Chapter 4

Global Human Resource

Management
 Introduction
• HRM is more complex in an international business
because of differences between countries in labor
markets, culture, legal systems, economic systems,
and so on.
• HRM must also determine when to use expatriate
managers (citizens of one country working
abroad),
• Who should be sent on foreign assignments, how
they should be compensated, how they should be
trained, and how they should be reoriented when
they return home.
 The Management Challenges of International
Business
• Coordinating market, product, and production
plans on a worldwide basis.
• Creating organization structures capable of
balancing centralized home-office control with
adequate local autonomy.
• Extending its HR policies and systems to
service its staffing needs abroad:
 Human Resource Management

What is Human Resource Management (HRM)?

Human Resource Management includes all activities used
to attract & retain employees and to ensure they perform
at a high level in meeting organizational goals.
These activities include:
1. Staffing (recruitment, selection).
2. Training and development.
3. Performance appraisal.
4. Compensation.
5. labor relations.
4
 Human Resource Management activities

Acquisition

Fairness Training

Human
Resource
Management
Health and
(HRM) Appraisal
Safety

Labor Relations Compensating

5
 The Strategic Role of International HRM

• Firms need to ensure there is a fit between

their human resources practices and strategy.
• In order to carry out a strategy effectively,
employees need the right training, an
appropriate compensation package, and a
good performance appraisal system
 Global Staffing Issues
• Selecting candidates for overseas assignment.
• Relocation processing.
• Immigration processing.
• Cultural and language orientation and training.
• Compensation processing.
• Tax administration.
• Career planning and development.
• Handling of spouse and dependent matters.
 Factors Affecting HRM in International Markets

Whatever their level of global participation,

organizations that operate in more than one
country must recognize that the countries are not
equal and differ in terms of four key factors:
• Culture.
• Education.
• Economic systems.
• Political systems.
Factors Affecting HRM in International Markets
 Culture
• Cultural characteristics influence the ways
members of an organization behave toward one
another as well as their attitudes toward various
HRM practices.
• Cultures strongly influence the suitability of HRM
practices.
• Cultural differences can affect how people
communicate and how they coordinate their
activities.
 Culture (continued)
• Organizations must prepare managers to
recognize and handle cultural differences.
– Recruit managers with knowledge of other cultures
– Provide training
• For expatriate assignments, organizations may
need to conduct an extensive selection process
to identify individuals who can adapt to new
environments.
 Education and Skill Levels
• Countries also differ in the degree to which their labor
markets include people with education and skills of
value to employers.
• Companies with foreign operations locate in countries
where they can find suitable employees.
• The educations and skill levels of a country’s labor force
affect how and the extent to which companies want to
operate there.
• In countries with a poorly educated population,
companies will limit their activities to low-skill, low-
wage jobs.
 Economic System

• A country’s economic system, whether

capitalist or socialist, as well as the
government’s involvement in the economy
through taxes or compensation, price controls,
and other activities, influences HRM practices in
a number of ways.
• The economic system provides many of the
incentives or disincentives for developing the
value of the labor force.
 Economic System

• In developed countries with great wealth, labor

costs are relatively high. This impacts
compensation and staffing practices.
• Income tax differences between countries make
pay structures more complicated when they
cross national boundaries.
 Political-Legal System
• The country’s laws often dictate the
requirements for HRM practices: training,
compensation, hiring, and firing.
• An organization that expands internationally
must gain expertise in the host country’s legal
requirements and ways of dealing with its legal
system.
• Organizations will hire one or more host-
country nationals to help in the process.
 1. Staffing Policy

When organizations operate globally. Employees may

come from:
• Parent (home)-country national – employee who was
born and works in the country in which an organization’s
headquarters is located.
•Host-country national – employee who is a citizen of
the country in which an organization operates a facility.
•Third-country national – employee who is a citizen of a
country that is neither the parent country nor the host
country of the employer.
 1. Staffing Policy

• A firm’s staffing policy is concerned with the

selection of employees who have the skills
required to perform a particular job
internationally.
• A staffing policy can be a tool for developing an
promoting the firm’s corporate culture (the
organization’s norms and value system)
• A strong corporate culture can help the firm
implement its strategy
 Types of Staffing Policy

There are three main approaches to staffing

policy within international businesses:

1. the ethnocentric approach.

2. the polycentric approach.

3. the geocentric approach.

 Types of Staffing Policy

1. The ethnocentric approach to staffing policy fills

key management positions with parent-country
nationals.
• It makes sense for firms with an international
strategy .
 Firms that pursue an ethnocentric policy believe
that:
• there is a lack of qualified individuals in the host
country to fill senior management positions.
 Types of Staffing Policy
• It is the best way to maintain a joined corporate
culture.
• Value can be created by transferring core
competencies to a foreign operation via parent
country nationals.
 The ethnocentric staffing policy is no longer
popular with most firms because:
• it limits advancement opportunities for host
country nationals.
• it can lead to "cultural myopia"
 Types of Staffing Policy
2. The polycentric staffing policy recruits host
country nationals to manage branches in their
own country, and parent country nationals for
positions at headquarters.
• It makes sense for firms pursuing a localization
strategy.
The polycentric approach:
• can minimize cultural myopia.
• may be less expensive to implement than an
ethnocentric policy.
 Types of Staffing Policy
 There are two disadvantages to the
polycentric approach:
• 1. host country nationals have limited
opportunities to gain experience outside their
own country and thus cannot progress beyond
senior positions in their own companies.
• 2. a gap can form between host country
managers and parent country managers.
 Types of Staffing Policy

3. The geocentric staffing policy seeks the best

people, regardless of nationality for key jobs.
• This approach is consistent with building a strong
joining culture and informal management
network
• It makes sense for firms pursuing either a global
or transnational strategy.
• Immigration policies of national governments
may limit the ability of a firm to pursue this
policy.
 Types of Staffing Policy
 The geocentric approach:
• Enables the firm to make the best use of its
human resources.
• Builds a team of international executives who
feel at home working in a number of different
cultures.
• Can be limited by immigration laws.
• Is costly to implement.