Globalization

The process of integrating world economies; growth in the functional integration of national economies

International HRM
is the process of procuring, allocating & effectively using HR in a multinational organization is the way in which work organizations deal with people management issues occuring in more than one national context

Culture
is customs, beliefs, norms & values that guide them to behavior of people in society and that are passed on from one generation to another

CULTURE

Political System

Education System

Values

Language

Religious Beliefs

Economic Prosperity

Organization Culture
is collective beliefs & principles of an organizations employees and is a product of such factors as history, tehnology, management style & national culture

Types of Business Culture:

Ethnocentric Culture: Senior Managers are from home country & home country practices are prevalent & subsidiary country units comply with centralized directions Polycentric Culture: Local managers are employed to implement strategies & subsidiaries are allowed to operate in more diverse ways including HR Geocentric Culture: Staffing is undertaken on a worldwide basis. HR practices emerge from staff from HO & subsidiary units Regio-centric Culture: Managers are recruited regionally & HR practices are consistent within the specific regions

Societal Clusters  Anglo: UK, USA, Australia, Ne Zealand, Ireland, Canada, South Africa
 South Asia: India, Malaysia, Philippines, Thailand, Indonesia  Arab: Egypt, Kuwait, UAE  Asian: China, Japan, South Korea, Singapore  Germanic: Germany, Austria, Netherlands

Drivers of globalization
Developing economies have huge markets MNCs locating their subsidiaries in low-wage and low-cost countries Changing demographics India, Thailand, China Regional trading blocs WTO, EU, NAFTA minimize trade and investment barriers and facilitate movement of people Declining trade and investment barriers Technology

Managing Global, Diverse Workforce Dimensions of multi-cultural management

Motivation Work Values

Leadership Communication

Teams HR Practices

Building a multi-cultural organization

Minimum Intergroup conflicts

Pluralism

Identification

Bias Free

Structural Integration

Leadership Diversity

Effective communication across cultures

Learn the language of the host country Be aware that cross-cultural barriers do exist Speak clearly Be sensitive to non-verbal communication Cultural sensitivity

Work Values
Independence Individualism Authority Compliance Conformity Collectivism Equality Empowerment

Managing Culturally Diverse Teams

1. 2. 3. 4. Adaptation Acknowledging cultural gaps & working around them Structural Intervention Changing the composition of a team Managerial Intervention Bringing in a higher level manager Exit Removing a team member

Terminology  Home Country: The native country to which the MNC belongs
 Host Country: The country in which an MNC has set up its operations  Expatriate: Inhabitant of the home country sent on an assignment to a Host Country  Local Country National ( LCN ): Native of the Host Country. Also called as Host Country National ( HCN )  Third Country National ( TCN ): Native of one country which is not the home country and being sent on an assignment to the host country which may be either the home country or a third country Eg: A U.S based company sending a Belgium employee to Singapore

Background
Internationalization of marketing Globalization of jobs - Companies now have production, marketing & servicing facilities all over the world - Overseas staffing can be done using three different kind of people: a) LCN b) Expatriate c) TCN - Each of these types of employees needs a compensation programme different from the Home Country and from each other

Types of Expatriates for the purpose of compensation: Expatriate, TCN, LCN Expatriate Compensation
Companies send current employees on international assignments for a no. of reasons, like: a)LCNs lack the required skills and knowledge b) Home Country employee has knowledge of the company for co-ordinating activities in foreign branch with the home country c) Employees chosen for this reason may be at an early stage of their careers and are thus being groomed for a higher responsibility

Components of Expatriate Compensation and some concern areas

Base Pay: The job is evaluated using the companys job evaluation plan Pay decided on either of these two methods: a) Home Country based method: Setting the base in relation to how the person would be paid for doing the job in the home country b) Host Country based method: Setting the base pay in relation to how the job is paid in the host country Advantage: Creates parity amongst HCNs Concern: Disparity with ones own income in home country Variable Pay: For expats can be similar to domestic programmes Concern: a) Supervisor is at a remote location & may not fully be apprised of the expats performance; b) Many a times, goals & perf. standards for expat. assignments are not clearly spelled out

Components of Expatriate Compensation and some concern areas ( contd.. )

Bonuses: Offered to entice an employee to take up foreign assignment. Various ways in which bonus is included in compensation: i) A percentage added to base pay ranging from 10% - 30% of base pay Concern: On repatriation bonus lost is seen as pay cut ii) Lumpsum payment at the beginning of the assignment Concern: Raises employees income & therefore taxes in one year Allowances: A) Cost-of-living-allowance: paid to keep the employee whole is a percentage of base pay calculated upon the difference in the cost of living between the HQ & the Host Country B) Education Allowance

Components of Expatriate Compensation and some concern areas ( contd.. )

Allowances ( contd.. ): C) Hardship & Danger Allowance: paid where the overseas assignment is at a location with extraordinary difficult living conditions & unhealthy conditions D) Automobile Allowance E) Other Allowances Benefits: a) Required Benefits mandated by law b) Discretionary Benefits like health insurance, retirals

TCN Compensation
TCN Compensation components are similar to that of Expatriate Compensation package. The basic difference of compensation plans for TCNs is the question of "equalization to where?" There are four alternatives: A)Host Country Equalization: This is paying a TCN the same amount that a local
country national would be paid

B)Headquarters Equalization: This type of equalization treats TCNs as if

they all worked in and are citizens of the headquarters country

C)

Home Country Equalization: This alternative means paying TCNs their regular

home country compensation package. Then a housing allowances is added, if the cost of living is higher in the country where the employee is being transferred

D) Modified Home Country Equalization: This final approach uses the home
country method for calculating living costs but uses a headquarters approach for calculating base pay. This approach works best if the company uses a split pay system. Otherwise TCNs from different countries would still be receiving different paycheques

LCN Compensation
Base Pay: Base pay in subsidiary companies depends on internal business factors, differences in prosperity and purchasing power, and social factors, unions, government, etc. Bonuses: Bonuses are common throughout the world as a part of the basic employment contract. In some cases it is even mandated by law. Eg: Payment of Bonus Act, 1965 in India Variable Pay: It is a form of profit-sharing practice and is mostly called as Performance Pay Allowances: The term allowances has a different meaning for LCN's than expatriates. In other countries allowances are additions to base pay given for a variety of reasons. They can increase an employee's pay by 20% or more.

LCN Compensation ( contd.. )

Benefits: A) Required: Such as i) Old age, invalidity & survivors ii) Sickness & maternity iii) Work injury iv) Unemployment v) Family Allowance B) Discretionary: Such as i) Transportation ii) Meals iii) Loans iv) Executive Perquisites

Approaches to International Compensation:

1. Going Rate Approach: Paid according to the Host Country Salary 2. Balance Sheet Approach: Equates purchasing power in foreign country with home country. Additional compensation given for tax adjustments, housing, etc. 3. Global Salary Approach: Applies to global managers in the international cadre. This is based on worldwide job evaluation systems

Compensation Administration:
- Establish salary bands - Salary increase reviews - Starting salary for new employees - Linkage to performance appraisal - Developing rates of pay for job

SOME DEFINITIONS
erformance Management
Performance Management is a means of getting of getting better results from the organization, teams, and individuals within the agreed framework of planned goals, objectives and standards

What is International Performance Management System?

It is a strategic HRM process that enables the multinational corporation (MNC) to evaluate and improve continuously individual, subsidiary unit, and corporate performance against clearly defined, preset objectives. Effective IPA ( International Performance Appraisal ) creates an incentive system that can ensure international employees and overseas subsidiaries are acting in accordance with the home companys interests

PERFORMANCE MANAGEMENT FLOW

PERFORMANCE CRITERIA
Hard Goals: are objective, quantifiable, and can be directly measured such as Return-on-Investment ( ROI ), market share, so on

Soft Goals: tend to be relationship-based or trait-based such as leadership style, interpersonal skills, etc.

Contextual Goals: attempt to take into consideration factors that result from the situation in which performance occurs.

FACTORS TO BE CONSIDERED IN INDIVIDUAL PERFORMANCE & APPRAISAL PROCESS

1. Expatriate Performance Management System - Who conducts the appraisal, how frequently, Appraisal System ( whether multi-rater, MBO, Balanced Scorecard, etc. ) 2. Compensation Package - How is individual compensation revised in line with organizational performance - How is variable decided 3. Task - The complexity of the job itself 4. Headquarters support - How frequently did HQ intervene and on what matters - Whether subsidiaries were visited by HQ staff and frequency of meetings with executives from the parent company

FACTORS TO BE CONSIDERED IN INDIVIDUAL PERFORMANCE & APPRAISAL PROCESS ( contd... )

5. Host Environment:

- Social, political, economic factors 6. Cultural Adjustment - Blending in with the host country organizational culture - Reflected through interpersonal relations, people management, conflict resolution, etc.

CHALLENGES IN APPRAISING EXPATRIATE MANAGERS

Challenges in appraising Overseas Managers:  Determining who should be the appraiser In most cases two groups evaluate the performance of the expatriate managers host nation managers & home office managers and both are subject to unintentional bias  Home country managers rely too much on Hard Goals while evaluating an expats performance  Deciding on which factors to base the appraisal  Fit of international operation in multinational strategy  Unreliable data  Complex and volatile environments  Time difference and distance separation  Local cultural situation

APPRAISAL OF HCN EMPLOYEES

Subsidiary managers tend to be assessed according to subsidiary performance, with a reliance on hard criteria similar to that applied to heads of domestic units or Divisions There is a danger that a PCN or TCN subsidiary managers will make decisions and implement local strategies that favor short-term performance to the detriment of longer term organizational goals her or his subsidiary performance will not be affected if the expatriate assignment has been completed before the consequences of those decisions and strategies begin to take effect Host-country managers may have a clearer picture of expatriate performance and can take into consideration contextual criteria, but they may have culturally bound basis (e.g. about role behavior) and lack an appreciation of the impact of the expatriates performance in the broader organizational context

APPRAISAL OF HCN EMPLOYEES ( contd.. )

Some expatriates may prefer to have parent-company evaluators given that their future career progression may depend on how the evaluation data is utilized back at headquarters; this may be especially so in cases where foreign operations are relatively less important Others, may prefer host-country evaluation if they perceive it as a more accurate reflection of their performance. Multiple raters are sometimes used in the domestic context such as the technique referred to as 360degree feedback.

Repatriation
Termination of an overseas assignment or homecoming

Reasons for Repatriation

Completion of period of posting Family compulsions Move on to another assignment Inability to adjust Failure to do a good job

Challenges of Repatriation:
Many a times organizations do not address the issue of repatriation in the same manner as expatriation Very few organizations hold re-entry sessions to discusses issues like career objectives, performance, plan for re-entry on account of reasons like: Lack of expertise Cost of program to train repatriates No perceived need for repatriation training by top management Repatriation problems are not dramatic, visible. Challenges for an organization The way an organization handles repatriation has an impact on staff availability for international assignments If a repatriate gets a promotion / a position with immense value , other employees see international assignments as a positive career move If an MNC does not reward expatriate performance, tolerates high turnover among expatriates, its workforce may interpret it as a high career risk

Challenges of Repatriation ( contd.. ) :

Challenges for an individual -Reverse culture shock Political, social, economic factors have changed. Person himself has changed and so have family members. Work place environment has itself changed. The person may end up feeling like a Martian at home and work - Reduced income: Many attractive components of the compensation may get exluded from the compensation ( bonuses, hardship allowance, etc. ) leading to a reduced income - Professional not in sync with his experience / not in the mainstream - Finding an interesting job with career advancement: Many expatriate jobs are highly challenging and autonomous. ( start-ups, clean-ups ). Finding positions back home with similar challenge and autonomy may be difficult.

Challenges of Repatriation ( contd.. ) :

Challenges for an individual ( contd.. ) - Having a job ready at the right time Eg: A person was sent on an overseas assignment for 3 years but was called back after 2 years since the assignment was over. Became very difficult to find an appropriate assignment when he came back suddenly -Logistics: Finding a good school, realtor, etc, can be challenging and unnerving - Handing off the old job and transitioning into a new one: Thinking about and planning a transition out when one is still fully engaged in ones position is difficult. One does not want to check out prematurely.

Need for a Repatriation Process:

If approx. 25% of employees exit the firm within a year of repatriation it amounts to a substantial loss financially as well as of human captial The skills, knowledge and experience gained by the individual on international assignment may be rare and scarce

Issues to be addressed through the Repatriation Process:

Study your repatriate retention rate over 2-5 years Find from repatriates their opinion on the relation between expatriate experience and current job. Based on the above develop a Repatriation Policy which stresses on points like:  Preparation, physical relocation, transition information  Financial and tax assistance ( including benefit and tax changes, loss of overseas allowance )  Re-entry position and career path assistance  Adjustment to Reverse culture shock ( including family disorientation)  School systems and childrens education
Contd..

Issues to be addressed through the Repatriation Process ( contd.. ):

Helping adjust to workplace changes such as corporate culture, structure, de-centralization  Stress management, communication-related training  Establishing networking opportunities, helping in forming new social contacts  If repatriation coincides with retirement then such individuals might require special counseling to assist in the transition in both back to home country & to retirement