International Human Resources Management Managing Human Resources Belcourt * Bohlander * Snell Copyright © 2008 by Nelson, a division of Thomson Canada Limited All rights reserved 5th Canadian edition PowerPoint Presentation by Monica Belcourt, York University and Charlie Cook, The University of West Alabama Objectives After studying this chapter, you should be able to: Identify the types of organizational forms used for competing internationally Explain the economic, political-legal, and cultural factors in different countries that HR managers need to consider Explain how domestic and international HRM differ Discuss the staffing process for individuals working internationally Identify the unique training needs for international Copyright © 2008and by Nelson, a assignees their employees division of Thomson Canada Ltd 15–2 Objectives (cont’d) After studying this chapter, you should be able to: Identify the characteristics of a good international compensation plan Reconcile the difficulties of home- and host-country performance appraisals Explain how labour relations differ around the world Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–3 Increasing Importance of Global Human Resource Understanding International International Mergers Mergersand and Acquisitions Acquisitions Foreign ForeignHuman Human Resources Resources Importance Importanceof of Global GlobalHuman Human Resources Resources Management Management Global Global Competition Competition Market MarketAccess Access Nelson, a Opportunities Opportunities Copyright © 2008 by division of Thomson Canada Ltd 15–4 Managing Across Borders • International corporation • Global corporation  Domestic firm that uses its existing capabilities to move into overseas markets  Firm that has integrated worldwide operations through a centralized home office • Multinational corporation (MNC) • Transnational corporation  Firm with independent business units operating in multiple countries Copyright © 2008 by Nelson, a division of Thomson Canada Ltd  Firm that attempts to balance local responsiveness and global scale via a network of specialized operating units 15–5 Types of Organizations Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Figure 15.1 15–6 Top International Companies MARKET VALUE (BILLIONS OF U.S DOLLARS) General Electric $286.10 Microsoft 263.99 ExxonMobil 244.93 Pfizer 244.89 Wal-Mart Stores 232.22 Citigroup 210.86 Johnson & Johnson 161.36 Royal Dutch/Shell Group 158.48 Copyright ©BP 2008 by Nelson, a division of10 Thomson Canada AIG Ltd Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34 153.24 150.97 15–7 Figure 15.2 Top International Companies (cont’d) SALES (BILLIONS OF U.S DOLLARS) Wal-Mart Stores $244.52 ExxonMobil 204.51 General Motors 184.21 Royal Dutch/Shell 179.43 BP 178.72 Ford Motor 162.59 DaimlerChrysler 156.84 Toyota Motor 134.23 General Electric 131.70 Copyright 10 © 2008 by Nelson, a Allianz division of Thomson Canada Ltd Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34 126.80 15–8 Figure 15.2 Top International Companies (cont’d) PROFITS (BILLIONS OF U.S DOLLARS) Citigroup $15.32 General Electric 15.13 Altria Group 11.10 ExxonMobil 11.01 Royal Dutch/Shell 9.42 Bank of America 9.25 Pfizer 9.18 Wal-Mart Stores 8.04 Toyota Motor 7.90 Copyright 10 © 2008 by Nelson, a Microsoft division of Thomson Canada Ltd Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34 7.83 15–9 Figure 15.2 How International Companies Affect the World Economy • Their production and distribution extend beyond national boundaries, making it easier to transfer technology • They have direct investments in many countries, affecting the balance of payments • They have a political impact that leads to cooperation among countries and to the breaking down of barriers of nationalism Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–10 Preparing for an International Assignment To prepare for an international assignment, one should become acquainted with the following aspects of the host country: Social and business etiquette History and folklore Current affairs, including relations between the host country and Canada Cultural values and priorities Geography, especially its major cities Sources of pride and great achievements of the culture Religion and the role of religion in daily life Political structure and current players Practical matters such as currency, transportation, time zones, hours of business Copyright © 2008 by Nelson, a 10 The language Figure 15.9 division of Thomson Canada Ltd 15–27 Training Methods • Reviewing available information about the host company: books, magazines, video tapes • Conversations with host country natives • Sensitivity training to become familiar with the customs and overcome prejudices • Temporary assignments to encourage shared learning Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–28 Highlights in HRM Stressors and Coping Responses in the Developmental Stages of Expatriate Executives STRESSOR PRIMARY RESPONSE Expatriate selection Cross-cultural unreadiness Assignment acceptance Unrealistic evaluation of stressors to come Hurried time frame Pre- and post-arrival Ignorance of cultural training differences Arrival Cultural shock Stressor reevaluation Feelings of lack of fit and differential treatment Novice Cultural blunders or inadequacy of coping responses Ambiguity owing to inability to decipher meaning of situations Transitional Rejection of host or parent culture Mastery Frustration with inability to perform boundary spanning role Bothered by living with a cultural paradox Repatriation Disappointment with unfulfilled expectations Copyright © 2008 by Nelson, a Sense of isolation Loss of autonomy division of Thomson Canada Ltd Source: J Sanchez, P Spector, and C Cooper, “Adapting to a Boundaryless World: A Developmental Expatriate Model,” Academy of Management Executive 14, no (May 2000): 96–106 Highlights 15.5 15–29 Returning from an Overseas Assignment • Repatriation  The process of an employee transitioning home from an international assignment  Throw a “welcome home” party  Offer counseling to ease the transition  Arrange conferences and presentations to make certain that knowledge and skills acquired away from home are identified and disseminated  Get feedback from the employee and the family about how well the organization handled the repatriation process Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–30 Compensation • Different countries have different norms for employee compensation  Financial (money) incentives versus nonfinancial incentives (prestige, independence, and influence)  Individual rewards versus collectivist concerns for internal equity and personal needs  General rule: match the rewards to the values of the local culture—create a pay plan that supports the overall strategic intent of the organization but provides enough flexibility to customize particular policies and programs to meet the needs of Copyright © 2008 in byspecific Nelson, locations a employees division of Thomson Canada Ltd 15–31 Forces Driving Global Pay CULTURAL PREFERENCES Importance of status Role of individual vs organization vs government Equality vs disparity Achievement vs relationships PERSONAL PREFERENCES Attitudes toward risk Quality of life vs work Short- vs long-term Competitiveness vs solidarity ECONOMIC CONDITIONS Size of economy Types of industries, natural resources Inflation, unemployment Protectionism vs open market SOCIAL CONSTRAINTS Income tax rates, social costs Laws and regulations Collective bargaining, worker participation Skills, education of workforce Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!” Compensation and Benefits Review 31, no (July/August 1999): 25–34 Figure 15.11 15–32 Compensation of Host-Country Employees • Hourly wages vary dramatically from country to country • Pay periods are different • Seniority may be an important factor • High pay rates can upset local compensation practices • Bonuses, profit-sharing, benefits and paid leave may be more extensive and legally required Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–33 Hourly Wages in Different Countries* COUNTRY $/HOUR Norway Germany (former West) 31.25 Switzerland 27.87 Belgium 27.73 Sweden 25.18 United States 21.97 France 21.13 Britain 20.37 Japan 20.09 Australia 20.05 Canada *Hourly compensation costs in U.S dollars 19.28 for production workers in manufacturing Source: U.S Department of Labor, Bureau of Labor Statistics, NovemberItaly 2004 18.35 Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 31.5 Figure 15.12 15–34 Compensation of Expatriate Managers • Provide an incentive to leave Canada • Allow for maintaining a N.A standard of living • Provide for security in countries that are politically unstable or present personal dangers • Include provisions for good healthcare • Provide for the education Copyright © 2008 by Nelson, a of children division of Thomson Canada Ltd • Consider foreign taxes the employee is likely to have to pay (in addition to domestic taxes) and help with tax forms and filing • Allow for maintaining relationships with family, friends, and business associates • Facilitate reentry home • Be in writing 15–35 Expatriate Compensation Systems • Home-Based Pay  Pay based on an expatriate’s home country’s compensation practices • Balance-Sheet Approach  A compensation system designed to match the purchasing power in a person’s home country Calculate base pay Figure cost-of-living allowance (COLA) Add incentive premiums Add assistance programs Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–36 Expatriate Compensation Systems (cont’d) • Host-Based Pay  Expatriate pay comparable to that earned by employees in a host country to which the expatriate is assigned • Localization  Adapting pay and other compensation benefits to match that of a particular country • Other Issues  Adequacy of medical care  Personal security Copyright © 2008 by Nelson, a  Education division of Thomson Canada Ltd 15–37 Performance Appraisal of International Managers • Who Should Appraise Performance?  Home-country evaluations  Host-country evaluations • Adjusting Performance Criteria  Augmenting job duties  Individual learning  Organizational learning • Providing Feedback  Debriefing interview Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–38 Boosting ROI of Expatriates Major initiatives planned to improve assignment return on investment (ROI): Better candidate selection Career-planning skills Communicating objectives Assignment preparation Monitoring program Cross-cultural training Developing or expanding intranet Communication/recognition Web-based cultural training Mandating destination Copyright © 2008 by Nelson, asupport division Other of Thomson Canada Ltd Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no (April 2002): 77–83 32% 26 24 20 17 10 17 15–39 Business Case International Organizations and Labour Relations • International Differences in Unions  The level at which bargaining takes place (national, industry, or workplace)  The degree of centralization of union-management relations  The scope of bargaining (parties and issues)  The degree to which government intervenes  The degree of unionization and union strength Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15–40 Key Terms • • • • • • • • • • • augmented skills balance-sheet approach codetermination core skills cultural environment culture shock expatriates, or home-country nationals failure rate global corporation global manager guest workers Copyright © 2008 by Nelson, a division of Thomson Canada Ltd • • • • • • • • • • • • home-based pay host-based pay host country host-country nationals international corporation localization multinational corporation (MNC) repatriation third-country nationals transnational corporation transnational teams work permit, or visa 15–41 [...]... Nelson, a division of Thomson Canada Ltd 15 11 The TheNations Nationsof ofthe the European EuropeanUnion Union Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 12 Cultural Environment of International Business Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Figure 15. 3 15 13 Domestic versus International HRM • Issues in international HRM in helping employees adapt to a new... Ltd 15 14 International Staffing • Expatriates, or Home-country Nationals  Employees from the home country who are on international assignment • Host-country Nationals  Employees who are natives of the host country • Third-country Nationals  Employees who are natives of a country other than the home country or the host country Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 15 Changes... governments Greater control International Intimate knowledge of environment and culture Company experience Multilingualism Language facility Mobility Experience provided to corporate executives Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Figure 15. 6 15 23 Expatriate Selection Criteria Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Figure 15. 7 15 24 Causes of Expatriate... Change management Highlights 15. 4 15 21 Measured Expatriate Characteristics • Core Skills  Skills that are considered critical to an employee’s success abroad • Augmented Skills  Skills that are helpful in facilitating the efforts of expatriate managers • Failure rate  Percentage of expatriates who do not perform satisfactorily Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 22 Comparison... Figure 15. 8 15 25 Training and Development • Essential training program content to prepare employees for working internationally:  Language training  Cultural training  Assessing and tracking career development  Managing personal and family life  Repatriation • Culture shock  Perpetual stress experienced by people who settle overseas Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 26... Sanchez, P Spector, and C Cooper, “Adapting to a Boundaryless World: A Developmental Expatriate Model,” Academy of Management Executive 14, no 2 (May 2000): 96–106 Highlights 15. 5 15 29 Returning from an Overseas Assignment • Repatriation  The process of an employee transitioning home from an international assignment  Throw a “welcome home” party  Offer counseling to ease the transition  Arrange conferences... natives of a country other than the home country or the host country Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 15 Changes in International Staffing over Time Copyright © 2008 by Nelson, a division of Thomson Canada Ltd Figure 15. 4 15 16 Hiring Host-Country Nationals • Three main advantages: 1 Hiring local citizens is generally less costly than relocating expatriates 2 Since local... Figure 15. 9 division of Thomson Canada Ltd 15 27 Training Methods • Reviewing available information about the host company: books, magazines, video tapes • Conversations with host country natives • Sensitivity training to become familiar with the customs and overcome prejudices • Temporary assignments to encourage shared learning Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 28 Highlights... Skill in building community Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 19 Selecting Global Managers 1 2 3 4 Begin with self-selection Create a candidate pool Assess core skills Assess augmented skills and attributes Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 20 Highlights in HRM Skills of Expatriate Managers CORE SKILLS Experience Decision making Resourcefulness... Figure 15. 11 15 32 Compensation of Host-Country Employees • Hourly wages vary dramatically from country to country • Pay periods are different • Seniority may be an important factor • High pay rates can upset local compensation practices • Bonuses, profit-sharing, benefits and paid leave may be more extensive and legally required Copyright © 2008 by Nelson, a division of Thomson Canada Ltd 15 33 Hourly