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GLOBAL HUMAN RESOURCE MANAGEMENT

Culture Approaches Expatriate Management Training, Appraising and Paying Expatriates Repatriation

Introduction Click to edit Master subtitle style

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WHAT IS GHRM?
Global Human Resource management is the process of procuring, allocating and effectively utilizing human resources in a multinational corporation. What is Corporation? an International

International Corporation is essentially 4/27/12 domestic firm that a

Why organizations expand internationally?


To capture enhanced market opportunities that foreign countries may present To achieve economies of scale in production and administration by expanding scope and volume of operations to international markets Keeping up with industry leaders may require organization to enter foreign markets 4/27/12 Acquiring ownership of foreign-based

TRADITIONAL Vs GLOBAL HRM


International HRM Managing broader range of functional requires areas Becoming more involved in employees personal lives Setting up several different HRM systems for different geographic locations Dealing with more complex external constituencies Participating in international assignments4/27/12 that have heightened

Strategies for expanding internationally


Exporting locally produced goods to host country Subcontracting or licensing production of certain goods or services to foreign partner Entering into joint venture with foreign partner Setting up operations (making a direct investment) in form of foreign branch or subsidiary
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CULTURAL DIFFERENCES DIMENSIONS


Culture defined -- A pattern of basic assumptions, values, beliefs and symbols of a group/population that foster an individual behaviour Individualism or collectivism dimension
Individualistic societies value development of, and focus on individual Collective societies value group relationships

Power distance dimension


Extent to which society is hierarchical, and how power is distributed among its members

Uncertainty avoidance dimension


Extent to which society feels comfortable with ambiguity, and values and encourages risk-taking

Quantity

versus

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quality

of

life

ASSESSING CULTURE

India

Collectiv e

Larg e

Moderat e

Modera te

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Staffing policy:

RECRUITMENT&SELECTIO N(STAFFING) APPROACHES TO GHRM


Selecting individuals with requisite skills to do a particular job. Also as tools for developing and promoting corporate culture.

Types of staffing policy:


Ethnocentric. Polycentric. Geocentric.
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Ethnocentric approach
Key management positions parent-country nationals Advantages: filled by

Overcomes lack of qualified managers in host nation Unified culture Helps transfer core competencies (and skills back)

Disadvantages:
Produces resentment in host country Can lead to cultural myopia
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Polycentric approach
Host-country nationals manage subsidiaries Parent company nationals hold key headquarter positions Best suited to multi-domestic businesses Advantages:
Alleviates cultural myopia. Inexpensive to implement Helps transfer core competencies

Disadvantages:

Limits opportunity to gain experience of hostcountry nationals outside their own country. Can create gap between home-and hostcountry operations
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Geocentric approach
Seek best nationality people, regardless of
not always possible

Best suited to Global and trans-national businesses Advantages:


Enables the firm to make best use of its human resources Equips executives to work in a number of cultures Helps build strong unifying culture and informal management network

Disadvantages:
National
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policies

may

limit

The expatriate problem


Expatriate: citizens of one country working in another Expatriate failure: premature return of the expatriate manager to his/her home country
Cost of failure is high: estimate = 3X the expatriates annual salary plus the cost of relocation (impacted by currency exchange rates and assignment location)

Impatriates: expatriates who are citizens of a foreign country working in the home country of their multinational employer 4/27/12

Reasons for expatriate failure


US multinationals

Inability of spouse to adjust Managers inability to adjust Other family problems Managers personal or emotional 4/27/12 immaturity

Japanese Firms Inability to cope with larger overseas responsibilities Difficulties with the new environment Personal or emotional problems Lack of technical competence Inability of spouse to adjust. Indian firms Homesickness, home country hangover Adjustment problem in a new culture Difference in work habits, lifestyle and values Personal or emotional maturity Other family reasons

ORIENTATION
International positions require an extensive orientation to familiarize the employees with culture, language and other unique aspects of the assignment. The orientation programme can be divided simply into two levels:

Pre-arrival orientation
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Expatriate selection
Reduce expatriate failure rates by improving selection procedures An executives domestic performance does not (necessarily) equate his/her overseas performance potential Employees need to be selected not solely on technical expertise but also on cross-cultural fluency

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Four attributes that predict success


Self-Orientation
Possessing high self-esteem, mental well-being self-confidence and

Others-Orientation
Ability to develop relationships with host-country nationals Willingness to communicate

Perceptual Ability
The ability to understand why people of other countries behave the way they do Being nonjudgmental and being flexible in management style

Cultural Toughness
Relationship between country of assignment and the expatriates adjustment to it
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Training and management development


Training: Obtaining skills for a particular foreign posting
Cultural training : Seeks to foster an appreciation of the host-countrys culture Language training : Can improve expatriates effectiveness, aids in relating more easily to foreign culture and fosters a better firm image Practical training: Ease into day-to-day life of the host country

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Training & management development continued


Development: Broader concept involving developing managers skills over his or her career with the firm
Several foreign postings over a number of years Attend management education programs at regular intervals

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Management development & strategy


Development programs designed increase the overall skill levels managers through: to of

On going management education Rotation of managers through a number of jobs within the firm to give broad range of experiences

Used as a strategic tool to build a strong unifying culture and informal management network Above techniques support transnational and global strategies 4/27/12

Compensation
Two issues:
Pay executives in different countries according to the standards in each country? or Equalize pay on a global basis? Method of payment

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Country Japan Canada

National differences in compensation


CEO HR Director Accountant $59, 107 44,866 61,375 30,652 107,839 66,377 $545,233 742,228 421,622 179,486 719,665 1,403,899 $235,536 188, 070 189,785 102,491 268,302 306,181

Mfg. Employee $51, 994 36,289 36,934 11,924 28,874 44,680

Germany Taiwan United Kingdom United States

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National differences in CEO pay for midsize companies

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Compensation issues
Type of Company Payment How much home-country expatriates should be paid. Pay can and should be country-specific. May have to pay its international cadre of managers the same.

Ethnocentric

Polycentric Geocentric/Transnational

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Expatriate pay
Typically use balance sheet approach Equalizes purchasing power to maintain same standard of living across countries Provides financial incentives to offset qualitative differences between assignment locations. Pay for Schools, health care, etc.
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Components of expatriate pay


Base Salary Foreign service premium Allowances Taxation Benefits
Hardship, housing, education allowances Same range as a similar position in the home country Extra pay for work outside country of origin cost-of-living and

Firm pays expatriates income tax in the host country Level of medical and pension benefits of identical overseas
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APPROACHES TO INTERNATIONAL COMPENSATION


There are mainly two approaches to international compensation. They are:
Market

Rate Approach Sheet Approach

Balance

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MARKET RATE APPROACH


Under this approach the base salary is linked to the structure in the host country. It has the following advantages:
It

is simple with host country is

Identification

possible
Equality

with local nationals

Disadvantages: 4/27/12

Balance Sheet Approach


This approach tries to maintain relativity to parent country employee colleagues and compensating for the costs of an international assignment. This system is designed to equalize the purchasing power of employees at comparable position levels living abroad and in the home country, to provide incentives to offset 4/27/12 qualitative differences between

The balance sheet approach contd.,

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Performance appraisal
Problems:
Unintentional bias Host-nation biased by cultural frame of reference Home-country biased by distance and lack of experience working abroad

Expatriate managers believe that headquarters unfairly evaluates and under appreciates them In a survey of personnel managers in U.S. multinationals, 56% stated foreign assignment 4/27/12 either detrimental or

Guidelines for performance appraisal


More weight should be given to onsite managers evaluation as they are able to recognize the soft variables Expatriate who worked in same location should assist home-office manager with evaluation If foreign on-site managers prepare an evaluation, home-office manager should be consulted before completion of formal terminal evaluation
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International Labour Relations


Foster harmony and minimize conflict between the firm and organized labour. Key issue:
Degree to which organized labour can limit the choices of an international business.

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Concerns of Organized Labour


Firms can counter bargaining power by threatening to move production to another country. International business will keep highly skilled tasks in home country and farm out only low-skilled tasks to foreign plants. Importing employment practices and contractual agreements from home country that may diminish unions influence and power.
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Strategy of organized labour


Attempts to establish international labour organizations Lobby for national legislation to restrict multinationals Attempts to achieve international regulations on multinationals through such organizations as the United Nations

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Multinationals Approach to Labour Relations


Decentralize: labour laws, union power and nature of collective bargaining vary from country to country Now a trend toward centralization:
Want to rationalize global operations Need to control labor costs and maximize threat of move to lower cost country Competitive advantage can come from the way work is organized in a 4/27/12 plant. Bargaining with local unions is,

Implication for Effective IHR


Human Resource Management practices vary across borders. Both home-country and hostcountry economic, social, cultural, political, and legal factors influence and constrain HR functions. Corporate strategies guide and determine how HR works in an organization. Global experience and good knowledge of IHR can enhance 4/27/12 ones career as a successful

REPATRIATION
The final issue in managing international assignments is repatriation (i.e., helping employees make the transition back home of arriving employees) of arriving employees. Though people face difficulty in acclimatizing and developing adjustment with the new culture of the new country, still they do not feel comfortable in quitting the job and going back to the home country by accepting the failures. The repatriation need not necessarily because of failure of a foreign assignment
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be

PHASES OF REPTRIATION
Prepar ation Physical relocati on Transiti on Readjust ment Repatria tion Process

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Repatriation of expatriates
Didnt know what position they hold upon return. Firm vague about return, role and career progression. Took lower level job. Leave firm within one year. Leave firm within three years

10
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20

30 40 percen t

50

60