Managing Global

Human Resources
Chapter 17

Presented by: FSZ

 Learning Objectives
 List the HR challenges of HR business

 Illustrate with examples how inter-country differences affect HRM

 List and briefly describe the main methods for staffing global organizations

 Discuss some important issues to keep in mind in training, appraising, and

compensating international employees

 Explain with examples how to implement a global HRM program

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 The Manager’s Global Challenge
 Differences in cultures, economic and legal systems influencing employer
HR practices from country to country

 What works in one country may not work in another

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 What is IHRM?

 The human resource management concepts and techniques employers use

to manage the human resource aspects of their international operations,
including acquiring, training, appraising and compensating employees, and
attending to their labor relations, health and safety, and fairness concerns

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 Questions Addressed by IHR
Managers

 What steps can we take to support the company’s global strategy?

 What’s the best way for us to pay our expatriate employees?

 How can we best staff our assignments abroad with global leaders?

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Critical Intercountry Differences that
Influence International HR Practices

Cultural

Political Intercountry Labor Relations

Differences

Legal Economic

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 Cultural Factors
 Countries differ widely in their cultures- basic values their citizens share

 Differences in authority, making decisions, etc.

 Hofstede's cultural dimensions theory is a framework for cross-cultural

communication, developed by Geert Hofstede. This theory presents 6 dimensions:
- Power distance index: The power distance index is defined as “the extent to which the less
powerful members of organizations and institutions (like the family) accept and expect that
power is distributed unequally.”

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 Cultural Factors
- Individualism vs. collectivism: This indicates the “degree to which people in a society are
integrated into groups.” Individualistic societies have loose ties and its counterpart,
collectivism, describes a society in which tightly-integrated relationships tie extended families
and others into in-group.

- Uncertainty avoidance index: The uncertainty avoidance index is defined as “a society's

tolerance for ambiguity,” in which people embrace or avert an event of something unexpected,
unknown, or away from the status quo.

- Masculinity vs. femininity: In this dimension, masculinity is defined as “a preference in society

for achievement, heroism, assertiveness and material rewards for success.” Its
counterpart represents “a preference for cooperation, modesty, caring for the weak and quality
of life.”
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 Cultural Factors
- Long-term orientation vs. short-term orientation: This dimension associates the connection
of the past with the current and future actions/challenges. A lower degree of this index (short-
term) indicates that people are focused on the present; value current social hierarchy and
tradition. Societies with a high degree in this index (long-term) focus on the future; value
persistence, perseverance, and saving.

- Indulgence vs. restraint: This dimension is essentially a measure of happiness; whether or not
simple joys are fulfilled. Indulgence is defined as “a society that allows relatively free
gratification of basic and natural human desires related to enjoying life and having fun.” Its
counterpart is defined as “a society that controls gratification of needs and regulates it by
means of strict social norms.”
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 Legal Factors & Labor Relations
 It is very important to understand the laws prior to entering the foreign market

 Think for a moment about the impact of local laws on Walmart while operating in
Germany (commercial ads based on price comparisons are not allowed)

 Firing people in the UK could be very expensive as compared to U.S

 Some countries (e.g. Germany) are concerned with codetermination which means
that employees have the right to have their own elected representatives on the
employer’s supervisory board

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 Economic Factors
 Different economic systems also translate into differences in human resources
management policies

 In market economies (US), government plays a relatively restrained role in deciding

what will be produced and sold, at what prices

 In planned economies (North Korea), the government decides and plans what to
produce and sell, at what price

 In mixed economies, many industries are still under direct government control, while
others make pricing and production decisions based on market demand
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 Economic Factors

 Some countries in the Euro Zone tend to put more restrictions on the number of hours
an employee can legally work (e.g. Portuguese workers average about 1980 hours of
work annually, while German workers average 1,648 hours)

 Differences in labor costs are also significant

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 International Staffing: Home or Local?
 Locals (Host country nationals)- they are citizens of the countries in which they are
working

 Expatriates (expats)- They are non-citizens of the countries in which they are working
(e.g. a Bangladeshi worker working in the UK)

 Home-country nationals- they are the citizens of the country in which the multinational
company has its headquarters

 Home-country nationals are also known as parent-country nationals

 Third country nationals- They are the citizens of a country other than the parent or the
host country (e.g. a Bangladeshi executive working in Sydney branch of Citibank)
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Use Expats or Locals?

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 Internationalize Stage, Management Values &
Staffing Policy
Ethnocentric Practices
- The notion that home-country attitudes, management style, knowledge, evaluation
criteria, and managers are superior to anything the host country has to offer

- The firm fills key management jobs with parent-country nationals

- Reasons include: lack of qualified host country senior management talent; a desire to
maintain a unified corporate culture and tighter control; and the desire to transfer the
parent company’s core competencies to a foreign subsidiary more expeditiously

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 Internationalize Stage, Management Values &
Staffing Policy
Polycentric Practices
- A conscious belief that only the host-country managers can ever really understand the
culture and behavior of the host-country market. Therefore, the foreign subsidiary
should be managed by local people

- Staff its foreign subsidiaries with host-country nationals, and its home office with
parent-country nationals

- May reduce local cultural misunderstandings that might occur if it used expatriate
manager

- Also less expensive

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 Internationalize Stage, Management Values &
Staffing Policy
Geocentric Practices
- The belief that the firm’s whole management staff must be hired on a global basis, on
the assumption that the best manager of a specific position anywhere may be in any of
the countries in which the firm operates
- Sony appointed as CEO someone from Wales who would run the firm’s U.S. operations

- Seeks the best people for key jobs throughout the organization, regardless of
nationality

- Such cross-pollination also help build a stronger and more consistent culture and set of
values among the entire global management team
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 Selecting International Managers

 Adaptability screening
- Assessing the expat’s (and spouse’s) probable success in handling the foreign transfer

- Overseas Assignment Inventory

 Realistic previews
- The problems to expect in the new job as well as about the cultural benefits and
unconventional behavior of the country

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 Orienting & Training Employees on
International Assignments
 There should be both pre-departure and on-going trainings
 Training is needed on:
- The impact of cultural differences on business outcomes
- How attitudes (both negative and positive) are formed and how they influence behavior
- Factual knowledge (history, politics, business norms, education systems, demographics) about the
target country
- Language & adjustment and adaptation skills

 Some employers use returning managers as resources to cultivate the global mindsets of
the departing managers
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 Appraising Managers Abroad
 Adapt the performance criteria to the local job and situation.

 Weigh the evaluation more toward the on-site manager’s appraisal than
toward the home-site manager’s.

 If the home-office manager does the appraisal, have him or her use a former
expatriate from the same location abroad for advice.

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 Compensating Managers Abroad
 Usual way to formulate expatriate pay is to equalize purchasing power across
countries, known as Balance sheet approach
 Basic idea is that each expatriate should enjoy the same standard of living
s/he would have had at home
 Addresses four groups of expenses—income taxes, housing, goods and
services, and discretionary income (children support, car payments)

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 Compensating Managers Abroad
 Some use Localization compensation policy- pay the incoming expat a
salary comparable to what a local person would earn, but supplement that
with payments to let that expat maintain home-country standard

 To help the expatriate manage home and foreign obligations, most employers
use a split pay approach (pay half a person’s actual pay in home-country
currency and half in the local currency)

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Balance Sheet Approach

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 Incentives
 Foreign Service Premium
- Financial payments over and above regular base pay, typically ranging between 10% and
30% of base pay
 Hardship Allowances
- Payments that compensate expatriates for exceptionally hard living and working
conditions at certain locations
 Mobility Premiums
- Lump-sum payments to reward employees for moving from one assignment to another

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 Repatriation
 Returning back to one’s home country after the international assignment
 the best one begins before the person is even sent abroad
 make sure the employee sees that the position is an integral part of a sensible
career plan
 it is important that the expatriate and his/her family don’t feel that the
company has forgotten them
 company should value the experience of the expatriate

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 Thanks!
Any questions?
You can find me at
[email protected]

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 Reference
Dessler, G. (2012). Human Resource Management (13th Edition).
New York: Pearson.

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