HUman resource managemenr 2e s keiman chapter14

Chapter 14
Establishing HRM Practices
in Foreign Countries

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Chapter Outline
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14-1 Gaining Competitive Advantage

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14-2 HRM Issues and Practices

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14-3 The Manager’s Guide

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-1a Opening Case: Losing Competitive
Advantage at General Electric
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Problem: Trying to “Americanize” a newly purchased
French firm.

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Solution: “Americanizing” GE-CGR

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How the solution hindered competitive advantage
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$25 million loss in its first year, instead of gaining $25
million as projected.
Cost-cutting measures including massive layoffs and
closing of plants.
Shrink in workforce from 6,500 to 5,000, as managers
and engineers left.

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14-1b Linking HRM Practices to Foreign
Competitive Advantage
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International business operations appear in a variety
of forms.
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Wholly owned subsidiaries: The most common way to
‘‘go international’’ by setting up foreign operations that
they own.
Joint venture: Firms may join up with foreign firms to
create a new company. Joint ventures have
mushroomed for two reasons:
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Local laws of some countries do not allow subsidiaries
to be wholly owned by foreign companies.
Joint ventures allow companies to draw on others’
expertise.

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14-1b Linking HRM Practices to Foreign
Competitive Advantage (cont.)
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Impact of International HRM practices on employee
motivation, satisfaction, and performance
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Failure to adjust to the foreign cultural environment is
the key reason why expatriates often fail to succeed.
Inappropriate HRM practices can profoundly affect the
motivation, satisfaction, and performance of foreign
and expatriate employees.
Companies need to properly select, train, manage,
compensate, and develop employees to work in crosscultural environments.

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14-2a Understanding Cultural Differences
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Culture: A society’s set of assumptions, values, and
rules about social interaction.

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Artifacts: Tangible things that represent the
superficial aspects of a country’s culture.

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Values: Rules of societal propriety and impropriety
that are shared by people within a culture.

•

Assumptions: A society’s beliefs that have evolved

from its attempts to adjust to the world around it.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2a Understanding Cultural Differences
(cont.)
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How people react to cultural improprieties
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When cultural rules are violated, the “guilty party” is
often condemned or punished in some manner.
Degree of condemnation depends on two factors:
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The extent to which the broken rule is widely shared
among a cultural group’s members.
The extent to which the rule is deeply held and viewed
as being important or sacred.

When working with people from other cultures, one

must attempt to learn the rules of that culture and
abide by them.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates
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Use of expatriates and competitive advantage
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Managers must understand many international
aspects of business; they learn this through a realworld foreign experience.
By overseeing foreign operations, managers can help
ensure that operations are congruent with corporate
strategy and policy.
Expatriates can communicate subsidiaries’ needs and
concerns to corporate headquarters in a timely and
effective manner.
Effective expatriate managers can communicate their

useful market knowledge to corporate managers.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates (cont.)
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Expatriate rights under the Civil Rights Act of 1991:
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Provides coverage to U.S. citizens employed in a
foreign country, provided that compliance with this
provision would not cause the employer to violate the
law of the foreign country.
The U.S. citizen must be employed overseas by a firm
controlled by an American employer.
Control can be determined through interrelation of
operations, common management, centralized control
of labor relations, and common ownership or financial
control of the corporation and the employer.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates (cont.)

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Selecting expatriates
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Most companies place too much emphasis on
technical skills, and too little emphasis on personality.
Personality traits often play a larger role in an
employee’s success at adapting to a new culture.
Personality traits that a successful expatriate should
possess:
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Ability to handle stress.
Reinforcement substitution
Ability to develop relationships.
Perceptual skills.

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14-2b The Use of Expatriates (cont.)
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Reinforcement substitution: The ability to find
substitutes for pleasurable pursuits that are

unavailable in a new culture.

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Ability to develop relationships: Two skills are
associated with expatriates developing relationships
with host nationals:
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Willing to communicate in the host language.
Conversational currency: An expatriate inserts social
and cultural tidbits and trivia into conversations with
host-national employees.

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14-2b The Use of Expatriates (cont.)
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Perceptual skills
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Flexibility of one’s belief systems.

Ability to avoid being judgmental about the belief and
value systems of the host culture.
Ability to make flexible attributions about why host
nationals behave the way they do.
High tolerance for uncertainty.

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14-2b The Use of Expatriates (cont.)
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Training expatriates: They should be taught to:
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Understand and work effectively with people from
different cultural, religious, and ethnic backgrounds.
Manage multicultural teams.
Understand global markets, global customers, global
suppliers, and global competitors.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates (cont.)
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Problems appraising expatriates’ job performance
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Invalid performance criteria
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Rater competence
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Performance criteria are often superimposed onto an
expatriate manager even though those criteria might not
make sense in the foreign culture.
Companies must construct criteria according to each
subsidiary’s unique situation.
Raters may lack an understanding of the social and
business contexts in which the work is performed,
increasing rating errors.

Rater bias
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Misinterpretations of behavior due to cultural differences.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.

14-2b The Use of Expatriates (cont.)
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Overcoming performance appraisal problems

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Utilize multiple raters.
Make sure that some of those raters have lived and
worked in the country in which the expatriate is
working.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates (cont.)
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Compensating expatriates
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Foreign service

premiums
Hardship allowance
Cost of living
allowances
Housing allowances
Utility allowances
Furnishing allowances
Education allowances

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Home leave allowances
Relocation allowances
Medical allowances
Car and driver
allowances
Club membership
allowances
Taxes

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.

14-2b The Use of Expatriates (cont.)
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Repatriates: Expatriates who return home.

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Problems repatriates encounter
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Not told what their job assignments will be prior to
returning home.
Expatriates return home to jobs that require less
autonomy and authority.
Difficulty readjusting to their native culture.
Loss of premiums.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2b The Use of Expatriates (cont.)
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HRM interventions for expatriates
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Mentoring
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Formalized career planning
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Keep track of the expatriate’s performance.
Keep expatriates updated about happenings in the
parent company.
Help the repatriate find a job in the parent company that
would make use of their international expertise.
Integrate overseas assignments into their succession
planning systems.

Communication systems
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Encourage a flow of information between expatriate
managers and parent company managers.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-2c Developing HRM Practices in HostNational Countries
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Adjust HRM practices to the norms and culture of the
host country.

•

Develop training programs after considering how the
culture views the educational process.

•

Develop compensation systems after understanding
what motivates employees in each culture.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-3a International HRM Issues
and the Manager’s Job
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Managing expatriate subordinates
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Managers must successfully navigate “long-distance
managing” which is a complex and difficult task.

Expatriate service

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A manager must be able to adapt his or her
management behavior to the culture of the host
country.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-3b How the HRM Department Can Help
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Advise management regarding these HRM concerns:

Who should be sent overseas?

What kind of training will they need?
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What kind of compensation package will be needed to
induce candidates to go overseas?
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In what ways do the company’s HR policies and
procedures need to be adjusted overseas due to
different legal issues and cultural norms?
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How do performance appraisal systems need to be
modified?
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How may global management development programs
be created that will successfully integrate career

development, training programs, and succession
planning?
© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.
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14-3c HRM Skill-Building for Managers
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Japan
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Japanese business norms are very formal and welldefined.
Japanese business culture demands that you conduct
business at restaurants, clubs, bars, and other off-site
locations.
By not observing/following proper cultural proprieties,
you will considered as not being well-mannered and
may lose the business deal.

© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.


14-3c HRM Skill-Building for Managers
(cont.)
•

Mexico

Most Mexican firms have a bureaucratic structure with
power vested at the top.
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Workers prefer that their managers keep a formal,
somewhat distant relationship with them.
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Mexicans frown upon such practices as employee
empowerment, open communication channels, and
employee ownership.
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Mexicans value harmony and have a low tolerance for
adversarial relations.
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Obedience and respect are more important than
independence and confrontation.

Pay-for-performance programs should be avoided
because they create social distance among
employees.
© 2010 Cengage Learning. Atomic Dog is a trademark used herein under license. All rights reserved.
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