CHAPTER 13 MANAGING HUMAN RESOURCES GLOBALLY
Companies are attempting to gain a competitive advantage which can be provided by in international
Countries with emerging economies are new markets with large numbers of potential
Many companies are building production facilities in other countries as a means of capitalizing
on those low labour costs for unskilled jobs (e.g. maquiladora plants).
Rapid rise in telecommunications and information technology enables work to be done more
rapidly, efficiently and effectively.
- Most organizations function in a global economy
- International competition is the number one factor affecting HRM
Current Global Challenges
European Economic Union
- The EU is a confederation of most of the European countries agreeing to engage in free trade with one
another with commerce regulated by the European Commission
- Complex economic and legislative framework
- Makes Europe on of the largest free market in the world
North American Free Trade Agreement (NAFTA)
- An agreement between Canada, US, and Mexico that has created a free market larger than the
European Economic Community
Two effects of employment in NA
1. Many low skilled jobs went south decreasing opportunities for Canadians and Americans
2. It has increased employment for Canadians and Americans with higher level skills
The Growth of Asia
- Japan, China, Singapore, Hong Kong and Malaysia are significant economic forces.
General Agreement on Tariffs and Trade (GATT)
- An international framework of rules and principles for reducing trade barriers around the world.
- Established the WTO to resolve disputes among GATT members
Factors Affecting HRM in Global Markets
Culture - the set of important assumptions that members of a community, organization share
Importance of culture in HRM
- Often determines the other three factors
affecting HRM in global markets:
Country`s laws, human capital, economic
- Often determines the effectiveness of various
HRM practices Hofstede Cultural Dimensions - different potential problems of managing employees from different
Power Distance (PD): How a culture deals with hierarchical power relationships.
Individualism-Collectivism (ID): Degree to which people act as individuals rather than as members of a
Masculinity-Femininity (MA): Describes the division of roles between the sexes within a society.
Uncertainty Avoidance (UA): Describes how cultures seek to deal with an unpredictable future.
Long-term/short-term orientation (LT): Describes how a culture balances immediate benefits with
Implications of Culture for HRM
Cultural characteristics influence the ways managers behave in relation to subordinates, as well as the
perceptions of the appropriateness of various HRM practices
1. Cultures differ strongly on things such as how subordinates expect leaders to lead, how
decisions are handled within the hierarchy and what motivates individuals.
2. Cultures may influence the appropriateness of HRM practices.
3. Cultures can influence compensation systems.
4. Cultures can influence communication and coordination processes in organizations.
5. Cultural diversity programs focuses on understanding the cultures of others in order to better
communicate with them.
Education Human Capital
Human Capital refers to the productive capabilities of individuals the knowledge, skills and
experience that have economic value
Variable that determine a country's human capital: Educational opportunities available to the labour
Countries with low human capital attract facilities that require low skills and low-wage levels.
Countries with high human capital are attractive sites for direct foreign investment that creates
Political Legal System
The political/legal system dictates the requirements for certain HRM practices such as training,
compensation, hiring, firing and layoffs
- Laws of a particular country often reflect societal norms about what constitutes legitimate behaviour.
- Legal system is an outgrowth of the culture, reflecting societal norms:
Canada has led the world in eliminating discrimination in the workplace and employment
Germany has provided employees with a legal right to "codetermination" in the workplace.
The EEC provides fundamental social rights of workers: freedom of movement and freedom to
choose one's occupation and be fairly compensated.
- A country's culture is integrally tied with its economic system
1. Under socialist systems, there is little economic incentive to develop human capital because
there is no monetary reward for doing so, but ample opportunity exists because education is
2. In capitalist systems, the opposite situation exists. The cost of education is higher but economic
incentives exist through individual salaries. - Economic systems affect HRM directly through taxes on compensation packages
- Every country varies in terms of its culture, human capital, legal system and economic systems. These
variation directly influence the types of HRM that is to be developed.
Managing Employees in a Global Context
Parent Country - The country in which the company's corporate headquarters are located
e.g. Canada is the parent country of RIM
Host Country - The country in which the parent country organization seeks to locate a facility
Third Country - Country other than the host country or parent country a company may or may not
have their facility
Expatriate - employees sent by a company in one country to manage operations in a different country
Three types of expatriates: