Chapter 20: International Human Resource Management and Labor Relations International Business, 4th Edition

Griffin & Pustay

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Chapter Objectives_1
Describe the nature of human resource management in international business Detail how firms recruit and select managers for international assignments Explain how international businesses train and develop expatriate managers Describe labor relations in international business
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Chapter Objectives_2
Discuss how international firms conduct performance appraisals and determine compensation for their expatriate managers Analyze retention and turnover issues in international business Explain basic human resource issues involving non-managerial employees
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Human Resource Management (HRM)

Set of activities directed at attracting, developing, and maintaining the effective workforce necessary to achieve a firms objective Differences in culture, levels of economic development, and legal systems among countries may force changes in HRM systems
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Figure 20.1 The International Human Resource Management Process

HRMs Strategic Content Recruitment and Selection Training and Development Performance Appraisal Compensation and Benefits Labor Relations
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Contribution to Organizational Effectiveness Prentice Hall 2004

International Managerial Staffing Needs

Staffing Issues
Recruiting Training Retaining

Staffing Categories
Managerial and Executive Employees Non-managerial Employees
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Scope of Internationalization
Size of staffing tasks depends on scope of firms international involvement
Export department International division Global organization

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Centralization versus Decentralization of Control

Centralized firms
Favor home country managers Most common amongst international division form

Decentralized firms
Favor host country managers Most common amongst multidomestic firms
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Staffing Philosophy
Parent Country Nationals (PCNs) Host Country Nationals (HCNs) Third Country Nationals (TCNs)

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Strategies for Staffing

Ethnocentric staffing model Polycentric staffing model Geocentric staffing model

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Figure 20.2 Necessary Skills and Abilities for International Managers

Skills and Abilities Necessary to Do The Job
Technical Functional Managerial

Skills and Abilities Necessary to Work In a Foreign Location

Adaptability Location-specific skills Personal characteristics

Improved Chances of Succeeding in An International Job Assignment

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Recruitment
Experienced Managers Younger Managers

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Selecting expatriates in an important element in international human resource management

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Managerial Selection
Managerial competence Appropriate training Adaptability to new situations

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Table 20.1 Questions from AT&Ts Questionnaire for Screening Overseas Transferees_1

Would your spouse be interrupting a career to accompany you on an international assignment? If so, how do you think this will affect your spouse and your relationship with each other? Do you enjoy the challenge of making your own way in new situations? Securing a job upon reentry will be primarily your responsibility. How do you feel about networking and being your own advocate? How able are you in initiating new social contacts Can you imagine living without a television?
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Table 20.1 Questions from AT&Ts Questionnaire for Screening Overseas Transferees_2

How important is it for you to spend significant amounts of time with people of your own ethnic, racial, religious, and national background? As you look at your personal history, can you isolate any episodes that indicate a real interest in learning about other peoples and cultures? Has it been your habit to vacation in foreign countries? Do you enjoy sampling foreign cuisine? What is your tolerance for waiting for repairs?
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Culture Shock

Psychological phenomenon that may lead to feelings of fear, helplessness, irritability, and disorientation

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Figure 20.3 Phases in Acculturation

Honeymoon

Disillusionment

Adaptation

Biculturalism
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Honeymoon Phase
New culture seems exotic and stimulating Excitement of working in new environment makes employee overestimate ease of adjusting Lasts for first few days or months
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Disillusionment Phase
Differences between new and old environments are blown out of proportion Challenges of everyday living Many stay stuck in this phase

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Adaptation Phase
Employee begins to understand patterns of new culture Gains language competence Adjusts to everyday living

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Biculturalism
Anxiety has ended Employee gains confidence in ability to function productively in new culture Repatriation may be difficult

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Overseas Success
Likelihood of managers being successful at overseas assignment increases if the managers
Can freely choose whether to accept or reject the assignment Have been given a realistic preview of the job and assignment Have been given a realistic expectation of what their repatriation assignment will be Have a mentor back home who will guard their interests and provide support See a clear link between the expatriate assignment and their long-term career path
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Training and Development

Assessing training needs Basic training methods
Standardized Customized

Developing younger managers

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Performance Appraisal
Process of assessing how effectively people are performing their jobs Purpose
To provide feedback to individuals about how well they are doing To provide a basis for rewarding top performers To identify areas in which additional training and development may be needed To identify problem areas that may call for a change in assignment
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Compensation Packages
Include salary and nonsalary items Determined by

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Labor market forces Occupational status Professional licensing requirements Standards of living Government regulations Tax codes
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Table 20.2 Annual Cost of Living in Selected Locations Worldwide, 2003

Rank 1 2 3 4 City Tokyo, Japan Moscow, Russia Osaka, Japan Hong Kong Index 126.1 114.5 112.2 111.6 Rank 11 12 13 14 City Shanghai, China St. Petersburg, Russia Oslo, Norway Hanoi, Vietnam Index 98.4 97.3 92.7 89.5

5
6 7 8 9 10

Beijing, China
Geneva, Switzerland London, UK Seoul, South Korea Zurich, Switzerland
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105.1
101.8 101.3 101.0 100.3 100.0

15
16 17 18 19 20

Copenhagen, Denmark
Ho Chi Minh City, Vietnam Milan, Italy Shenzhen, China Guangzhou, China White Plains, NY, USA

89.4
88.5 87.2 86.7 86.7 86.2

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New York City, USA

Differential Compensation
Cost-of-living allowance Hardship premium or foreign-service premium Tax equalization system

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Figure 20.5 An Expatriate Balance Sheet

Foreign and Excess U.S. Taxes Paid by company Excess Foreign Costs Paid by company Foreign Service Premium/ Hardship Added by company

U.S. Domestic Base Salary

Taxes Consumption Savings

U.S. Hypothetical Tax and Social Security

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U.S. Spendable Income U.S. Hypothetical Housing and Utilities U.S. Auto Purchase

U.S. Levels

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Labor Relations
Labor relations in a host country often reflects laws, culture, social structure, and economic conditions Union membership may be high

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These striking South Korean workers are picketing government offices in Seoul

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