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Chapter 17 Managing Global Human Resources

PowerPoint Presentation by Charlie Cook The University of West Alabama

Part Five | Employee Relations

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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WHERE WE ARE NOW…

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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More managers and employers today find themselves managing people internationally. The purpose of this chapter is to improve your effectiveness at applying your human resource knowledge and skills when global issues are involved. The topics we’ll discuss include the internationalization of business, inter-country differences affecting HR, improving international assignments through selection, and training and maintaining international employees.

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List the HR challenges of international business.
Illustrate with examples how intercountry differences affect HRM.
List and briefly describe the main methods for staffing global organizations.
Discuss some important issues to keep in mind in training, appraising, and compensating international employees.
Explain with examples how to implement a global human resource management program.

LEARNING OUTCOMES

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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HR and the Internationalization of Business

The Global Challenges

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 HR policies and systems
to service staffing needs abroad

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Taking the company global triggers various management challenges. The employer has to install all those management systems it needs to manage its overseas activities. These management systems include organization structures, managerial controls, worldwide banking relationships, and, of course, human resource management systems for recruiting, selecting, training, and appraising and compensating its workers abroad.

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Challenges of International HRM

Deployment

Getting the right skills to where they are needed, regardless of geographic location

Knowledge and Innovation Dissemination

Spreading state-of-the-art knowledge and
practices throughout the organization regardless
of their origin

Identifying and Developing Talent
on a Global Basis

Identifying those who can function effectively in a global organization and developing their abilities

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Intercountry Differences Affecting HRM

International
Human Resource Management

Labor
relations

Political/Legal
systems

Economic
systems

Cultural factors and ethics issues

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Companies operating only within the United States generally have the luxury of dealing with a relatively limited set of economic, cultural, and legal variables. A company operating multiple units abroad doesn’t face such homogeneity. Managers have to be cognizant of and generally adapt their human resource policies and practices to cope with the cultural, political, legal, and economic differences among countries.

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Global Differences and Similarities
in HR Practices

International
HRM

Training and development practices

Use of pay and
other incentives

Purpose of performance appraisal

Personnel
selection
procedures

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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The wide variations in human resource management practices among companies around the world impact on and create complexity in the development of international HRM practices. A practice that works in one country may not work at all in another country and may even be illegal.

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Staffing the Global Organization

International staffing: Home or local?

Expatriates (expats)

Home-country nationals

Third-country nationals

Offshoring

Having local employees abroad do jobs that the firm’s domestic employees previously did in-house

Offshoring Issues

Effective local supervisory/management structure

Screening and required training for locals

Local compensation policies and working conditions

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Filling a company’s jobs abroad has traditionally been the heart of international human resource management. The process involves identifying and selecting the people who will fill the positions, and then placing them in those positions.

Offshoring and its increasing popularity raises important international staffing issues.

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Management Values and
International Staffing Policy

Ethnocentric

Geocentric

Top Management Values

Polycentric

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Experts classify top executives’ values related to how international operations are staffed as ethnocentric, polycentric, or geocentric.

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Selecting Expatriate Managers

Adaptability Screening

Assessing the assignee’s (and spouse’s)
probable success in handling the foreign transfer.

Overseas Assignment Inventory

A test that identifies the characteristics and attitudes international assignment candidates should have.

Realistic Previews

Cover problems to expect in the new job, as well as the cultural benefits, problems, and idiosyncrasies
of the country.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Adaptability screening aims to assess the expatriate assignees’ (and spouses’) probable success in handling the foreign transfer, and to alert the firm to issues (such as the impact on children) the move may involve and which may affect the assignee’s success in completing the international assignment.

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FIGURE 17–2 Five Factors Important in International Assignee Success and Their Components

I. Job Knowledge and Motivation

Managerial ability

Organizational ability

Imagination

Creativity

Administrative skills

Alertness

Responsibility

Industriousness

Initiative and energy

High motivation

Frankness

Belief in mission and job

Perseverance

II. Relational Skills

Respect

Courtesy

Display of respect

Kindness

Empathy

Nonjudgmental

Integrity

Confidence

III. Flexibility/Adaptability

Resourcefulness

Ability to deal with stress

Flexibility

Emotional stability

Willingness to change

Tolerance for ambiguity

Adaptability

Independence

Dependability

Political sensitivity

Positive self-image

IV. Extracultural Openness

Variety of outside interests

Interest in foreign cultures

Openness

Knowledge of local language(s)

Outgoingness and extraversion

Overseas experience

V. Family Situation

Adaptability of spouse and family

Spouse’s positive opinion

Willingness of spouse to live abroad

Stable marriage

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Figure 17-2 shows the five items identified in one study that asked international assignees from various countries to specify which traits were important for success in a foreign assignment.

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FIGURE 17–3
Overseas Assignment
Inventory

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Many firms also use tests such as the Overseas Assignment Inventory (OAI). This identifies the characteristics and attitudes international assignment candidates should have. Its publisher establishes local norms and conducts ongoing validation studies. Figure 17-3 illustrates the OAI.

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Inability of spouse
to adjust

Inability to cope
with overseas responsibilities

Lack of cultural
skills

Why Expatriate
Assignments Fail

Personality of expatriate

Personal
intentions

Family
pressures

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Several factors can impact on the likelihood that an expatriate assignment will be successful.

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Making Expatriate Assignments Successful

Realistic previews

Careful screening

Cultural and language training

Improved benefits package

Improved orientation

Helping
Expatriate Assignments Succeed

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Many employers post expatriates abroad, but often assignments fail. Understanding the main potential problems and what actions to take to make a successful assignment are important management skills.

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Orienting and Training Employees on International Assignment

Predeparture training is needed on:

The impact of cultural differences on
business outcomes

How attitudes (both negative and positive)
are formed and how they influence behavior

Factual knowledge about the target country

Language and adjustment and adaptation skills

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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When it comes to the orientation and training required for success overseas, the practices of most U.S. employers reflect more talk than substance. Executives tend to agree that international assignees do best when they receive the special training (in things like language and culture) that they require. However, few companies actually provide such training.

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Trends in Expatriate Training

Use of returning managers as resources to cultivate
the “global mind-sets” of their home-office staff.
Use of software and the Internet for cross-cultural training.
Rotating assignments that permit professional growth.
Management development centers where executives hone their overseas skills.
Classroom programs provide overseas executives with educational opportunities similar to stateside programs.
Continuing, in-country cross-cultural training.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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This slide lists some of the methods that firms use to provide continuing, in-country cross-cultural training during the early stages of an overseas assignment.

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Compensating Expatriates

The “Balance Sheet Approach”

Home-country groups of expenses—income taxes, housing, goods and services, and discretionary expenses—are the focus of attention.

The employer estimates what each of these four expenses is in the expatriate’s home country,
and what each will be in the host country.

The employer then pays any differences such
as additional income taxes or housing expenses.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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The most common approach to formulating expatriate pay is to equalize purchasing power across countries, a technique known as the balance sheet approach.

Table 17-1 in the textbook illustrates the balance sheet approach for someone transferring from the U.S. to Belgium.

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TABLE 17–1 The Balance Sheet Approach (Assumes U.S. Base Salary of $80,000)

Annual Expense	Chicago, U.S.	Brussels, Belgium (US$ Equivalent)	Allowance
Housing & utilities	$35,000	$67,600	$32,600
Goods & services	6,000	9,500	3,500
Taxes	22,400	56,000	33,600
Discretionary income	10,000	10,000	0
Total	$73,400	$143,100	$69,700

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Incentives for International Assignments

Foreign Service Premiums

Financial payments over and above regular base pay, and typically range between 10% and 30% of base pay

Hardship Allowances

Payments to compensate expatriates
for exceptionally hard living and working conditions at certain foreign locations

Mobility Premiums

Lump-sum payments to reward employees for moving from one assignment to another

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Employers use incentives to encourage participation in international assignments. Foreign service premiums are financial payments over and above regular base pay. Hardship allowances compensate expatriates for hard living and working conditions at certain foreign locations. Mobility premiums are lump-sum payments to reward employees for moving from one assignment to another.

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Steps in Establishing a Global Pay System

Identify any gaps in existing rewards systems.

Develop a global compensation philosophy framework.

Systematize pay systems worldwide.

Adapt global pay policies to local conditions.

Conduct an ongoing pay policies program assessment.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Balancing global consistency in compensation with local considerations starts with establishing a rewards program that supports the employer’s strategic needs. In practice, doing so involves five steps (probably over several years).

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Appraising Expatriate Managers

Challenges

Determining who should appraise the manager.

Deciding on which factors to base the appraisal.

Improving the Expatriate Appraisal Process

Stipulate the assignment’s difficulty level, and
adapt the performance criteria to the situation.

Weigh evaluation more toward on-site manager’s appraisal than toward that of the home-site manager.

If home-office manager does appraisal, use a former expatriate from same overseas location for advice.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Several things complicate the task of appraising an expatriate’s performance. The questions of who will appraise the expatriate and which performance measures to use are crucial.

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International Labor Relations

Industry-wide centralization

Content and scope of bargaining

Employer organization

Multiple union recognition

Characteristics of European Labor Relations

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Firms opening subsidiaries abroad will find substantial differences in labor relations practices among countries and regions. This is important, because, while union membership is dropping in the United States, it is still relatively high abroad, and unions abroad therefore tend to be more influential. Union-employer relations vary markedly across different European countries.

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Terrorism, Safety, and Global HR

Taking Protective Measures

Crisis management teams

Intelligence services

Kidnapping and Ransom (K&R) Insurance

Crisis situations

Kidnapping: employee is a hostage
until employer pays a ransom

Extortion: threatening bodily harm

Detention: holding employee without
any ransom demand

Threats to property or products unless
employer makes a payment

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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The increased threat of terrorism is affecting human resource activities in many ways. Prospective expatriates are increasingly reluctant to take their families abroad, and those who do are demanding more compensation. Travel between countries is becoming more difficult. And for employees and facilities abroad, employers have had to institute more comprehensive safety plans, as well as other measures.

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Repatriation: Problems and Solutions

Problem

Making sure that the expatriate and his or her family don’t feel that the company has left them adrift.

Solutions

Match the expat and his or her family with
a psychologist trained in repatriation issues.

Make sure the expat always feels “in the loop”
with what’s happening back at the home office.

Provide formal repatriation services when
the expat returns home.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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A worrisome fact about sending employees abroad is that 40% to 60% of them will probably quit within 3 years of returning home. Given the investment in training and sending these high-potential people abroad, it makes sense to do everything possible to make sure they stay with the firm. For this, formal repatriation programs can be quite useful.

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How to Implement a Global HR System

Best practices in developing worldwide human resource policies and practices:

Form global HR networks that make local HR managers a part of global teams.

Remember that it’s more important to standardize ends and competencies than specific methods.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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With employers increasingly relying on local rather than expatriate employees, transferring one’s selection, training, appraisal, pay, and other human resource management practices abroad is a top priority.

Employers who successfully implement global HR systems do so by applying several best practices. This enables them to install uniform global human resource policies and practices around the world. The basic idea is to develop systems that are acceptable to employees in units around the world, and ones that the employers can implement more effectively.

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Making the Global HR System
More Acceptable

Best practices for making a global HR system
more acceptable to local managers:

Remember that global systems are more accepted in
truly global organizations.

Investigate pressures to differentiate and determine
their legitimacy.

Try to work within the context of a strong corporate culture.

Implementing the global HR system:

Constant contact: “You can’t communicate enough.”

Dedicate adequate resources for a global HR effort.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Employers engage in three best practices so that the global human resource systems they develop will be acceptable to local managers around the world.

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TABLE 17–2 Summary of Best Global HR Practices

Work within existing local systems—integrate global tools into local systems
Create a strong corporate culture
Create a global network for system development— global input is critical
Treat local people as equal partners in system development
Assess common elements across geographies
Focus on what to measure and allow flexibility in how to measure
Allow for local additions beyond core elements
Differentiate when necessary
Train local people to make good decisions about which tools to use and how to do so
Communicate, communicate, communicate!
Dedicate resources for global HR efforts
Know, or have access to someone who knows, the legal requirements in each country

Do . . .

Try to do everything the same way everywhere
Yield to every claim that “we’re different”—make them prove it
Force a global system on local people
Use local people just for implementation
Use the same tools globally, unless you can show that they really work and are culturally appropriate
Ignore cultural differences
Let technology drive your system design—you can’t assume every location has the same level of technology investment and access
Assume that “if we build it they will come”—you need to market your tools
or system and put change management strategies in place

Don’t . . .

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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Table 17-2 below summarizes best practices for instituting global HR systems.

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K E Y T E R M S

codetermination

expatriates (expats)

home-country nationals

third-country nationals

ethnocentric

polycentric

geocentric

adaptability screening

foreign service

premiums

hardship allowances

mobility premiums

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Human Resources Management 12e Gary Dessler

Human Resources Management 12e
Gary Dessler

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