International business

Angela gomez

chapter20.pptx

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International Business

Sixteenth Edition

Chapter 20

International Human Resource Management

Learning Objectives (1 of 2)

20-1 Profile international human resource management

20-2 Distinguish the perspective of the expatriate

20-3 Differentiate the staffing frameworks used by MNEs

20-4 Describe expatriate selection

Learning Objectives for the chapter.

Learning Objectives (2 of 2)

20-5 Appraise expatriate preparation

20-6 Summarize expatriate compensation

20-7 Profile expatriate repatriation

20-8 Describe expatriate failure

Learning Objectives for the chapter.

IHRM

Objective 20-1

What is IHRM?

What are the characteristics of IHRM?

Learning Objective 1: Profile international human resource management.

International Human Resource Management (IHRM) shepherds an MNE’s most valued assets—its people. IHRM organizes people within the MNE, developing policies and systems that improve individual productivity and collective performance. Opening and operating a business, whether a small-scale micronational or a vast multinational, requires finding people to implement the strategy, motivating them to perform well, upgrading their skills so they can move on to bigger challenges and, ultimately, retaining them.

IHRM is a performance driver, identifying, developing, staffing, compensating, and retaining the executives that command the requisite skills and outlooks to direct the MNE.

Types of Expatriates

Objective 20-2

Local

Expatriate

Home-country National

Parent-country National

Third-Country National

Inpatriate

Transpatriate

Learning Objective 2: Distinguish the perspective of the expatriate.

This chapter looks at two broad types of executives: locals and expatriates. A local is hired by the MNE in his or her home country to staff the local operations; no special provisions apply to his or her work contract. A German national working in the Berlin office of a German MNE, for example, fits this profile. An expatriate (or “expat”) is an executive sent to work temporarily in a country that is not his or her legal residence. There are various types of expatriates. A home-country national, also known as a parent-country national, is a citizen of the country where the firm is headquartered (i.e., a Brazilian national sent to the Argentinean subsidiary of her Brazilian MNE). A third-country national is neither a citizen of the home nor the host country (i.e., a Malaysian national running the Russian subsidiary of his Australian company). If the Malaysian executive is transferred to the MNE’s Australian headquarters, he is then an inpatriate. Finally, a transpatriate refers to expat lifers who work an ongoing series of international assignments, plan never to return to headquarters, and in extreme cases, profess neither a corporate nor national “home.”

Trends in Expatriate Assignments

Objective 20-2

Commuter Assignments

Who goes abroad

Women

Third-country Nationals

Reverse expatriates

Learning Objective 2: Distinguish the perspective of the expatriate.

So-called commuter assignments post an expatriate for a short span. In extreme cases, it comprises the workweek, with the expat returning home for the weekend—say, shuttling between Paris and Madrid.

Besides duration, who goes abroad changes. Traditionally, expatriates were mid- and upper-level executives sent overseas to develop leadership potential and prepare for greater responsibilities. Effectively, international assignments were career stepping-stones for the MNE’s best and brightest but now expat searches consider older employees, whose children have grown and whose spouses see an international assignment positively, and younger employees, who are single, more mobile, and eager to experience life abroad.

Expanding Scope of Women The gender dimension of expatriate selection evolves. In absolute terms, females compose roughly 20 percent of expatriates.49 Relative growth has been far more dramatic. Since 2001, MNEs in the Asia–Pacific region have seen a sixteen- fold increase in women on international assignments, MNEs in North America have seen nearly a fourfold rise, and Europe has doubled its count.

Growing Scope of Third-Country Nationals MNEs establish operations abroad in increasingly dissimilar markets—say, from the United States to Canada to England to India to Singapore to China to Vietnam. The changing workflow of globalization elevates the role of third-country nationals, who often have the outlook, resourcefulness, and versatility to run operations in diverse locales

Reverse Expatriates The rising importance of emerging markets refines our evolving ideas of expatriates. Historically, MNEs recruited executives in richer countries and assigned them to units in developing countries. Now, talented executives from emerging economies—so-called reverse-expats—are sent straight to richer countries to speed their development.

Staffing Frameworks

Objective 20-3

Ethnocentric

Polycentric

Geocentric

Learning Objective 3: Differentiate the staffing frameworks used by MNEs.

Ethnocentrism occurs when one group places itself at the top of a supposed hierarchy of relevant groups. Hence, the ethnocentric framework signifies the belief that the management principles and business practices used by headquarters are superior to those used in other countries.

Polycentrism is the principle of organizing around different, but equivalently important political, social, or economic centers. Hence, the polycentric staffing framework acknowledges the business practices of foreign centers as philosophically and practically equivalent to those at home. Because business in the home country differs from that in foreign markets, and given intrinsic cross-national equivalency, IHRM adapts policies and systems to the host business environment. Thus, local executives from local units (e.g., home nationals staff headquarters, Russians run Russian subsidiaries, Mexicans run Mexican subsidiaries, and so on.)

Geocentrism is a world-oriented set of attitudes and values that regards humanity as a single entity sharing universal outlooks and orientations. The geocentric staffing framework sees the blunt split of home-, host-, and third-country managers as needless divisions. Rather, it reasons the best way, wherever discovered, works everywhere, whenever applied. IHRM develops talented executives, regardless of their home nations or eventual host market, with the knowledge, skills, and abilities needed to get the job done.

Staffing Frameworks: Advantages and Drawbacks

Objective 20-3

Table 20.1 Frameworks to Staff International Operations: Principles and Practices

Learning Objective 3: Differentiate the staffing frameworks used by MNEs.

This figure illustrates the advantages and drawbacks to each staffing policy.

Expatriate Selection Considerations

Objective 20-4

What is expatriate selection?

What skills are required for success?

Learning Objective 4: Describe expatriate selection.

Screening executives to find those with the highest potential and greatest inclination for a foreign assignment anchors expatriate selection.

Successful expats usually have the following skills and abilities.

Technical competence An enduring selection criteria is an executive’s technical expertise, as indicated by past job performance, and his understanding of how to transfer it to the foreign unit.

Self-orientation An expatriate assignment is marked by ambiguity, uncertainty, and risk. Thrust into challenging situations, an expat’s effectiveness depends upon developing new knowledge, skills, and abilities.

Others orientation International travelers note that new situations in new settings challenge their values and outlooks. Understanding how colleagues, customers, and competitors in the local market see events, rather than criticizing dissimilar perspectives, supports strong performance.

Resourcefulness The precise job descriptions found in the job bank of the home office inevitably give way to far broader responsibilities in foreign subsidiaries. Complicating matters is the fact that the expat usually lacks the battery of resources she commanded at the home office. The call to do many jobs simultaneously requires finding ways to interpret how locals engage the workplace, make decisions, tolerate uncertainty, use power, and build consensus.

Global mindset reflects awareness of differences across countries coupled with a capacity to divine overlapping principles.

Successful Expats

Objective 20-4

Figure 20.4 Key Competencies of Expatriates

Learning Objective 4: Describe expatriate selection.

This figure illustrates the key competencies a successful expat will have.

Expat Preparation and Development

Objective 20-5

Pre-departure Programs

In-country Development Programs

Family Matters

Learning Objective 5: Appraise expatriate preparation.

Predeparture preparation programs Host-country familiarization and cross-cultural orientation anchor most preparation programs. A universal method is education about the way things work in the host country. Topics include politics, laws, economics, workplace practices, business etiquette, logistics options, and social situations.

In-country development programs In-country development efforts, often through mentorship programs, virtual meetings, and executive coaching, support the expatriate.

Family Matters Executives decline expatriate assignments for a variety of reasons, including compensation, security, and quality-of-life concerns. All pale in comparison to the influence of family and partner/spouse/children concerns—executives cite those reasons nearly 70 percent of the time they decline an expat offer.110 Furthermore, a persistent cause of poor performance is the struggles an expatriate’s spouse and children experience adapting to their new home. The foreign assignment is stressful for the expatriate, but the transfer can overwhelm the family. Challenges follow from education concerns, lifestyle adjustments, and families. Assistance with these family matters can make an assignment more successful.

Compensation Considerations

Objective 20-6

Conditions and considerations for reasonable salaries

Learning Objective 6: Summarize expatriate compensation.

Considerations for reasonable salaries.

IHRM’s mission is “keeping the expatiate whole,” setting compensation so that working abroad does not impose additional costs that diminish one’s standard of living.

IHRM devises packages that convince an executive and family to go abroad, reflect the responsibility of the foreign assignment, and ensure that their after-tax income will not fall because of the foreign assignment.

IHRM sets plans that preserve pay equity among peers, promote parity among expatriates, and ensure compensation competes with packages offered by rivals.

IHRM delivers compensation packages that reconcile parent- and host-country financial, legal, and customary practices.

IHRM devises efficiently administered compensation systems and policies. These tasks are formidable and inexorably expand in line with the scale and scope of the international operations.

Compensation Plans

Objective 20-6

Types of Compensation Plans

Home based method

Headquarters based method

Host based method

Global market method

Learning Objective 6: Summarize expatriate compensation.

Types of compensation methods.

Home-Based Method This method bases expatriate compensation on the salary of a comparable job in the expat’s hometown, thereby preserving equity with home-country colleagues as well as simplifying their eventual return.

Headquarters-Based Method This method sets the expatriate’s salary in the terms of a comparable job in the city where the MNE has its headquarters.

Host-Based Method Sometimes called destination pricing, going rate, or localization, this method bases expatriate compensation on the prevailing pay scales in the foreign locale. IHRM starts by setting the expatriate’s salary in terms of a local executive with similar responsibilities.

Global Market Method Variability in the types, conditions, and duration of expatriate assignments, from traditional to commuter to flexpatriate, require IHRM tweak compensation methods.

Components of Expat Compensation

Objective 20-6

Figure 20.2 Factors Influencing IHRM in IB

Learning Objective 6: Summarize expatriate compensation.

This figure shows the variety of aspects in relation to expatriates salary..

Repatriation

Objective 20-7

What is Repatriation?

Challenges with Repatriation

Learning Objective 7: Profile expatriate repatriation.

IHRM drives a cycle of events: selection, preparation, compensation, and repatriation. The latter task is the process of reintegrating an expatriate into the home company upon completion of her foreign assignment, intact, and in good spirits.

Career progression The principal cause of repatriation frustrations is finding the right job for the returning executive.

Changes in personal finance Returning home significantly alters the expat’s finances. Many enjoy rich benefits during an international assignment, living in exclusive neighborhoods, sending children to prestigious schools, employing domestic help, socializing with elites, and still saving a good amount. Returning home to a reasonable compensation plan with far fewer privileges can prove demoralizing

Personal readjustment Return challenges repatriates to readjust to home life.163 Problems emerge as they, and their families, experience reverse culture shock

Expatriate Failure

Objective 20-8

Definition

Costs associated with failure

Learning Objective 8: Describe expatriate failure.

Expatriate failure, narrowly defined, is a manager’s premature return home due to poor operational performance.

Expatriate failure is operationally costly, professionally detrimental, and personally stressful.

Some folks, despite best-intentions, do not adjust well to working abroad. In theory, an ideal expatriate’s technical qualification, self-confidence, resourcefulness, and global mindset make her effective anywhere and everywhere.172 For some, this ideal rings hollow given struggles overcoming the operational and lifestyle challenges of the assignment. Sadly, awareness of differences, as one might hear from an executive about to depart Boston for Bangkok, does not confirm the capacity to adapt to the odd, strange, and different. Displacement can lead to nostalgia, culture shock, and depression. Notwithstanding the glamour and rewards, the expatriate lifestyle moves some far beyond their comfort zone. Then, no matter the degree of preparation, a sought-after adventure devolves into a nerve wracking exile.