chapter twenty

Human Resource Management

McGraw-Hill/Irwin International Business, 11/e

Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
Discuss the importance of creating a company
global mindset

Explain the relationship between competitive

strategies (international, multidomestic, regional, and transnational) and international HR management approaches (ethnocentric, polycentric, regiocentric, and global)

Compare home country, host country, and third

country nationals as IC executives

Explain the difficulties of finding qualified

executives for international companies (ICs) and the importance of foreign language knowledge
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Learning Objectives Explain what an expatriate is and the challenges of

and opportunities of an expat position

Discuss the increasing importance of Identify some of the complications of

accommodating the trailing spouse of an expatriate executive

compensation packages for expatriate executives

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The Global Mindset

Expatriate
A person living outside citizenship country

Global Mind-set
A mind-set that combines an openness to and an awareness of diversity across markets and cultures with a propensity and ability to synthesize across this diversity

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International HRM Approaches

Ethnocentric
Hiring and promoting employees on the basis of parent companys home country frame of reference

Polycentric
Hiring and promoting employees on the basis of specific local context of the subsidiary

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International HRM Approaches

Regiocentric
Hiring and promoting employees on the basis of the specific regional context of the subsidiary

Geocentric
Hiring and promoting employees on the basis of ability and experience without considering race or citizenship

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Strategic Approach, Organizational Concerns, and the International Human Resource Management Approach to Be Used

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Recruitment, Selection and Training

Parent Country National (PCNs) or Home Country National
- Study of language and culture

Host Country National (HCN)

Hired in the host country

Third Country National

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Recruitment, Selection and Training

Third Country National (TCN)
May accept lower wages and benefits than will employees from the home country May also come from a culture similar to that of the host country May have worked for another unit of the IC and be familiar with policies, procedures and people Common approach in developing countries May not be welcome by host country May come from an international agency Greater use as companies take geocentric view
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Expatriates
Family
Nine of ten expatriate failures family-related

Unhappy spouses major reason for early return

Company losing a million-dollar corporate-training investment in executive

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Language Training
Language Trap
International business person speaks only home language English language has become lingua franca Chinese new hot language to know

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Expatriate Services
Health care programs to assist companies and expatriates with
Claims administration Language Translations Currency conversions Service standardization www.ExpatExpert.com www.branchor.com
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Expatriate Services
Banking services Online, 24-hour assistance Training Culture and language

House hunting, utilities hook up, grocery and hardware shopping, long-distance care for relatives, schools, organizations, and cultural items

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Compensation

Salaries

Paying home country nationals the same

salaries as their domestic counterparts permits worldwide consistency bonuses Increasing use of third country nationalsoften treated like PCNs Trend to pay HCNs same base

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Total compensation Costs for Sending an Expatriate American Manager to Russia

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Allowances
Housing Allowance
Permits executive to live at same standard as at home

Cost-of-Living Allowance
Based on differences in price of food, utilities, transportation, entertainment, clothing, personal services, and medical expenses as compared to home

Allowances for Tax Differentials

Ensures expatriates will not have less after-tax pay at home

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Allowances
Education Allowances
Insures children receive education equal to that at home

Moving and Orientation Allowances

Household effects and language instruction

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Ranking of 50 Cities from Most to Least Expensive, 2006

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Bonuses
Bonuses
Expatriate employee compensation payments in addition to base salary and allowances because of hardship, inconvenience, or danger Bonuses include Overseas premiums Contract termination payments Home leave reimbursement
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Compensation Packages
For expatriate employees, packages incorporate many types of payments or reimbursements and must take into consideration exchange rates and inflation

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Hardship Differential Pay Premiums for Selected Cities and Countries, 2006

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Compensation Packages Can Be Complicated

Allowances and percentage of base salary are usually paid in host country currency
Percentage usually 65 to 75 percent, with remainder banked where employee directs

What Exchange Rate?

Must be chosen More difficult in countries with exchange controls and nonconvertible currencies

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Compensation of Third Country Nationals

Trend toward applying the same compensation plan to third country nationals as home country expatriates Problems can arise in
The calculation of income tax differential when American expatriate compared with expatriate from another country Home leave bonus
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International Status
Entitles expatriate employee to allowances and bonuses applicable to the place of residence and employment Perks
Compensate executives while minimizing taxes Private pension plan Retirement payment Life Insurance Hidden slush funds (can be illegal) Club membership Company house Foreign affiliate directorship
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