International Human

Resources Management

Managing Human Resources

Bohlander • Snell 14th edition

© 2007 Thomson/South-Western. PowerPoint Presentation by Charlie Cook

All rights reserved. The University of West Alabama
 Objectives
After studying this chapter, you should be able to:

1. Identify the types of organizational forms used for

competing internationally.
2. Explain the economic, political-legal, and cultural
factors in different countries that HR managers
need to consider.
3. Explain how domestic and international HRM differ.
4. Discuss the staffing process for individuals working
internationally.
5. Identify the unique training needs for international
assignees and their employees.

© 2007 Thomson/South-Western. All rights reserved. 15–2

 Objectives (cont’d)
After studying this chapter, you should be able to:

6. Identify the characteristics of a good international

compensation plan.
7. Reconcile the difficulties of home- and host-country
performance appraisals.
8. Explain how labor relations differ around the world.

© 2007 Thomson/South-Western. All rights reserved. 15–3

 Increasing Importance of Global Human Resource
Understanding
International
International
Mergers
Mergersandand
Acquisitions
Acquisitions

Importance
Importanceof
of
Foreign Global
GlobalHuman
Human
ForeignHuman
Human Global
Global
Resources
Resources Resources
Resources Competition
Competition
Management
Management

Market
MarketAccess
Access
Opportunities
Opportunities

© 2007 Thomson/South-Western. All rights reserved. 15–4

 Managing Across Borders
• International corporation • Global corporation
 Domestic firm that uses its  Firm that has integrated
existing capabilities to move worldwide operations
into overseas markets. through a centralized home
• Multinational corporation office.
(MNC) • Transnational corporation
 Firm with independent  Firm that attempts to
business units operating in balance local
multiple countries. responsiveness and global
scale via a network of
specialized operating units.

© 2007 Thomson/South-Western. All rights reserved. 15–5

 Figure 15–1 Types of Organizations

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 Figure 15–2 Top International Companies

MARKET VALUE
(BILLIONS OF U.S. DOLLARS)

1. General Electric $286.10

2. Microsoft 263.99
3. ExxonMobil 244.93
4. Pfizer 244.89
5. Wal-Mart Stores 232.22
6. Citigroup 210.86
7. Johnson & Johnson 161.36
8. Royal Dutch/Shell Group 158.48
9. BP 153.24
10. AIG 150.97
Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.
© 2007 Thomson/South-Western. All rights reserved. 15–7
 Figure 15–2 Top International Companies (cont’d)

SALES
(BILLIONS OF U.S. DOLLARS)

1. Wal-Mart Stores $244.52

2. ExxonMobil 204.51
3. General Motors 184.21
4. Royal Dutch/Shell 179.43
5. BP 178.72
6. Ford Motor 162.59
7. DaimlerChrysler 156.84
8. Toyota Motor 134.23
9. General Electric 131.70
10. Allianz 126.80
Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.
© 2007 Thomson/South-Western. All rights reserved. 15–8
 Figure 15–2 Top International Companies (cont’d)

PROFITS
(BILLIONS OF U.S. DOLLARS)

1. Citigroup $15.32
2. General Electric 15.13
3. Altria Group 11.10
4. ExxonMobil 11.01
5. Royal Dutch/Shell 9.42
6. Bank of America 9.25
7. Pfizer 9.18
8. Wal-Mart Stores 8.04
9. Toyota Motor 7.90
10. Microsoft 7.83
Source: Chester Dawson, “The Global 1000,” Business Week, July 14, 2003, 34.
© 2007 Thomson/South-Western. All rights reserved. 15–9
 How International Companies Affect the
World Economy
• Their production and distribution extend beyond
national boundaries, making it easier to transfer
technology.
• They have direct investments in many countries,
affecting the balance of payments.
• They have a political impact that leads to
cooperation among countries and to the
breaking down of barriers of nationalism.

© 2007 Thomson/South-Western. All rights reserved. 15–10

 How Does the Global Environment
Influence Management?
• Unified Economies
 Closely partnered nations such as the European
Union (EU) have developed into strong competitors.
 Promotes job growth in trading nations.
• Cultural environment
 The communication patterns, religion, values and
ideologies, education, and social structure of a host
country influence how HR is conducted in that
country.

© 2007 Thomson/South-Western. All rights reserved. 15–11

 The
TheNations
Nationsof
ofthe
the
European
EuropeanUnion
Union

© 2007 Thomson/South-Western. All rights reserved. 15–12

 Figure 15–3 Cultural Environment of International Business

© 2007 Thomson/South-Western. All rights reserved. 15–13

 Domestic versus International HRM
• Issues in international HRM in helping
employees adapt to a new and different
environment outside their own country:
 Relocation
 Orientation
 Objective
 Translation services

© 2007 Thomson/South-Western. All rights reserved. 15–14

 International Staffing
• Expatriates, or Home-country Nationals
 Employees from the home country who are on
international assignment.
• Host-country Nationals
 Employees who are natives of the host country.
• Third-country Nationals
 Employees who are natives of a country other than
the home country or the host country.

© 2007 Thomson/South-Western. All rights reserved. 15–15

 Figure 15–4 Changes in International Staffing over Time

© 2007 Thomson/South-Western. All rights reserved. 15–16

 Hiring Host-Country Nationals
• Three main advantages:
1. Hiring local citizens is generally less costly than
relocating expatriates.
2. Since local governments usually want good jobs for
their citizens, foreign employers may be required to
hire locally.
3. Most customers want to do business with
companies they perceive to be local versus foreign.

© 2007 Thomson/South-Western. All rights reserved. 15–17

 Recruiting Internationally
• Work Permit, or Visa
 Government document granting a foreign individual
the right to seek employment.
• Guest Workers
 Foreign workers invited to perform needed labor.
• Apprenticeships
 Vocational training programs in skilled trades.
• Transnational Teams
 Teams composed of members of multiple
nationalities working on projects that span multiple
countries.
© 2007 Thomson/South-Western. All rights reserved. 15–18
 Highlights in HRM 1

Global Laws and Pacts Prohibiting Discrimination

U.S. laws affecting firms conducting business outside the
United States:
• Title VII of the Civil Rights Act of 1964
• Age Discrimination in Employment Act (ADEA)
• Americans with Disabilities Act (ADA)
International laws that require nondiscrimination in
employment:
• European Union (EU)—Equal Pay Directive
• International Labour Organization (ILO)—Equal
Remuneration Convention No. 100
• Organization for Economic Cooperation and Development
(OECD)—Guidelines for Multinational Enterprises
• United Nations—Global Compact

© 2007 Thomson/South-Western. All rights reserved. 15–19

 Selecting Global Managers
• Global manager
 A manager equipped to run an international business
• Skills Categories
Ability to seize strategic opportunities
Ability to manage highly decentralized organizations
Awareness of global issues
Sensitivity to issues of diversity
Competence in interpersonal relations
Skill in building community

© 2007 Thomson/South-Western. All rights reserved. 15–20

 Selecting Global Managers
1. Begin with self-selection.
2. Create a candidate pool.
3. Assess core skills.
4. Assess augmented skills and attributes.

© 2007 Thomson/South-Western. All rights reserved. 15–21

 Highlights in HRM 2

Skills of Expatriate Managers

CORE SKILLS AUGMENTED SKILLS
Experience Technical skills
Decision making Negotiation skills
Resourcefulness Strategic thinking
Adaptability Delegation skills
Cultural sensitivity Change management
Team building
Maturity

© 2007 Thomson/South-Western. All rights reserved. 15–22

 Measured Expatriate Characteristics
• Core Skills
 Skills that are considered
critical to an employee’s
success abroad.
• Augmented Skills
 Skills that are helpful in
facilitating the efforts of
expatriate managers.
• Failure rate
 Percentage of expatriates who
do not perform satisfactorily.

© 2007 Thomson/South-Western. All rights reserved. 15–23

 Figure 15–5 Comparison of Advantages in Sources of Overseas Managers

HOST-COUNTRY HOME-COUNTRY NATIONALS THIRD-COUNTRY

NATIONALS (EXPATRIATES) NATIONALS

Less costly Talent available within company Broad experience

Preferred by host-country Greater control International

outlook governments
Intimate knowledge of Company experience Multilingualism
environment and culture
Language facility Mobility
Experience provided to corporate
executives

© 2007 Thomson/South-Western. All rights reserved. 15–24

 Highlights in HRM 3

Top Three Barriers for Women Attempting

to Gain Global Managerial Experience
• Getting selected—the biggest hurdle to entering
the global business arena
• Being perceived as less internationally mobile
than men due to work and personal
responsibilities
• Lack of mentors and networks on international
assignments

Source: Adapted from Passport to Opportunity: U.S. Women in Global Business (New York: Catalyst, 2000).
© 2007 Thomson/South-Western. All rights reserved. 15–25
 Figure 15–6 Expatriate Selection Criteria

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 Figure 15–7 Causes of Expatriate Assignment Failure

• Family adjustment
• Lifestyle issues
• Work adjustment
• Bad selection
• Poor performance
• Other opportunities arise
• Business reasons
• Repatriation issues

© 2007 Thomson/South-Western. All rights reserved. 15–27

 Training and Development
• Essential training program content to prepare
employees for working internationally:
 Language training
 Cultural training
 Assessing and tracking career development
 Managing personal and family life
 Repatriation
• Culture shock
 Perpetual stress experienced by people who settle
overseas.

© 2007 Thomson/South-Western. All rights reserved. 15–28

 Figure 15–8 Preparing for an International Assignment

To prepare for an international assignment, one should become

acquainted with the following aspects of the host country:
1. Social and business etiquette
2. History and folklore
3. Current affairs, including relations between the host country
and the United States
4. Cultural values and priorities
5. Geography, especially its major cities
6. Sources of pride and great achievements of the culture
7. Religion and the role of religion in daily life
8. Political structure and current players
9. Practical matters such as currency, transportation, time zones,
hours of business
10. The language

© 2007 Thomson/South-Western. All rights reserved. 15–29

 Training Methods
• Reviewing available information about the host
company: books, magazines, video tapes.
• Conversations with host country natives.
• Sensitivity training to become familiar with the
customs and overcome prejudices.
• Temporary assignments to encourage shared
learning.

© 2007 Thomson/South-Western. All rights reserved. 15–30

 Figure 15–9 A Synthesis of Country Clusters

Source: Simcha Ronen and Oded Shenkar, “Clustering

Countries on Attitudinal Dimensions: A Review and Synthesis,”
Academy of Management Review 10, no. 3 (July 1985): 435–54.
Copyright © 1985 by Academy of Management Review.
Reprinted with permission of the Academy of Management
Review via Copyright Clearance Center.
© 2007 Thomson/South-Western. All rights reserved. 15–31
 Figure 15–10 Selected Foreign-Born Executives

NAME, COMPANY, AND COUNTRY OF ORIGIN

Charles Bell, McDonald’s (Australia)

Fernando Aguirre, Chiquita Brands International (Mexico)
Matthew Barrett, Barclays (Canada)
Jean-Pierre Garnier, GlaxoSmithKline (France)
Douglas Daft, Coca-Cola (Australia)
Neville Isdel, Coca-Cola (Ireland)
Sidney Taurel, Eli Lilly (Morocco)
Mahendra Vora, Intelliseek (India)
Carlos Gutierrez, Kellogg (Cuba)
Raj Gupta, Rohm and Haas (India)
Fred Hassan, Schering-Plough (Pakistan)

© 2007 Thomson/South-Western. All rights reserved. 15–32

 Highlights in HRM 5
Stressors and Coping Responses in the Developmental Stages of
Expatriate Executives
PRIMARY
STRESSOR RESPONSE

Expatriate selection Cross-cultural unreadiness.

Assignment acceptance Unrealistic evaluation of stressors to come.
Hurried time frame.
Pre- and post-arrival Ignorance of cultural training differences.
Arrival Cultural shock.
Stressor reevaluation.
Feelings of lack of fit and differential treatment.
Novice Cultural blunders or inadequacy of coping responses.
Ambiguity owing to inability to decipher meaning of situations.
Transitional Rejection of host or parent culture.
Mastery Frustration with inability to perform boundary spanning role.
Bothered by living with a cultural paradox.
Repatriation Disappointment with unfulfilled expectations.
Sense of isolation.
Loss of autonomy.
Source: J. Sanchez, P. Spector, and C. Cooper, “Adapting to a Boundaryless World: A Developmental
Expatriate Model,” Academy of Management Executive 14, no. 2 (May 2000): 96–106.
© 2007 Thomson/South-Western. All rights reserved. 15–33
 Returning from an Overseas Assignment
• Repatriation
 The process of an employee transitioning home from
an international assignment.
 Throw a “welcome home” party.
 Offer counseling to ease the transition.
 Arrange conferences and presentations to make certain
that knowledge and skills acquired away from home are
identified and disseminated.
 Get feedback from the employee and the family about
how well the organization handled the repatriation
process.

© 2007 Thomson/South-Western. All rights reserved. 15–34

 Compensation
• Different countries have different norms for
employee compensation.
 Financial (money) incentives versus nonfinancial
incentives (prestige, independence, and influence)
 Individual rewards versus collectivist concerns for
internal equity and personal needs
 General rule: match the rewards to the values of the
local culture—create a pay plan that supports the
overall strategic intent of the organization but
provides enough flexibility to customize particular
policies and programs to meet the needs of
employees in specific locations.

© 2007 Thomson/South-Western. All rights reserved. 15–35

 Figure 15–11 Forces Driving Global Pay

CULTURAL PREFERENCES PERSONAL PREFERENCES

Importance of status Attitudes toward risk
Role of individual vs. organization Quality of life vs. work
vs. government Short- vs. long-term
Equality vs. disparity Competitiveness vs. solidarity
Achievement vs. relationships

ECONOMIC CONDITIONS SOCIAL CONSTRAINTS

Size of economy Income tax rates, social costs
Types of industries, natural resources Laws and regulations
Inflation, unemployment Collective bargaining, worker
Protectionism vs. open market participation
Skills, education of workforce

Source: Steven Gross and Per Wingerup, “Global Pay? Maybe Not Yet!”
Compensation and Benefits Review 31, no. 4 (July/August 1999): 25–34.
© 2007 Thomson/South-Western. All rights reserved. 15–36
 Compensation of Host-Country Employees
• Hourly wages vary dramatically from country to
country.
• Pay periods are different.
• Seniority may be an important factor.
• High pay rates can upset local compensation
practices.
• Bonuses, profit-sharing, benefits and paid leave
may be more extensive and legally required.

© 2007 Thomson/South-Western. All rights reserved. 15–37

 Figure 15–12 Hourly Wages in Different Countries*
COUNTRY $/HOUR

Norway 31.55
Germany (former West) 31.25
Switzerland 27.87
Belgium 27.73
Sweden 25.18
United States 21.97
France 21.13
Britain 20.37
Japan 20.09
Australia 20.05
Canada 19.28
Italy 18.35
Spain 14.96
Israel 11.73
Korea 10.28
Portugal 6.23
Taiwan 5.84
Brazil 2.67
Mexico 2.48
China 0.63
*Hourly compensation costs in U.S. dollars
for production workers in manufacturing. Sri Lanka 0.49
Source: U.S. Department of Labor, Bureau of Labor Statistics, November
2004.
© 2007 Thomson/South-Western. All rights reserved. 15–38
 Compensation of Expatriate Managers
• Provide an incentive to • Consider foreign taxes the
leave the United States employee is likely to have
• Allow for maintaining a to pay (in addition to
U.S. standard of living domestic taxes) and help
with tax forms and filing
• Provide for security in
countries that are • Allow for maintaining
politically unstable or relationships with family,
present personal dangers friends, and business
associates.
• Include provisions for
good healthcare • Facilitate reentry home
• Be in writing
• Provide for the education
of children

© 2007 Thomson/South-Western. All rights reserved. 15–39

 Expatriate Compensation Systems
• Home-Based Pay
 Pay based on an expatriate’s home country’s
compensation practices
• Balance-Sheet Approach
 A compensation system designed to match the
purchasing power in a person’s home country
1. Calculate base pay
2. Figure cost-of-living allowance (COLA)
3. Add incentive premiums
4. Add assistance programs

© 2007 Thomson/South-Western. All rights reserved. 15–40

 Expatriate Compensation Systems (cont’d)
• Host-Based Pay
 Expatriate pay comparable to that earned by
employees in a host country to which the expatriate is
assigned.
• Localization
 Adapting pay and other compensation benefits to
match that of a particular country
• Other Issues
 Adequacy of medical care
 Personal security
 Education

© 2007 Thomson/South-Western. All rights reserved. 15–41

 Performance Appraisal of International
Managers
• Who Should Appraise Performance?
 Home-country evaluations
 Host-country evaluations
• Adjusting Performance Criteria
 Augmenting job duties
 Individual learning
 Organizational learning
• Providing Feedback
 Debriefing interview

© 2007 Thomson/South-Western. All rights reserved. 15–42

 Figure 15–13 Boosting ROI of Expatriates

Major initiatives planned to improve assignment

return on investment (ROI):
Better candidate selection 32%
Career-planning skills 26
Communicating objectives 24
Assignment preparation 20
Monitoring program 17
Cross-cultural training 10
Developing or expanding intranet 7
Communication/recognition 6
Web-based cultural training 5
Mandating destination support 4
Other 17
Source: Andrea Poe, “Selection Savvy,” HRMagazine 47, no. 4 (April 2002): 77–83.
© 2007 Thomson/South-Western. All rights reserved. 15–43
 International Organizations and Labor
Relations
• International Differences in Unions
 The level at which bargaining takes place (national,
industry, or workplace)
 The degree of centralization of union-management
relations
 The scope of bargaining (parties and issues)
 The degree to which government intervenes
 The degree of unionization and union strength.

© 2007 Thomson/South-Western. All rights reserved. 15–44

 Key Terms
• augmented skills • home-based pay
• balance-sheet approach • host-based pay
• codetermination • host country
• core skills • host-country nationals
• cultural environment • international corporation
• culture shock • localization
• expatriates, or home-country • multinational corporation
nationals (MNC)
• failure rate • repatriation
• global corporation • third-country nationals
• global manager • transnational corporation
• guest workers • transnational teams
• work permit, or visa

© 2007 Thomson/South-Western. All rights reserved. 15–45