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Slide 14.

Chapter 14

Human resource
management strategy

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.2

Human resource
management strategy

Objectives
Introduction
Selection and repatriation
Training and development
Compensation
Labor relations
Strategic management and IHRM strategies.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.3

Objectives
Define the term international human resource
management and discuss human resource strategies in
overseas operations.
Describe the screening and selection criteria often used in
choosing people for overseas assignments.
Relate some of the most common types of training and
development that are offered to personnel who are going
overseas.
Discuss the common elements of an international
compensation package.
Explain some of the typical labor relations practices used
in the international arena.
Describe some of the HRM strategies that are currently
receiving a great deal of attention from MNEs.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.4

Introduction
International human resource management
(IHRM): the process of selecting, training,
developing and compensating personnel in
overseas positions.
Three basic sources of personnel talent that
MNEs can tap for these positions:
Home-country nationals (expatriates)
Host-country nationals
Third-country nationals.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.5

Figure 14.1

The management of multinational enterprises

Source: Reprinted from Columbia Journal of World Business, Summer 1973, Lawrence G. Franko, Who Manages Multinational Enterprises? page 33, Copyright 1973, with permission
from Elsevier Science
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.6

Selection and repatriation

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.7

International screening
criteria and selection procedures
International screening criteria:

Adaptability
Self-reliance
Age, experience and education
Health and family status
Motivation and leadership.

Selection procedures:
Interviews (often including spouse)
Tests.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.8

Repatriation of expatriates
Reasons for repatriation:
The pre-determined time assignment is
completed.
Expatriates desire to have their children educated
in the home country.
Expatriate might be unhappy overseas.
Expatriate might have performed poorly.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.9

Readjusting
Expatriates might find it difficult to adjust back to
the home environment. A number of reasons can
be cited:

The home-office job lacks the high degree of


authority and responsibility that expatriates had in
their overseas job.
A feeling that the company does not value
international experience.
They may no longer be well known among people
at headquarters.
Their old job may have been eliminated or
drastically changed.
Technological advances at headquarters may have
rendered their existing skills and knowledge
obsolete.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.10

Adjustment strategies
Transition strategies are designed to help
smooth the move from foreign to domestic
assignments.

The repatriation agreement, which spells out how


long a person will be posted overseas and sets
forth the type of job the person will be given upon
returning.
To rent or maintain the expatriates home during
the overseas tour.
To assign a senior executive as a sponsor for each
manager who is posted abroad.
To maintain ongoing communications with
expatriate managers, thereby ensuring that they
are aware of what is happening in the home office.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.11

Training and development

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.12

Training and development


Training: the process of altering employee
behavior and attitudes in a way that increases the
probability of goal attainment.
Managerial development: the process by which
managers obtain the necessary skills,
experiences and attitudes they need to become
or remain successful leaders.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.13

Training programs
Types of training:
Standardized training programs: generic
programs that can be used with managers
anywhere in the world.
Tailor-made training programs: designed to meet
the specific needs of the participants and typically
include a large amount of culturally based input.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.14

Training programs (Continued)


Research shows that the following six types of
programs are most popular:
Environmental briefings used to provide information about
such things as geography, climate, housing and schools.
Cultural orientation designed to familiarize the individual with
cultural institutions and value systems of the host country.
Cultural assimilators using programmed learning approaches
designed to provide the participants with intercultural
encounters.
Language training.
Sensitivity training designed to develop attitudinal flexibility.
Field experience, which sends the participant to the country
of assignment to undergo some of the emotional stress of
living and working with people from a different culture.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.15

Compensation

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.16

International compensation package


Common elements in an international
compensation package:
Base salary: the amount of cash compensation
that an individual receives in the home country.
Benefits
Allowances
Cost-of-living allowance: payment to compensate
for differences in expenditures between the home
country and the foreign location.
Hardship allowance: a special payment made to
individuals who are posted to areas that are
regarded as less desirable.

Tax protection and/or tax equalization.


Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.17

Current compensation trends


Owing to the high costs of expatriates, MNEs are
taking the following steps:
Not sending expatriates to overseas positions
unless there is a need for their specific services.
Increasingly replacing permanent relocation and
long-term assignment with as-needed short trips
that typically last less than a year.
A growing number of MNEs are now dropping
bonuses or premiums for overseas assignments
and replacing them with lump-sum premiums.
Many companies are beginning to phase out
incentive premiums.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.18

Figure 14.2

Cost of expatriate managers

Source: C. Reynolds, Compensation of Overseas Personnel, in J. J. Famularo (ed.), Handbook of Human Resource Administration, 2nd ed. (New York: McGraw-Hill, 1986), p. 51.
Reproduced with permission of The McGraw-Hill Companies
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.19

Table 14.1

Employer incentive practices around the world

Source: Geoffrey W. Latta, Expatriate Incentives: Beyond Tradition, HRfocus, March 1998, p. S4. Reprinted by permission HRfocus, March 1998. 212/2440360. http://www.ioma.com
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.20

Labor relations

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.21

Figure 14.3

Labor unions worldwide, 1995 (percentage of labor force that is unionized)

Source: International Labor Organization, World Labour Report, November 1997


Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.22

Labor relations practices


Labor unions traditionally have been strong in
Germany.
Unions set the pay scale for around 90 percent of
the countrys workers, with wages determined by
job classifications.
Union membership is voluntary, but there is only
one union in each major industry.

In Japan, unionmanagement relationships are


extremely cooperative.
Social custom dictates nonconfrontational behavior.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.23

Industrial democracy
Industrial democracy: the legally mandated right
of employees to participate in significant
management decisions.
Forms of industrial democracy
Codetermination: a legal system that requires
workers and their managers to discuss major
strategic decisions before companies implement
the decisions.
Work councils: groups that consist of both worker
and manager representatives and are charged with
dealing with matters such as improving company
performance, working conditions and job security.
Shop floor participation.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.24

Industrial democracy in action


In Germany, industrial democracy and
codetermination are both very strong, especially
in the steel and auto industries.
In Denmark, industrial democracy gives workers
the right to participate in management on both a
direct and an indirect basis.
Japans use of industrial democracy concepts is
not tied to political philosophy, as in Europe, but
more oriented toward Japanese culture and the
belief in group harmony.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.25

Strategic management and


IHRM strategies

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.26

Human resource
management strategies
There are a number of human resource
management (HRM) strategies currently receiving
attention from MNEs, including:
language training
cultural adaptation
Cf. cultural assimilator
competitive compensation
specially designed HRM programs

structural empowerment
accelerated resource development
employee welfare emphasis
efficiency emphasis
long-termism.
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.27

Cultural assimilators
A cultural assimilator is a programmed learning
technique that is designed to expose members of
one culture to some of the basic concepts,
attitudes, role perceptions, customs and values of
another culture.
Cultural assimilators are developed for pairs of
cultures, such as to familiarize managers from the
US with the culture in Germany.

Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.28

Table 14.3 Cost of living in select cities (New York = 100), 2009
Source: Adapted from UBS, Price and Earnings, 2009.
E-resources: http://www.ubs.com/1/e/wealthmanagement/wealth_management_research/prices_earnings.html
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

Slide 14.29

Table 14.4 HRM practices in select countries


Source: Adapted from Journal of World Business, Vol. 32, No. 3, 1997, Paul R. Sparrow and Pawan S. Budhwar,
Competition and Change: Mapping the Indiana HRM Recipe Against World-Wide Patterns, p. 233, Copyright 1997 with
permission from Elsevier Science
Rugman and Collinson, International Business, 6th Edition, Pearson Education Limited 2013

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