Part Six
Managing International Operations
Chapter Twenty
Human Resource Management
Chapter Objectives
• To discuss the importance of human resource management in international business
• To profile principal types of staffing policies used by international companies
• To explain the qualifications of international managers
• To examine how MNEs select, prepare, compensate, and retain managers
• To profile MNEs’ relations with organized labor
Factors Influencing HRM in
International Business
Human Resource Management (HRM)
• Human resource management refers to activities necessary to staff the
organization.
• HRM is more difficult for the international company than its domestic counterpart due to:
Environmental differences.
Organizational challenges.
The Strategic Function of International HRM
• Research and anecdotes show that the MNE
whose HRM policies support its chosen strategy creates superior value
• Many MNEs struggle to develop effective HRM policies
• An expatriate is an employee who leaves her or his native country to live and work in another.
• A third-country national is an employee who is a citizen of neither the home nor the host country.
Staffing Policies
• Three perspectives describe how companies set about staffing their international operations, namely the:
ethnocentric - fills management positions with home-country nationals
polycentric - uses host-country nationals to manage local subsidiaries
geocentric approaches - seeks the best people for key jobs throughout the organization, regardless of their nationality
• Companies may use elements of each staffing policy but one type normally predominates
• While executive transferred from headquarters to local operations are more likely to best understand the
company’s core competencies, an ethnocentric staffing can result in a narrow perspective in foreign markets
Comparing Approaches to Staffing
Foreign Operations
Selecting Expatriates
• Technical competence often is the strongest determinant of who is selected for an
international assignment.
• Adaptiveness refers to a person’s potential for
Self-maintenance and personal resourcefulness.
Developing satisfactory relationships.
Interpreting the immediate environment.
• Top managers in subsidiaries usually assume a greater range of leadership roles and broader duties than do managers of similar-size home- country operations.
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Expatriate Failure
• Expatriate failure is operationally costly and professionally detrimental.
• The improving sophistication of MNE
selection procedures has reduced the rate of expatriate failure.
• A leading cause of expatriate failure is the
inability of a spouse to adapt to the host
country.
Training Expatriates
• Training and predeparture preparations can lower the
probability of expatriate failure. Increasingly, preparation activities include the spouse.
• Training and predeparture preparations often includes:
general country orientation
cultural sensitivity
practical skills
• MNEs usually anchor training programs to transfer specific information about the host country as well as improve the executive's cultural sensitivity.
Compensating Expatriates
• Compensation must neither overly reward nor unduly punish a person for accepting a foreign assignment.
• The most common approach to expatriate pay is the balance sheet approach.
• MNEs often provide additional compensation or more fringe benefits to employees who work in remote or dangerous areas.
• Companies struggle to determine the proper
degree to which they should equalize pay for the same job done in different countries.
Repatriating Expatriates
• Repatriation, the act of returning home from a foreign assignment, has many difficulties
• Repatriation tends to cause dissonance in many areas, most notably
Financial.
Work.
Social.
• The principal cause of repatriation frustrations is finding the right job for someone to return to
International Labor Relations
• A labor union is association of workers who have united to represent their
collective views for wages, hours, and working conditions.
• Collective bargaining refers to negotiations
between labor union representatives and
employers to reach agreement on a work
contract.
How Labor Looks At The MNE
• Labor claims it is disadvantaged in dealing with MNEs because:
It is hard to get full data on MNEs’ global operations.
MNEs can manipulate investment incentives.
They can easily move value activities to other countries.
Ultimate decision making occurs in another country.
How Labor Responds To The MNE
• Labor tries to strengthen its bargaining power through cross-national cooperation.
• Labor may be at a disadvantage in MNE negotiations because the
Country bargaining unit is only a small part of MNE activities.
MNE may continue serving customers with foreign production or resources.
• Falling union membership in many countries
foreshadows lower bargaining power for labor, whereas the effort of MNEs to develop integrated labor relations across countries increases their bargaining power.
