals
▫ Results in resentment, lower productivity, and
increased turnover in that group
▫ Can lead to cultural myopia
9
10. Staffing Policy 4 of 9
10
Types of Staffing Policies continued
● Polycentric
○ Requires host-country nationals to be
recruited to manage subsidiaries, while
parent-country nationals occupy key
positions at corporate headquarters
○ Firm is less likely to have cultural myopia
○ May be less expensive than an
ethnocentric approach
○ Host-country nationals have limited
opportunities to gain experience outside
their own country and thus cannot
progress beyond senior positions in their
own subsidiary
○ Gap between host-country managers and
parent-country managers
■ Can result in inertia within the firm
11. 11
Staffing Policy 5
of 9
Types of Staffing Policies continued
● Geocentric
○ Makes the best use of its human resources
○ Builds a cadre of international executives who feel at
home working in a number of cultures
○ Firms may be better able to create value from the
pursuit of experience curve and location economies and
from the multidirectional transfer of core competencies
than firms pursuing other staffing policies
○ Many countries want foreign subsidiaries to employ
their citizens.
○ Can be expensive to implement
13. Staffing Policy 6 of 9
13
Learning Objective 19-3 Explain why managers may fail to thrive in foreign postings.
Expatriate Managers
● Used by ethnocentric and geocentric staffing policies
● Inpatriates
○ A subset of expatriates who are citizens of a foreign
country working in the home country of their
multinational employer
14. Staffing Policy 7 of 9
14
Expatriate Managers continued
● Expatriate failure rates
○ Results in premature return from a foreign posting
and high resignation rates
○ High costs
○ Reasons for U.S. failure (Tung):
1. Inability of spouse to adjust
2. Manager’s inability to adjust
3. Other family problems
4. Manager’s personal or emotional maturity
5. Inability to cope with larger overseas responsibilities
15. Staffing Policy 8 of 9
15
Expatriate Managers continued
● Expatriate selection
○ Four dimensions that predict success (Mendenhall and
Oddou):
■ Self-orientation
● Others-orientation
● Perceptual ability
● Cultural toughness
16. Staffing Policy 9 of 9
16
Global Mindset
● Fundamental attribute of a global manager
● Can deal with high levels of complexity and
ambiguity, and are open to the world
17. Training and Management Development 2 of 5
17
Learning Objective 19-4 Recognize how management development and training
programs can increase the value of human capital in the international business firm.
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.
18. Training and Management Development 3 of 5
Training for Expatriate Managers continued
▪ Practical training
▫ Aimed at helping the expatriate manager and family ease
themselves into day-to-day life in the host country
▫ Support network of friends
18
19. Training and Management Development 4 of 5 19
Repatriation of Expatriates
● Should be seen as the final link
○ Often they 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.
20. 20
Communication Strategy 4 of 10
Push versus Pull Strategies
● Push strategy emphasizes personal selling.
○ Costly
● Pull strategy depends more on mass media advertising.
● Choice is determined by:
○ Consumer sophistication
○ Channel length
○ Media availability
21. 21
Training and Management Development 5 of 5
Management Development and Strategy
● Ongoing management education
● Rotations of managers through a number of jobs
within the firm to give them varied experiences
22. 22
Performance Appraisal 1 of 2
Learning Objective 19-5 Explain how and why performance appraisal systems might
vary across nations.
Performance Appraisal Problems
● Unintentional bias
● Distance and lack of experience working abroad by home-
country managers
○ Tend to rely on hard data that does not present a
complete picture
23. 23
Performance Appraisal 2 of 2
Guidelines for Performance Appraisal
▪ Reducing bias
▫ Give more weight to an onsite manager’s appraisal than to an
offsite manager’s appraisal.
▫ Home-office managers should be consulted before an onsite
manager completes a formal termination evaluation.
24. Compensation 1 of 4
Learning Objective 19-6 Understand how and why compensation systems might vary
across nations.
National Differences in Compensation
▪ U.S. CEOs earn, on average, roughly double the pay of non-U.S.
CEOs.
▫ Should the firm pay executives in different countries
according to the prevailing standards in each country, or
should it equalize pay on a global basis?
▫ More of a problem in geocentric staffing
24
25. Compensation 2 of 4
25
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
27. Compensation 3 of 4
27
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 his
or her country of origin
28. 28
Compensation 4 of 4
Expatriate Paycontinued
● Allowances
○ Hardship
○ Housing
○ Cost of living
○ Education
● Taxation
○ May have to pay income tax to both the home- and
host-country governments
● Benefits
○ Same level of medical and pension benefits abroad
that they received at home
29. Building a Diverse Global Workforce 1 of 4
29
Reasons a Diverse Workforce May Improve
Performance
1. Diverse talents bring insights into the needs of a diverse
customer base.
2. An enterprise with a homogenous employee base is
underutilizing the talent to be found among women and
minorities.
3. Customers may appreciate interacting with an enterprise
whose employees look like them, and therefore, have a better
understanding of their needs, tastes, and preference.
4. May improve the brand image of an enterprise
5. Increases employee satisfaction
30. Building a Diverse Global Workforce 2 of 4
30
Steps to Take
1. Understand that diversity efforts represent a type of
organizational change and should be driven from the top.
2. Top managers must create a clear value proposition that
identifies the benefits of building a diverse and inclusive culture.
3. Managers must set clear goals (not quotas) for what they would
like to achieve, identify the gap between the current situation
and the desired state, and measure performance improvements
over time.
31. Building a Diverse Global Workforce 3 of 4
Steps to Take continued
4. Managers should be held accountable for attaining global
diversity goals and reward those who hit or exceed goals.
5. Hiring should include people from diverse backgrounds.
31
32. Diversity Workshops
▪ Overcome the subconscious biases and stereotyping of the
majority that may lead to discrimination against minority
employees.
▫ Role playing
▫ Reminding people about biases
▫ Helping people focus on differences to reduce
stereotyping
▪ Recruit women and minorities.
Building a Diverse Global Workforce 4 of 4
32
33. International Labor Relations 1 of 3
33
Learning Objective 19-7 Understand how organized labor can influence strategic choices
in international business firms.
The Concerns of Organized Labor
● The company can counter its bargaining power with the power to
move production to another country.
● The business 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.
34. International Labor Relations 2 of 3 34
The Strategy of Organized Labor
● Response has included three actions:
○ Trying to establish international labor organizations
○ Lobbying for national legislation to restrict
multinationals
○ Trying to achieve international regulations on
multinationals through such organizations as the United
Nations
● International trade secretariats (ITSs)
○ Largely unsuccessful
■ Cause competition between national unions
■ Wide variation in union structure
37. A diagram shows people in the center, surrounded by
boxes labeled structure, incentives and controls, culture,
and processes. Human resources is responsible for the
organizational architecture aspects of people, incentives
and controls, and culture.
37
Appendix 1 Figure 19.1 The role of human
resources in shaping organizational architecture
38. Appendix 2 Figure 19.3 The balance sheet
approach to expatriate pay
38
Four columns are displayed, each divided into sections.
1. Home-country salary column. From bottom to top it reads reserve; goods and
services; housing; and income taxes.
2. Assignment-location costs column. From bottom to top it reads reserve;
goods and services; housing; and home- and assignment-location income
taxes.
3. Assignment-location costs paid by company and from salary column. From
bottom to top it reads reserve; goods and services; housing; and income
taxes.
4. Home-country equivalent purchasing power column. From bottom to top it
reads reserve; goods and services; housing; income taxes; and premiums and
incentives.
The income taxes and home- and assignment-location income taxes are
additional costs paid by the company.
Reserve for all four columns is the same size. Goods and services is larger for
the “assignment-location costs” and “home-country salary” columns. Housing
and income taxes are both larger for the “assignment-location costs” and
“assignment-location costs paid by company and from salary” columns.
