Global Human Resource Management. Vorravee Pattaravongvisut

Transcription

1 Global Human Resource Management Vorravee Pattaravongvisut

2 Traditional Organization Chart Top Management Middle Management Front-line people Customers

3 Customer Oriented Org Chart Customers Front-line people Customers Middle management Top management Customers

4 The Focus Look briefly at the strategic role of HRM. Examine HRM s four major tasks: Staffing policy. Management training and development. Performance appraisal. Compensation policy. Tasks are complicated by: Varying compensation policies among countries. Labor laws may prohibit unions in one country and mandate them in another. Equal employment legislation may be pursued in one country and not in another.

5 The Strategic Role of International HRM Insure that HRM policies are congruent with the firm s strategy, structure and controls.

6 Strategy, Structure and Control Systems International Strategy Structure Multidomestic International Global Transnational and Controls Centralization of operating decision Horizontal differentiation Decentralized Core competency Some centralized Mixed centralized centralized and decentralized Rest decentralized Informal matrix Worldwide area Worldwide Worldwide Informal matrix structure product division product division Need for coordination Low Moderate High Very high Integrating mechanisms Performance Ambiguity Need for cultural controls None Few Many Low Moderate High Low Moderate High Very many Very high Very high

7 Staffing policy: Staffing Policy Selecting individuals with requisite skills to do a particular job. Tool for developing and promoting corporate culture. Types of staffing policy: Ethnocentric. Polycentric. Geocentric.

8 Types of staffing policy Ethnocentric Polycentric Geocentric Key management positions filled by parent-country nationals Host-country nationals manage subsidiaries, parent company nationals hold key Headquarter positions Seek best people, regardless of nationality

9 Staffing (A) Three international staffing approaches: Ethnocentric: Focus on home country norms (HQ) Good for an international strategy Polycentric: Emphasize host country norms (Subsidiary) Good for a multidomestic strategy Geocentric: Flexibility is the key Good for global and transnational strategies

10 (B) Expatriates Staffing A manager working in a different country High expatriate costs: $300,000 annually High expatriate failure rates: More than 10% U.S. European Japanese expat failure 76% 41% 24% No. 1 problem for U.S. and European expats: Inability of spouse to adjust No. 1 problem for Japanese expats: Inability to cope with the larger responsibility

11 (C) Expatriate selection Staffing Self-orientation: Self-confidence Others-orientation: Open mindedness Perceptual ability: Cross-cultural sensitivity Cultural toughness: Ability to adjust to distant cultures In other words, don t select expats just based on technical skills and domestic track record!

12 Comparison of Staffing Approaches Staffing Strategic Approach Appropriateness Advantages Disadvantages Ethnocentric International Polycentric Multidomestic Geocentric Global and Transnational Overcomes lack of Produces resentment qualified managers in host country host nation Unified culture Can lead to cultural Helps transfer core myopia competencies Alleviates cultural Limits career mobility myopia Isolates headquarters Inexpensive to from foreign implement subsidiaries Uses human resources National immigration efficiently policies may limit Helps build strong implementation culture and informal Expensive management network

13 The Expatriate Problem Citizens of one country working in another. Inpatriates: expatriates who are citizens of a foreign country working working in the home country of their multinational employer. Expatriate failure: Premature return of the expatriate manager to his/her home country. Cost of failure is high: Estimate = 3X the expatriate s annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location).

14 Expatriate Failure Rates Recall Rate Percent Percent of Companies US Multinationals 20-40% 7% 10-20% 69 < European Multinationals 11-15% 3% <5 59 Japanese Multinationals 11-19% 14% <5 76

15 Reason for Expatriate Failure US Multinationals Inability of spouse to adjust. Manager s inability to adjust. Other family problems. Manager s personal or emotional immaturity. Inability to cope with larger overseas responsibilities. Japanese Firms Inability to cope with larger overseas responsibilities. Difficulties with the new environment. Personal or emotional problems. Lack of technical competence. Inability of spouse to adjust. European Multinationals: Inability of spouse to adjust.

16 Expatriate Selection An executive s domestic performance does not (necessarily) equate to his/her overseas performance. Self-orientation: Strengthen self-esteem, self-confidence and mental well-being. Others-orientation: Enhance ability to interact with host-country nationals. Perceptual ability: The ability to empathize - understand why people in host-country behave the way they do. Cultural toughness: How well an expatriate adjusts to a particular posting tends to be related to the country of assignment.

17 Training and development (A) Expats training Only 30% expats receive training Always a good idea to involve family Types of training Cultural training: Deeper understanding Foreign language training: Basics will be helpful Practical training: The nuts and bolts for survival Timing and intensity

18 Training and development Training: obtaining skills for a particular (foreign) posting. Development: develops manager s skills over his/her career in the Firm.

19 Training Training and development Practical training Language and cultural training Departure/entry Time

20 Training for Expatriate Managers Cultural: Seeks to foster an appreciation of the hostcountry s culture. Language: Can improve expatriate s effectiveness, relate more easily to culture and fostered a better firm image. Practical: Ease into day-to-day life of the host country.

21 Management and Development Strategy Programs designed to increase overall skill through mix of education and assignment rotations. Provides varied experience. Attempt to improve firm s management productivity and quality. Particularly true for transnational strategy. Unifying corporate culture and management networks. Socialize norms and value systems. Foster esprit de corps. Build informal networks Strengthen identification with company.

22 Didn t know what position they hold upon return. Repatriation of expatriates Firm vague about return, role and career progression. Took lower level job. Leave firm within one year. Leave firm within three years %

23 Performance Appraisal Problems: Unintentional bias. Host-nation biased by cultural frame of reference. Home-country biased by distance and lack of experience working abroad. Expatriate managers believe that headquarters unfairly evaluates and appreciates them. Many believe a foreign posting does not benefit their career.

24 Guidelines for Performance Appraisal More weight given to onsite manager s evaluation. Expat who worked in same location should assist home-office manager with evaluation. If foreign on-site manager preparing evaluation, home-office manager should be consulted before finalization.

25 Compensation (A) National differences in compensation Pay managers in different countries according to local norms, or on a global basis? Ethnocentric firms: Pay expats according to their home country standards Polycentric firms: Pay local rates Geocentric firms: Equalization seems to be the only way out in the long run; but it can be very costly

26 Compensation (B) Expatriate pay: Very expensive! Base salary: Similar to similar positions domestically Foreign service premium: 10-30% base salary, as an inducement Allowances Hardship Cost of living Housing Education Taxation and benefits

27 National differences in compensation CEO HR Director Accountant Mfg. Employee Argentina $860,704 $326,874 $63,948 $17, 884 Canada 742, ,070 44,866 36,289 Germany 421, ,785 61,375 36,934 Taiwan 179, ,491 30,652 11,924 UK 719, , ,839 28,874 US 1,403, ,181 66,377 44,680

28 Prague Mexico City Johannesburg Budapest Caracas New Delhi Manila Warsaw Bogota Istanbul Santiago Sao Paulo Buenos Aires Lisbon Jakarta Bangkok Kuala Lumpur Hong Kong Moscow Singapore Taipei Seoul Tel Aviv London Beijing New York Athens Tokyo New York = 100, June 1997 Source: The Economist, June 28, 1997, p Cost of living New York = 100

29 Compensation Issues Ethnocentric Polycentric Geocentric/Transnational How much home-country expatriates should be paid. Pay can and should be countryspecific. May have to pay its international cadre of managers the same.

30 Expatriate Pay Typically use balance sheet approach. Equalizes purchasing power across countries. Provides financial incentives to offset qualitative differences between assignment locations. Components of a typical expatriate compensation package include: Base salary. Foreign service premium. Various allowances. Tax differentials. Benefits.

31 International Labor Relations Foster harmony and minimize conflict between the firm and organized labor. Key issue: degree to which organized labor can limit the choices of an international business.

32 Concerns of Organized Labor Firms can counter bargaining power by threatening to move production to another country. International business will keep highly skilled tasks in home country and farm out only lowskilled tasks to foreign plants. Importing employment practices and contractual agreements from home country that may diminish union s influence and power.

33 Strategy of International Labor Try to establish international labor organizations. Lobby legislatures to restrict multinationals. Use United Nations to regulate multinationals. Efforts have not been successful.

34 Multinationals Approach to Labor Relations Decentralize: labor laws, union power and nature of collective bargaining varies from country to country. Now a trend toward Centralize: Want to rationalize global operations. Need to control labor costs and maximize threat of move to lower cost country. Competitive advantage can come from the way work is organized in a plant. Bargaining with local unions is, therefore, a priority. Before move, get new union approval for work practices.

35 International labor relations (A) Domestic unions: Resent job losses (B) Foreign unions: Resent exploitation by foreign bosses and companies (C) Global strategies of organized labor: Trying to establish international labor organiztions Lobbying governments to restrict MNEs Lobbying UN to regulate MNEs None has been very successful (e.g., Seattle protest in December 1999)

36 Managerial implications (A) Pay attention to cultural differences and their impact on HRM (B) Focus on key problem areas: Selection, training, and repatriation of expats; Development of local managers; and Compensation (C) Be open-minded enough to accommodate changes