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Chapter 15

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Administrative Studies
ADMS 2600
Sung Kwon

Chapter 15: International Human Resources Management The Global Environment  free trade agreements between countries  technological advances that increase individual productivity  development of common platforms for moving knowledge and information increase global similarities and the need for HRM to integrate practices political and cultural differences - create global environments that present needs for HRM to adapt practices to the local countries in which they are operating Global Similarities Factors that increased the economic integration across countries: 1. free trade 2. service-based business 3. integrated technology platforms  emphasized the need for HRM practices and systems to be more globally integrated and consistent across countries Free trade - creation of free trade zones within Europe, North America, and the Pacific Rim EU - comprised of 27 member countries - goal is to facilitate the flow of goods, services, capital, and human resources across national borders in Europe in a manner similar to the way they cross provincial borders in Canada NAFTA - created the world's largest free market Numerous trade agreements that have significantly facilitated trade among Asian countries, making Asia the fastest growing region in the world  Association of Southeast Asian Nations (ASEAN)  East Asia Economic Group  Asia-Pacific Economic Cooperation (APEC)  South Asian Association for Regional Cooperation (SAARC) China - has emerged as a dominant trade leader since instituting trade reforms in the late 1970s - in the last decade and a half, China's economy has grown dramatically, drastically altering political and trading relations among nations - 1.3 billion population represent a massive, largely untapped consumer market for global companies - big multinational corporations such as General Electric (GE), Toyota, and Intel are building or expanding their manufacturing units in the country - many smaller firms are heading to China as well Business services versus manufacturing - through technological advances, the number of manufacturing jobs is decreasing in proportion to the number of service-based jobs - companies are increasingly turning to sophisticated machinery that requires fewer workers to produce the same amount of product, such as cars, clothes, and computers - service-based jobs are much harder to replace with technology than manufacturing jobs - services will always be in demand, regardless of whether you are in a developed country such as Canada or a less developed country such as Haiti - service-based jobs that can be traded across borders range from highly complex to simple, including research and development, consulting, finance and accounting, HRM, tech support, customer service, and basic data entry jobs Integrated technology platforms - technology has also increased the rate at which services can be traded across countries - integrated technology platforms represent common operating systems such as Microsoft Windows 7 that can be used across multiple computers connected through the Internet - work becomes less specific to particular companies and countries - employees become empowered to compete without the need for a large company Global Differences - political and cultural differences can act as major obstacles political differences - country's labour laws, property rights, and patents o Brazil - any bonuses paid for two consecutive years become a legal entitlement o in many countries, particularly those in Africa - property rights are poorly protected by governments o civil unrest can also lead to the poor enforcement of property rights o China - intellectual property rights have seen little protection o environmental restrictions make some countries more attractive to do business in than others cultural environment - communications, religion, values and ideologies, education, and social structure o US, Ireland, UK - language and culture similarities; attractive places to locate their facilities (call centres) o Eastern Europe - citizens are well educated and largely possess English-speaking skills Culture - integrated phenomenon - by recognizing and accommodating taboos, rituals, attitudes toward time, social stratification, kinship systems, and the many other components, managers stand a better chance of understanding the culture of a host country —a country in which an international business operates - different cultural environments require different approaches to HRM - strategies, structures, and management styles that are appropriate in one cultural setting may lead to failure in another Ethics in HRM: Bribery Abroad systemic corruption - can add 20 to 25 percent to the costs of government procurement and may result in the purchase of inferior goods or unnecessary services Corruption of Foreign Public Officials Act - any employee caught bribing foreign officials could face five years in jail and unlimited fines - chief executive officer could also face jail time, even if he was unaware of the bribe Managing across Borders Four basic types of organizations:  international corporation o a domestic firm that builds on its existing capabilities to penetrate overseas markets o Honda, GE, and Procter & Gamble (P&G) used this approach to gain access to Europe—they essentially adapted existing products for overseas markets without changing much else about their normal operations (P&G's extremely successful introduction of a detergent brick used on washboards in India)  multinational corporation (MNC) o more complex form that usually has fully autonomous units operating in multiple countries o Shell, Philips, and ITT - have traditionally given their foreign subsidiaries a great deal of latitude to address local issues such as consumer preferences, political pressures, and economic trends in different regions of the world o subsidiaries are run as independent companies, without much integration  global corporation o multinational firm that maintains control of operations back in the home office o Japanese companies, such as Matsushita and NEC, tend to treat the world market as a unified whole and try to combine activities in each country to maximize efficiency on a global scale o operate much like a domestic firm, except that they view the whole world as their marketplace  transnational corporation o attempts to achieve the local responsiveness of an MNC while also achieving the efficiencies of a global firm o to balance this ―global/local‖ dilemma, a transnational corporation uses a network structure that coordinates specialized facilities positioned around the world o by using this flexible structure, a transnational corporation provides autonomy to independent country operations but brings these separate activities together into an integrated whole o Ford, Unilever, and Shell have made good progress in restructuring operations to function more transnationally Domestic versus International HRM International HRM - being seen more and more as a key source of competitive advantage for international businesses - necessarily places a greater emphasis on functions and activities such as relocation, orientation, and translation services to help employees adapt to new and different environments outside their own countries and to help newly hired employees in foreign countries adapt to working for companies headquartered outside their borders Staffing Internationally Expatriates (home-country nationals) - employees from company’s home country host-country nationals - natives of the host country third-country nationals - natives of a country other than the home country or the host country early stages of international expansion - organizations often send home-country expatriates to establish activities (particularly in less developed countries) and to work with local governments - generally very costly - expatriates have received generous salaries, automobiles, full relocation services, private schooling for their children, trips home, and other perks – costing more than $300,000 yearly, on average Three main advantages of hiring host-country nationals:  Hiring local citizens is generally less costly than relocating expatriates  Local citizens know the cultural and political landscape of the country and are often more likely to be able to gain the support of local staff members  Foreign employers may be required to hire locally as per the host country’s government regulations  Most customers want to do business with companies (and people) they perceive to be local versus foreign Why Canadians are Sent on Global Assignments Reasons employees decline an international assignment:  family issues  related to housing  reluctant spouse with a career  schooling  repatriation To deal with these issues, organizations are offering:  a predecision trip to the foreign country  orientation programs and work permits for spouses  short-term assignments so that the family does not have to move  extensive vacations, particularly in hardship locations Third-country nationals - often multilingual and already acclimated to the host country's culture - live in a nearby region - less costly to relocate and sometimes better able to cope culturally with the foreign environment expatriates - only when a specific set of skills is needed or when individuals in the host country require development host-country nationals - tax incentives, tariffs, and quotas frequently implemented by the host country to encourage local hiring Recruiting Internationally Four core criteria that are viewed as essential in worldwide recruiting efforts: 1. personal integrity 2. a drive for results 3. respect for others 4. capability work permit or visa - document issued by a government granting authority to a foreign individual to seek employment in that government's country recruiting executives - companies use search firms such as Korn/Ferry in North America or Spencer Stuart in the United Kingdom recruiting at lower levels - more informal approaches tend to be useful - advertise their firms and employment ―brand‖ to recruits who are not familiar with it - referrals and radio announcements in third-world countries - many people lack sufficient reading or writing skills guest workers - foreign workers invited to perform needed labour - lower direct labour costs for a company - indirect costs—housing, language training, health services, recruitment, transportation, etc.—can be costly Apprenticeships - major source of trained labour in European nations - in Europe, a dual-track system of education directs a large number of youths into vocational training - German system of apprenticeship training, one of the best in Europe, provides training for office and shop jobs under a three-way responsibility contract between the apprentice, his or her parents, and the organization - at the conclusion of their training, apprentices can work for any employer but generally receive seniority credit with the training firm if they remain in it - France has been able to draw on its ―Grandes écoles‖ for centuries o created during the Renaissance to fulfill a need that universities were not meeting at the time o educate prospective engineers up to the equivalent level of master of engineering Staffing Transnational Teams transnational teams - composed of members of multiple nationalities working on projects that span multiple countries - help develop low-cost but high-quality products for the poor - especially useful for performing tasks that the firm as a whole is not yet structured to accomplish; may be used to o transcend the existing organizational structure to customize a strategy for different geographic regions o transfer technology from one part of the world to another o communicate between headquarters and subsidiaries in different countries - fundamental task in forming a transnational team is assembling the right group of people who can work together effectively to accomplish the goals of the team - members were added only if they offered a unique skill that added value to the team Selecting Employees Internationally Few things firms can do to better understand the local market: 1. international HR managers should get to know the universities, technical schools, and primary schools in the area o schools provide extensive networks to future employees and provide insight on the type of hires managers would want to select 2. international HR managers should develop networks in the business and government communities o company must use personal networks to develop trust in the company o international HR manager's job will not be just to select the right people who come to the office but to select the right people within the community 3. international HR managers must understand the employees of the firm's competitors o develop a better understanding of what to look for in other employees while building up a new pool of applicants to recruit in the future Selecting Global Managers Six skill categories for the global manager, or manager equipped to run an international business:  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 Advantages of hiring global managers from three different groups Host-Country Nationals Home-Country Nationals (Expatriates) Third-Country Nationals  Less costly  Talent available within company  Broad experience  Preferred by host-country governments  Greater control  International outlook  Intimate knowledge of environment and  Company experience  multilingualism culture  Mobility  Language facility  Experience provided to corporate Steps involved in selecting individuals for an international assignment (sequencing can make a big difference): 1. Begin with self-selection o employees should begin the process years in advance by thinking about their career goals and interest in international work o companies can more easily avoid the problems of forcing otherwise promising employees into international assignments where they would be unhappy and unsuccessful 2. Create a candidate pool o organizations can build a database of candidates for international assignments o information in the database might include availability, languages, country preferences, and skills 3. Assess candidate's core skills o managers assess each candidate on technical and managerial readiness relative to needs of assignment o initial focus should be on the requirements of the job 4. Assess augmented skills and attributes o expatriate selection decisions are driven typically by technical competence and professional and international experience o individual's ability to adapt to different environments o satisfactory adjustment depends on flexibility, emotional maturity and stability, empathy for the culture, language and communication skills, resourcefulness and initiative, and diplomatic skills Reasons for expatriate assignment failures  poor cultural fit  lack of expatriate support from headquarters  spouse's inability to adjust to his or her new surroundings Causes of Expatriate Assignment Failure  Family adjustment  Poor performance  Lifestyle issues  Other opportunities arise  Work adjustment  Business reasons  Bad selection  Repatriation issues To improve the success of expatriate assignments, expatriate must find a way to adjust to the: 1. demands of their company o employees who share a common vision with the company are willing to undergo difficulties for the organization 2. country environment o employees who take time to understand the culture and market in which they are operating will be better able to cope with unexpected changes and demands 3. family needs o employees who have family members who are supportive and interested in an overseas assignment are much more successful in their international assignments 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 Training and Development - important not only for expatriate managers but also for the foreign employees they will ultimately supervise - biggest mistake managers can make is to assume that people are the same everywhere - corporations that are serious about succeeding in global business are tackling these problems head-on by providing intensive training - good training programs also help attract needed employees from the host countries - entering into partnerships with university executive education programs to customize the training experiences to the specific needs of expatriate managers and foreign nationals Content of Training Programs Those working internationally need to know as much as possible about 1. the country where they are going 2. that country's culture 3. the history, values, and dynamics of their own organizations Sensitivity training - can help expatriates overcome ethnic prejudices they might harbor - simulate a field experience in sensitivity training by visiting a nearby subculture in their native countries or by actually visiting the foreign country prior to relocating there Individuals should become acquainted with the following aspects of the host country:  Social and business etiquette  History and folklore  Current affairs, including relations between the host country and Canada  Cultural values and priorities  Geography, especially its major cities  Sources of pride and great achievements of the culture  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 Five essential elements of training and development programs that prepare employees for working internationally: 1. language training 2. cultural training 3. assessing and tracking career development 4. managing personal and family life 5. repatriation—a final, but critical, step Language Training - English is almost universally accepted as the primary language for international business - English is usually the designated language for meetings and formal discourse - learning the language is only part of communicating in another culture Cultural Training - people's attitudes and behaviours are influenced, in large part, by the society in which they have received their education and training - being successful depends on one's ability to understand the way things are normally done and to recognize that changes can’t be made abruptly without considerable resistance, and possibly antagonism, on the part of locals - nations tend to cluster according to similarities in certain cultural dimensions, such as work goals, values, needs, and job attitudes - studying cultural differences can help mgrs identify & understand work attitudes & motivation in other cultures Assessing and Tracking Career Development - working abroad tends to increase a person's responsibilities and influence within the corporation - provides a person with a set of experiences that are uniquely beneficial to both the individual and the firm o international assignments enhance a person's understanding of the global marketplace and offer the opportunity to work on a project important to the organization To maximize the career benefits of a managerial assignment, a candidate should ask two key questions before accepting a foreign post: 1. Do the organization's senior executives view the firm's international business as a critical part of their operation? o expatriates with clear goals that truly need to be accomplished are likely to find their assignments more rewarding - fewer companies sending expatriates abroad for career development purposes only 2. Within top management, how many executives have a foreign-service assignment in their background, and do they feel it is important to have overseas experience? o successful foreign assignment tends to lead to another and another Managing Personal and Family Life Culture shock - a disorientation that causes perpetual stress - experienced by people who settle overseas for extended periods - stress is caused by hundreds of jarring and disorienting incidents, such as being unable to communicate, having trouble getting the telephone to work, being unable to read the street signs, and a myriad of other everyday matters that are no problem at home - minor frustrations become catastrophic events, and one feels helpless and drained, emotionally and physically dual-career partnerships - some employers are providing informal help finding jobs for the spouses of international transferees - other companies are establishing more formal programs to assist expatriate couples o career- and life-planning counselling, continuing education, intercompany networks to identify job openings in other companies, and job-hunting/fact-finding trips o may even create a job for the spouse, although this is not widely practiced - although a spouse's career may create some problems initially, in the long run, it actually may help ease an expatriate's adjustment process Repatriation - helping employees make the transition back home Repatriation programs - designed to prepare employees for adjusting to life at home (which at times can be more difficult than ad
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