Chapter 9

Staffing, Training, and

Compensation for Global
Operations
PowerPoint by
Kristopher Blanchard
North Central University

© 2006 Prentice Hall 9-1

 Introduction
[In the new millennium], the caliber of the
people will be the only source of
competitive advantage.
—Allan Halcrow, Personnel Journal

Of the top 100 UK firms surveyed by Cendant

International Assignment Services, 63
reported failed foreign assignments.
- www.expat.FT.com

© 2006 Prentice Hall 9-2

 Staffing Philosophies for Global
Operations
Firms using an ethnocentric staffing approach fill
key managerial positions with people from
headquarters – that is, parent-country nationals
(PCNs).
In a polycentric staffing approach, local managers
– host-country managers (HCNs) – are hired to fill
key positions in their own country.

© 2006 Prentice Hall 9-3

 Staffing Philosophies for Global
Operations
In the global staffing approach, the best
managers are recruited from within or
outside of the company, regardless of
nationality.
In a regiocentric staffing approach,
recruiting is done on a regional basis – say
within Latin America for a position in
Chile.

© 2006 Prentice Hall 9-4

 Problems with Expatriation
Selection based on headquarters criteria
rather than assignment needs
Inadequate preparation, training, and
orientation prior to assignment
Alienation or lack of support from
headquarters
Inability to adapt to local culture and
working environment

© 2006 Prentice Hall 9-5

 Problems with Expatriation
Problems with spouse and children – poor
adaptation, family unhappiness
Insufficient compensation and financial
support
Poor programs for career support and
repatriation

© 2006 Prentice Hall 9-6

 Training and Development
Challenges faced by expatriates
– China: a continuing problem for expatriates; one complained that
at his welcome banquet he was served duck tongue and pigeon
head
– Brazil: expatriates stress that cell phones are essential because
home phones don’t work
– India: returning executives complain that the pervasiveness of
poverty and street children is overwhelming
– Indonesia: here you need to plan ahead financially because
landlords typically demand rent two to three years in advance
– Japan: expatriates and their families remain concerned that
although there is excellent medical care, the Japanese doctors
reveal little to their patients.

© 2006 Prentice Hall 9-7

 Cross-Cultural Training: Culture
Shock
Culture shock is a state of disorientation and
anxiety about not knowing how to behave in an
unfamiliar culture. The cause of culture shock is
the trauma people experience in new and different
cultures, where they lose the familiar signs and
cues that they had used to interact in daily life and
where they must learn to cope with a vast array of
new cultural cues and expectations.

© 2006 Prentice Hall 9-8

 Cross-Cultural Training: Culture Shock
Honeymoon – when positive attitudes and expectations,
excitement, and a tourist feeling prevail
Irritation and hostility – the crisis stage when cultural
differences result in problems at work, at home, and in daily
living
Gradual adjustment – a period of recovery in which the
“patient” gradually becomes able to understand and predict
patterns of behavior, use the language, and deal with daily
activities, and the family starts to accept their new life
Biculturalism – the stage at which the manager and family
members grow to accept and appreciate local people and
practices and are able to function effectively in two cultures

© 2006 Prentice Hall 9-9

 Cross-Cultural Training: Sub-
Culture Shock
Subculture shock occurs when a
manager is transferred to another part
of the country where there are cultural
differences – essentially from what she
or he perceives to be a “majority”
culture to a “minority” one.

© 2006 Prentice Hall 9-10

 Training Techniques
Area studies, that is, documentary programs
about the country’s geography, economics,
sociopolitical history, and so forth
Culture assimilators, which expose trainees to
the kinds of situations they are likely to encounter
that are critical to successful interactions
Language training
Sensitivity training
Field experiences – exposure to people from
other cultures within the trainee’s own country

© 2006 Prentice Hall 9-11

 Integrating Training with Global Orientation

© 2006 Prentice Hall 9-12

 Integrating Training with Global Orientation

© 2006 Prentice Hall 9-13

 Training Host-Country Nationals
We found that the key human resource role of
the MNC [in Central and Eastern Europe]
was to expose the local staff to a market
economy; to instill world standards of
performance; and provide training and
functional expertise.
Richard Peterson, “The use of Expatriates and Inpatriates in Central and
Eastern Europe Since the Wall Came Down,” Journal of World
Business, 2003.

© 2006 Prentice Hall 9-14

 Training Host-Country Nationals
Continuous training and development of
HCNs and TCNs for management positions
is an important factor for long-term success
of the multinational corporation
Ongoing development will facilitate the
transition to an indigenization policy
The company will have a well-trained
management staff with broad international
experience

© 2006 Prentice Hall 9-15

 Management Focus: Success! Starbucks’ Java
Style Helps Recruit, Train, and Retain Local
Managers in Beijing
Starbucks Coffee International now has 70
facilities in China. In addition to converting a
nation of tea drinkers into coffee lovers, Starbucks
had to deal with the problem of finding, training,
and keeping local Chinese managers. As part of
their training effort, Starbucks sends managers to
Tacoma, Washington for three months to learn not
only how to make a cup of coffee, but also to learn
culture. Chinese managers appreciate a company
that invests in their development and treats them
with respect.

© 2006 Prentice Hall 9-16

 Training Host-Country Nationals
Training to facilitate e-business
adoption is taking on increasing
importance
Training in information and
communication technologies is
particularly critical for firms in new
economy and emerging markets
List of training needs for managers in
Eastern Europe
© 2006 Prentice Hall 9-17
 Training Priorities for E-Business
Development

Return
© 2006 Prentice Hall 9-18
 Compensating Expatriates
Compensation is a crucial link between
strategy and its successful implementation
– Must be a fit between compensation and the
goals of the firm
Maintaining an appropriate compensation
package is more complex than it would
seem
– Little variation in typical salary but there is a
wide variation in net spendable income

© 2006 Prentice Hall 9-19

 Balance Sheet Approach

© 2006 Prentice Hall 9-20

 Compensating Expatriates
Salary – Local salary buying power and
currency translation, as compared with home
salary; bonuses or incentives for dislocation
Taxes – Equalize any differential effects on
taxes as a result of the assignment
Allowances – Relocation expenses; cost-of-
living adjustments; housing allowance for
assignment and allowance to maintaining
house at home; trips home for family;
private education for children
Benefits – Health insurance; stock options

© 2006 Prentice Hall 9-21

 Compensating Host-Country Nationals
A number of variable apply including local
market factors and pay scales, government
involvement in benefits, unions, and the
cost of living must all be considered
Eastern Europeans spend 35% to 40% of
their disposable income on food and utilities
– East European managers must have cash for
about 65% to 80% of their base pay
– US managers must have cash of about 40%

© 2006 Prentice Hall 9-22

 Compensating Host-Country Nationals
To be competitive, MNCs can focus on
providing goods and services that are either
not available at all or are extremely
expensive.
It is important to make clear what benefits,
as well as salary, come with a position
because of the way compensation is
perceived and regulated around the world

© 2006 Prentice Hall 9-23

 Comparative Management in Focus:
Compensating Russians
Korean companies are cashing in by signing
up low-cost Russian engineers.
www.Businessweek.com, March 8, 2004

Russia is our No.1. destination for technology

outsourcing.
Cha Dae Sung, Samsung, March 8, 2004

© 2006 Prentice Hall 9-24

 Comparative Management in Focus:
Compensating Russians
Select Russian employees who are achievement-
oriented and willing to take risks
Tie individual bonuses to initiative and personal
accountability (to encourage individual goal setting).
Organize social events and other group activities.
Provide small-group incentives
Provide a mix of short- and long-term incentives
Tailor the compensation package to individual
preferences

© 2006 Prentice Hall 9-25

 What is total rewards? http://www.worldatWork.com
Total Rewards: All of the tools available to the employer that may be
used to attract, motivate and retain employees. Total rewards include
everything the employee perceives to be of value resulting from the
employment relationship. 
Throughout history, employers have been challenged with attracting,
motivating and retaining employees. From the simplest barter systems
of centuries past to the current complex incentive formulas of today,
the organizational premise has been the same: Provide productivity
and results to our enterprise and we will provide you with something
of value.
There are five elements of total rewards, each of which includes
programs, practices, elements and dimensions that collectively define
an organization's strategy to attract, motivate and retain employees.
These elements are:
Compensation
Benefits
Work-Life
Performance and Recognition
Development and Career Opportunities

© 2006 Prentice Hall 9-26

 Looking Ahead
Chapter 10 – Developing a Global
Management Cadre
– Preparation, Adaptation, and Repatriation
– Global Management Teams
– The Role of Women
– Working within Local Labor Relations Systems

© 2006 Prentice Hall 9-27