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Human Resource Management

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Human Resource Management (MGT501)
Lesson 44
This lecture demonstrates how managers can effectively utilize HRM practices to enhance their firms'
competitive response in an era when the opportunities and challenges facing business are international in
nature. It covers the stages of international involvement, the challenges of expatriate job assignments, and
the ways to make those assignments more effective. It also discusses the development of HRM policies in a
global context and the specific HR concerns of exporting firms.
A. Managing Human Resources in an International Business
Globally, HR executives are strategic partners with line managers and actively participate in top-level
business decisions that bring human resource perspectives to the global management of a company.
Basically, the role of the global human resource executive is focused on being a strategic business partner
and decision maker. Any human resource initiative must be based on maximizing productivity to best
benefit the bottom line, and, therefore, a solid understanding of the total global system is essential. Just as
global business enterprises evolve, so do the human resources that support them. The global human
resources role is, and should be, a natural extension of the positive orientation toward global human
resource management and the recognition of the strategic role that must play.
I. The Stages of International Involvement
Firms progress through five stages (e.g., domestic operations, export operations, subsidiaries or joint
ventures, multinational operations, and transnational operations) as they internationalize their operations.
See Figure for a graphical
display of these stages.  The
The Stages of Internationalization
higher the stage, the more HR
practices need to be adapted to
diverse  cultural,  economic,   Stage 2: Export Operations The firm
Stage 4: Multinational
Operations The f irm becomes a
legal   expands its market to include ot her
full-fledged mult inational corp.
countries, but retains production
environments.  For example,   facilities within domestic borders.
(MNC) with assembly and
production facilit ies in several
HRM practices at Stage 5
countries and regions of the
Stage 1: Domestic
world. Some decentralization of
Operations The
decision making is common, but
firm's market is
corporations) are designed to
many personnel decisions are
blend individuals from diverse
still made at corp. headquarters.
backgrounds to create a shared
Stage 5: Transnational
corporate (rather than national)
Operations Firms that reach this
stage are often called transna-
identity and a common vision.
tional because they owe little
The  evolution  of  global
allegiance to their country of
origin. Operations are highly
Stage 3: Subsidiaries or Joint Ventures
business stages are:
decentralized, with each busi-
The firm physically moves some of its
ness unit free to make personnel
operations out of t he home country.
decisions with very loose control
from corp. headquarters.
abroad, either directly
or indirectly, by retaining foreign agents and distributors.
Licensing--An arrangement whereby an organization grants a foreign firm the right to use
intellectual properties such as patents, copyrights, manufacturing processes, or trade names for a
specific period of time.
Franchising--The parent company grants another firm the right to do business in a prescribed
manner. Franchisees must follow stricter operational guidelines than do licensees. Licensing is
usually limited to manufacturers, whereas franchising is popular with service firms such as
restaurants and hotels.
Multinational Corporation (MNC)--A firm that is based in one country (the parent or home
Human Resource Management (MGT501)
country) and produces goods or provides services in one or more foreign countries (host
Global Corporation--Has corporate units that are integrated to operate as one organization
worldwide in a number of countries.
II. Global Human Resource Management
The utilization of global human resources to achieve organizational objectives without regard to geographic
boundaries. Those engaged in the management of global human resources develop and work through an
integrated global human resource management system similar to that experienced domestically.
III.  Global Staffing
A global organization must have qualified individuals in specific jobs at specific places and times in order to
accomplish its goals. This process involves obtaining such people globally through human resource
planning, recruitment, and selection.
Type of staff members
Expatriate: An employee working in a firm who is not a citizen of the country in which the firm is
located but is a citizen of the country in which the organization is headquartered.
Host-country national (HCN): An employee working in a firm who is a citizen of the country in
which the firm is located, but where the firm is operated by an organization headquartered in another
country. Normally the bulk of employees in international offices will be host-country nationals.
Third-country national (TCN): A citizen of one country, working in a second country, and
employed by an organization headquartered in a third country.
Approaches to Global Staffing
Ethnocentric staffing: Companies primarily hire expatriates to staff higher-level foreign positions.
Polycentric Staffing: When more host-country nationals are used throughout the organization,
from top to bottom.
Regiocentric Staffing: Similar to the polycentric approach, but regional groups of subsidiaries
reflecting the organizations strategy and structure work as a unit.
Geocentric staffing: A staffing approach that uses a worldwide integrated business strategy.
Global training and development is needed because people, jobs, and organizations are often quite
different globally.
IV. Global Human Resource Development
a. Expatriate Development--The development process should start as soon as the workforce is
selected, even before beginning global operations if possible.
b. Repatriation Orientation and Training--Orientation and training is necessary prior to
repatriation, which is the process of bringing expatriates home. Repatriation orientation and
training is needed to prepare the employee, and the family, for a return to the home-country culture
and to prepare the expatriate's new subordinates and supervisor for the return.
Human Resource Management (MGT501)
V. Global Compensation and Benefits
Probably the main reason that organizations relocate to other areas of the world is because of high-wage
pressures that threaten their ability to compete on a global basis. Basically, the compensation levels are
usually much lower globally. Variations in laws, living costs, tax policies, and other factors all must be
considered when establishing global compensation packages.
VI.  Global Safety and Health
Safety and health aspects of the job are important because employees who work in a safe environment and
enjoy good health are more likely to be productive and yield long-term benefits to the organization. For this
reason, progressive global managers have long advocated and implemented adequate safety and health
programs. Basically, U.S.-based global operations are often safer and healthier than those of the host-
country operations, but frequently not as safe as similar operations in the United States.
VII. Possible Barriers To Effective Global Human Resource Management
Unfortunately, a global organization must cope with various unknowns. The management of HR functions
globally is enormously complicated by the need to adapt HR policies and practices to different host
countries. HR management must consider the potential impact of global differences on human resources.
Differences in politics, law, culture, economics, labor/management relations systems, and other factors
complicate the task of global human resource management.
Political and Legal Factors--the nature and stability of political and legal systems vary throughout
the globe. firms enjoy a relatively stable political and legal system. The same is true in many of the
other developed countries, particularly in Europe. However, in other nations, the political and legal
systems are much more unstable. Some governments are subject to coups, dictatorial rule, and
corruption, which can substantially alter the business environment as well as the legal environment.
Legal systems can also become unstable, with contracts suddenly becoming unenforceable because of
internal politics.
b. Cultural Factors--Cultural differences vary from country to country with corresponding differences
in HR practices. HR practices must be adapted to local cultural norms, and, therefore, most HR staff
members in a foreign subsidiary should be drawn from host-country nationals. However, just because
certain cultural norms are restrictive does not mean that an attempt at change should not be made.
Companies must bring in a critical mass of expatriates who carry the culture with them and always
leave one or two behind to oversee locals and ensure that they are following corporate policies. The
key is to accommodate local cultures but maintain the critical nature of the corporate culture.
Economic Factors--Differences in economic systems must also be thoroughly investigated. In a
capitalist system, the overwhelming need for efficiency favors HR policies and practices that value
productivity and efficiency. In a socialist system, HR practices favor the prevention of
unemployment, often at the expense of productivity and efficiency, which is often unacceptable. The
impact of economic factors on pending global operations must be fully understood and accounted
for prior to developing HR policies and practices. Probably one of the greatest economic factors is
the difference in labor costs.
d. Labor/Management Relations Factors--The relationship between workers, unions, and
employers varies dramatically from country to country and obviously has an enormous impact on HR
management practices.
VIII. The Challenges of Expatriate Assignments
One of the most challenging tasks for any firm operating internationally is to manage its expatriate work
force effectively.
a.  Why International Assignments End in Failure
The failure. expatriates is estimated to be in the 20 to 40 percent range. Six factors account for most
Human Resource Management (MGT501)
Career blockage
Culture shock
Lack of pre-departure cross-cultural training
Overemphasis on technical qualifications
Getting rid of a troublesome employee
Family problems
Difficulties on Return
When the expatriates return home, they may experience additional problems, which include:
Lack of respect for acquired skills
Loss of status
Poor planning for return position
Reverse culture shock
Effectively Managing Expatriate Assignments with HRM Policies and Practices
Companies can minimize the chances of failure by putting in place a sensible set of HRM policies and
practices that get to the root of the problems. Such policies and practices would pertain to selection,
training, career development, and compensation. Adequate practices in these areas can be used to avoid
The choice of an employee for an international assignment is a critical decision. To choose the best
employee for the job, management should:
Emphasize cultural sensitivity as a selection criteria
Establish a selection board of expatriates
Require previous international experience
Explore the possibility of hiring foreign-born employees
Screen candidates' spouses and families
The assumption that people everywhere respond in similar fashion to the same images, symbols, and
slogans has hurt U.S. companies. Cross-cultural training sensitizes candidates for international assignment
to the local culture, customs, language, tax laws, and government.
Career Development
The expatriate's motivation to perform well on an international assignment will depend to a large amount
on the career development opportunities offered by the employer.
Firms can use compensation packages to enhance the effectiveness of expatriate assignments. However,
compensation policies can create conflict if locals compare their pay packages to the expatriate's and
conclude that they are being treated unfairly.
Global Equal Employment Opportunity
Equal employment opportunity worldwide ranges from virtually none to a highly sophisticated system.
Some countries have extensive EEO laws, and they are enforced vigorously. Other countries have similar
laws that are not enforced, whereas others have no laws relating to EEO.
Eight Keys to Global Human Resource Management of Expatriates
Global HR management of expatriates can be made simpler and more manageable by following eight steps,
which are general guidelines for developing an expatriate workforce.
Human Resource Management (MGT501)
The global business plan must be completely understood to make it easier to determine how
existing human resource policies can be adapted to accomplish global objectives.
The company's Foreign Service policy should be a set of guidelines, not rigid rules, for relocating
employees and their families around the world while maintaining the domestic corporate culture.
Develop a global budget process so the overall cost of each expatriate global assignment can be
estimated. Such costs represent enormous investments and should be carefully considered to
determine if expatriates or host-country or third-country nationals should be used.
Profile the candidate and his or her family to determine who might be an effective candidate for a
global assignment. Often an entire family, not just an employee, must be considered in making the
The terms and conditions of the global assignment should be clearly stated up front. Expatriates
should be given both a verbal and written presentation of the assignment's terms and conditions to
ensure a complete understanding of both the benefits and responsibilities of the global assignment.
Prepare expatriates and their families for relocation with departure orientation and training.
Employees and their families should be given language training and cultural training, as well as a
general orientation of everyday living and local customs.
Develop and implement a continual development process to take advantage of the employee's
global experiences, including career planning, as well as home-country development during the
global assignment period.
Prepare returning expatriates and their families with repatriation orientation training.
Maintaining Corporate Identity through Corporate Culture
Maintaining an effective corporate culture that reflects that of the home country is essential for continuity
worldwide and often requires innovative insight. When a U.S. company hires too many local people in its
foreign offices, it risks losing the unique set of values and operating procedures that defines its corporate
Often a corporation forms an alliance with a company in the host country. In such situations, it is essential
that the corporate cultures and management styles of the partners blend together as quickly as possible.
Long-term success means having a corporate culture that supports the goals of the global organization and
effectively deals with the international business environment. As a firm becomes more and more global in
nature, it becomes more difficult to have a supportive corporate culture. Alliances are useful for all partners
because collaboration makes it possible to share the costs and risks of doing business, and it enables
companies to share financial resources, technology, production facilities, marketing expertise, and of course,
human resources. However, problems may occur in international alliances when people from different
organizations and national cultures work together. Regardless of whether an alliance exists, it is essential
that the corporate culture focus on making a profit. Combining an effective corporate culture that keys on
innovatively coping with the global environment and, at the same time, being profitable is what all global
companies must strive for. Ideally, the corporate culture of global corporations will closely parallel that of
the home country.
Human Resource Management (MGT501)
Ethnocentric Staffing
Companies primarily hire expatriates to staff higher-level foreign
Polycentric Staffing
When more host-country nationals are used throughout the organization,
from top to bottom.
Regiocentric Staffing
Similar to the polycentric approach, but regional groups of subsidiaries
reflecting the organizations strategy and structure work as a unit.
Geocentric Staffing
A staffing approach that uses a worldwide integrated business strategy
An employee working in a firm who is not a citizen of the country in
which the firm is located but is a citizen of the country in which the
organization is headquartered.
An arrangement whereby an organization grants a foreign firm the right to
use intellectual properties such as patents, copyrights, manufacturing
processes, or trade names for a specific period of time.
Multinational Corporation
A firm that is based in one country (the parent or home country) and
produces goods or provides services in one or more foreign countries
(host countries).
Global Corporation
Has corporate units that are integrated to operate as one organization
worldwide in a number of countries.
Table of Contents:
  1. INTRODUCTION TO HRM:Growing Importance of HRM, Road Map of the Course
  2. ESSENTIALS OF MANAGEMENT:Concepts and Essential of Management, Managerís Roles
  3. ORGANIZATION AND COMPONENTS OF ORGANIZATION:Open versus Closed Systems, The Hawthorne Studies
  4. PEOPLE AND THEIR BEHAVIOR:Why to work in organizations?, The Goals of Organizational Behavior
  5. INDIVIDUAL VS. GROUP BEHAVIOR:What Are Roles?, Problem solving Team
  6. PERSONNEL MANAGEMENT TO HUMAN RESOURCE MANAGEMENT:Records and Administration, Competitive Advantage
  7. HRM IN A CHANGING ENVIRONMENT:Productivity, New Trends at Work Place
  8. How organization Cultivate a Diverse Workforce, STEPS TOWARD MANAGEMENT OF DIVERSITY
  9. FUNCTIONS AND ENVIRONMENT OF HRM:Compensation and Benefits, Safety And Health, Interrelationships of HRM Functions
  10. LINE AND STAFF ASPECTS OF HRM:Authority, Line versus Staff Authority, Staff Manager
  11. LEGAL CONTEXT OF HR DECISIONS:Doing the Right Thing, Affirmative Action, Unintended Consequences
  12. HUMAN RESOURCE PLANNING (HRP):Benefits of HR Planning, Forecasting Human Resource Availability
  13. STRATEGIC PLANNING AND HRIS:HRís Strategic Role, Human Resource Information System, Common HRIS Functions
  14. JOB ANALYSIS:Purposes of the job Analysis, Questions Job Analysis Should Answer
  15. JOB ANALYSIS:Methods of Collecting Job Analysis Information, Observation, Source of Data
  16. JOB ANALYSIS (CONTD.):SURPLUS OF EMPLOYEES FORECASTED, Diversity through Recruiting Efforts
  17. SOURCES OF RECRUITMENT:ALTERNATIVES TO RECRUITMENT, Quantity of the Applicants, Quality of the Applicants
  18. SELECTION:Initial Screening, Advantages of Successful Screening
  19. SELECTION TESTS:Characteristics of Properly Designed Selection Tests, Guidelines for Conducting an Interview
  20. SELECTION PROCESSÖ CONTD:Background Investigations, Physical Exam, Selecting Managers
  21. SOCIALIZATION:Compensation and Benefits, Team Membership, Stages in socialization Process, Training and Development Trends
  22. TRAINING AND DEVELOPMENT:Learning, Phases of Training, Why Transfer of Training Fails
  23. MAXIMIZING LEARNING:Following up on Training, Repetition, Feedback, Purposes of T & D
  24. CAREER MANAGEMENT:Individual career planning, Career Planning and Development Methods
  25. PERFORMANCE:Determinants of Job Performance, Why is performance measured?, Performance Management
  28. COMPENSATION SYSTEM:Pay, Job Pricing, Compensation: An Overview, Compensation Surveys
  29. BENEFITS:Total Compensation, Discretionary Benefits (Voluntary), Workplace Flexibility
  30. ROLE OF MONEY IN PERFORMANCE OF EMPLOYEES:Types of Pay-for-Performance Plans, Empower Employees
  31. MOTIVATION:The Motivation Process, Motivational Theories, Challenges of motivating employees
  32. OCCUPATION, HEALTH & SAFETY:Physical Conditions, Accident Investigation, Smoking in The work place
  33. STRESS MANAGEMENT:Symptoms of Stress, Managing Stress,
  34. COMMUNICATION IN ORGANIZATION:Burnout, Social Support at Work & Home, Communication in organization, Meetings
  35. TRADE UNIONS:Collective Bargaining, The HRM Department in a Nonunion Setting, Phases of Labor Relations
  36. CONFLICT AND NEGOTIATION:Transitions in Conflict Thought, Individual Conflict Management Styles
  37. POWER AND POLITICS:Sources of Power, Advantages and Disadvantages of PowerPower and Politics in Context
  38. EMPLOYEE RIGHTS AND DISCIPLINE:Contractual Rights, Management Rights, Disciplining Employees,
  39. DISCIPLINE (CONT...):Factors to Consider when Disciplining, Disciplinary Guidelines, Employee Separations
  40. LEADERSHIP:The Leaderís Behavior, Situational Theories of Leadership, Becoming a Leader
  41. REVISION (LESSON 12-21):Plans, Job Specification, Human resource planning, Selection Process, Corporate Culture
  42. REVISION (LESSON 22-26):Training, Case Study Method, Training, Performance
  43. REVISION (LESSON 27-35):Classification Method, Compensation, Empowerment, Mediation
  44. INTERNATIONAL DIMENSIONS OF HRM:Global Corporation, Type of staff members, Approaches to Global Staffing
  45. CONCLUSION & REVIEW:Strategies for Gaining Competitive Advantage, High-performance Work System