chp12

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Alan M Rugman and Simon Collinson, International Business, 5th Edition, © Pearson Education Limited 2009

Human resourcemanagement strategy

Chapter 12

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Introduction

• International human resource management (IHRM)– the process of selecting, training, developing and

compensating personnel in overseas positions.

• Three basic sources of personnel talent that MNEs can tap for these positions:– home-country nationals (expatriates)– host-country nationals– third-country nationals.

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Figure 12.1 The management of multinational enterprisesSource: Reprinted from Columbia Journal of World Business, Summer 1973, Lawrence G. Franko, “Who Manages Multinational Enterprises?” page 33, Copyright 1973, with permissionfrom Elsevier Science

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Selection and repatriation

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International screeningcriteria and selection procedures

• International screening criteria:– adaptability

– self-reliance

– age, experience and education

– health and family status

– motivation and leadership

• Selection procedures:– interviews (often including spouse)

– tests.

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Repatriation of expatriates

• Reasons for repatriation:– The predetermined time assignment is completed.

– Expatriates’ desire to have their children educated in the home country.

– Expatriate might be unhappy overseas.

– Expatriate might have performed poorly.

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Readjusting

• Expatriates might find it difficult to adjust back to the home environment. A number of reasons can be cited:– The home office job lacks the high degree of

authority and responsibility that expatriates had in their overseas job.

– A feeling that the company does not value international experience.

– They may no longer be well known among people at headquarters.

– Their old job may have been eliminated or drastically changed.

– Technological advances at headquarters may have rendered their existing skills and knowledge obsolete.

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Adjustment strategies

• Transition strategies are designed to help smooth the move from foreign to domestic assignments.– The repatriation agreement, which spells out how

long a person will be posted overseas and sets forth the type of job the person will be given upon returning.

– To rent or maintain the expatriate’s home during the overseas tour.

– To assign a senior executive as a sponsor for each manager who is posted abroad.

– To maintain ongoing communications with expatriate managers, thereby ensuring that they are aware of what is happening in the home office.

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Training and development

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Training and development

• Training: the process of altering employee behaviour and attitudes in a way that increases the probability of goal attainment.

• Managerial development: the process by which managers obtain the necessary skills, experiences and attitudes they need to become or remain successful leaders.

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Training programs

• Types of training: – Standardized training programs: generic

programs that can be used with managers anywhere in the world.

– Tailor-made training programs: designed to meet the specific needs of the participants and typically include a large amount of culturally based input.

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• Research shows that the following six types of programs are most popular:– Environmental briefings used to provide information about

such things as geography, climate, housing and schools.– Cultural orientation designed to familiarize the individual with

cultural institutions and value systems of the host country.– Cultural assimilators using programmed learning approaches

designed to provide the participants with intercultural encounters.

– Language training.– Sensitivity training designed to develop attitudinal flexibility.– Field experience, which sends the participant to the country

of assignment to undergo some of the emotional stress of living and working with people from a different culture.

Training programs (Continued)

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Compensation

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International compensation package

• Common elements in an international compensation package– Base salary: the amount of cash compensation

that an individual receives in the home country. – Benefits– Allowances

• Cost-of-living allowance: payment to compensate for differences in expenditures between the home country and the foreign location.

• Hardship allowance: is a special payment made to individuals who are posted to areas that are regarded as less desirable.

– Tax protection and/or tax equalization.

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Current compensation trends

• Owing to the high costs of expatriates, MNEs are:– Not sending expatriates to overseas positions

unless there is a need for their specific services.

– Increasingly replacing permanent relocation and long-term assignment with as-needed short trips that typically last less than a year.

– A growing number of MNEs are now dropping bonuses or premiums for overseas assignments and replacing them with lump-sum premiums.

– Many companies are beginning to phase out incentive premiums.

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Figure 12.2 Cost of expatriate managersSource: C. Reynolds, “Compensation of Overseas Personnel,” in J. J. Famularo (ed.), Handbook of Human Resource Administration, 2nd ed. (New York: McGraw-Hill, 1986), p. 51. Reproduced with permission of The McGraw-Hill Companies

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Labour relations

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Figure 12.3 Labour unions worldwide, 1995 (percentage of labour force that is unionized)Source: International Labor Organization, World Labour Report, November 1997

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Labour relations practices

• Labour unions have been traditionally strong in Germany. – Unions set the pay scale for around 90 percent of

the country’s workers, with wages determined by job classifications.

– Union membership is voluntary, but there is only one union in each major industry.

• In Japan, union–management relationships are extremely cooperative. – Social custom dictates non-confrontational

behavior.

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Industrial democracy

• Industrial democracy: the legally mandated right of employees to participate in significant management decisions.

• Forms of industrial democracy. – Codetermination: a legal system that requires workers and their

managers to discuss major strategic decisions before companies implement the decisions. • Popular in Europe: legally mandated in Austria, Denmark, the Netherlands, and

Sweden

– Work councils: groups that consist of both worker and manager representatives and are charged with dealing with matters such as improving company performance, working conditions, and job security.• Most powerful in Germany, the Netherlands, and Italy, although popular

throughout Europe

– Shop floor participation: giving workers an opportunity to make their voices heard• Most popular in Scandinavian countries, and has spread to other EU nations

and the US

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Industrial democracy in action

• In Germany, industrial democracy andcodetermination are both very strong, especially in the steel and auto industries.

• In Denmark, industrial democracy gives workers the right to participate in management on both a direct and an indirect basis.

• Japan’s use of industrial democracy concepts are not tied to political philosophy, as in Europe, but more oriented toward Japanese culture and the belief in group harmony.

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Cultural assimilators

• A cultural assimilator is a programmed learning technique that is designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another culture. – Cultural assimilators are developed for pairs of

cultures, such as to familiarize managers from the US with the culture in Germany.

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Five Specially Designed HRM Programs

• Structural empowerment• Accelerated resource development• Employee welfare• An efficiency emphasis• An emphasis on long-term results

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Table 12.4 HRM practices in select countriesSource: Adapted from Journal of World Business, Vol. 32, No. 3, 1997, Paul R. Sparrow and Pawan S. Budhwar, “Competition and Change: Mapping the Indiana HRM Recipe Against World-Wide Patterns,” p. 233, Copyright © 1997 with permission from Elsevier Science

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