InternationalBusinessManagement.Chapter_19.pptx

International Business

1. International Business 11e By Charles W.L. Hill Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. Chapter 19 Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Global Human Resource Management

3. What Is Human Resource Management? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 3 Human resource management (HRM) - the activities an organization carries out to utilize its human resources effectively These activities include determining human resource strategy staffing performance evaluation management development compensation labor relations Firms need to ensure that there is a fit between their human resources practices and strategy

4. What Is the Strategic Role of HRM in International Firms? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 4 HRM can help the firm reduce the costs of value creation and add value by better serving customer needs more complex in an international business differences between countries in labor markets, culture, legal systems, economic systems, etc.

5. What Is the Strategic Role of HRM in International Firms? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 5 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 how they should be reoriented when they return home

6. What Is the Strategic Role of HRM in International Firms? The Role of Human Resources in Shaping Organizational Architecture Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 6

7. What Is a Staffing Policy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 7 Staffing policy is concerned with the selection of employees who have the skills required to perform a particular job can be a tool for developing an d promoting the firm’s corporate culture the organization’s norms and value system a strong corporate culture can help the firm implement its strategy

8. What Is a Staffing Policy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 8 Three main approaches to staffing policy: The ethnocentric approach - fill key management positions with parent-country nationals The polycentric approach - recruit host-country nationals to manage subsidiaries in their own country, and parent-country nationals for positions at headquarters The geocentric approach - seek the best people, regardless of nationality, for key jobs

9. Why Choose an Ethnocentric Staffing Policy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 9 Firms that pursue an ethnocentric policy believe that there is a lack of qualified individuals in the host country to fill senior management positions it is the best way to maintain a unified corporate culture value can be created by transferring core competencies to a foreign operation via parent country nationals it makes sense with an international strategy But it limits advancement opportunities for host country nationals it can lead to "cultural myopia"

10. Why Choose a Polycentric Staffing Policy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 10 The polycentric approach makes sense for firms pursuing a localization strategy can minimize cultural myopia may be less expensive to implement than an ethnocentric policy But host-country nationals have limited opportunities to gain experience outside their own country and so cannot progress beyond senior positions in their own subsidiaries a gap can form between host-country managers and parent-country managers

11. Why Choose a Geocentric Staffing Policy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 11 The geocentric approach is consistent with building a strong unifying culture and informal management network makes sense for firms pursuing a global or transnational strategy enables the firm to make the best use of its human resources builds a cadre of international executives who feel at home working in a number of different cultures But can be limited by immigration laws is costly to implement

12. Which Staffing Policy Is Best? Comparison of Staffing Approaches Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 12

13. What Is Expatriate Failure? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 13 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 each expatriate failure can cost between $40,000 and $1 million between 16% and 40% of all American expatriates in developed countries fail and almost 70% of Americans assigned to developing countries fail

14. What Is the Rate of Expatriate Failure? Expatriate Failure Rates Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 14

15. Why Do Expatriate Managers Fail? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 15 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

16. Why Do Expatriate Managers Fail? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 16 The reason for European expatriate failure is the inability of the manager’s spouse to adjust 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

17. How Can Firms Reduce Expatriate Failure? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 17 Firms can reduce expatriate failure through improved selection procedures Four dimensions that predict expatriate success are Self-orientation - the expatriate's self-esteem, self- confidence, and mental well-being Others-orientation - the ability to interact effectively with host-country nationals Perceptual ability - the ability to understand why people of other countries behave the way they do Cultural toughness – the ability to adjust to the posting

18. Expatriate failures can be a costly problem for multinational enterprises. As such, expatriate selection is an important role for global human resource managers. If you were an HR manager for a London-based multinational enterprise that was launching a subsidiary in your home town, what are some challenges that you would expect an expatriate manager to face, and how might you seek to minimize those challenges and reduce the chance of failure? How would your response change if your company was based in Japan, India, or South Africa? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 18

19. Why Is a Global Mindset Important? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 19 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

20. What Is Training and Management Development? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 20 After selecting a manager for a position, training and development programs should be implemented Training focuses upon preparing the manager for a specific job Management development is concerned with developing the skills of the manager over time gives the manager a skill set and reinforces organizational culture Historically, most firms focus more on training than on management development

21. Why Is Training Important for Expatriate Managers? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 21 Training can reduce expatriate failure Cultural training - fosters an appreciation for the host country's culture Language training - an exclusive reliance on English diminishes an expatriate's ability to interact with host country nationals Practical training - helps the expatriate and expatriate’s family ease into day-to-day life in the host country But, studies show that only about 30% of managers sent on one- to five-year expatriate assignments received training before their departure

22. What Happens When Expatriates Return Home? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 22 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

23. Why Is Management Development Important to Firm Strategy? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 23 Management development programs increase the overall skill levels of managers through ongoing management education rotations of managers through jobs within the firm to give them varied experiences Management development can be a strategic tool to build a strong unifying culture and informal management network support both transnational and global strategy

24. How Should Expatriates Be Evaluated? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 24 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

25. How Can Performance Appraisal Bias Be Reduced? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 25 To reduce bias in performance appraisal more weight should be given to an on-site manager's appraisal than to an off-site manager's appraisal a former expatriate who has served in the same location should be involved in the process Home-office managers should be consulted before an on-site manager completes a formal termination evaluation

26. What Are the Key Issues in Compensating Expatriates? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 26 Two key issues on compensation How to adjust compensation to reflect differences in economic circumstances and compensation practices How to pay expatriate managers

27. How Should National Differences in Compensation Be Treated? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 27 Currently, there are substantial differences in executive compensation across countries Research shows a top U.S. executive made an average of $525,923 in the 2005-2006 period, compared to $278,697 in Japan, and $158,146 in Taiwan

28. How Should National Differences in Compensation Be Treated? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 28 Question: Should pay be equalized across countries? Many firms have recently moved toward a compensation structure that is based on global standards especially important in firms with a geocentric staffing policy But, most firms still set pay according to the prevailing standards in each country

29. How Should Expatriates Be Paid? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 29 Most firms use the balance sheet approach equalizes purchasing power across countries so employees have the same living standard in their foreign posting as at home and adds a financial incentive to take the position

30. How Should Expatriates Be Paid? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 30 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 can be paid either in the home currency or in the local currency Foreign service premium - extra pay the expatriate receives for working outside his country of origin generally offered as an incentive to accept foreign assignments

31. How Should Expatriates Be Paid? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 31 Various allowances - hardship, housing, cost-of- living, education Tax differentials - may have to pay income tax to both the home-country and host-country governments when no reciprocal tax treaty exists company usually covers extra tax assessments Benefits – many firms provide the same level of medical and pension benefits abroad that employees receive at home

32. Why Are International Labor Relations Important? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 32 Question: Can organized labor limit the choices available to an international business? Labor unions can limit a firm's ability to pursue a transnational or global strategy HRM needs to foster harmony and minimize conflict between management and organized labor

33. What Are the Concerns of Organized Labor? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 33 Organized labor is concerned that Multinationals can counter union bargaining power by threatening to move production to another country Multinationals will farm out only low-skilled jobs to foreign plants making it easier to switch production locations Multinationals will import employment practices and contractual agreements from their home countries and reduce the influence of unions

34. How Does Organized Labor Respond to MNC Power? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 34 Organized labor has responded to the increased bargaining power of multinational corporations by Trying to set-up their own international organizations Lobbying for national legislation to restrict multinationals Trying to achieve regulation of multinationals through international organizations, such as the United Nations So far, these efforts have had only limited success

35. How Are MNCs Responding to Organized Labor? Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19- 35 Many firms are centralizing labor relations to enhance the bargaining power of the multinational vis-à-vis organized labor in the past, labor relations were usually decentralized to individual subsidiaries The way in which work is organized within a plant can be a major source of competitive advantage, so it is important for management to have a good relationship with labor