International Human Resource Management

Chapter 8

IBUS 681, Dr. Yang

Learning Objectives
Define international human resource management Understand how corporate strategy influences IHRM Explain major IHRM functions Discuss additional concerns of managing expatriate employees
IBUS 681, Dr. Yang 2

Major HRM Functions

Staffing
Recruiting and selection

Training and development Compensation and benefits

Employee motivation

Performance evaluation Labor relations

IBUS 681, Dr. Yang 3

Major Areas of IHRM

The management of human resources in global corporations

The management of expatriate employees

The comparison of HRM practices in a variety of different countries

IBUS 681, Dr. Yang

Approaches to Managing and Staffing Subsidiaries

Ethnocentric Polycentric Regiocentric Geocentric

What factors would influence your choice?

IBUS 681, Dr. Yang 5

Choosing an Approach to IHRM

Political and legal concerns Level of development in foreign locations Technology and the nature of the product Organizational life cycle Age and history of the subsidiary Organizational and national cultural differences
IBUS 681, Dr. Yang 6

Recruitment and Selection

Employee classification
Parent country national (PCN) Host country national (HCN) Third country national (TCN)

Managing and staffing approaches Selecting the right candidate

IBUS 681, Dr. Yang

Selecting the Right Candidate

Need a balance between internal corporate consistency and sensitivity to local labor practices Consider cultural values, e.g.,
Achievement-oriented Ascription-oriented

Must comply with local labor laws, e.g.,

EEOA

IBUS 681, Dr. Yang

Expatriate Selection
Western European and Japanese MNCs emphasize technical competence and ability to acclimate North American corporations select mainly on technical competence
Behaviors successful at home may not work abroad Previous experience abroad may or may not predict future success

IBUS 681, Dr. Yang

Training and Development

Planned individual learning, organization development, and career development Delivery of programs worldwide Developing globally minded managers

IBUS 681, Dr. Yang

10

Delivery of Programs Worldwide

Centralized approach
Ethnocentric training originates at headquarters and corporate trainers travel to subsidiaries Geocentric training develops through input from both headquarters and subsidiary staff and trainers could be from any location

IBUS 681, Dr. Yang

11

Delivery of Programs Worldwide

Decentralized approach
Training on a local or regional basis Local people develop training materials and techniques for use in their own area

Effective training considers cultural background of trainees With a centralized approach, trainers need to adapt to local cultures

IBUS 681, Dr. Yang

12

Cultural Impacts on Training and Development Practices

Human resource development roles Analysis and design Development and delivery Administration and environment
US and Canada East Asia Middle East and North Africa Latin America
IBUS 681, Dr. Yang 13

Cross-Cultural Training Methods

Cultural Briefings
Explain the major aspects of the host country culture, including customs, traditions, every day behaviors.
Explain the history, geography, economy, politics, and other general information about the host country and region. Portray a real-life situation in business or personal life to illustrate some aspect of living or working in the host culture.

Area Briefings

Cases

IBUS 681, Dr. Yang

14

Cross-Cultural Training Methods (cont.)

Role Playing
Allows the trainee to act out a situation that he or she might face in living or working in the host country.

Provides a written set of situations that the Culture Assimilator trainee might encounter in living or working in the host country. Trainee selects one from a set of responses to the situation and is given feedback as to whether it is appropriate and why.

Field Experiences

Provide an opportunity for the trainee to go to the host country or another unfamiliar culture to experience living and working for a short time.
IBUS 681, Dr. Yang 15

How Situational Factors Influence the Selection of a CCT Method

EXPERIENTIAL Simulations Low Field Trips Role Plays Interactive Language Training High ANALYTICAL Sensitivity Training Culture Assimilators Case Studies Degree of Classroom Language Training Job Novelty Films FACTUAL Books Lectures Area Briefings Low High Low
High Degree of Culture Novelty

Degree of Training Rigor

Degree of Interaction with Host Country Nationals

IBUS 681, Dr. Yang

Developing Globally Minded Managers

Companies whose CEO's have international assignment experience are better performers Even stronger if the top management team also has international experience and the company has an extensive global strategy Companies must identify managers with global potential and provide them various training and development opportunities.
IBUS 681, Dr. Yang 17

Performance Evaluation
Systematic appraisal of employees performance within the organization
Depends on overall HRM strategy Should consider cultural influences

IBUS 681, Dr. Yang

18

Performance Evaluation
Purpose Timeframe Standards Feedback Market conditions Economic factors

IBUS 681, Dr. Yang

19

Expatriate Performance
Multinationals
U.S.
Western Europe Japan

Failure Rates
10-40%

Top Reasons
Family Adaptability

5-15% Less than 5% Larger Responsibility

Based on HR administrative reports Failure as premature return from international assignments

IBUS 681, Dr. Yang

20

Expatriates Selection Criteria

Technical competence Adaptability Communication skills Family stability Gender Age Ethnicity
IBUS 681, Dr. Yang 21

Compensation and Benefits

Salary-related and non-salary related factors Organizational philosophy and strategy Cost to the organization Employee motivation Company image

IBUS 681, Dr. Yang

22

Typical Expatriate Benefits

Overseas premium Housing allowances Cost of living allowances (COLA) Moving expenses Tuition assistance for dependent education Home leave Tax reimbursement plans

IBUS 681, Dr. Yang

23

How HR and IHR differ in compensation?

Company strategy and philosophy Salary and non-salary related, e.g.
Key elements in compensation package Home-based, host based or region-based Performance and motivation Gender Nationality

IBUS 681, Dr. Yang

24

Employee Compensation
Intrinsic
Participate in decision making Greater job freedom and discretion More responsibility More interesting work Opportunities for personal growth Diversity of activities
Performancebased

Extrinsic
Financial
Implied Explicit Membership-based Membership-based

Non-Financial
Preferred office furnishings Preferred lunch hours Assigned parking spaces Preferred work assignments Business Cards Own secretary Impressive titles

Piecework Commission Incentive plans Performance bonuses Merit pay plans

Cost- of- living increases Labor market adjustment

Protection programs
Pay for time not worked

Time-in-rank increase
Profit sharing

Services and perquisites

IBUS 681, Dr. Yang

25

Per Capita Incomes by Metropolitan Area (U.S. Average: $29,469)

TOP 10
1 2 3 4 5 San Francisco, Ca San Jose, Ca New Heaven, Bridgeport, Stamfort, Danbury, Waterbury, Conn. Bergen, Passaic, NJ Middelsex, Sommerset, Hunterdon, NJ $57,414 $55,157 $46,542 $42,726 $42,392 6 7 8 9 10 West Palm Beach, Boca Raton, Fla Trenton, NJ Seattle, Bellevue, Everett, Wash Nassau, Suffolk, NY Naples, Fla $41,007 $40,954 $40,686 $40,353 $40,121

Source: U.S. Department of Commerce Bureau of Economic Analysis, The Mercury News, August 4, 2002 IBUS 681, Dr. Yang 26

Per Capita Incomes by Metropolitan Area (U.S. Average: $29,469)

BOTTOM 10
1 McAllen, Edinburg, Mission, Texas Brownsville, Harlingen, San Benito, Texas Laredo, Texas Yuma, Ariz. Las Cruces, N.M. $13,344 6 Auburn, Opelika, Ala. $18,484

2
3 4 5

$14,906
$15,114 $16,002 $17,321

7
8 9 10

El Paso, Texas
Merced, CA Provo, Orem, Utah Pine Bluff, Ark.

$18,535
$18,536 $19,128 $19,826

Source: U.S. Department of Commerce Bureau of Economic Analysis, The Mercury News, August 4, 2002 IBUS 681, Dr. Yang 27

Typical U.S. Expatriate Remuneration Package

Remuneration Package
Cash premium & Allowances Relocation assistance

London
$12,540 (28.5%)
8,888 (20.2%) 8,184 (18.6%) 14,888 (32.7%) 44,000 132,000 $432,000

Brussels
$37,625 (30.1%)
24,875 (19.9%) 18,750 (15%) 43,750 (35%) 125,000 375,000 $675,000

Tokyo
$45,080 (19.6%)
53,750 (28.8%) 41,880 (18.2%) 91,310 (39.7%) 230,000 690,000 $990,000

Riyadh
$62,700 (33%)
25,650 (18.5%) 39,330 (20.7%) 62,320 (32.8%) $190,000 570,000 870,000

Itemized reimbursement
Taxation Total annual incremental cost Total three-year incremental cost

Total three-year cost Incremental plus base

Based on a 3-year term with an annual base pay of $100,000

IBUS 681, Dr. Yang

28

Gender Pay Gap Differentials in EU and the US

.Country
Austria

Time Period
1990-99

Women's Average Pay as Percentage of Men's

68% 67% (monthly gross earnings) 75.3% 79.4% for blue-collar workers 64.2% 70.1% for white-collar workers (gross annual earnings). 83.61% 82% in private sector 80% 82% (monthly earnings). 84.2% 88.2% for full-time employees (monthly pay) 75.1% 75.8% for all employees including part-time 75.3% 75.8% for blue-collar workers (West Germany) 69.4% 70.4% for white-collar workers (West Germany). 80% (average gross hourly earnings) 80% 84.5% (hourly earnings) 82.3% 81.7% (annual income). 85% (1999 average, no overtime figures given)

Trends
Increasing

Belgium
Denmark Finland France

1991-96
1995-1999 1990-99 1991-98

Narrowing
Stable Stable No information

Germany
Greece Ireland Italy Luxembourg

1997-2000
1996-1998 1987-97 1991-98 1995-2000

Narrowing
Narrowing Narrowing No information Narrowing

Netherlands
Portugal Spain Sweden UK U.S.

1990-98
1997-98 1996-2000 1995-2000 1990-2000 1983-2000

73% 77% (hourly pay)

77% 76.5% (monthly pay) 74.9% 76.9% (monthly pay) 84% 82% (monthly pay) 76.6% 80.6% (hourly pay) 66.6% 76.0% (weekly full-time wage and salary)

Narrowing
Increasing Narrowing Increasing Narrowing Narrowing

Source: Adapted from National data - EIRO; Eurostat data, May 2001, Theme 3; US DOL Bureau of Labor Statistics, August 2001

IBUS 681, Dr. Yang

29

Womens Average Earnings as Percentage of Mens

U.S. EU Average Austria Portugal Germany France Netherlands Greece Spain Belgium Finland Sweden U.K. Denmark Ireland Luxembourg Norway

76 78.6 65.2 72.3 73 75.8 76 76.2 77.8 79.6 80.6 82 82 82.9 84.5 85 86

20

40
IBUS 681, Dr. Yang

60

80

100
30

Gender-based Occupation
Who Does What
Management, professional and related occupations Physicians and surgeons Dentists Dental assistants Registered nurses Personal care and service occupations Lawyers Paralegals and legal assistants Postsecondary teachers Elementary and middle school Teachers

% of Positions Held by Women

50.3 29.4 22.0 96.5 92.2 77.6 29.4 86.4 46.0 81.3

Preschool and kindergarten teachers

Librarians Architects and engineers Clergy
Source: USDOL BLS, 2005

98.1
83.2 13.8 15.0
IBUS 681, Dr. Yang 31

Wal-Marts Gender-based Pay Differentials

Average Annual Earnings 2001 Job Categories Regional VP District MGR Store MGR Assistant MGR MGMT Trainee Dept Head Sales Associate Cashier No. of % of Employees Women 39 508 3,241 18,731 1,203 63,747 100,003 50,987 10% 10 14 36 41 78 68 93
IBUS 681, Dr. Yang

Male Salaries 239,500 105,700 39,800 23,200 23,500 16,500 14,500

Female Salaries 177,100 89,300 37,300 22,400 21,700 15,100 13,800

Gender Gap .67 .74 .84 .94 .97 .92 .92 .95
32

$419,400 $279,800

Based on Business Week March 3, 2003

Family Impact on Gender-based Pay Ratios

(Corrected for Hours)
Country
Germany (monthly) United Kingdom (annual)

All Workers
.6880 .6337

Married Workers
.5730 .5966

Single Workers
1.027 .9489

United States (annual)

Austria (monthly) Switzerland (monthly) Sweden (annual) Norway (annual) Australia (annual) Average

.6849
.7256 .6174 .7673 .7308 .7489 .6995

.5944
.6558 .5768 .7274 .7160 .6909 .6417

.9552
.9703 .9449 .9350 .9158 .9144 .9514

Source: Adapted from The gender earning gaps: Learning from international comparisons, Blau and Kahn, American Economic Review, (82) 2, 1992

IBUS 681, Dr. Yang

33

The Dual-career Penalty

Lower Pay
Average income of men with MBA and whose wives were:

Working $95,067
Up

Not Working $125,120

Up

48%

in six years

59%

in six years

Fewer Promotions
% entered top management positions whose wives were:

Working 28%
IBUS 681, Dr. Yang

Not Working 38%

34

Source: Effects of alternative family structures on managerial career paths, Schneer, and Reitman, Academy of Management Journal 30 (4), 1993

Why both are working?

250% 202.2% 200% 150% 100% 65.8% 50% 16.7% 0%
Top 5% (male) Top 5% (family)

Percentage change 1975-95 Income vs. Costs

66.5%

31.6%

30.2%
Tax

30.9%
New House

36.4%

College (bublic)

New Car

College Day Care (Private)

Source: Is your family wrecking your career, Fortune, March 17, 1997: 71

IBUS 681, Dr. Yang

35

Labor Relations
Labor relations function
Identify and define roles of management and workers in the workplace Collective bargaining

Union organizations Union membership Labor law

IBUS 681, Dr. Yang

36

Union Density Figures for Selected Countries

Country
Australia Canada China Colombia Germany Hong Kong Iceland

Percentage of Union Membership

28% 30% 90% 7% 26% 15% 50%

Country
India Japan Norway Mexico Slovakia South Korea Turkey

Percentage of Union Membership

26% 22% 71% 30% 60% 12% 57%

France

10%

U.S.
IBUS 681, Dr. Yang

14%
37

Source: U.S. Department of Labor, Bureau of International Labor Affairs, Foreign Labor Trends and Bureau of Labor Statistics,

Trade Unions in Industrial Countries

Sweden Australia UK Germany New Zealand Japan US France
0% 35.2% 32.9% 35.0% 28.9% 24.3% 28.8% 24.0% 18.0% 14.2% 14.5% 9.1% 20% 40% 60% 80% 100%
38

83.8% 91.1% 50.0% 45.5%

1985 1995
54.1%

IBUS 681, Dr. Yang

Managing Expatriates
Training and development Cross-cultural adjustment Expatriate evaluation Expatriate compensation Expatriate reentry assistance
Minimize reverse culture shock Integrate the manager back into the home office Adjustments to a new or lower standard of living Allow for reentry time

IBUS 681, Dr. Yang

39

Culture Shock Cycle

High

Mood

Low

Length in a New Culture

IBUS 681, Dr. Yang

40

Retaining the Expatriates

80% believe they would be promoted
About 23% get the promotion 20% want to leave the company upon return

Averaged 44% turnover 25% leave within one year after repatriation, 55% after three years Average turnover cost is $250,000

IBUS 681, Dr. Yang

41

Convergence or Divergence?
Large corporations preference for consistent worldwide systems Smaller companies desire for more professional systems Need to follow local HRM laws and social norms Development of unique techniques and practices to suit local cultural and legal requirements

IBUS 681, Dr. Yang

42

Implications for Managers

Every international manager has responsibility for effectively managing human resources, and therefore, must understand IHRM functions. It is helpful to understand IHRM because of potential impacts on ones career.
IBUS 681, Dr. Yang 43