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
  competitive with domestic firms in local markets, but with a global strategic
New form is evolving among high-tech companies  transnational corporations
o Geo-diversity is an advantage, top execs and core functions are in different countries
 Possible by Internet
o HR management must be integrated into overall strat of org  directly aligned
 Workforce planning
o Analyze local and international external labor markets as well as internal labor markets
o Inexhaustible cheap labor are drying up as demand outstrips supply
o Multinational corporations need to make the most of global labor pool
 Implies corp strategy of labor arbitrage moves to lower-wage locations as
existing ones get too pricey
 i.e. moving from shanghai to Chengdu
o developed countries’ labor markets usually supply skilled tech & prof people
o developing countries have severe shortages of qualified people, with surplus of
nonskilled workers
o find top management potential early & provide lots of training to employees
 recruitment
o select from three basic models
 national group of parent company only
 only within their country and country of branch location
 adopt international perspective and unrestricted use of all nationalities
o ethnocenterism- home-country only
 appropriate during early phases of intl expansion bc of concerns with
transplanting biz that works in home countries
 BUT implies blocked promotional paths for local executives
 Increase tendencies to impose management style of parent company
o Limiting recruitment to home and host-country nationals
 May result from acquision of local companies
 Eliminates language barriers, expensive training, and cross-cultural problems
 Take advantage of local salary levels while paying premium for high quality
 BUT difficult to bridge gap btwn subsidiary and parent companies
 Exclusion of some very able executives
o Geocentrism: seeking best person for job regardless of nationality
 Optimal at first glance
 BUT very expensive, takes a long time, and requires huge centralized control
 Cross national service is emphasized and duly rewarded
 International staffing
o Selection process for intl managers is intuitive and unsystematic
o Major problem: often based soley on technical competence and job knowledge, which
does not predict abilities to adapt, to deal with foreign workers, or to perceive norms
o Variety of personal characteristics predict success
o General mental ability
 Defined broadly as the ability to learn
 Includes any measure that combines two or more specific aptitudes
 Validity of GMA is 0.57 for high complexity jobs, 0.51 for medium, 0.38 for low
 Robust predictor of job performance and training in Europe and the US
 Meta-analysis says across 12 occupational categories, it predicted performance
in job and in training
 o Personality
 Three personalities are related to success (completing expatriate assignment)
 Extroversion, agreeableness, and emotional stability
 Conscientiousness is a general work ethic that affects performance ratings
o Other characteristics
 Openness—extent to which individual is creative and curious and has broad
interests
 Tenacity/resilience—stays positive despite setbacks
 Communication—clear, fluent, talks at a pace that holds attention in
group/individual situations
 Adaptability—easily adjusts to new situations, receptive to new ideas, changes
in response to changing demands
 Organizational and commercial awareness—alert ot changing dynamics
 Teamwork—cooperates and works well with others in pursuit of shared goals
 Developing relationships is key
 Self-discipline—committed, consistent, dependable, conscientious
 Cross-cultural awareness—sees issues from perspective of ppl in other cultures
 GMA correlated to language acquisition, openness correlated with instructor’s
ratings, agreeableness correlated negatively with ratings
 Too agreeable = “pushover”
 Applicability of US employment laws to multinational employers
o Title VII of CRA, Age discrim act, americans with disabilities, uniformed services
employment and reempoloyment rights act ALL apply to US citizens abroad and US
citiznes of foreign corporations doing biz in the US (even if fewer than 20 workers)
 However not apply to foreign employees of US based multinational (not US
citizens)
o EEOC reviews degree of interrelated operations, extent of common management,
degree of centralized control, place of incorporation
o If laws of particular country prohibit hiring of women in jobs, US company MUST follow
that country’s law
 Orientation
o Important before departure and after arrival
o Formalized efforts for entire family, with reps of the country and former expatriates, are
extreemley important
 Top family challenges in 2014: partner resistance (40%), family adjustment
(38%), children education (42%), degree of difficulty of destination (22%)
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
info
 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
adaptability
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
operates
 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
peers
 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
uncommon
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
harmony
 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
 The NAFTA
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

REPATRIATION
 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
descending):
 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