INTERNATIONAL

HRM
International HRM Differences

• Greater Number of Services

• Special Services to Unique
Group
• Compensation Complexity
• Foreign Exchange Rate
Attention
• Language and Cultural
Differences
Increasing Importance of Global Human
Resources Understanding
International
Mergers and
Acquisitions

Importance of
Foreign Human Global Human Global
Resources Resources Competition
Management

Market Access
Opportunities
 Composition of the Cultural Environment of
International Business
Religion Values and Attitudes
Language
sacred objects Toward:
spoken
philosophical time
written language
systems achievement
official language
beliefs & norms work
linguistic pluralism
prayer wealth
language hierarchy
taboos change
international languages
holidays scientific method
mass media
rituals risk-taking
Education
Law
formal education
common law
vocational training
code law
primary education
foreign law
secondary education
home country law
higher education
antitrust policy
literacy level
international law
human resources
regulation
planning
Technology and Material
Politics Culture Social Organization
nationalism transportation kinship
sovereignty energy systems social institutions
imperialism tools & objects authority structures
power communications interest groups
national interests urbanization social mobility
ideologies science social stratification
political risk invention status systems
Key Issues in International HRM
1. Worldwide Human Resources
Planning
– Recruiting and Selection
– Expatriate orientation and training
– Repatriation
– Performance appraisal
2. Compensation
– Dealing with inflation and unexpected
changes in exchange rates
– Providing sufficient pay to keep
individuals
– Should company pay hardship allowance?
– Dissatisfaction with cost of living
allowances
3. Housing (Complex problems at home
and overseas)
Key Issues in International HRM
4. Benefits Planning
– Developing equity among employees
– Several plans necessary for different
categories of personnel
5. Taxation (Proliferation of new laws)
6. Communication of HR Policies and
Programs Worldwide
– Treat communication as a continuous
process
– Face-to-Face contact frequently
– Make policy manuals brief and simple
– Be sensitive to needs of receiver
– Send regular written explanations of policy
changes
– Periodic rotation of overseas HR managers
desirable
– Security
Global Manufacturing
International Corporation

Domestic firm that uses its

existing capabilities to move
into overseas markets.
Multinational Corporation (MNC)

Firm which independent

business units operating in
multiple countries.
Global Corporation

Firm that had integrated

worldwide operations
through a centralized home
office.
Transnational Corporation

Firm that attempts to

balance local responsiveness
and global scale via a
network of specialized
operating units.
 Types of Organizations

Global Transnational
Views the world as a single Specialized facilities permit
High market; operations are local responsiveness; complex
controlled centrally from the coordination mechanisms
corporate office. provide global integration.
Global
Efficiency

International
Low
Uses existing capabilities to
expand into foreign markets.
Multinational
Several subsidiaries operating
as stand-alone business units
in multiple countries.

Low High

Local Responsiveness
The Multi-National Corporation
(MNC)

• Home Country Employment

• External Country
Employment
Managing in a Foreign Environment

• Attitudes Vary
• Motivational Tools are
Distinctly Different
 Cultural Environment
of International Business
Clustering Nations Approach
• Geography
• • Work Goals
Languages
• • Values
Religion
• • Needs
Job Attitudes
Managerial Values

• Role of Competition
• Role of Blame
• Role of Shame
• Role of Participation: Japan
(hi)
• Role of Autocratic: Europe
(hi) and South America (hi)
Sources of Managerial Talent

• Home Country Nationals

(Expatriates)
• Host Country Nationals
(Natives)
• Third Country Nationals
(Non-Home/Host)
Advantages of Different Sources
for Overseas Managers

Host Country Home Country Third Country

•Less cost •Talent available •Broad experience
within company
•Preference of •International
host country •Greater control outlook
government
•Company •Multi-lingualism
•Knowledge of experience
environment
•Mobility
•Language facility
•Experience
provided to
corporate
executives
 SOME OF THE LARGEST U.S.
MULTINATIONALS
AT&T General Electric Microsoft

Cisco General Motors Procter and Gamble

Citicorp. Hewlett-Packard RJR Nabisco

Coca-Cola IBM Texaco

DuPont Intel United Technologies

Exxon/Mobil Oil J.P. Morgan Wal-mart

Ford Motor Johnson & Johnson Xerox

Motorola
6 Major Reasons for American Expatriate
Failures in Foreign Environment

• Inability of the manager’s spouse to

adjust to a different cultural environment.
• The manager’s inability to adapt to a
different physical or cultural environment.
Other family-related problems.
• The manager’s personality or emotional
immaturity.
• The manager’s inability to cope with the
responsibilities posed by the overseas
work.
• The manager’s lack of technical
competence.
• The manager’s lack of motivation to work
overseas.
Selection Methods

• Interviews (executives and

psychologists)
• Assessment Centers
(exercises)
• Tests (language and special
tests)
• Role of Family
 Flowchart of the Selection-Decision Process
Start the Selection Process

YES Select local national and subject him/her to training

Can the position be filled by a local national? basically aimed at improving technical and managerial
skills.

NO

Identify degree of interaction required with local Emphasis* on tasks variables.

community – using a 7- or 9- point scale, ranging from low LOW
to high, indicate the degree of interaction with local Second but by no means unimportant question is to ask
community required for successful performance on the job. whether the individual is willing to serve abroad.

HIGH YES NO

Is candidate willing? Probably not suitable for position

YES
NO Identify degree of similarity /
dissimilarity between cultures – using a
Probably not suitable for position 7- or 9-point scale, ranging from similar
to highly diverse, indicate the magnitude
VERY SIMILAR of differences between the two cultures,
Start orientation
HIGHLY DIVERSE (moderate to high rigor)
Emphasis* on task variables

Emphasis* on “relational abilities” factor.

Start orientation “Family situation” factor must also be
(moderate to high rigor) taken into consideration.

Start orientation (most rigorous)

Preparing for an International Assignment

Study the following subjects:

• Social and business etiquette.
• History and folklore.
• Current affairs, including relations between the
country and the United States.
• The culture’s values and priorities.
• Geography, especially the cities.
• Sources of pride: artists, musicians, novelists,
sports, great achievements of the culture,
including things to see and do.
• Religion and the role of religion in daily life.
• Political structure and current players.
• Practical matters such as currency, transportation,
time zones, hours of business.
• The language.
Cultural Shock

• "A Disorientation that

Causes Perpetual Stress"

– Disorienting Incidents
– Impossible Communication
– Telephone Difficulties
– Family Frustrations
Special Considerations

• Career Development Risks

• Reentry Problems
• Managing Family Life
• Terrorism
Recruitment

• Government Regulations
• Work Permits Universally
Required
• Recruitment of Locals
Varies
• Guest Workers
• Role of Church, Family,
Politics
Selection
• Merit Versus Best Family
• Family Ties
• Social Standing
• Origin
• Industrialized versus Less
Developed
Training Issues

• Local Resources
• Less Technical Capabilities
• Apprenticeship Strengths in
Europe
• Management Development
(US Leader)
• Language (English Need)
Compensation

• Host Country Employees

– Production Standard or Time
or Combination
– Benefits (often higher than
U.S.)
– Profit Sharing (may be
Required)
• Managers
– Narrowing of Salary Gap
with USA
Expatriate Compensation

• Base Pay
• Differentials
• Incentives
• Company Assistance
• Cost: 3-4 times USA Rate
Compensation of Expatriate Managers

To be effective, a compensation
program must:

1. Provide an incentive to leave the

united states.
2. Maintain an American standard of
living.
3. Facilitate reentry into the united
states.
4. Provide for the education of
children.
5. Maintain relationships with family,
friends, and business associates.
Compensation Elements of an Expatriate

• Programs used by most U.S. Based MNCs

have four elements:
• Base pay – equal to pay of domestic
counterparts in comparably evaluated
jobs.
• Differentials – to offset the higher costs of
overseas goods, services, and housing.
• Incentives – to compensate the person for
separation from family, friends, and
domestic support systems.
• Company assistance programs – to cover
added costs such as moving and storage
costs, automobile, and education
expenses.
 The Price of an Expatriate
An employer’s typical first-year expenses
Note: Additional costs
of sending a U.S. executive abroad.
often incurred aren’t Direct Compensation Costs
listed above, including Base Salary 100%
language and cross- Foreign-service premium 15%
cultural training for Goods and services differential 20%
employee and family, and Housing costs 20-40%
costs of selling home and
cars in the U.S. before Transfer Costs

moving. Relocation allowance 5%

Air fare 2%
*Figures take into account Moving household goods 25%
payments by employee to
company based on Other Costs

hypothetical U.S. income Company Car 15%

Schooling (two children) 20%
tax and housing costs.
Annual home leave (four people) 5%
*It is not unusual to triple Personal income tax abroad 50%

costs compared to USA

earnings. Total = Salary plus 187-207%