Chapter 16

Managing Human Resources Globally

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 What Do I Need to Know?
LO 16-1 Summarize how the growth in international business activity affects human resource
management.
LO 16-2 Identify the factors that most strongly influence HRM in international markets.
LO 16-3 Discuss how differences among countries affect HR planning at organizations with
international operations.
LO 16-4 Describe how companies select and train human resources in a global labor market.
LO 16-5 Discuss challenges related to managing performance and compensating employees
from other countries.
LO 16-6 Explain how employers prepare managers for international assignments and for their
return home.

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 HRM in a Global Environment 1

Global HRM
More companies are expanding globally.
• Exporting products.
• Building facilities.
• Entering alliances.

Trade agreements facilitate global activities.

• USMCA.
• World Trade Organization (WTO).

HRM needs to understand laws and customs for international workforce.

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 HRM in a Global Environment 2

As companies in the United States and

Europe outsource jobs in order to keep
costs low, countries such as India
continue to see employment rates hold
steady or even rise.

Terry Vine/Getty Images

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 HRM in a Global Environment 3

Employees in an International Workforce

Many employees are citizens of other countries.
• Parent country: country in which organization’s headquarters is located.
• Host country: country (other than parent country) in which organization operates a facility.
• Third country: neither parent nor host country.

Expatriates (“expats”): employees assigned to work in another country.

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 1
When starting your career, would you be interested in taking a
job in another country? What would be the biggest motivator
POLLING QUESTION
in your decision?
A. Yes, it would be a fun and exciting challenge.
B. Yes, if I already knew the language.
C. No, I would be too nervous about learning another country’s culture,
language, and customs.
D. No, I wouldn’t want to leave my family.
E. Other

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 HRM in a Global Environment 4

Employers in the Global Marketplace

• An international organization is one that sets up operations in one or more foreign
countries.
• A multinational company builds facilities in many countries to minimize production
and distribution costs.
• A global organization locates facility based on ability to effectively, efficiently, and
flexibly produce product or service, using cultural differences as an advantage.

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 Figure 16.1 Levels of Global Participation

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 HRM in a Global Environment 5

Transnational HRM System

• Decisions made from a global perspective.
• Includes managers from many countries.
• Decisions based on ideas contributed by people representing a variety of cultures.
• Decisions balance uniformity with flexibility.

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 Factors Affecting HRM in International Markets 1

Culture
A community’s set of shared assumptions about how the world works and what ideals
are worth striving for.
• Greatly affects country’s laws.
• Cultural influences may be expressed through customs, languages, religions, and so on.
• Influences what people value, so it affects people’s economic systems and efforts to invest in
education.
• May determine effectiveness of HRM practices.

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 Factors Affecting HRM in International Markets 2

Culture continued In Taiwan, a country that

Hofstede’s Six Dimensions is high in collectivism,
co-workers consider
1. Individualism/collectivism. themselves more as
2. Power distance. group members instead
of individuals.
3. Uncertainty avoidance.
4. Masculinity/femininity.
5. Long-term/short-term orientation.
6. Indulgence/restraint.

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 Factors Affecting HRM in International Markets 3

Culture continued
Cultural differences can affect how people communicate and how they coordinate their
activities.
Organizations must prepare managers to recognize and handle cultural differences.
• Recruit managers with knowledge of other cultures.
• Provide training to give existing managers cultural knowledge.

Organizations must select expatriates carefully.

• Expatriates must be able to adapt to new environments.

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 Factors Affecting HRM in International Markets 4

Education and Skill Levels

• U.S. has growing need for knowledge workers (engineers, teachers, scientists, health
care workers).
• Labor markets in many countries are very attractive because they offer high skill
levels and low wages.
• Educational opportunities vary per country.
• Education and skill levels of country’s labor force affect how and the extent to which
companies operate there.

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 Education
Students at the University of Warsaw in Poland
are provided with a government-supported
education. In general, former Soviet bloc
countries tend to be generous in funding
education, so they tend to have highly educated
and skilled labor forces. Capitalist countries such
as the United States generally leave higher
education up to individual students to pay for, but
the labor market rewards students who earn a
college degree.

ArtMediaFactory/Shutterstock
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 Factors Affecting HRM in International Markets 5

Economic System
Closely tied to the culture of the country.
• Provides many incentives or disincentives for developing the value of the labor force.

Labor costs relatively high in developed, wealthy countries.

• Impacts compensation, recruiting, and selection decisions.

Income tax differences between countries complicate pay structures when they cross
national boundaries.

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 Factors Affecting HRM in International Markets 6

Political-Legal System
Country’s government and laws impact HRM.
Dictates requirements for certain practices:
• Training, compensation, hiring, firing, and layoffs.

Organizations must gain expertise in host country’s legal requirements and ways of
dealing with legal system.
• Host-country nationals can be hired to help in process.

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 Human Resource Planning in a Global Economy

Relevant Issues
Local market pay rates and labor laws.
Where to locate international facilities.
• Cost and availability of qualified workers.
• Financial and operational requirements.

Outsourcing may be involved.

Job design varies.

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 Selecting Employees in a Global Labor Market
Qualities associated with success in
foreign assignments are the ability to
communicate in the foreign country,
flexibility, enjoying a challenging
situation, and support from family
members. What would persuade you to
take a foreign assignment?

Rob Brimson/The Image Bank/Getty Images

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 Figure 16.2 Emotional Stages Associated with a Foreign Assignment

Sources: Debra Bruno, “Repatriation Blues: Expats

Struggle with the Dark Side of Coming Home,” The Wall
Street Journal, April 15, 2015, http://blogs.wsj.com; Delia Flanja, “Culture
Shock in Intercultural Communication,” Studia Europaea (October 2009),
Business & Company Resource Center, http://galenet.galegroup.com.
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 2
Rachel is an expatriate working in Japan. She is feeling very
uncomfortable in her surroundings. She often feels as if she has
POLLING QUESTION
said the wrong thing. Rachel is most likely in which emotional
stage of expatriation?
A. Honeymoon
B. Culture shock
C. Learning
D. Adjustment

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 Training and Developing a Global Workforce 1

Training Programs for an International Workforce

1. Establish objectives for the training and its content.
2. Ask what training techniques, strategies, and media to use.
3. Identify interventions and conditions that must be in place for the training to meet
its objectives.
4. Identify who in the organization should be involved in reviewing and approving the
program.

• Consider international differences among trainees.

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 Table 16.1 Effects of Culture on Training Design
Cultural Dimension Impact on Training
Individualism Culture high in individualism expects participation in exercises and
questioning to be determined by status in the company or culture.
Uncertainty Avoidance Culture high in uncertainty avoidance expects formal instructional
environments. There is less tolerance for impromptu style.
Masculinity Culture low in masculinity values relationships with fellow trainees.
Female trainers are less likely to be resisted in low-masculinity
cultures.
Power Distance Culture high in power distance expects trainers to be experts. Trainers
are expected to be authoritarian and controlling of session.
Time Orientation Culture with a long-term orientation will have trainees who are likely
to accept development plans and assignments.

Source: Based on B. Filipczak, “Think Locally, Act Globally,” Training, January 1997, pp. 41–48.
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 Training and Developing a Global Workforce 2

Cross-Cultural Preparation
Preparing employees and family members for an assignment in a foreign country.
Training is necessary for all three phases of assignment:
1. Preparation for departure.
2. The assignment itself.
3. Preparation for the return home.

Career Development

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 Performance Management across National Boundaries

Management Methods
Must consider legal requirements, local business practices, and national cultures when
establishing method.
These factors can cause many differences:
• Which behaviors are rated.
• How and the extent to which performance is measured.
• Who performs the rating.
• How feedback is provided.

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 Compensating an International Workforce 1

Pay Structure
Market pay structures can differ substantially across countries in terms of pay level and
relative worth of jobs.
Differences cause dilemmas for global companies:
• Should pay levels and differences reflect what workers are used to in their own countries?
• Should pay levels and differences reflect the earnings of colleagues in the host or domestic
country?

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 Figure 16.3 Earnings in Selected Occupation Groups in Three Countries

Access the text alternative for slide images.

Source: Wage and hour data from International Labour Orgaaccessed July 2,
2018. nization,
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 Compensating an International Workforce 2

Pay Structure continued

• Decisions impact companies’ costs and ability to compete.
• When comparing wages, companies must consider differences in education, skills,
and productivity.
• Cultural and legal differences can also affect pay structure.

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 Compensating an International Workforce 3

Incentive Pay
• Bonuses and stock options are common kinds of incentives that are awarded
differently per country.

Employee Benefits
• Consider laws of each country involved, as well as employees’ expectations and values
in those countries.

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 Figure 16.4 Average Hours Worked in Selected Countries

Access the text alternative for slide images. Source: Organisation for Economic Co-operation and Development,
“Average Annual Hours Actually Worked per Worker,”
© McGraw Hill OECD.Stat, https://stats.oecd.org, accessed May 15, 2020.
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 International Labor Relations

Labor Relations
• Global companies often need to work with unions in more than one country.
• Establish policies and goals for labor relations, overseeing labor agreements, and
monitoring labor performance.
• Day-to-day decisions usually handled by foreign subsidiary.
• Cultural differences affect labor negotiations.

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 Managing Expatriates 1

Selecting Expatriate Managers

Managers need technical competence in the area of operations.
The organization should consider each candidate’s skills, learning style, and approach
to problem solving.
Adapting to new culture requires:
• Maintaining positive self-image and feeling of well-being.
• Fostering relationships with host-country nationals.
• Perceiving and evaluating host country’s environment accurately.

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 Managing Expatriates 2

Preparing Expatriates
• Cross-cultural training on how to behave in business settings in foreign country.
• Information about practical matters: housing, schooling, recreation, shopping, health
care.
• Potentially learning a new language.
• Career development and coaching.
• Help navigating challenges.

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Figure 16.5 Impressions of Americans: Comments by Visitors to the United States

Access the text alternative for slide images. Source: J. Feig and G. Blair, There Is a Difference, 2nd ed. (Washington,
DC: Meridian House International, 1980), cited in N. Adler, International
© McGraw Hill Dimensions of Organizational Behavior, 2nd ed. (Boston: P WS-Kent, 1991).
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 Managing Expatriates 3

Managing Expatriates’ Performance

Requires clear goals for overseas assignment.
Requires frequent evaluation of whether expatriate is on track to meet those goals.
• Communication technology is helpful.

HR should work with managers to develop measurement criteria for performance and
success.

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 Managing Expatriates 4

Compensating Expatriates
Balance sheet approach is most often used to determine package.
• Gives manager same standard of living as home country, plus extra pay for inconvenience of
locating overseas.

Total pay divided into four components of pay package:

• Base salary.
• Tax equalization allowance.
• Benefits.
• Allowances.

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 Figure 16.6 The Balance Sheet for Determining Expatriate Compensation

Source: From C. Reynolds,

Access the text alternative for slide images. “Compensation of Overseas Personnel,” in Handbook of Human
Resource Administration, 2nd ed., ed. by J. J. Famularo, McGraw-Hill,
1986, p. 51. Reprinted with permission of The McGraw-Hill Companies, Inc.
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 Managing Expatriates 5

Helping Expatriates Return Home

Repatriation: process of preparing expatriates to return home from a foreign
assignment.
Two activities help make transition process smooth:
• Communication: expatriate receives information and recognizes changes at home while
abroad.
• Validation: expatriate receives recognition for overseas service upon returning home.

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 End of Chapter 16

© 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill. 39