International business

Chapter 18 – Global Human Resource

Development
M.ABDULLAH LCM-3850
GUL AFSHAN KAZMI LCM-3840
M.AZAN KHAN LCM-3851
M.HUSSAIN LCM-3854
 Definition HRM

 Human resource management refers to the activities

an organization carries out to use its human
resources effectively.
 These activities include determining the firm’s
human resource strategy, staffing, performance
evaluation etc.
Human Resource Management in Local

 HRM in local including recruitment, hiring, and

other human capital management support its also
include onboarding process.
 This includes hiring the agency's workforce,
managing benefit plans, and providing professional
development opportunities.
The strategic role of human resources
in international business:

International human resource management (IHRM) refers to the planning, selection,

training, employment, and evaluation of employees for international operations.

● Management struggles with a wide range of challenges in hiring and managing

workers within the distinctive cultural and legal frameworks that govern
employee practices around the world.

● International human resource managers, usually located at corporate or regional

headquarters, support subsidiary managers by providing IHRM guidelines and by
hiring, training, and evaluating employees for international operations.
 Staffing Policy

The Ethnocentric Approach

The ethnocentric approach to recruitment means that we hire
people from our parent country to fill positions all over the
world. For example, if we want to fill an executive role in a
foreign country, we could:

● Relocate one of our existing employees who’s a permanent

resident of our parent country.
● Hire a person from our parent country who lives or wants
to live in the host country.
 The Polycentric Approach

The polycentric approach to recruitment means that we

hire locals to fill our positions in a host country. For
example, we could advertise on local job boards or create
a contract with a local recruitment agency.
For example, if we want to expand our clientele to a specific
country, we’d hire a local professional who knows the
market and can coordinate our sales operations.] We’ll
apply one of the other approaches if we haven’t found
qualified candidates after [four months].
 Geocentric Approach:

Geocentric approach to recruitment is hiring the best people

to fill our positions without regard to where they come from
or where they live. This means:

 Hiring remote employees. We use this option when we

want to hire someone at a place where we don’t have
offices. For example, if we want a customer support agent
in another time zone to support our customers there.
 Relocating our employees. This includes both bringing
foreign talent into our parent country and relocating
people to a new host country.
 Expatriate

 Derived from Latin word where ex means “outside

of” and patria means “fatherland”
 Expatriate is “a person that is living outside of their
home country”.
 They are usually skilled in their field
 An expatriate may be a citizen of the Pakistan,
but works for a company based in China
 Expatriate Failure Rates

 Major Disadvantage:
Probability of expatriates failure rate is high,
Expatriates experience Cultural shocks
For example: new food, different language, different hand
gestures
Reasons for Failure in Expatriates

 Family adjustment
 Lifestyle issues
 Work adjustment
 Poor Performance
 Managers fail to develop relationship with key people
 Companies fail to pick the right person
 Excess of different responsibilities
 Lack of technical support
 Expatriate Selection Process

One way to reduce expatriate failure rates is by

improving selection procedure
For this purpose Mendenhall identified four
dimensions:-
• Self Orientation
• Other’s Orientation
• Percepetual Ability
• Cultural Toughness
 Expatriate Selection Process

 Self Oriented
Self confident & mental wellbeing

 Other’s Orientation
Willing to communicate with each other
 Expatriate Selection Process

 Perceptual Ability
Ability to understand and emphasize why people are
behaving in a certain way

 Cultural toughness
This refers to how well an expatriate adjusts to a
particular posting
Training and management process:

Selection is just the first step in matching a manager

with a job. The next step is training the manager to do
the specific job.
 Training and development of
expatriate managers:

 Cultural training
 Language training
 Practical language
 Management development and
strategy:

 Management development programs are designed to

increase the overall skill levels of managers through a
mix of ongoing management education and rotations
of managers through a number of jobs within the firm
to give them varied experiences. They are attempts to
improve the overall productivity and quality of the
firm’s management resources.
 Performance Appraisal

 Performance appraisal systems are used to evaluate

the performance of managers against some criteria
 PERFORMANCE APPRAISAL
PROBLEMS:

 Unintentional bias
 Bias from home country managers
 Bias from host country managers
 Bias from home country managers
1. Biased base on their own cultural frame of
references and expectations.
 Bias from host country managers
1. Biased due to distance and lack of experience
2. Comparing performance in foreign assignment with
home country
3. Performance appraisal based on hard data
4. Ignorance of soft variables
Guidelines for performance appraisal

 most expatriates appear to believe more weight

should be given to an on-site manager’s appraisal
than to an off-site manager’s appraisal.
 The evaluation may be especially valid when the
onsite manager is of the same nationality as the
expatriate
 Compensation

 International compensation refers to all forms of

financial. returns and tangible benefits that
employees of an. international organization receive
from their employer in exchange for providing their
labor and commitment.
 NATIONAL DIFFERENCES IN COMPENSATION

 Substantial differences exist in the compensation of

executives at the same level in various countries.
Among other things, this survey looked at average
compensation for top human resource executives
across 26 countries in the 2005-06 period for
companies with annual sales of around $500
million.
 EXPATRIATE PAY

An expatriate, or expat, is an individual living and/or

working in a country other than their country of
citizenship, often temporarily and for work reasons.
An expatriate can also be an individual who has
relinquished citizenship in their home country to
become a citizen of another.
1. Base Salary
An expatriate’s base salary is normally in the same range as the base salary
for a similar position in the home country.

2. Foreign Service Premium

This premium is intended to offset the problems inherent in breaking home ties
and adjusting to different cultures, and the costs connected with any travel for
personal purposes between the foreign base and the United States
 15% of Base Salary
3. Allowances

Designed to encourage employees to accept an assignment abroad. Four types of

allowances are often included in an expatriate’s compensation package:
i. Hardship Allowances
A hardship allowance is paid when the expatriate is being sent to a
difficult location, usually defined as one where such basic
amenities as health care, schools, and retail stores are grossly
deficient by the standards of the expatriate’s home country.

ii. Housing Allowances

A housing allowance is normally given to ensure that the
expatriate can afford the same quality of housing in the foreign
country as at home.
● 10 to 30 percent of the expatriate’s total compensation package
iii. Cost-of-living Allowances
A cost-of-living allowance ensures that the expatriate will enjoy the same standard of living in the foreign
posting as at home.

iv. Education Allowances

An education allowance ensures that an expatriate’s children receive adequate schooling (by home-
country standards).
 4. Taxation
Unless a host country has a reciprocal tax treaty with the expatriate’s home country, the expatriate
may have to pay income tax to both the home- and host-country governments.

5. Benefits
Many firms also ensure that their expatriates receive the same level of medical and pension benefits abroad
that they received at home. This can be costly for the firm, since many benefits that are tax deductible for
the firm in the home country (e.g., medical and pension benefits) may not be deductible out of the country.
 International Labour Relations

The HRM function of an

international business is typically
responsible for international labor
relations. From a strategic
perspective, the key issue in
international labor relations is the
degree to which organized labor can
limit the choices of an international
business.
Aims of Labor Relations

1. First, we review organized labor’s concerns about

multinational enterprises
2. Second, we look at how organized labor has tried to
deal with these concerns.
3. And third, we look at how international businesses
manage their labor relations to minimize labor
disputes.
 CONCERNS OF ORGANIZED LABOR

Labor unions generally try to

● get better pay
● greater job security
● better working conditions
Unions’ bargaining power is derived largely from their ability to
threaten to disrupt production, either by a strike or some other
form of work protest (e.g., refusing to work overtime).
 Ford Moving Plan

Clearly threatened British unions with a plan to move

manufacturing to Continental Europe unless British
workers abandoned work rules that limited
productivity, showed restraint in negotiating for wage
increases, and curtailed strikes and other work
disruptions.
STRATEGY OF ORGANIZED LABOR

1) Trying to establish international labor organizations

2) Lobbying for national legislation to restrict
multinationals.
3) Trying to achieve international regulations on
multinationals through such organizations as the
United Nations
APPROACHES TO LABOR RELATIONS

International businesses differ markedly in their approaches to

international labor relations.
The main difference is the degree to which labor relations activities are
1. Centralized
2. Decentralized.
As labor laws, union power, and collective bargaining differ so much
from country to country, most international businesses have
decentralized international labor relations activities to their foreign
subsidiaries.
Apple’s Global Human Resource — Case Study

The HR strategies of Apple always seem to hire a diverse, independent,

talented employee who doesn’t need direction. Apple follows non
egalitarian methods which suggest Apple fills 95% of the roles that are
critical to business success.
Apple’s Ecosystem