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Chapter 16- International Dimensions of HR Management

 The world is becoming a global village as multinational investment grows

 Repatriation – process of reentering one’s native culture after being absent from it

THE GLOBAL CORPORATION: A fact of modern organizational life

 Demise of communism, fall of trade barriers, rise of networked info
 Foreign direct investment reached $1.35 trillion in 2013
o 52% coming from and going to developed countries
 2014 Fortune Global 500 aggregate revenues: 31.1 trillion, with $2 trillion in profits
 Signs of Globalization
o Globalization = dominant driving force in the economy
o Expanding high-tech, info-based economy
o Mass collaboration through file-sharing, blogs, social networking
o Proctor and Gamble uses outside scientific networks to generate 35% of new products
from outside the company
o Programmers volunteer on open source projects world wide
o More than 500 million people use skype, reducing costs of telecom
o Ebay created self-sustaining alternative to retail stores
o E-commerce makes firms global the moment websites are up
o Coca-cola generates 80% of sales outside the US
o Financial markets are open 24 hours a day around the world
 Backlash against globalization
o Growing fear that globalization only benefits big companies, not average citizens
 Insecurity
 Companies churn their workforces and operations are sent overseas,
cutting US workforce in the US by 4% the past 13 years
 Not just because wages are lower in China, but bc growth is there
 Mistrust
 Multilateral instituions like IMF, World Bank are losing credibility
 Secret decisions made behind closed doors
 Managing global supply networks
 Extended network of relationships requires transparency, better
communication, greater trust, genuine reciprocity
 More collaborative, partnership-like environment
 Priorities
 Environment and labor standards overseas are issues
 Technophobia
 Battle against GMOs is just one reaction against high-tech
 Science and innovation may be seen as threats
 Preservation of traditional, national values is most important
o Multinational corporations are responsible to uphold labor standards, living standards,
and contribute to communities in which they operate
 Companies like Levi Strauss, Home Depot, Starbucks are doing well
o 82,000 multinational enterprises ($80 mil employees, $18 trillion in sales) operate global
o global corporation
 one that’s an insider in any market/nation where it operations
o Three phases
 Initial orientation- two days
 Cultural briefings, with special emphasis on drug or alcohol laws on top
of traditions, history, gov, economy, health, visa info
 Assignment briefings—length, vacations, salary, tax, policy, repatriation
 Relocation—shipping, packing, home sale/rental, housing
 Must emphasize NO penalty to changing their minds (better to leave
now than wait til later and fail)
 Predeparture orientation- two or three days
 Make lasting impression on employees and remind them of material
 Introduce language, reinforce open-mindedness, emergency & arrival
 Postarrival orientation
 Employees and families met by sponsors, to reduce stress associated
with work and family demands
 Orientation toward environment – schools, housing, medical facilities,
transportation, local gov
 Orientation toward work unit and fellow employees, like office
norms/politics, expectations, team building
o To relieve feelings of strangeness or tension
 Orientation to actual job, to focus on cultural diffs in way jobs are done
 Cross-cultural training and development
o Formal programs to prepare people of diff cultures to interact effectively
o Training in three areas: culture, language, day-to-day matters
o Female expatriates need training on norms, values, traditions that host nationals
possess about women and how to deal with challenges of being a women
o Effects of training on development of skills during adjustment is mixed
o Conclusions depend on training design factors and trainee characteristics
o Training should be prior to departure and after arrival—can reduce early-return rate
o Culture shock occurs 4-6 months after arrival
 Homesickness, boredom, withdrawal, need for excessive sleep, compulsive
eating/drinking, irritability
o Common stresses of everyday living is amplified when expatriate is away from family
o Key characteristic of successful global managers is adaptability
 8 dimensions: emergency, work stress, problem solving, dealing with
uncertainty, learning work tasks and tech, interpersonal/cultural/physical
o train to expose them to situations they will encounter that requires adaptation to
 increase transfer of training
 be consistent with idea that adaptive performance is enhanced by experience
 integration of training and business strategy
o globalization influences training activities and their focus
o the more a firm moves away from export stage of development, more rigorous training
should be
o socialize host-country managers into firm’s corporate culture and other practices
 international compensation
o salary levels for the same job differ among countries in which global corporation
 fluctuating exchange rates require constant attention
o ideally, effective intl compensation policy meets following
 attract and retain employees
 facilitate transfers btwn foreign affiliates and home-country to foreign locations
 establish and maintain consistent relationship between compensations
 maintain reasonable compensation in relation to competition
 support org goals and motivate employees to make effort to make org success
o localization—paying expatriates on same scale as local nationals
 works well when employee has little home-country experience (college grad)
 works well in permanent or indefinite transfers
 reduces costs, but there are long-term tax and retirement benefit complications
o local-plus compensation—localizes expatriates in host-country salary program
 then add allowances (housing assistance, education, medical coverage)
 used for employees coming from lower-wage to higher-wage countries, and for
permanent transfers
 used for training or developmental assignments, and roles with significant
incentive compensation (financial services)
o balance sheet approach—used by 71% of orgs
 ensures expatriates neither gain nor lose financially compared to home-country
 facilitates mobility among expatriates in cost-efective way
 differences in attractiveness of assignments are compensated with separate
allowances (premiums) and incentives
 hardship allowances in war zones or health-problem-ridden places
 host-country costs – income taxes, housing, goods and services –tend to be
higher abroad than at hom
 two philosophies
 protection—supplementing expatriates
 equalization—equalizing income taxes and providing local currency for
life in the host-country
 Benefits
o Vary drastically from one country to another
 i.e. statutory rights vary from country to country—pensions, sick pay, minimum
wage, holiday pay, overtime pay, minimum work time, severance
o Qualitative parity—commiting to offer employees worldwide the following
 Core benefits, like health care
 Required benefits, like mandatory profit sharing
 Recommended benefits, like life insurance if costs permit
 Optional benefits, like local transportation or meal support
 India has health care for aging parents, or Mexico city has “pollution
escape trips”
o Quantitative parity—treat employees equitably from total cost perspective
 If employee is in country with rich health care or pension (france) the company
does not want to add a layer of benefits due to unfairness
 Verizon reviews each country from total-rewards perspective
 Premiums like housing, education, income tax equalization, hardship, danger,
and home leave allowances
 Pay adjustments and performance management
o Adjustments are based on how well people do their jobs
o In most countries, objective measures for rating employee/managerial performance are
o Four broad constraints on expatriates regarding achieving goals
 1) differences in local accounting rules make it difficult to compare performance
 2) objectives tend to be more fluid and flexible
 3) separation by time and difference make it difficult for perfM accounting for
country-specific factors
 4) market development in foreign subsidiaries is slower than at home
o three cultural differences to consider during perfM
 communications, goal setting, and rewards
 concepts are interpreted/implemented differently in individualistic vs
collectivistic cultures
o singling out one’s contribution may cause employee to “lose face” among peers
 where nepotism is common, primary objective = preserve working relationships
o individualistic cultures popular topic is appraisal interviews
 ability to conduct interviews and communicate bad news are key skills for
successful manager
o collectivist societies discussing person’s performance openly will clash with norm of
 subordinate view it as unacceptable loss of face, so there are more subtle,
indirect ways of communicating feedback
o equity norm- rewards are distributed to group members based on contributions
 more expatriates perceive that methods are fair (procedural justice), better
adjustment and performance overseas
o determine purpose of appraisal, set standards of performance, allow more time to
achieve results abroad, and keep objectives flexible and responsve to market and
environmental conditions
 Labor Relations in the Intl Arena
o Laws, practices, structures vary considerably among countries
 Unions, management or government dictations of terms, may or may not exist
o Unions may constrain global companies by influencing wage levels so that cost
structures are noncompetitive, limiting varying employment levels at own discretion,
and hindering global integration
o Transnational collective bargaining
 Unions in more than one country negotiate jointly with the same company
 Global corporations are hard to deal with and penetrate with union power
o Problems that global corporations present to unions
 Union expansion cannot follow expansion of company across boundaries (legal
differences, feelings of nationalism, differences in union structure, industrial
relations practices)
 Foreign investment has changed from raw materials to parallel operations in
different countries
 Threatens home country union members with job loss or slower job
growth if wages are higher than workers of host country
 Firm’s ability to switch/shut down production from one location due to labor
dispute has increased if operations are paralleled in other locations
o Solution: transnational collective bargaining
 Requires coordination and cooperation
 National and local leaders have to relinquish autonomy to intl level
 Laws that restrict sympathy strikes, boycotts, and affiliations with labor unions
hamper cooperation
 Language barriers, cultural/religious/ideological differences, fear of losing
autonomy… make TCB rare
 Toward intl labor standards
o Four forces drive the trend of adopting intl labor standards
 Labor union; pressure from social-advocacy groups; resentment against
multinationals; US-European proposals between trade policy & human rights
o Set standards:
 Child labor, forced labor, discrim, workers’ health, wages, work conditions
o Industry is making progress
 Tech companies created Electronic Industry Code of Conduct
 Incorporates standards like environmental standards
 Apparel industry committed to building safety and wages
o Eliminated trade barriers in goods and services within US, Canada, Mexico
o Companies are free to invest in all three NAFTA countries, but individuals are not free to
work outside their home countries
o NAFTA changed trade among the three, tripling trade to $1.1 trillion annually
o Overall trade and employment increased but wide disagreement about what NAFTA
actually has done to work on its promises

 Sobering statistics
o 68% of expatriates do not know what their jobs will be upon return
o 54% return to lower-jobs, 11% promoted
o 5% believe companies value overseas experience
o 77% have less disposable income upon return
 reverse culture shock
o being accustomed to foregin ways makes home feel strange
o when asked in 2014 what steps companies were taking to reduce attrition (top 6
 greater opportunity to use intl experience
 guarantee position upon completion of intl assignment
 offer repatriation career support
 offer greater position choices
 greater recognition before and after intl assignment
 offering repatriation support for family
 solutions: planning, career mamangement, compensation
 planning
o 94% of companies hold repatrireation discussions but only 16 have formal
strategy linked to career management and retention
o need for companies to allow repatriates to use intl experience as next step in career
o define one or more of purposes for sending expatriate abroad: executive dev,
coordination and control between HQ and foreign ops, training
o with no planned purpose in repatriation, $1m in investment is squandered bc turnover
is almost 20% within 2 years of being back
 career management
o number one issue for expatriates
o companies need to give them a reason to stay beyond financial rewards
o leverage intl experiences in appropriate and challenging roles
o 16% of 111 expatriates who repatriated were in a job they said was a demotion, 57%
argue it’s a lateral move, 27% say promotion
 compensation
o loss of monthly premium that an expatriate is used to comes to a severe shock
o mobility premium (e.g. three months pay) for each move—overseas, back home, to
antoehr assignment
o low-cost loans so expatriates can get back to hometown housing markets
o financial counseling is also an option