Lecture International business (9e): Chapter 19 - Charles W.L. Hill

International Business

9e 

By Charles W.L. Hill
McGraw­Hill/Irwin

        Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved.


Chapter 19
Global Human
Resource Management

McGraw­Hill/Irwin

        Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved.


What Is Human 
Resource Management?
 Human resource management (HRM) - the
activities an organization carries out to utilize its
human resources effectively
 more complex in an international business

 These activities include determining human
resource strategy, staffing, performance
evaluation, management development,
compensation, labor relations
 expatriate managers

 Firms need to ensure there is a fit between their
human resources practices and strategy
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What Is The Strategic Role Of 
HRM In International Firms?
The Role of Human Resources in Shaping Organizational Architecture

19­4


What Is A Staffing Policy?
 Staffing policy - the selection of employees
who have the skills required to perform a
particular job
 Three main approaches to staffing policy
1. The ethnocentric approach - fill key management
positions with parent-country nationals
2. The polycentric approach recruit host country
nationals to manage subsidiaries in their own
country, and parent country nationals for positions
at headquarters
3. The geocentric approach seek the best people,
regardless of nationality for key jobs

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Which Staffing 
Policy Is Best?
Comparison of Staffing Approaches

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What Is Expatriate Failure?
 Firms using an ethnocentric or geocentric
staffing strategy will have expatriate managers
 expatriate failure is the premature return of an
expatriate manager to the home country

 The main reasons for Japanese expatriate
failure are
 the inability to cope with larger overseas responsibility
 difficulties with the new environment
 personal or emotional problems
 a lack of technical competence
 the inability of spouse to adjust
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What Is Expatriate Failure?
 The main reasons for U.S. expatriate failure are
 the inability of an expatriate's spouse to adapt
 the manager’s inability to adjust
 other family-related reasons
 the manager’s personal or emotional maturity
 the manager’s inability to cope with larger overseas

responsibilities

 The reason for European expatriate failure is
 the inability of the manager’s spouse to adjust

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How Can Firms Reduce 
Expatriate Failure?
 Firms can reduce expatriate failure through improved
selection procedures
 Four dimensions that predict expatriate success are
1. Self-orientation - the expatriate's self-esteem, selfconfidence, and mental well-being
2. Others-orientation - the ability to interact effectively with
host-country nationals
3. Perceptual ability - the ability to understand why people
of other countries behave the way they do
4. Cultural toughness – the ability to adjust to the posting

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Why Is A Global
 Mindset Important?
 A global mindset may be the fundamental
attribute of a global manager
 cognitive complexity
 cosmopolitan outlook

 A global mindset is often acquired early in life
from
 a family that is bicultural
 living in foreign countries
 learning foreign languages as a regular part of family
life
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What Is Training And 
Management Development?

 After selecting a manager for a position, training
and development programs should be
implemented
 Training focuses upon preparing the manager for
a specific job
 Cultural training
 Language training
 Practical training

 Management development is concerned with
developing the skills of the manager over time
 historically, most firms focus more on training than on
management development
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What Happens When 
Expatriates Return Home?

 Training and development should include
preparing and developing expatriate
managers for reentry into their home
country organization
need good programs for
re-integrating expatriates back into work life within
their home country organization
utilizing the knowledge they acquired while abroad

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How Should 
Expatriates Be Evaluated?
 Evaluating expatriates can be especially
complex
 typically, both host nation managers and home office
managers evaluate the performance of expatriate
managers

 But, both types of managers are subject to
unintentional bias
 home country managers tend to rely on hard data
when evaluating expatriates
 host country managers can be biased towards their
own frame of reference
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What Are The Key Issues In 

Compensating Expatriates?
 Two key issues on compensation
1. How to adjust compensation to reflect
differences in economic circumstances
and compensation practices
 there are substantial differences in executive
compensation across countries

1. How to pay expatriate managers
 most firms use the balance sheet approach

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
1.
2.
3.
4.
5.

What Are The Key Issues In 
Compensating Expatriates?

A compensation package has five components
Base salary - normally in the same range as the base
salary for a similar position in the home country
Foreign service premium - extra pay the expatriate
receives for working outside his country of origin
Various allowances - hardship, housing, cost-of-living,

education
Tax differentials - may have to pay income tax to both
the home country and the host-country governments
no reciprocal tax treaty exists
Benefits – many firms provide the same level of
medical and pension benefits abroad that employees
receive at home

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Why Are International Labor 
Relations Important?
 Organized labor is concerned that
1. Multinationals can counter union bargaining power
by threatening to move production to another
country
2. Multinationals will farm out only low-skilled jobs to
foreign plants making it easier to switch production
locations
3. Multinationals will import employment practices and
contractual agreements from their home countries
and reduce the influence of unions

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Why Are International Labor 
Relations Important?

 Organized labor has responded to the
increased bargaining power of multinational
corporations by

1. Trying to set-up their own international organizations
2. Lobbying for national legislation to restrict
multinationals
3. Trying to achieve regulation of multinationals through
international organizations such as the United
Nations

 Many firms are centralizing labor relations to
enhance the bargaining power of the
multinational vis-à-vis organized labor

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