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GLOBALBUSINESS_HUMMANRESOURCES.pptGLOBAL BUSINESS COURSE
GLOBAL HUMAN RESOURCE MANAGEMENT
WEEK 6
Meritxell Solé
SUMMER 1 2019-2020
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Opening case: “A Global Team of Mary Kay Inc.”
“A company is only as good as its people. … In order to grow and progress in sales force, you don’t move upward, you expand outward. This gives the independent sales force a deep sense of personal worth.”
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Founded in 1963 by Mary Kay Ash, it’s an American privately owned multilevel marketing company that sells cosmetic products in more than 35 countries. Mary Kay Ash’s son, Richard Rogers, is board chair, and David Holl is president and CEO. The multilevel marketing model adopted by Mary Kay Inc. involves “beauty consultants” selling directly to customers in local community. Direct selling approach and local focus create a unique global workforce model. The company’s global sales force exceeds 3.5 million distributors, with some $4 billion in wholesale sales worldwide. Since opening its first international operations in Australia in 1971, Mary Kay has expanded to more than 35 countries on 5 continents. It ranks as one of the top brands in the US. “Pink” has become associated with Mary Kay—from its beginning as a “Mary Kay pink” color on 1968 Cadillac Mary Kay bought herself as a reward after 5 successful years. As part of Mary Kay rewards program, in 1969 five pink Cadillacs were rewarded to top salespeople. From this start, recognition of people has been an integral part of the Mary Kay culture and experience.
The idea is that recognizing achievements heightens ambition among the workforce, and success globally becomes a cultural value system. Pink Cadillacs to diamond bumblebees to Mary Kay porcelain dolls to trips to exotic locations such as Australia, England, Greece, and China motivate the Mary Kay beauty distributors. This people focus is a staple of the Mary Kay global philosophy.
Similarities among Mary Kay operations globally outweigh any country-to-country differences. And, importantly, just as original reasoning was for founding the company in the US, Mary Kay is an important factor in the employment of women in the workforce in many countries, particularly in developing nations. While products may vary to meet the needs and preferences of local consumers in the global marketplace, they are held to the same rigid quality-control standards whether they are purchased in the USA, Brazil, China, or Russia. This quality backing gives independent beauty consultants assurances that they are part of a trustworthy Mary Kay Inc. team.
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A GLOBAL TEAM AT MARY KAY INC.
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- A multilevel marketing company selling cosmetic products in more than 35 countries.
- “Beauty consultants” sell directly to customers.
- Global independent sales force exceeds 3.5 million with $4 billion in wholesale sales worldwide.
- Recognition of people integral part of the Mary Kay culture – recognizing achievement heightens ambition.
- Mary Kay global philosophy “A company is only as good as its people . . .”
- Employs women in the workforce in many countries, particularly developing nations.
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INTERNATIONAL HRM
HRM is more complex in an international business because of differences between countries in LABOR MARKETS, CULTURE, LEGAL SYSTEMS, ECONOMIC SYSTEMS, ETC.
- International HRM also deals with issues related to expatriate managers (citizens of one country working abroad):
- When to use expatriates.
- Who to send on expatriate postings.
- How expatriates should be compensated.
- How to handle the repatriation of expatriates.
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STRATEGIC ROLE OF GLOBAL HRM
- Strategy is implemented through organization:
People are the linchpin to the firm’s organizational architecture,
Superior HRM can be a sustained source of high productivity and competitive advantage in a global economy.
- Success in international business requires that HRM policies be congruent with the firm’s strategy!
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THE ROLE OF HUMAN RESOURCES IN SHAPING ORGANIZATIONAL ARCHITECTURE
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WILL WE SEE AN INFLUX OF CHINESE WORKERS WORLDWIDE?
Asia is among the fastest-growing areas of the world for international students. For example, foreign enrollment of students at universities in Indonesia and South Korea has more than doubled since 2005. In particular, China has become the most popular destination in Asia, and the country ranks 3rd among all countries in hosting international students. Education in China is still a state-run system of public education, where the Ministry of Education is in charge. By some estimates, China has been growing investment in education by some 20% annually for more than a decade, and the quality of education has been improved along with this increased spending. This has resulted in Chinese people becoming more knowledgeable about today’s global marketplace; adding to the pool of talent are the Chinese who are educated abroad and decide to return home after their education. Collectively, these highly educated Chinese are more likely to want to work for a foreign company than a Chinese company. Companies already recruit Chinese in China for their foreign operations, but how significant do you think the potential influx of Chinese-educated people around the world will become in the next five years?
Source: K. Sheehy, “Explore the World’s Top Universities,” U.S. News & World Report, October 8, 2013
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STAFFING POLICY
Staffing policy is concerned with the selection of employees for a particular job.
- It involves selecting people who have the right skills for a particular job;
- It also involves developing and promoting the corporate culture of the firm: the organization’s norms and value systems.
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TYPES OF STAFFING POLICY
The ethnocentric approach: key management positions are filled by parent-country nationals.
The polycentric approach: host country nationals manage local subsidiaries and parent country nationals hold positions at HQ.
The geocentric approach: the best people are sought for key jobs throughout the organization, regardless of their nationality:
The most attractive policy is the geocentric approach, however it is not always easy to implement.
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ETHNOCENTRIC APPROACH
Ethnocentric Approach makes sense for firms with an international strategy.
Attractive when:
There is a lack of qualified individuals in the host country, to fill senior management positions,
A unified corporate culture is desired,
The firm wants to transfer knowledge of core, competencies to the foreign operation.
Unattractive because:
It limits the advancement of host country nationals,
It can lead to cultural myopia.
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POLYCENTRIC APPROACH
Polycentric Approach is best suited to firms pursuing localization.
- Minimizes the dangers of cultural myopia, but can create a gap between home and host country operations.
Attractive because:
- The firm is less likely to suffer from cultural myopia,
- It may be less expensive to implement.
Unattractive because:
- Host country nationals do not gain foreign experience and cannot progress beyond senior positions in their own subsidiaries,
- A gap can form between host country and parent managers.
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GEOCENTRIC APPROACH
Geocentric Approach makes sense for firms with global or transnational strategies.
- Consistent with building a strong unifying culture and informal management network.
Advantages:
- Makes the best use of human resources,
- Builds a cadre of international executives who feel at home working in a number of different cultures.
Disadvantages:
- Difficulties with immigration laws,
- Costs associated with implementing the strategy.
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COMPARISON OF STAFFING APPROACHES
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| Staffing Approach | Strategic Appropriateness | Advantages | Disadvantages |
| Ethnocentric | International | Overcomes lack of qualified managers in host nation Unifies culture Helps transfer core competencies | Produces resentment in host country Can lead to cultural myopia |
| Polycentric | Localization | Alleviates cultural myopia Inexpensive to implement | Limits career mobility Isolates headquarters from foreign subsidiaries |
| Geocentric | Global standardization and transnational | Uses human resources efficiently Helps build strong culture and informal management networks | National immigration policies may limit implementation Expensive |
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STAFFING POLICY - EXPATRIATES
Expatriate Managers
Ethnocentric and geocentric approaches rely on expatriate managers
Firms that use expatriates must consider the problem of expatriate failure: the premature return of an expatriate manager to the home country.
Expatriate Failure Rates
U.S. firms have higher expatriate failure rates than either European or Japanese firms
Research shows that 76% of U.S. MNEs had expatriate failure rates of 10% or more and 7% had failure rates as high as 20%,
Failure rates may have dropped, but estimates of the cost of expatriate failure range from $40,000 to $1 million.
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STAFFING POLICY - EXPATRIATES
The main reasons for expatriate failure for U.S. MNEs:
- The inability of an expatriate's spouse to adjust
- The inability of the manager to adjust
- Other family problems
- The manager’s personal or emotional maturity
- The inability to cope with larger overseas responsibilities
For European firms, only one reason was found to consistently explain expatriate failure
- The inability of the manager’s spouse to adjust to a new environment
For Japanese firms, the reasons for failure were
- 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 a spouse to adjust
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STAFFING POLICY – EXPATRIATE SELECTION
- Expatriate failure rates can be reduced through better selection procedures.
- Mendenhall and Oddou identified four dimensions that predict expatriate success:
- Self-orientation (dimension strengthen the expatriate’s self-esteem, self-confidence, and mental well-being).
- Others-orientation (enhance the expatriate’s ability to interact effectively with host-country nationals).
- Perceptual ability (ability to understand why people of other countries behave the way they do, that is, the ability to empathize).
- Cultural toughness (relationship between the country of assignment and how well an expatriate adjusts to a particular posting).
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WOULD YOU SEND A WOMAN ON AN INTERNATIONAL ASSIGNMENT?
Would you send a woman expatriate to Saudi Arabia, Japan, Korea, or Kuwait? How are Western women expatriates doing in foreign cultures that have traditionally limited women’s public roles?
In many cases, women sent to these countries have met with substantial success. Their key challenge is often simply to get the assignments! Once in place, women expatriates are usually successful. This is in part because once in the culture, women expatriates are seen first as expatriates who fall outside the local role for women. In addition, “expat” women also have salience in their new environment—they are noticed—and this can be a distinct business advantage. Locals often take pride in developing business relationships with women expatriates because by doing so, they can suggest that the foreign stereotype of their culture is superficial and incomplete. But cultural barriers still remain, with some cultures having restrictions on what women are allowed to do and not do in business settings and social life.
With these lingering potential problems in some countries in the world, would you send a woman on an international assignment?
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GLOBAL MINDSET
- Some experts believe that a global mindset is essential to the success of global managers.
- It is predicted that people’s global mindset will improve significantly in the next 20 years.
- 90% of the time employees are selected based on their technical expertise rather than important traits such as cultural sensitivity and adaptability.
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TRAINING & MANAGEMENT DEVELOPMENT
- Training focuses upon preparing the manager for a specific job.
- Management development focuses on developing the skills of the manager over career with the firm.
- Traditionally, training has been considered more important than management development, however this mindset is beginning to shift.
Training for Expatriate Managers:
- CULTURAL TRAINING: seeks to foster an appreciation for the host country's culture.
- LANGUAGE TRAINING: improves the effectiveness of managers and helps them better relate to the foreign country.
- PRACTICAL TRAINING: helps the expatriate manager and family ease into day-to-day life of the host country.
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LANGUAGE TRAINING IN LENOVO
Lenovo decided that English has to be the official language of the company, even though it is a Chinese enterprise.
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MANAGEMENT DEVELOPMENT & NETWORK
Management development programs increase the skill levels of managers:
- Management education,
- The rotation of managers through jobs.
Management development is often used as a strategic tool to build a strong unifying culture and informal management network
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PERFORMANCE APPRAISAL
- Performance appraisal systems are used to evaluate employees.
- These systems are important components in the firm’s control system.
Performance Appraisal Problems:
Unintentional bias,
Host country managers can be biased towards their own frame of reference,
Tend to rely on hard data: productivity, profitability, market share.
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GUIDELINES FOR 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 appraisal process.
- Home office managers should be consulted before an on-site manager completes a formal termination evaluation.
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COMPENSATION
Two key issues:
- Adjusting compensation to reflect national differences in economic circumstances and compensation practices.
- How expatriate managers should be paid.
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NATIONAL DIFFERENCES IN COMPENSATION
- Firms using a geocentric policy that want to develop an international cadre of managers must pay executives the same salary regardless of their country of origin.
- If a firm does not equalize pay, it could create resentment among foreign nationals.
- A recent Mercer Management Consulting survey showed that some 85% of companies in the survey have a global compensation strategy in place.
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McDonald's Global Compensation Practices
"McDonald's benefits and compensation program is designed to attract, retain and engage talented people who will deliver strong performance and help McDonald's achieve our business goals and objectives.”
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With more than 400,000 managers and senior staff employees in 118 countries around the world, by the early 2000s McDonald’s realized it had to develop a consistent global compensation and performance appraisal strategy. As with many companies that have expanded to many corners of the world, McDonald's found itself with a decentralized and inconsistent compensation program. Many reasons existed for this new global HR compensation strategy. Foremost among them was that McDonald's executive of worldwide human resources, Rich Floersch, pointed a need to have a consistent global HR strategy to attract and retain better people. After months of consultation with global managers to ensure that any new system was formed via collaborative approach, McDonald's began to roll out its new global compensation program.
One important element of this program calls for the corporate head office to provide local country managers with a menu of business principles to focus on in the coming year. These principles include areas such as customer service, marketing, and restaurant re-imaging. Each country manager then picks three to five areas to focus on for success in the local market. For example, if France is introducing a new menu item, it might create business targets around that for the year. Human resource managers then submit their business cases and targets to senior executives at headquarters for approval. At the end of the year, the country’s annual incentive pool is based on how the region met its targets, as well as on the business unit’s operating income. A portion of an individual employee’s annual bonus is based on that mix.
Other portion of an employee’s annual incentive is based on individual performance. McDonald’s has always had a performance rating system, but within its new HR management strategy, the company has now introduced global guidelines that suggest 20% of employees receive the highest rating, 70% the middle, and 10% the bottom. By this McDonald’s hopes to encourage differentiation of performance while allowing for some local flexibility. Also, by providing principles and guidance, and yet allowing local country managers to customize their compensation programs to meet local market demands, McDonald’s claims it has seen a reduction in turnover. The company’s own internal surveys suggest more employees now believe that their compensation is fair and reflects local market conditions.
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BALANCE SHEET APPROACH TO EXPATRIATE PAY
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EXPATRIATE PAY
- The most common approach to expatriate pay is the balance sheet approach
- Equalizes purchasing power across countries so employees can have the same standard of living in the foreign country as they do at home
- Typical compensation packages include
- Base salary
- A foreign service premium
- Allowances of various types
- Benefits
- Tax differentials
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EXPATRIATE PAY
- Base Salary: normally in the same range as the base salary for a similar position in the home country.
- Foreign Service Premium: extra pay the expatriate receives for working outside his country of origin.
- Allowances:
- Hardship allowances
- Housing allowances
- Cost-of-living allowances
- Education allowances
- Benefits: many expatriates receive the same level of medical and pension benefits abroad that they received at home
- Taxation: the expatriate may have to pay income tax to both the home country and the host-country governments unless a host country has a reciprocal tax treaty with the expatriate’s home country
- When a reciprocal tax treaty is not in force, the firm typically pays the expatriate’s income tax in the host country
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INTERNATIONAL LABOR RELATIONS
Concerns of Organized Labor:
- Multinationals can counter union bargaining power by threatening to move production to another country.
- Multinationals will keep highly skilled tasks in the home country and farm out only low skilled tasks.
- Imported employment practices and contractual agreements will reduce its influence and power.
Strategy of Organized Labor:
- Trying to set-up their own international organizations
- Lobbying for national legislation to restrict multinationals
- Trying to achieve regulations of multinationals through international organization such as the United Nations
So far, these efforts have had only limited success
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Links
- Why Brexit uncertainty means companies plan for the worst:
- https://edition.cnn.com/videos/business/2019/01/29/brexit-business-uncertainty-ge-lon-orig.cnn/video/playlists/business-brexit/
- In Gibraltar, British citizens worry about effects of Brexit: https://www.pbs.org/newshour/show/gibraltar-british-citizens-worry-effects-brexit
