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Learning Objectives Human Resource Management Gaining a Competitive Advantage

After reading this chapter, you should be able to: • Identify the recent changes that have caused companies to expand into international markets. • Discuss the four factors that most strongly influence HRM in international markets. • List the different categories of international employees. • Identify the four levels of global participation and the HRM issues faced within each level. • Discuss the ways companies attempt to select, train, compensate, and reintegrate expatriate managers.

Chapter 15 Managing Human Resources Globally

McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, All Rights Reserved.

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Introduction

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Current Global Changes

• Organizations now function in a global economy. • International expansion can provide a competitive advantage: – Entering different countries may provide large numbers of potential customers. – Building production facilities in countries with low-cost labor may prove cost-efficient. • Maquiladora plants

– The rapid increase in telecommunications and information technology enables work to be done more rapidly, efficiently, and effectively around the globe. 15-3

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• European Economic Community • North American Free Trade Agreement • The Growth of Asia – Japan, China, Singapore, Hong Kong, and Malaysia are significant economic forces.

• General Agreement on Tariffs and Trade (GATT) 15-4

Factors Affecting HRM in International Markets

Hofstede’s Cultural Dimensions

Education Human Capital

Culture

Human Resource Management

Economic System

Political-Legal System

• Individualism/collectivism - the degree to which people act as individuals rather than as members of a group. • Power distance - how a culture deals with hierarchical power relationships. • Uncertainty avoidance - how cultures deal with the fact that the future is not perfectly predictable. • Masculinity-femininity describes the division of roles between the sexes within a society. • Long-term/short-term orientation - the tendency of a culture to focus on long-term benefit or short-term outcomes.

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Implications of Culture for HRM

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Education/Human Capital

• Cultures differ on such things as leadership, decision-making, and motivation. • Cultures influence the appropriateness of HRM practices. • Cultures may influence compensation systems. • Cultural differences can affect the communication and coordination processes in organizations. 15-7

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• Countries differ in their levels of human capital. • A country's human capital is determined by a number of variables, primarily, educational opportunity. • Countries with low human capital attract facilities that require low skills and lowwage levels. • Countries with high human capital are attractive sites for direct foreign investment that creates high-skill jobs. 15-8

Political/Legal System

Economic System

• Dictates the requirements of certain HRM practices, such as training, compensation, hiring, firing, and layoffs. • The legal system is an outgrowth of the culture, reflecting societal norms. – United States has led the world in eliminating discrimination in the workplace and controlling the process of labor management negotiations. – Germany has provided employees with a legal right to "codetermination" in the workplace. – The EEC provides for the fundamental social rights of workers: freedom of movement and freedom to choose one's occupation and be fairly compensated.

• Under socialist economies, there is little economic incentive to develop human capital, but ample opportunity exists because education is free. • In capitalist systems, the opposite situation exists, with higher tuition at state universities but economic incentives exist through individual salaries

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Types of International Employees

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Types of International Employees

• A parent country is the country in which the company's corporate headquarters is located. • A host country is the country in which the parent country organization seeks to locate (or has already located) a facility. • A third country is a country other than the host country or parent country. • An expatriate is an employee sent by a company in one country to manage operations in a different country. 15-11

Basic Marketing – Chapter 6 Handout 6-3

• Parent-country nationals (PCNs) are employees who were born and live in a parent country. • Host-country nationals (HCNs) are those employees who were born and raised in the host country, as opposed to the parent country. • Third-country nationals (TCNs) are employees born in a country other than the parent country or host country but who work in the host country. 15-12

Levels of Global Participation Domestic Parent Country

Host Country

Corporate headquarters

International Corporate headquarters

Foreign subsidiary

Foreign subsidiary

Multinational Corporate headquarters

Foreign subsidiary

Global Organizations • Global organizations compete on state-ofthe-art, top-quality products and services with the lowest possible costs.

Global Corporate headquarters

Foreign subsidiary

Foreign subsidiary

Increasing Participation in Global Markets

– Transnational scope refers to the fact that HR decisions must be made from a global rather than a national or regional perspective. – Transnational representation reflects the multinational composition of a company's managers. – Transnational process refers to the extent to which the company's planning and decisionmaking processes include representatives and ideas from a variety of cultures.

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Compensation of Expatriates

Selection of Expatriate Managers • Successful expatriates have the following skills or abilities: – Technical competence – Ability to adjust to, and be sensitive to, a new culture. Three dimensions include: • the self dimension • the relationship dimension • the perception dimension

• Use of women in expatriate assignments has proven beneficial for companies; recent evidence disproves the notion that women are not successful managers in foreign countries. 15-15

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• Total pay packages have four components: – Base Salary—Annual salary, unadjusted. – Tax Equalization allowances— Payments for higher tax rates of other countries. – Benefits—Continuation of, or substitute for, home benefits. – Allowances—Cost-of-living, housing, education, and relocation payments. 15-16

Reacculturation of Expatriates • Reentry to the home organization may result in culture shock. – According to some sources, 60 to 70 percent of expatriates do not know what their position will be upon their return.

• Transition process necessitates communication of corporate changes while the expatriate is overseas and validation of the importance of the expatriate's international work.

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