Career Development Plan Part I - Job Analysis and Selection

1. What factors should I consider in “sizing up” managers, employees, and customers from a different culture?

2. What should be the components of expatriate recruitment, selection, orientation, and training strategies?

3. How should an expatriate compensation package be structured?

4. What kinds of career management issues should a manager consider before deciding to work for a foreign-owned firm in the United States?

5. What special issues deserve attention in the repatriation of overseas employees?

Source: Adapted from D. Woodruff. Distractions make global manager a difficult role. (Nov. 21, 2000). The Wall Street Journal, pp. B1, B18. Reprinted by permission of The Wall Street Journal, © 2000 Dow Jones & Company, Inc. All rights reserved worldwide.

My first day on the job is turning into a nightmare. I am about to meet with a promising young manager who has just botched a new assignment, and in just a few hours, I'm scheduled to make a strategy presentation to my new boss. But the phone won't stop ringing, and I'm being deluged with e-mail.

It's a good thing this isn't really happening. I'm at a makeshift office in suburban London taking part in a workplace-simulation exercise. It's just like the one hundreds of Motorola Inc. executives around the world will go through in the coming months as part of a wide-ranging effort at the company to identify and evaluate tomorrow's top international managers.

Like many multinationals, Motorola is pressing to find talented leaders to run its increasingly complicated global business. As companies cross borders to make acquisitions and expand operations, the demand for employees with international management skills is growing exponentially. The consequences can be dire for firms that fail to build up a cadre of competent global managers. Poor decisions can lead to multi-billion-dollar flubs, as products flop and marketing campaigns go awry.

Motorola's Internet-based test, developed with Aon Consulting Worldwide, can be administered remotely any place in the world. As Aon executives explained to me how the simulation would work, I imagined myself enduring several hours of awkward play-acting. In practice, the experience is startlingly lifelike.

My role is Chris Jefferson, regional manager in the finance unit of a fictitious conglomerate, Globalcom. My laptop computer has been specially set up so that I can send and receive e-mail, look up information about my employer, and consult my calendar—where several meetings have already been scheduled. An Aon psychologist will play several roles, phoning me from an adjacent office and popping in at the end in the role of Jean Dubois, my boss.

As soon as I settle in to my windowless, brick-walled office, the telephone calls begin, and unexpected visitors arrive. Urgent tasks come so fast and furiously that I quickly forget it is all a game. Several calls and e-mails concern a promising middle manager who has let several details of a critical new assignment fall through the cracks.

Another Aon psychologist is playing the role of the manager, and he enters my office for our meeting. I try teasing out of him information about what's going wrong. We talk for several minutes before a voice in the back of my brain reminds me that it's all only make-believe.

The meeting is over and I have less than two hours to get my presentation ready. I hurry to prepare, scouring my computer for information about Globalcom. I find things like market research, news reports, results of an employee survey, and corporate press releases, but just like one of those bad dreams, I keep getting sidetracked by a steady stream of telephone calls. An irate customer rails shrilly at me about poor service and threatens to bolt to the competition. E-mails, some of them demanding immediate attention, keep popping up on my computer screen.

1. Can you identify any differences between managing domestically versus internationally?

2. How accurate are such workplace simulations? In what form might results show up?

3. Do simulations like Motorola's “travel well”? That is, do you think they will work in different cultures?

Increasingly, the world is becoming a “global village” as multinational investment continues to grow. All the HR management issues that have been discussed to this point are interrelated conceptually and operationally and are particularly relevant in the international context: workforce planning, recruitment, selection, orientation, training and development, career management, compensation, and labor relations. In examining all these issues, as well as considering the special problems of repatriation (the process of reentering one's native culture after being absent from it), this chapter thus provides a capstone to the book.

The demise of communism, the fall of trade barriers, and the rise of networked information have unleashed a revolution in business. Market capitalism guides every major country on earth. About $1.6 trillion of foreign exchange changes hands every day; goods and services flow across borders more freely than ever; and vast information networks instantly link nations, companies, and people. The result—21st-century capitalism.1 To begin to appreciate the magnitude of this trend, consider a snapshot of the 2004 Fortune Global 500 (the largest 500 firms in the world). Their aggregate revenues were $14,873 billion, profits were $731.1 billion, their assets totaled $60,814 billion, and they employed more than 45.9 million of the world's people.2

· Global telecommunications enhanced by fiber optics, satellites, and computer technology.5

· E-commerce that makes firms “global” from the moment their Web sites are up and running as customers from around the world log on.6

· Giant multinational corporations such as Gillette, Unilever, and Nestlé, which have begun to lose their national identities as they integrate and coordinate product design, manufacturing, sales, and services on a worldwide basis.

· Growing free trade among nations (e.g., the European Union; the North American Free Trade Agreement among Mexico, the United States, and Canada; and the Association of Southeast Asian Nations).

· Financial markets' being open 24 hours a day around the world.

· Cost pressures (that prod firms to move where labor and other resources are cheapest), coupled with a search for new markets (as firms and consumers around the world seek foreign goods and services).

· The integration of cultures and values through the spread of items such as music, food, and clothing, which have led to common consumer demands around the world.7

· The emergence of global standards and regulations for trade, commerce, finance, products, and services.

In no small part, the booming U.S. economy of recent years has been fueled by globalization. Open borders have allowed new ideas and technology to flow freely around the globe, accelerating productivity growth and allowing U.S. companies to be more competitive than they have been in decades. Yet there is a growing fear on the part of many people that globalization benefits big companies instead of average citizens—of America or any other country.8 Five factors are driving this backlash:9

· Insecurity. As companies restructure and adapt to market forces, they are churning their workforces.10 Many operations are being sent overseas, as both blue- and white-collar workers watch their jobs migrate to India, the Philippines, Mexico, Canada, China, Ireland, and elsewhere.11

· Mistrust. Big, multilateral institutions such as the International Monetary Fund (IMF), the World Bank, and the World Trade Organization are losing their credibility. Their secret decisions made behind closed doors are not acceptable to citizens accustomed to transparent, democratic institutions.

· Policy. Long-held prescriptions for solving international financial crises are losing support. Bailing out private banks while depressing growth and forcing unemployment higher is no longer acceptable as the sole remedy to financial troubles overseas.

· Technophobia. The battle against genetically modified food is just one indicator of the growing reaction against the dot-com world. In the United States, and especially in Europe, science and innovation are seen by many as threats, not solutions. Preservation of traditional, national values is most important.13 Globalization is the enemy.

In the public eye, multinational corporations are synonymous with globalization. In all of their far-flung operations, therefore, they bear responsibility to be good corporate citizens, to preserve the environment, to uphold labor standards, to provide decent working conditions and competitive wages, to treat their employees fairly, and to contribute to the communities in which they operate. Some have done so admirably. Levi Strauss & Co. has ethical manufacturing standards for its overseas operations. Home Depot Inc. has adopted an eco-friendly lumber supply program with the Rainforest Action Network. Starbucks is working with Conservation International to buy coffee from farmers preserving forests.14 Actions like these make a strong case for continued globalization.

In 2004 an estimated 60,000 multinational enterprises (MNEs) with 800,000 subsidiaries and $16 trillion (U.S. dollars) in sales were operating in countries around the globe. By 2010 there are expected to be 90,000 MNEs, 15 million subsidiaries, and $25 trillion (U.S. dollars) in sales.15 Before proceeding further, let's define some terms that we will use throughout the chapter:

· A global corporation is one that has become an “insider” in any market or nation where it operates and is thus competitive with domestic firms operating in local markets.16 Unlike domestic firms, however, the global corporation has a global strategic perspective and claims its legitimacy from its effective use of assets to serve its far-flung customers.

· An expatriate or foreign-service employee is a generic term applied to anyone working outside her or his home country with a planned return to that or a third country.

· Home country is the expatriate's country of residence.

· Host country is the country in which the expatriate is working.

· A third-country national is an expatriate who has transferred to an additional country while working abroad. A German working for a U.S. firm in Spain is a third-country national.

Expatriates staff many, if not most, overseas operations of multinational firms, and the costs can be astronomical.

One of the first lessons global corporations learn is that it is far cheaper to hire competent host-country nationals (if they are available) than to send their own executives overseas. Foreign-service employees typically cost two to three times the salary of a comparable domestic employee and often many more times the salary of a local national employee in the assignment country (see Table 16-1).17 An employee with a $75,000 to $100,000 base salary will cost his or her firm an average of $1 million during a three-year assignment.18 While the exact number of U.S. expatriates is not known, the State Department estimates it at about 3.5 to 4 million.19

Source: Provided By Carolyn Gould, Principal, PricewaterhouseCoopers LLP. Used with permission.

Of course, costs fluctuate with international exchange rates relative to the U.S. dollar. In view of these high costs, firms are working hard to reduce these costs, for example, through the use of efficient purchaser indexes for established expatriates. Such indexes assume that a person is not completely new to a situation and has learned about some local brands and outlets and therefore pays prices that are lower than someone who is not familiar with the location.21 Firms also are working hard to reduce the failure rate among their expatriates—about 10 percent of expatriate assignments for companies based in North America and Europe and about 15 percent for Asian firms.22 For companies, the costs of mistaken expatriation include the costs of initial recruitment, relocation expenses, premium compensation, repatriation costs (i.e., costs associated with resettling the expatriate), replacement costs, and the tangible costs of poor job performance. When an overseas assignment does not work out, it still costs a company, on average, twice the employee's base salary. For employees, the costs are more personal: diminished self-esteem, impaired relationships, and interrupted careers.23

Although the costs of expatriates are considerable, there are also compensating benefits to multinational firms. In particular, overseas postings allow managers to develop international experience outside their home countries—the kind of experience needed to compete successfully in the global economy that we now live in.24

Nevertheless, it is senseless to send people abroad who do not know what they are doing overseas and cannot be effective in the foreign culture. More specifically, companies need to consider the impact of culture on international HR management. But what is culture? Culture refers to characteristic ways of doing things and behaving that people in a given country or region have evolved over time. It helps people to make sense of their part of the world and provides them with an identity.

Managers who have no appreciation for cultural differences have a local perspective. They believe in the inherent superiority of their own group and culture, and they tend to look down on those considered “foreign.” Rather than accepting differences as legitimate, they view and measure alien cultures in terms of their own.

By contrast, managers with a cosmopolitan perspective are sensitive to cultural differences, respect the distinctive practices of others, and make allowances for such factors when communicating with representatives of different cultural groups. Recognizing that culture and behavior are relative, they are more tentative and less absolute in their interactions with others.25

Particularly when business does not go well, Americans returning from overseas assignments tend to blame the local people, calling them irresponsible, unmotivated, or downright dishonest. Such judgments are pointless, for many of the problems are a matter of fundamental cultural differences that profoundly affect how different people view the world and operate in business. This section presents a systematic framework of 10 broad classifications that will help managers assess any culture and examine its people systematically. It does not consider every aspect of culture, and by no means is it the only way to analyze culture. Rather, it is a useful beginning for cultural understanding. The framework is comprised of the following 10 factors:26

· Sense of self and space.

· Dress and appearance.

· Food and feeding habits.

· Communication and language.

· Time and time consciousness.

· Relationships.

· Values and norms.

· Beliefs and attitudes.

· Work motivation and practices.

· Mental processes and learning.

Self-identity may be manifested by a humble bearing in some places, by macho behavior in others. Some countries (e.g., the United States) may promote independence and creativity, while others (e.g., Japan) emphasize group cooperation and conformity. Americans have a sense of space that requires more distance between people, while Latins and Vietnamese prefer to get much closer. Each culture has its own unique ways of doing things.

This includes outward garments as well as body decorations. Many cultures wear distinctive clothing—the Japanese kimono, the Indian turban, the Polynesian sarong, the “organization-man or -woman” look of business, and uniforms that distinguish wearers from everybody else. Cosmetics are more popular and accepted in some cultures than in others, as is cologne or after-shave lotion for men.

The axiom “Words mean different things to different people” is especially true in cross-cultural communication. When an American says she is “tabling” a proposition, it is generally accepted that it will be put off. In England, “tabling,” means to discuss something now. Translations from one language to another can generate even more confusion as a result of differences in style and context. Coca-Cola found this out when it began marketing its soft-drink products in China.

The traditional Coca-Cola trademark took on an unintended translation when shopkeepers added their own calligraphy to the company name. “Coca-Cola,” pronounced “ke kou ke la” in one Chinese dialect, translates as “bite the wax tadpole.” Reshuffling the pronunciation to “ko kou ko le” roughly translates to “may the mouth rejoice.”27

In many cultures, directness and openness are not appreciated. An open person may be seen as weak and untrustworthy, and directness can be interpreted as abrupt, hostile behavior. Providing specific details may be seen as insulting to one's intelligence. Insisting on a written contract may suggest that a person's word is not good.

Nonverbal cues may also mean different things. In the United States, one who does not look someone in the eye arouses suspicion and is called “shifty-eyed.” In some other countries, however, looking someone in the eye is perceived as aggression. Just as communication skills are key ingredients for success in U.S. business, such skills are basic to success in international business. There is no compromise on this issue; ignorance of local customs and communications protocol is disrespectful.28

To Americans, time is money. We live by schedules, deadlines, and agendas; we hate to be kept waiting, and we like to “get down to business” quickly. In many countries, however, people simply will not be rushed. They arrive late for appointments, and business is preceded by hours of social rapport. People in a rush are thought to be arrogant and untrustworthy.

In the United States, the most important issues are generally discussed first when making a business deal. In Ethiopia, however, the most important things are taken up last. While being late seems to be the norm for business meetings in Latin America, the reverse is true in Switzerland, Sweden, and Germany, where prompt efficiency is the watchword.29 The lesson for Americans doing business overseas is clear: Be flexible about time and realistic about what can be accomplished. Adapt to the process of doing business in any particular country.

In some cultures (e.g., France, Japan, Korea, and to some extent the United States and Great Britain), where a person went to school may affect his or her status.30 Often, lifelong relationships are established among individuals who attended the same school. Finally, the issue of nepotism is viewed very differently in different parts of the world. While most U.S. firms frown upon the practice of hiring or contracting work directly with family members, in Latin America or Arab countries, it only makes sense to hire someone you can trust.31

Values reflect what is important in a society. For example, in Arab culture, dignity, honor, and reputation are considered to be paramount virtues. America is a country in the midst of a values revolution, as the children of the Depression give way to the children of affluence, who are concerned with quality of life, self-fulfillment, and meaning in experiences.32

From its value system, a culture sets norms of behavior, or what some call “local customs.” One such norm is that in Eastern countries businesspeople strive for successful business outcomes after personal relationships have been established, while Westerners develop social relationships after business interests have been addressed. International managers ignore such norms at their peril.33 For example, consider the impact of values and norms on management styles and HR practices in the European Union. See International Application on the following page.

To some degree, religion expresses the philosophy of a people about important facets in life. While Western culture is largely influenced by Judeo-Christian traditions and Middle Eastern culture by Islam, Oriental and Indian cultures are dominated by Buddhism, Confucianism, Taoism, and Hinduism. In cultures where a religious view of work still prevails, work is viewed as an act of service to God and people and is expressed in a moral commitment to the job or quality of effort. In Japan, the cultural loyalty to family is transferred to the work organization. It is expressed in work-group participation, communication, and consensus.34

T. Fujisawa, cofounder of Honda Motor Co., once remarked: “Japanese and American management is 95 percent the same, and differs in all important respects.” In other words, while organizations are becoming more similar in terms of structure and technology, people's behavior within those organizations continues to reveal culturally based differences.35

INTERNATIONAL APPLICATION Human Resource Management in the European Union36

As of 2004 the European Union (EU) comprises 25 countries. The older members are Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Greece, Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United Kingdom. The 10 new members include Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. With its new members, the EU represents a consumer market of 400 million people, with an annual GDP that exceeds $8 trillion (U.S. dollars). A central EU theme is respect for differences that we live with; we do not fight about them.

The EU represents the economic and political unification of Europe—the free movement of capital, goods, and people and the harmonization of EU legislation. Does this mean that multinationals operating in Europe can deal with people in the various EU countries on a regional basis and in a universal manner? Is there such a thing as “European HRM”? A recent analysis of 12,965 articles published between 1975 and 1999 from 26 HR journals in the original nine languages of 10 EU countries indicates that the answer is no. So also do the results of in-depth interviews with 48 European HR experts (practitioners, consultants, and academics) in 14 different countries of the EU conducted on location in the original languages of the countries.

In spite of the economic, political, and social unification of Europe as a result of the EU, there is no harmonized manner in which HR services are delivered across or within the various European countries. Rather, Euro-HRM is a mosaic of practices that differ primarily on the basis of the size of the company, and the different national, cultural, legal, and geographic contexts. Outsiders should know eight key things about HRM in the EU countries:37

1. Each country has a unique set of intricate laws that govern employment and labor relations.

2. Each country has a unique culture that impacts management styles and the corporate cultures of companies.

3. Within some EU countries there are different subcultures that influence HRM.

4. The power of the labor unions is decreasing, but labor relations issues remain very important.

5. Each country has developed a set of institutions that reflects its traditions and influences the way HR is practiced.

6. Distinct underlying social models have an impact on the way HR is practiced in each country. For example, the Dutch social justice model emphasizes the widespread belief that the government should play an active, interventionist role to provide social justice in areas such as occupational health, safety, and terminations. In contrast, the Italian social model is a mixture of Christian and Marxist values. It emphasizes the individual's need for protection and solidarity and is less meritocratic and competitive than Protestant cultures.

7. There are formal consultation processes in place that allow for greater involvement of employees and trade unions in the decision-making processes of companies.

8. Importing HR practices from abroad without attempting to localize them to the specific culture, laws, and languages of the country provides little chance of successful implementation.

Linguists, anthropologists, and other experts who have studied this issue have found vast differences in the ways people think and learn in different cultures. While some cultures favor abstract thinking and conceptualization, others prefer rote memory and learning. The Chinese, Japanese, and Korean written languages are based on ideograms, or “word pictures.” On the other hand, English is based on precise expression using words. Western cultures stress linear thinking and logic—that is, A, then B, then C, then D. Among Arabic and Oriental cultures, however, nonlinear thinking prevails—that is, A may be followed by C, then back to B and on to D. This has direct implications for negotiation processes. Such an approach, in which issues are treated as independent and not linked by sequence, can be confusing and frustrating to Westerners because it does not appear “logical.” What can we conclude from this? What seems to be universal is that each culture has a reasoning process, but each manifests the process in its own distinctive way.39 Managers who do not understand or appreciate such differences may conclude (erroneously and to their detriment) that certain cultures are “inscrutable.”

COMPANY EXAMPLE: IBM

Geert Hofstede, a Dutch researcher, identified five dimensions of cultural variation in values in more than 50 countries and three regions (East Africa, West Africa, and Arab countries). Initially, he relied on a database of surveys covering, among other things, the values of employees of subsidiaries of IBM in 72 countries.40 He analyzed 116,000 questionnaires, completed in 20 languages, matching respondents by occupation, gender, and age at different time periods (1968 and 1972). Over the next several decades, he collected additional data from other populations, unrelated to IBM but matched across countries. Hofstede's five dimensions reflect basic problems that any society has to cope with but for which solutions differ: power distance, uncertainty avoidance, individualism, masculinity, and long-term versus short-term orientation. Other researchers generally have confirmed these dimensions.41

Power distance refers to the extent that members of an organization accept inequality and whether they perceive much distance between those with power (e.g., top management) and those with little power (e.g., rank-and-file workers). Hofstede found the top power-distance countries to be Malaysia, Guatemala, and the Philippines; the bottom ones were Austria, Israel, and Denmark.

Cultural Differences among Workers Worldwide

Individualism reflects the extent to which people emphasize personal or group goals. If they live in nuclear families that allow them to “do their own thing,” individualism flourishes. However, if they live with extended families or tribes that control their behavior, collectivism—the essence of which is giving preference to in-group over individual goals—is more likely.42 The most individualistic countries are the United States and the other English-speaking countries. The most collectivist countries are Guatemala, Ecuador, and Panama.

Hofstede's fourth dimension, masculinity, is found in societies that differentiate very strongly by gender. Femininity is characteristic of cultures where sex-role distinctions are minimal. While masculine cultures tend to emphasize ego goals—the centrality of work, careers, and money—feminine cultures tend to emphasize social goals—quality of life, helping others, and relationships. Hofstede found the most masculine cultures to be Japan, Austria, and Venezuela, while the most feminine were Sweden, Norway, and the Netherlands.

Finally, long-term versus short-term orientation refers to the extent to which a culture programs its members to accept delayed gratification of their material, social, and emotional needs. Countries scoring highest in long-term orientation include China, Hong Kong, and Taiwan; Pakistan, Nigeria, and the Philippines score at the opposite end. Americans tend to be relatively short-term oriented.

Hofstede found that cultures, especially national cultures, are extremely stable over time. He believes that cultural change basic enough to invalidate the country-dimension index scores will need either a very long period of time—say, 50 to 100 years—or extremely dramatic outside events. More recent replications show no loss of validity.43

This work is valuable because it provides a set of benchmarks against which other studies can be organized conceptually. It also helps us to understand and place into perspective current theories of motivation, leadership, and organizational behavior.

As companies become more global in their operations, cross-cultural interaction becomes more common.

1. Do not export headquarters-country bias. As we have seen, the HR management approach that works well in the headquarters country might be totally out of step in another country. Managers who bear responsibility for international operations need to understand the cultural differences inherent in the management systems of the countries in which their firms do business.

2. Think in global terms. We live in a world in which a worldwide allocation of physical and human resources is necessary for continued survival.

3. Recognize that no country has all the answers. Flexible work hours, quality circles, and various innovative approaches to productivity have arisen outside the United States. Effective multinational managers must not only think in global terms, but also be able to synthesize the best management approaches to deal with complex problems.

COMPANY EXAMPLE: SHOULD YOU WORK FOR A FOREIGN-OWNED FIRM IN THE UNITED STATES?44

Increasing numbers of American managers are joining foreign-based companies that are doing business in the U.S. market. However, working for such a company can be difficult. Its offices typically are managed by expatriates, who are most comfortable with the culture, language, and customs of their mother country and are likely to import international management styles into the U.S. workplace. For their U.S. subordinates, that could mean fewer opportunities for advancement and a wide range of other cultural differences. Such problems arise frequently when a U.S. firm merges with or is acquired by a foreign one, such as Germany's Daimler and the American company, Chrysler. Executives from both companies seemed to understand that a successful merger would require the two companies to abandon their respective business cultures and to create a new and distinctive one. Yet from the beginning of the formal relationship, in late 1998, issues that should have been handled easily, like labor relations or differences in emission-control policies, got bogged down in turf battles. Instead of trying to blend the best of each company's culture, in the words of one senior executive, “it became a question of comparing the styles of the two and picking one.” This had led to serious integration problems.

Does it help to know the language of the foreign firm? Yes, but even if people are linguistically capable, say experts, learning how to praise or criticize someone from a different culture is a difficult skill. Asking a Swiss or German boss for a performance appraisal would probably lead to a very specific answer, while a Japanese, Korean, or Chinese boss would tend to be more vague.

Despite these difficulties, there will be healthy payoffs for those who can cross cultural boundaries. Many foreign-owned companies doing business in the United States offer competitive salaries and assignments abroad. In addition, working for a foreign company can promote empathy for other cultures and a skill at working with people from around the world. Those are attractive characteristics in a global job market.

Before we consider recruitment, selection, training, and other international HR management issues, it is important that we address a fundamental question: Is this subject worthy of study in its own right? The answer is yes, for two reasons—scope and risk exposure.45 In terms of scope, there are at least four important differences between domestic and international operations. International operations have

1. More HR activities, such as taxation, coordination of dependents, and coordination of multiple-salary currencies.

2. More involvement in employees' personal lives, such as housing, health, education, and recreation.

3. Different approaches to management, coupled with complex equity issues, as the workforce mix of expatriates and locals varies.

4. Broader external influences, such as from societies and governments.

Heightened risk exposure is a second distinguishing characteristic of international HR management. A variety of legal issues confront companies in each country, and the human and financial consequences of a mistake in the international arena are much more severe. For example, the cost of a failed international assignment can be as high as $1 million (U.S. dollars).46 On top of that, terrorism is now an ever-present risk for executives overseas, and it clearly affects how they assess international assignments.47 The cost of a kidnapping may run $2 to $3 million, and it is estimated that there are 10,000 to 15,000 kidnappings a year worldwide.48

All of this has had an important effect on how people are prepared for and moved to and from international assignment locations. In light of these considerations, it seems reasonable to ask “Why do people accept overseas assignments?” Why do they go? As companies' global ambitions grow, fast-track executives at companies such as General Mills, Procter & Gamble, Gillette, General Electric, and ExxonMobil see foreign tours as necessary for career advancement.49 Evidence indicates that U.S.-based multinationals actually do perform better when they have CEOs with international-assignment experience.50

Consider Logitech International, for instance. Its manufacturing headquarters are in Taiwan to capitalize on low-cost Asian manufacturing. Meanwhile, its business development headquarters in Switzerland has lined up strategic partnerships that have kept the company at the cutting edge of peripherals design, particularly for optical pens and mice, which has helped Logitech hold its own against mighty Microsoft in worldwide markets for peripherals.53

The development of transnationals has led to a fundamental rethinking about the nature of a multinational company. Does it have a home country? What does headquarters mean? Is it possible to fragment corporate functions globally? To be sure, organizational structure directly affects all HR functions from recruitment through retirement because to be effective, HR management must be integrated into the overall strategy of the organization. Indeed, from the perspective of strategic management, the fundamental problem is to keep the strategy, structure, and HR dimensions of the organization in direct alignment.54

This issue is particularly critical for firms doing business overseas. They need to analyze the local and the international external labor markets as well as their own internal labor markets in order to estimate the supply of people with the skills that will be required at some time in the future. There are six other key issues in international workforce planning:55

1. Identifying top management potential early.56

2. Identifying critical success factors for future international managers.

3. Providing developmental opportunities.

4. Tracking and maintaining commitments to individuals in international career paths.

5. Tying strategic business planning to HR planning and vice versa.

6. Dealing with multiple business units while attempting to achieve globally and regionally focused (e.g., European, Asian) strategies.

Broadly speaking, companies operating outside their home countries follow three basic models in the recruitment of executives: (1) They may select from the national group of the parent company only, (2) they may recruit only from within their own country and the country where the branch is located, or (3) they may adopt an international perspective and emphasize the unrestricted use of all nationalities.58 Each of these strategies has both advantages and disadvantages.

A strategy of ethnocentrism may be appropriate during the early phases of international expansion, because firms at this stage are concerned with transplanting a part of the business that has worked in their home countries. Hence, detailed knowledge of that part is crucial to success. On the other hand, a policy of ethnocentrism, of necessity, implies blocked promotional paths for local executives. Moreover, if there are many subsidiaries, home-country nationals must recognize that their foreign service may not lead to faster career progress. Finally, there are cost disadvantages to ethnocentrism as well as increased tendencies to impose the management style of the parent company.59

This may result from acquisition of local companies. In Japan, for instance, where the labor market is tight, most people are reluctant to switch firms. Thus, use of a local partner may be extremely important. Hiring nationals has other advantages as well. It eliminates language barriers, expensive training periods, and cross-cultural adjustment problems of managers and their families. It also allows firms to take advantage of (lower) local salary levels while still paying a premium to attract high-quality employees.

Yet these advantages are not without cost. Local managers may have difficulty bridging the gap between the subsidiary and the parent company, because the business experience to which they have been exposed may not have prepared them to work as part of a global enterprise.60 Finally, consideration of only home- and host-country nationals may result in the exclusion of some very able executives.

At first glance it may appear that a strategy of geocentrism is optimal and most consistent with the underlying philosophy of a global corporation. Yet there are potential problems. Such a policy can be very expensive, it can take a long time to implement, and it requires a great deal of centralized control over managers and their career patterns. To implement such a policy effectively, companies must make it very clear that cross-national service is important and that it will be rewarded.

Recent reviews indicate that the selection process for international managers is, with few exceptions, largely intuitive and unsystematic.62 A major problem is that the selection of people for overseas assignments often is based solely on their technical competence and job knowledge.63 This is a mistake; technical competence per se has nothing to do with one's ability to adapt to a new environment, to deal effectively with foreign coworkers, or to perceive, and if necessary, imitate, foreign behavioral norms.64 Keep this in mind as you consider various factors that determine success in an international assignment. Let us begin with general mental ability.

General mental ability (GMA) may be defined broadly as the ability to learn. It includes any measure that combines two, three, or more specific aptitudes, or any measure that includes a variety of items that measure specific abilities (e.g., verbal, numerical, spatial relations).65 As we noted in Chapter 7, the validity of GMA as a predictor of job performance as well as performance in training is well established in the United States, on the basis of meta-analyses of hundreds of studies.66 The estimated validity of GMA for predicting supervisory ratings of job performance is 0.57 for high-complexity jobs (17 percent of U.S. jobs), 0.51 for medium-complexity jobs (63 percent of U.S. jobs), and 0.38 for low-complexity jobs (20 percent of U.S. jobs). The estimated validity of GMA as a predictor of training success is 0.63.

Is GMA as robust a predictor of job performance and training in Europe as it is in the United States? The answer is yes. On the basis of a meta-analysis of 85 independent samples with job performance as the criterion and 89 independent samples with training success as the criterion, the validity of GMA as a predictor of job performance as well as performance in training across 12 occupational categories has been established in the European Community.67 Findings were similar or somewhat larger than those in the United States for similar occupational groups.

INTERNATIONAL APPLICATION Job Aid for Spouses of Overseas Executives

Today, families in which both parents are working have become the majority among married couples with children.68 About 41 percent of employees transferred abroad have spouses who worked before relocating. At the same time, global companies are expanding into areas such as central and Eastern Europe and the Middle East, where spouses of expatriates face particularly tough obstacles to finding jobs. Here is a scenario likely to become more and more common in the future. A company offers a promotion overseas to a promising executive. But the executive's spouse has a flourishing career in the United States. What should the company—and the couple—do?

Employers and employees are wrestling with this dilemma more often these days. As noted in Chapter 10, job aid for the so-called trailing spouse is already a popular benefit for domestic transfers. Not so for international transferees. While 60 percent of trailing spouses would like career assistance from the expatriate's employer, only 17 percent receive it.69

To fill their international needs, more firms are turning to short-term assignments (3 to 12 months) or “commuter assignments,” in which spouses move to adjoining countries or regions. Another option is intercompany networking, in which one MNE attempts to place an expatriate's spouse in a suitable job with another MNE in the same city or country. Sometimes this takes the form of a reciprocal arrangement, that is, “You find my expatriate's spouse a job and work visa and I will do the same for you.”70

HR officers may try to find a job for the spouse within the company, press a spouse's current employer for a foreign post, provide job leads through customers and suppliers, or plow through costly government red tape to get work permits. This kind of aid usually occurs in industries such as banking, financial services, pharmaceuticals, and computers, all of which have significant numbers of high-level women executives. Other firms, such as Motorola, provide continuing education benefits that will finance either local or correspondence courses or provide allowances for spouses to attend professional seminars and conferences so they can keep up with developments in their professions.

Despite company efforts, it is often very difficult to place spouses abroad. Where there are language barriers or barriers of labor laws, tradition, or underemployment, it can be almost impossible. Certain Middle Eastern nations frown on women working or even driving. In Switzerland and Kenya, expatriate spouses even need permission to work as volunteers.71 Moreover, an international assignment can slow a spouse's professional progress and sometimes stir resentment. On the other hand, some spouses find their overseas experiences as personally and professionally rewarding as their spouses do. One American tax lawyer received permission to work in Brussels as an independent legal consultant. A German travel executive followed his wife to Britain and, seven months later, landed a job organizing exhibitions between Britain and Germany. Since 91 percent of married female expatriates (and 50 percent of married male expatriates) are in dual-career marriages, it is not surprising that spousal income loss is a key factor determining an executive's decision to accept or reject an overseas position.72

When success is defined in terms of completing the expatriate assignment and supervisory ratings of performance on the assignment, evidence indicates that three personality characteristics are related to ability to complete the assignment. These are extroversion and agreeableness (which facilitate interactions and making social alliances with host nationals and other expatriates), and emotional stability. Conscientiousness is a general work ethic that supervisors “see” in their subordinates, and this affects their performance ratings. Expatriate assignments require a great deal of persistence, thoroughness, and responsibility—all of which conscientious people possess and use.73

Because personality characteristics are relatively immutable, organizations should think of selection (on the basis of personality) as the precursor to cross-cultural training: First identify expatriate candidates with the requisite personality characteristics, then offer cross-cultural training to those identified.74 This sequence is reasonable, because cross-cultural training may only be effective when trainees are predisposed to success in the first place.

A recent study examined the validity of a broad set of predictors for selecting European managers for a cross-cultural training program in Japan.75 The selection procedure assessed GMA, personality (in terms of the four characteristics described earlier, plus openness—the extent to which an individual is creative, curious, and has broad interests), and dimensions measured by an assessment center and a behavior description interview. Two assessment center exercises, an analysis presentation exercise and a group discussion exercise, were designed to measure the personal characteristics related to performance in an international context. The analysis presentation exercise assessed the following:

· Tenacity/resilience. Keeps difficulties in perspective, stays positive despite disappointments and setbacks.

· Communication. Communicates clearly, fluently, and to the point; talks at a pace and level that holds people's attention, both in group and individual situations.

· Adaptability. Adapts readily to new situations and ways of working, receptive to new ideas, willing and able to adjust to changing demands and objectives.

· Organizational and commercial awareness. Alert to changing organizational dynamics, knowledgeable about financial and commercial issues, focuses on markets and business opportunities that yield the largest returns.

· Teamwork. Cooperates and works well with others in the pursuit of team goals, shares information, develops supportive relationships with colleagues, and creates a sense of team spirit.

Finally, in addition to tenacity resilience and teamwork, the behavior description interview was designed to assess:

· Self-discipline. Committed, consistent, and dependable; can be relied on to deliver what has been agreed; is punctual and conscientious.

· Cross-cultural awareness. Able to see issues from the perspective of people from other cultures.

Results indicated that GMA was significantly correlated with the test measuring language acquisition (corrected correlation of 0.27), openness was significantly related to instructors' ratings of cross-cultural training performance (corrected correlation of 0.33), and agreeableness correlated significantly negatively with instructors' ratings of cross-cultural training performance (corrected correlation of −0.26). Although agreeableness may be universally positive for forming social relationships, individuals who are too agreeable may be seen as “pushovers” in some cultures. Hence agreeableness may be culturally bound in terms of perceptions of professional competence.76

Finally, emotional stability correlated significantly negatively with the language proficiency test (corrected correlation of −0.29). All dimensions measured in the group discussion exercise were significantly correlated with instructor ratings (corrected correlations ranged from 0.31 to 0.40) and from 0.33 to 0.44 with the language proficiency test. Three dimensions, all measured by the group discussion exercise, also predicted performance in cross-cultural training: teamwork, communication, and adaptability. This study also used a process of selecting people for cross-cultural training, providing the training to those selected, and then sending abroad those who passed the training. Performance in the cross-cultural training significantly predicted executives' performance in the Japanese companies (correlations of 0.38 for instructors' ratings and 0.45 for Japanese-language proficiency). An important advantage of this process is that it may reduce the costs of international assignees, because only people who pass the selection process, and who therefore are predisposed for expatriate success, are sent to the training and abroad.

What about motivation to succeed in an overseas assignment? High motivation has long been acknowledged as a key ingredient for success in missionary work. Who, for example, can forget the zeal of the Protestant missionaries in the book Hawaii, by James Michener, as they set out from their native New England? While motivation is often difficult to assess reliably, firms should at the very least try to eliminate from consideration those who are only looking to get out of their own country for a change of scenery. One way to do that is to have candidates (and their spouses) complete self-assessments, as in the following company example.

AT&T is a worldwide player, having experienced exponential growth in overseas markets. Here are some typical questions it uses to screen candidates for overseas transfers:77

· Would your spouse be interrupting a career to accompany you on an international assignment? If so, how do you think this will affect your spouse and your relationship with each other?

· Do you enjoy the challenge of making your own way in new situations?

· How able are you in initiating new social contacts?

· Can you imagine living without television?

· How important is it for you to spend significant amounts of time with people of your own ethnic, racial, religious, and national background?

· As you look at your personal history, can you isolate any episodes that indicate a real interest in learning about other peoples and cultures?

· Has it been your habit to vacation in foreign countries?

· Do you enjoy sampling foreign cuisines?

· What is your tolerance for waiting for repairs?

Interviewing Potential Expatriates

The Age Discrimination in Employment Act (as amended in 1984), Title VII (as amended by the Civil Rights Act of 1991), and the Americans with Disabilities Act apply to United States citizens employed abroad. They also apply to U.S. citizens of foreign corporations doing business in the United States, even if those corporations employ fewer than 20 workers in the United States. However, they do not apply to foreign employees of a U.S.-based multinational who are not U.S. citizens.78

Orientation is particularly important in overseas assignments, both before departure and after arrival. Formalized orientation efforts—for example, elaborate multimedia presentations for the entire family, supplemented by presentations by representatives of the country and former expatriates who have since returned to the United States—are important. After all, approximately 80 percent of international assignees are accompanied by a spouse, children, or both.79

Some firms go further. Federal Express, Colgate-Palmolive, and Apache Corp., for example, actually send prospective expatriates and their families on familiarization trips to the foreign location in question. While there, they have to “live like the natives” do by taking public transportation, shopping in local stores, and visiting prospective schools and current expatriates.80 “The cost of the trip is nothing, compared with the cost of a failed assignment,” says Apache's director of international HR.81

· Cultural briefing. Traditions, history, government, economy, living conditions, clothing and housing requirements, health requirements, and visa applications. (Drugs get a lot of coverage, both for adults and for teenagers—whether they use drugs or not. Special emphasis is given to the different drug laws in foreign countries. Alcohol use also gets special attention when candidates are going to Muslim countries, such as Saudi Arabia.)

· Assignment briefing. Length of assignment, vacations, salary and allowances, tax consequences, and repatriation policy.

· Relocation requirements. Shipping, packing, or storage; home sale or rental; and information about housing at the new location.

During this time, it is important that employees and their families understand that there is no penalty attached to changing their minds about accepting the proposed assignment. It is better to bail out early than reluctantly to accept an assignment that will be regretted later.

The second phase is predeparture orientation, which may last another 2 or 3 days. Its purpose is to make a more lasting impression on employees and their families and to remind them of material that may have been covered months earlier. Topics covered at this stage include

· Introduction to the language.

· Further reinforcement of important values, especially open-mindedness.

· En route, emergency, and arrival information.

The final aspect of overseas orientation is postarrival orientation. Upon arrival, employees and their families should be met by assigned company sponsors. This phase of orientation usually takes place on three levels, and a dedicated support staff may provide it. The purpose is to reduce the stress associated with clashing work and family demands:83

· Orientation toward the environment. Language, transportation, shopping, and other subjects that—depending on the country—may become understandable only through actual experience, such as dealing with local government officials.

· Orientation toward the work unit and fellow employees. Often a supervisor or a delegate from the work unit will introduce the new employee to his or her fellow workers, discuss expectations of the job, and share his or her own initial experiences as an expatriate. The ultimate objective, of course, is to relieve the feelings of strangeness or tension that the new expatriate feels.

· Orientation to the actual job. This may be an extended process that focuses on cultural differences in the way a job is done. Only when this process is complete can we begin to assess the accuracy and wisdom of the original selection decision.

INTERNATIONAL APPLICATION How to Stay Safe Abroad86

Many parts of the world are dangerous, and becoming more so, including many cities in the United States. In Colombia, Argentina, and Pakistan, kidnapping is almost a cottage industry. In China, extortion and other crimes are on the rise. In Paris, young hoodlums are boarding buses and holding up passengers and drivers. In Mexico, many cabs are driven by bandits who kidnap foreigners, force them to withdraw cash from an ATM, beat them, and dump them in remote locations. In Istanbul, bars catering to Westerners often present them with exorbitant bills, which they have no choice but to pay. According to experts in security, terrorism remains relatively rare, while crime is everywhere. Here are some tips to help keep you safe:

· Make photocopies of your passport, plane tickets, and other key documents. Leave a copy at home with family or friends. Take nonstop flights whenever possible, and don't show hotel details on your luggage.

When Axcelis Technologies, a maker of tools for manufacturing semiconductors, outsourced some jobs to India last year, the company worried that some of its employees might resent their new Indian colleagues. So it hired one of India's premier “awareness” trainers to offer a course on “Working Effectively with Indians.” The daylong course starts with a quiz to assess how much students already know about India. The trainer then discusses aspects of India's religious and linguistic diversity and its differences with the United States, after which he divides the class into groups to analyze different case studies of working situations. He follows that up with a tutorial on communication tips, including pointers on shaking hands, business protocol, and business attire in India. Sometimes he ends the class with an Indian meal.

“At first I was skeptical and wondered what I'd get out of the class,” says the firm's HR director. “But it was enlightening for me. Not everyone operates like we do in America.”

The knowledge the trainees gain may be basic, but it can help avoid business misunderstandings. For example, when Indians shake hands, they sometimes do so rather limply. That isn't a sign of weakness or dislike; instead, a soft handshake conveys respect. When an Indian avoids eye contact, that is also a sign of deference. Another tip that trainees learn is not to plunge right into business talk right away during meetings, but first to chat about current events and other subjects. The rationale: Culturally, Indians prefer a more roundabout way into business issues. Says the trainer: “When people understand these differences they're less likely to make mistakes with each other.”

To be sure, many of the common stresses of everyday living become amplified when a couple is living overseas with no support other than from a spouse. To deal with these potential problems, spouses are taught to recognize stress symptoms in each other, and they are counseled to be supportive. One exercise, for example, is for the couples periodically to list what they believe causes stress in their mates, what the other person does to relieve it, and what they themselves do to relieve it. Then they compare lists.94 To help avoid, or at least minimize culture shock, some companies invest in “awareness training.” See International Application above.

A key characteristic of successful global managers is adaptability. Empirical research has revealed eight different dimensions of adaptability: handling emergencies or crisis situations; handling work stress; solving problems creatively; dealing with uncertain and unpredictable work situations; learning work tasks, technologies, and procedures; demonstrating interpersonal adaptability; cultural adaptability; and physically oriented adaptability.95 This implies that an effective way to train employees to adapt is to expose them to situations like they will encounter in their assignments that require adaptation. Such a strategy has two benefits: (1) It enhances transfer of training, and (2) it is consistent with the idea that adaptive performance is enhanced by gaining experience in similar situations.

An example of such integration is Federal Express Corporation (FedEx). FedEx has integrated the latest information technology into its corporate strategy, the core of which is to use IT to help customers take advantage of international markets. In fact, the $25 billion (U.S. dollars) transportation giant sees itself more as an IT company than as a transporter of goods (operating 622 flights a week to and from Asian markets alone). Today, more than two-thirds of FedEx customers handle orders and deliveries online. “We decided years ago,” says chairman and CEO Frederick W. Smith, “that the most important element in this business is information technology, and we have geared everything to that philosophy—recruitment, training, and compensation. Fail-safe precision is the key to it all.”97

Compensation policies can produce intense internal conflicts within a company at any stage of globalization. Indeed, few other areas in international HR management demand as much top-management attention as does compensation.

The principal problem is straightforward: Salary levels for the same job differ among countries in which a global corporation operates. Compounding this problem is the fact that fluctuating exchange rates require constant attention in order to maintain constant salary rates in U.S. dollars.

Ideally, an effective international compensation policy should meet the following objectives:

· Attract and retain employees who are qualified for overseas service.

· Facilitate transfers between foreign affiliates and between home-country and foreign locations.

· Establish and maintain a consistent relationship between the compensation of employees of all affiliates, both at home and abroad.

· Maintain compensation that is reasonable in relation to the practices of leading competitors.98

Notice that none of these objectives links to performance or ensures that the expatriate assignment is consistent with the organization's objectives. Those omissions are striking.99

· Localization.

· “Higher-of-home-or-host” compensation.

· Balance sheet.

Localization refers to the practice of paying expatriates on the same scale as local nationals in the country of assignment. It implies paying a Saudi a British salary and benefits in London, and an American an Argentine package in Buenos Aires. Salary and benefits may be supplemented with one-time or temporary transition payments.

Localization works well under certain conditions, for example, when transferring an employee with very limited home-country experience, such as a recent college graduate, to a developed country. It also works well in the case of permanent, indefinite, or extremely long (e.g., 10-year) transfers to another country. While it is designed to reduce costs, and may do so effectively in the short term, there can be long-term tax and retirement benefit complications that make localization less desirable, particularly for expatriates who plan to return to their home countries.101

Higher-of-home-or-host compensation localizes expatriates in the host-country salary program but establishes a compensation floor based on home-country compensation so that expatriates never receive less than they would be paid at home for a comparable position.

This approach frequently is used for transfers within regions—notably in Latin America and in the European Union—and for assignments of unlimited duration. It is less appropriate for expatriates on a series of assignments of two to three years.

The balance-sheet approach is by far the most common method used by North American, European, and, increasingly, Japanese global organizations to compensate expatriates. Its primary objective is to ensure that expatriates neither gain nor lose financially compared with their home-country peers. If there is no financial advantage to being in one country instead of another, then this objective will be realized. It also facilitates mobility among the expatriate staff in the most cost-effective way possible.102

Nonmonetary differences in the attractiveness of individual assignments (if they are not already reflected in base pay) may be compensated with separate allowances (premiums) and incentives. For example, expatriates often receive “hardship” allowances if they are sent to culturally deprived locations, war zones, or those with health or safety problems. Figure 16-1 illustrates this approach. Note the labels at the bottom of each of the four columns of Figure 16-1. The first is “home-country salary.” Each of the four categories identified in this column is a “norm” that represents the typical proportion of income that someone at the stated income level and family size spends (e.g., a $75,000-a-year manager with a wife and two small children). Each category behaves differently as income increases and family size changes. In most countries, as income rises, income taxes and the reserve (net disposable income that can be saved, invested, or spent at home) increase at increasing rates, while housing and goods and services increase at decreasing rates.

(Source: Compensation basics for North American expatriates: Developing an effective program for employees working abroad. American Compensation Association, Scottsdale, AZ, 1995, p. 8. Used with permission.)

The column labeled “home-country equivalent purchasing power” illustrates the objective of the balance sheet: to provide the expatriate with the same purchasing power as a peer at home, plus any premiums and incentives necessary to induce an employee to accept a particular foreign assignment.

Two philosophies characterize the balance-sheet approach:

1. Protection, which is paying expatriates the supplements in home-country currency suggested by the lighter-colored blocks in column 3 of Figure 16-1.

2. In a process known as equalization, the employer pays the reserve in home-country currency after deducting home-country norms from the expatriate's salary for income taxes, housing, and goods and services. The company pays all income taxes through the expatriate, while making payments to the expatriate in local currency to provide housing and purchasing power for goods and services comparable to the purchasing power of a home-country peer.

The most important advantages of the balance-sheet approach are

· It preserves the purchasing power of expatriates in a cost-effective manner.

· It facilitates mobility among expatriates.

This is not to imply that companies are not using alternative approaches. Small companies with very few expatriates, for example, may relay on negotiation of the overall compensation package on a case-by-case basis. Others use a modified balance-sheet approach that ties salary to a region (Asia-Pacific, Europe, North America) rather than to the home country.103

In an analysis of the international compensation package, two major components are (1) benefits and (2) pay adjustments and incentives. Let's consider each of these.

Benefits may vary drastically from one country to another. For example, in Mexico an acquired rights law requires that if a benefit, service, or bonus is paid two years in a row, it becomes an employee's right. Both India and Mexico mandate profit sharing—10 percent of pretax profits must be distributed to employees.104 Most developed and emerging economies have some form of national health care supplied by employer- and employee-paid premiums. In Russia, benefits are a major strategic tool for employers, who offer scarce goods and services, medical care, improved housing, and access to quality products.105

Global corporations commonly handle benefits coverages in terms of the best-of-both-worlds benefits model. Here is how it works. Wherever possible, the expatriate is given home-country benefits coverage, for example, with respect to pensions and medical coverage.108 However, in areas such as disability insurance, where there may be no home-country plan, the employee may join the host-country plan.

Most U.S. multinationals also offer various types of premiums and incentives. Their purpose is to provide for the difference in living costs (i.e., the costs of goods, services, and currency realignments) between the home country and the host country. Premiums may include any one or more of the following components:

· Housing allowance.

· Education allowance to pay for schools, uniforms, and other educational expenses that would not have been incurred had the expatriate remained in the United States.

· Income tax equalization allowance (as described earlier).

· Hardship pay, which is usually a percentage of base pay provided as compensation for living in an area with climactic extremes, political instability, or poor living conditions.

· Hazardous-duty pay to compensate for living in an area where physical danger is present, such as a war zone. For example, contractors working to rebuild Iraq typically get bonuses that equal 100 percent of their salaries.109

· Home leave, commonly one trip per year for the entire family to the expatriate's home country. Hardship posts normally include more frequent travel for rest and relaxation.

· School allowance, as a rule, companies will pay for private schooling for the children of their expatriates.110

Finally, it is common practice for companies to pay for security guards in many overseas locations, such as in Middle Eastern countries, in the Philippines, and in Indonesia.

Despite such differences, research indicates that there are also important similarities in reward allocation practices across cultures. The most universal of these seems to be the equity norm, according to which rewards are distributed to group members based on their contributions.112 In general, the more expatriates perceive that the methods the parent organization uses to plan and implement decisions are fair (procedural justice), the better their adjustment and performance in overseas assignments.113

When implementing performance appraisal overseas, therefore, first determine the purpose of the appraisal. Second, whenever possible, set standards of performance against quantifiable assignments, tasks, or objectives. Third, allow more time to achieve results abroad than is customary in the domestic market. Fourth, keep the objectives flexible and responsive to potential market and environmental conditions.114Table 16-2 illustrates characteristics of performance appraisal in a Western culture (the United States), a Middle Eastern culture (Saudi Arabia), and a Far Eastern culture (Korea). Perhaps the most important lesson of this table is that a foreign manager could be completely misled by assuming that the approach that “works” in his or her own culture will work elsewhere.115

Note: Characteristics of the Saudi Arabian approach to appraisal come from Harris, P. R., & Moran, R. T. (1990). Managing cultural differences (3d ed.), Gulf Publishing, Houston.

Source: Cascio, W. F., & Bailey, E. (1995). International HRM: The state of research and practice. In O. Shenkar (ed.), Global perspectives of human resource management, Prentice-Hall, Englewood Cliffs, NJ, p. 29.

ETHICAL DILEMMA Bribery to Win Business?

In the United States, the Foreign Corrupt Practices Act of 1977 (amended in 1988 to increase criminal fines for organizations and civil sanctions for individuals) prohibits payments by U.S. firms and their managers to win foreign business. It has cost them billions. In France and Germany, however, companies may offset payments to foreign officials against tax charges.116 In Korea, bribes are a way of life. Former president Roh Tae Woo amassed a $650 million slush fund (prior to its exposure and ensuing scandal and reforms in 1995), and even midlevel bureaucrats who wield regulatory powers demand payments. How much? About 1.2 percent of annual sales for big companies, and about 0.8 percent for small- and mediumsized companies.117 Is this ethical?

Korea (and Russia) wish to join the 29 member countries of the Organization for Economic Cooperation and Development (OECD), but they will have to change their ways to do so. In 1997, OECD member countries agreed to negotiate a binding international convention to criminalize the bribery of foreign public officials, “irrespective of the value or the outcome of the bribe, of perceptions of local custom, or of the tolerance of bribery by local authorities.”118

Labor relations structures, laws, and practices vary considerably among countries.120 Unions may or may not exist. Management or government may dictate terms and conditions of employment. Labor agreements may or may not be contractual obligations. Management may conclude agreements with unions that have little or no membership in a plant or with nonunion groups that wield more bargaining power than the established unions do. And principles and issues that are relevant in one context may not be in others, for example, seniority in layoff decisions or even the concept of a layoff.121

In general, unions may constrain the choices of global companies in three ways: (1) influencing wage levels to the extent that cost structures may become noncompetitive, (2) limiting the ability of companies to vary employment levels at their own discretion, and (3) hindering or preventing global integration of such companies (i.e., by forcing them to develop parallel operations in different countries).122

One of the most intriguing aspects of international labor relations is multinational collective bargaining. Unions have found global corporations particularly difficult to deal with in terms of union power and difficult to penetrate in terms of union representation.123 Here are some of the special problems that global corporations present to unions:

1. While national unions tend to follow the development of national companies, union expansion typically cannot follow the expansion of a company across national boundaries, with the exception of Canada. Legal differences, feelings of nationalism, and differences in union structure and industrial relations practices are effective barriers to such expansion.

2. The nature of foreign investment by global corporations has changed. In the past, they tended to invest in foreign sources of raw materials. As a result, the number of processing and manufacturing jobs in the home country may actually have increased. However, in recent years there has been a shift toward the development of parallel, or nearly parallel, operations in other countries.124 Foreign investment of this type threatens union members in the home country with loss of jobs or with a slower rate of job growth, especially if their wages are higher than those of workers in the host country. This threat is very real in Germany, for example, where labor rates are 62 percent higher than in Greece and 80 percent higher than in Portugal.125

One solution to the problems that global corporations pose for union members is multinational collective bargaining. For this to work, though, coordination of efforts and the cooperation of the unions are required. What is called for is an “international union” with the centralization of authority characteristic of U.S. national unions. Yet three persistent problems stand in the way of such an international union movement:126

1. National and local labor leaders would have to be willing to relinquish their autonomy to an international level. This is a major stumbling block because the local union or enterprise union is essentially an autonomous organization.

2. Political and philosophical differences pose a further barrier to any international union movement. For example, a French labor leader committed to a communist form of economic organization is unlikely to yield authority willingly to an international union patterned after the United Auto Workers or any other union committed to the capitalist economic system. Conversely, the leaders of the United Auto Workers are unlikely to relinquish their autonomy to a communist international labor union.

3. Union solidarity is difficult to maintain in less-developed versus industrialized countries. Workers in a less-developed country, who earn low wages and have few employment alternatives, are (understandably) reluctant to support the bargaining demands of their high-wage counterparts in developed countries.

In view of the lack of success with multinational collective bargaining, unions have taken a different tack. Labor unions in the United States, for example, are attempting to influence the international labor practices of U.S.-based corporations, arguing that U.S.-based employees are unable to compete with overseas workers who are paid below-market wages and benefits. Toys 'R Us has been the target of several such campaigns over the past several years, including a “toycott” to force the retailer to stop selling goods allegedly manufactured with prison or child labor in China and a unionled boycott to protest the company's refusal to allow unionization of its workers.127 Self-policing by multinationals has not worked, but outside audits by independent bodies, such as the Worker Rights Consortium, have begun to lift the veil of secrecy that often shrouds factory work in less developed countries.128 While companies such as Reebok, Nike, Liz Claiborne, and Mattel have begun to enforce their codes of conduct that require contractors to fix harsh or abusive working conditions, experts estimate that 90 percent of Western companies charged with such abuses have done nothing meaningful to address them.129

· Prohibitions on child labor.

· Prohibitions on forced labor.

· Prohibitions against discrimination.

· Protection for workers' health.

· Payment of adequate wages.

· Provision of safe working conditions.

· Freedom of association.

Another strategic development is regional trading blocks, of which NAFTA is just one example.

The North American Free Trade Agreement (NAFTA) is one of the most radical free-trade experiments in history. It ranks on a par with Europe's creation of the euro and China's casting off Marxism for capitalism.130 Begun in 1994, NAFTA will eliminate trade barriers on goods and services within the United States, Canada, and Mexico over 15 years, and it creates a region of 421 million consumers, melding two first-world economies (United States and Canada) with a struggling Third-World country (Mexico). It is North America's strategic response to the global economy.

How has it worked? Results have been mixed. Employment in the maquiladora border factories—which import auto parts and electronics, process them, and send them north again, all duty-free—boomed initially, but employment is down 20 percent from its peak, as many operations have shifted to cheaper locales, such as China. An assembly worker in Mexico earns $1.47 an hour; his counterpart in China makes $0.59. Since 1994, Mexico's per-capita income rose 24 percent, to just over $4,000—which is roughly 10 times China's.131 And the U.S. deficit with Mexico is only 10 percent of total trade with that country (exports plus imports). By contrast, the U.S. deficit with the European Community equals 14 percent of trade; with Japan, 38 percent; and with China, 72 percent.132 In general, NAFTA has been good to Mexico. According to Mexican President Vicente Fox, “NAFTA gave us a big push—it gave us jobs, it gave us, knowledge, experience, and technological transfer.”

The relatively small direct impact of NAFTA on the U.S. economy actually conceals its pervasive, but subtle, indirect effects. For example, outsourcing of low-skill jobs to low-wage countries is an unstoppable trend. However, the NAFTA free-trade zone has given U.S. companies a way of taking advantage of cheap labor while still keeping close links to U.S. suppliers. Mexican assembly plants get 82 percent of their components from U.S. suppliers. By contrast, factories in Asia use far fewer U.S. parts. If General Motors relies on a plant in Matamoros, Mexico, to build wire harnesses for car audio systems, that's far better for the U.S. economy than if the carmaker buys its harnesses from, say, Taiwan. Says one economist, “Without NAFTA, entire industries might be lost, rather than just labor-intensive portions.”133

In Mexico, labor, management, and the government are working together toward a common goal: world-class levels of productivity. To illustrate this, consider the case of Volkswagen de México.

Conflict erupted when the government-controlled union at VW, based in Puebla, Mexico, agreed with management on a massive restructuring plan to raise productivity. VW management insisted the new agreement was vital for global competitiveness. This was hardly idle talk, because VW supplies the entire North American market from Puebla. Fearing layoffs, however, a group of dissidents opposed the plan. After weeks of a bitter strike, the government gave VW permission to rip up the union contract. The company promptly fired 14,000 workers and rehired all of them, minus some 300 dissidents, under a new contract. Within days, VW instituted a new HR management system; seniority as a basis for promotion is out, while training, and lots of it, is in. Workers are now promoted according to skills and performance.134 The federal government has long had enormous control over unions in Mexico, a situation that reformers are trying to change.135

Dealing with Union Dissidents

Today, the most favored union leaders in Mexico preach the gospel of productivity—and it's paying off. Already Nissan de México is exporting Sentras to Canada and light trucks back to Japan, while Ford's superefficient Hermosillo plant builds Escorts and Tracers for U.S. consumption.136

Perhaps an unanticipated effect of NAFTA is that it has set the stage for unprecedented levels of cooperation among labor groups across national borders. U.S. unions are now using the treaty to help organize and support workers in Mexico. Why? Because if Mexican wages rise, so the thinking goes, companies won't be so apt to move their plants to Mexico. This is why workers at a Ford plant in St. Paul, Minnesota, sent money to workers at a Ford plant north of Mexico City, who were battling the company over layoffs and work rules.137

Consider these sobering repatriation statistics:138

· 68 percent of expatriates do not know what their jobs will be when they return home.

· 54 percent return to lower-level jobs. Only 11 percent are promoted.

· Only 5 percent believe their companies value overseas experience.

· 77 percent have less disposable income when they return home.

Furthermore, having become accustomed to foreign ways, upon reentry they often find home-country customs strange and, at the extreme, annoying. Such reverse culture shock may be more challenging than the culture shock experienced when going overseas!139 Possible solutions to these problems fall into three areas: planning, career management, and compensation.

Increasingly, multinational corporations are seeking to improve their HR planning and also to implement it on a worldwide basis. Careful inclusion of expatriation and repatriation moves in this planning will help reduce uncertainty and the fear that accompanies it.

The attrition rate for repatriated workers is among the highest in corporate life, as high as 50 percent within one year.142 Firms such as 3M, IBM, Ford, and Disney appoint a “career sponsor” (usually a group vice president or higher)143 to look out for the expatriate's career interests while she or he is abroad and to keep the expatriate abreast of company developments. The development of e-mail networks certainly has made that job faster and easier than it used to be. Sponsors also must be sensitive to the “job shock” the expatriate may suffer when she or he gets back and must be trained to counsel the returning employee (and her or his family as well) until resettlement is deemed complete.144 To accelerate this process, some firms assemble a group of former expatriates to give advice and offer insights based on their own experiences.145

The loss of a monthly premium to which the expatriate has been accustomed is a severe shock financially, whatever the rationale. To overcome this problem, some firms have replaced the monthly foreign-service premium with a onetime mobility premium (e.g., three months' pay) for each move—overseas, back home, or to another overseas assignment. A few firms also provide low-cost loans or other financial assistance so that expatriates can get back into their hometown housing markets at a level at least equivalent to what they left. Finally, there is a strong need for financial counseling for repatriates. Such counseling has the psychological advantage of demonstrating to repatriates that the company is willing to help with the financial problems that they may encounter in uprooting their families once again to bring them home.146

Human Resource Management in Action: Conclusion

Says Kelly Brookhouse, an industrial/organizational psychologist who directs Motorola's executive development program, “We put people into a simulated environment and throw business challenges at them to see how they respond. We get a fairly comprehensive picture of people's leadership profile.”

“It was hard. A lot harder than I had expected,” says Mandy Chooi, a Beijing-based HR executive at Motorola who recently went through the exercise. “It's surprising how realistic and demanding it is.”

The ways in which a company operates overseas can have fundamental, long-term impacts on all three of these indicators. Recognize that poor conditions in an organization's international facilities can generate intense negative publicity, if discovered. In a recent poll, 51 percent of consumers surveyed said that a company's record on fairness and equality in hiring influences their buying choices. However, only 16 percent of company executives mentioned this record as a potential factor. Issues such as child and forced labor are particularly inflammatory to Western consumers.

Levi Strauss & Co. found a way to minimize the use of child labor in its international facilities without repudiating local custom. It pays would-be child laborers to go to school and offers them a position in its factories once the children have reached the legal minimum age of 14. Using this strategy, the company is able to maintain commitment to its principles without alienating local families who often depend on their children's wages to survive.147 The strategy also has the benefits of enhancing productivity, quality of work life, and profits.

Companies that use such assessments often see a quick payoff. French food group Danone SA reduced its failure rate among expatriate managers to 3 percent from about 35 percent in the three years since it started using such assessment programs.

IMPLICATIONS FOR MANAGEMENT PRACTICE

No one has discovered a single best way to manage. But before a company can build an effective management team, it must understand thoroughly its own culture, the other cultures in which it does business, and the challenges and rewards of blending the best of each. In the immediate future, there will certainly be international opportunities for managers at all levels, particularly those with the technical skills needed by developing countries. In the longer run, global companies will have their own cadres of globalites, sophisticated international executives drawn from many countries, as firms like Gillette, Nestlé, and Sumitomo do now.148 There is a bright future for managers with the cultural flexibility to be sensitive to the values and aspirations of foreign countries.

Finally, there is one thing of which we can be certain. Talent—social, managerial, and technical—is needed to make global business work. Competent HR management practices can find that talent, recruit it, select it, train and develop it, motivate it, reward it, and profit from it. This will be the greatest challenge of all in the years to come.

The phone rings. “Damn,” I mutter. A persistent colleague wants me to send a team member to Holland for three months to help land a big new client. I put her off politely and promise to call back later. But I've lost precious time, and when Ms. Dubois strolls in, the presentation is still humming through the printer on my desk.

Sounds a lot like real life, doesn't it?

Foreign investment by the world's leading corporations is a fact of modern organizational life. For executives transferred overseas, the opportunities are great, but the risks of failure are considerable. This is because there are fundamental cultural differences that affect how different people view the world and operate in business. The lesson for companies doing business overseas is clear: Guard against the exportation of home-country bias, think in global terms, and recognize that no country has all the answers.

Recruitment for overseas assignments is typically based on one of three basic models: (1) ethnocentrism, (2) limiting recruitment to home- and host-country nationals, or (3) geocentrism. Selection is based on five criteria: personality, skills, attitudes, motivation, and behavior. Orientation for expatriates and their families often takes place in three stages: initial, predeparture, and postarrival. Cross-cultural training may incorporate a variety of methods and techniques, but to be most effective it should be integrated with the firm's long-range global strategy and business planning. International compensation presents special problems because salary levels differ among countries. To be competitive, firms normally follow local salary patterns in each country. Expatriates, however, receive various types of premiums (foreign service, tax equalization, cost-of-living) in addition to their base salaries—according to the balance-sheet approach. Benefits are handled in terms of the best-of-both-worlds model. An overseas assignment is not complete, however, until repatriation problems have been resolved. These fall into three areas: personal finances, reacclimation to the U.S. lifestyle, and readjustment to the corporate structure. Finally, because global companies operate across national boundaries while unions typically do not, the balance of power in the multinational arena clearly rests with management. To provide a more level playing field, unions are pushing hard for international labor standards.

· multinational enterprise

· global corporation

· expatriate

· home country

· host country

· third-country national

· efficient purchaser index

· culture

· local perspective

· cosmopolitan perspective

· norms of behavior

· uncertainty avoidance

· individualism

· masculinity

· long-term versus short-term orientation

· transnational corporation

· ethnocentrism

· geocentrism

· general mental ability

· extroversion

· agreeableness

· emotional stability

· conscientiousness

· openness

· cross-cultural training

· culture shock

· localization

· higher-of-home-or-host compensation

· balance-sheet approach

· protection

· equalization

· modified balance-sheet approach

· acquired rights law

· best-of-both-worlds benefits

· equity norm

· maquiladora

· repatriation

· reverse culture shock

· mobility premium

· globalites

American business is increasingly international in scope. Many problems can arise when Americans attempt to conduct business in foreign countries without an awareness of the local culture and customs. The obvious solution to these problems is education and training—in particular, a series of briefings (provided by the HR department) for expatriates before they are sent on overseas assignments.

The purpose of this exercise is to familiarize you with the culture and customs of one foreign country and with the process of developing and implementing a cultural briefing program for expatriates.

Select a foreign country in which you have some interest. Then go to your college's library and find several resources that discuss the customs and cultural dimensions of your chosen country that would be important for a businessperson to know.

Collect visual aids for your briefing. For instance, your library or a campus professor may have posters, DVDs, videos, photos, or other visual aids available through online services that you can borrow to give students a visual overview of the country you have chosen. A local travel agency may have some brochures that you could pass around as part of your presentation. Another possibility is to develop a brief role play which demonstrates a “rude” American insulting his or her host through ignorance of local customs. Such a demonstration can be built right into your overall cultural briefing.

Be creative! The main idea is to teach the other students in your class about the conduct of business in another country and the importance of a cultural briefing for expatriates before they leave the United States.

1Fox, J. (2001, July 23). First, baby it's cold outside. Fortune, pp. 30-33. See also Garten, J. (2001, May 14). What business should be telling the president. BusinessWeek, p. 34.