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1. What are the advantages and disadvantages of using expatriate managers in foreign countries? What MNC’s prefer in international operation?

2. How expatriate managers are appraised and compensated and why?

3. How many IHRM orientations do we have and which benefit the global companies the most and why?

Chapter 12

4. What is the resource pool and how it is divided into natural and induced factors? How these divisions help companies to recruit globally?

5. How recruitment differs in individualistic and collectivist cultures and why? How companies adjust to these cultural differences?

6. How performance appraisals differ from country to country and how they are used for compensation in various cultures? Choose two opposite countries and explain.

Chapter
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

12
HRM in the Local Context:
Knowing When and How to Adapt

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.

Learning Objectives (1 of 3)
Have a basic understanding how the national context affects HRM practices.
Describe how recruitment and selection practices differ among national contexts.
Identify possible host adaptations in recruitment and selection practices for a multinational company.
Explain how training and development techniques are used in different countries.

Learning Objectives (2 of 3)
Name sources of high-quality workers in different nations.
Understand how training must be adapted to host country workers.
Identify how performance evaluation and compensation practices differ in various national contexts.

Learning Objectives (3 of 3)
Discuss possible host country adaptations in performance evaluation and compensation practices for a multinational company.
Understand how labor costs vary among nations.
Appreciate how the national context and historical conditions affect the relationship between management and labor in different countries.

Key Questions
Regarding Local Employees
How can we identify talented local employees?
How can we attract these employees to apply for jobs?
Can we use our home country’s training methods with local employees?
What types of appraisal methods are customary?
What types of rewards do local people value?
Do any local laws affect staffing, compensation, and training decisions?

Why Do Nations Differ in HRM? (1 of 5)
Because of the national context:
National culture and social institutions influence how managers make decisions regarding strategies
Countries vary widely with regards to social institutions and national culture
Multinationals must select and implement practices that meet national context.

Why Do Nations Differ in HRM?
(2 of 5)
Because of the resource pool: all the human and physical resources available in a country
Includes quality of labor, availability of scientific laboratories, and sources of fuel
Arises from both from natural and induced factor conditions
Unique to each country

Why Do Nations Differ in HRM? (3 of 5)
Factors influencing the resource pool:
The quality, quantity, and accessibility of raw material
The quantity, quality, and cost of personnel available
The scientific, technical, and market-related knowledge available to firms
The cost and amount of capital available to firms for operations and expansion
The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation

Why Do Nations Differ in HRM? (4 of 5)
Natural Factor Conditions: national resources that occur naturally, e.g., abundant water supply
Induced-Factor Conditions: national resources created by a nation, e.g., superior educational system

Why Do Nations Differ in HRM? (5 of 5)
Major national context characteristics that affect HRM:
Education and training of the labor pool
Laws and cultural expectations of selection practices
Types of jobs favored by applicants
Laws and cultural expectations regarding fair wages and promotion criteria
Laws and traditions regarding labor practices

Recruitment (1 of 2)
The major steps in recruitment
Managers determine that jobs are available
Employers determine the types of people and skills that are necessary for the job
Employers generate a pool of applicants for the job

Exhibit 12.2:
Steps in the Recruiting Process

Recruitment (1 of 2)
Recruitment strategies
Walk-ins or unsolicited applications
Advertisements placed in newspaper or on the Internet
Company Web site job postings
Internal job postings
Public and private personnel agencies
Placement services of educational institutions
Current employee recommendations

Recruitment in the United States
U.S. managers:
Tend to see online or print advertising as one of the most effective recruitment methods.
Fear employee referrals result in the recruitment of people with similar backgrounds
Fear that recruitment by personal contacts may result in biases against some groups.
Open and public advertisements are the most effective, reflective of individualistic U.S. culture.

Exhibit 12.3:
Types of Recruitment and Effectiveness
Source: Based on data reported in Zalesova, A. and R.W. Robertson. 2010. “Building a better workforce: Trials and tribulations of employee recruitment and management.” Feature editions, 4, 70-80
Method of Recruitment % of Respondent Using the Method Effectiveness of Recruitment Method
(1: not very effective to 5: very effective)
Newspaper advertisement 86 2.9
Referrals from employees 85 3.6
Use of recruiters 77 3.7
Use of Internet 66 2.6
Recruitment on schools 62 3.3
Job fairs 48 2.7
Use of consultants 44 3.1
Competitors 15 3.1

Recruitment Around the World (1 of 3)
While the U.S. favors open forms of recruitment, recruitment in collectivist societies tends to focus on the in-group, such as the family and friends of current employees.
Backdoor Recruitment: prospective employees are friends or relatives of those already employed
Managers are recruited from prestigious universities.

Micah White (MW) – The new MS A-head for this section is “Recruitment” but that A-head has already been used before in the preceding section of the new MS. Please confirm appropriate A-head and match this slide’s heading to A-head. For now, I have changed this to “Recruitment Around the World,” as this seems to apply to the whole section of the MS.

Recruitment Around the World (2 of 3)
Not only companies but individuals have recruitment preferences based on national culture & social institutions.
Looking for jobs through public vs. private agencies:
Individuals in former communist and socialist societies were more likely to rely on public agencies.
Individuals in more individualistic societies used private agencies.

Recruitment Around the World (3 of 3)
Posting ads and responding to ads:
Both are very public forms of recruitment.
Individualistic societies and egalitarian (low-masculinity) societies prefer such forms.
Applicants apply directly.
Individuals in Socialist societies and former communist countries prefer to talk to friends, relatives and other connections to find a job.

Selection in the United States (1 of 2)
Gather information on a candidate’s job qualifications
Find a match between the candidate’s skills and the job requirements.
The focus is on the individual’s achievements rather than group affiliations.
Many firms prohibit Nepotism, the hiring of relatives.
Many also prohibit managers from supervising family members.

Exhibit 12.7:
Typical Steps in U.S. Personnel Selection
SOURCE: Adapted from Bohlander, George W., and Scott Snell. 2009. Managing Human Resources. Cincinnati, OH: South-Western; Werther, William B., and Keith Davis. 1993. Human Resources and Personnel Management. New York: McGraw-Hill.

Selection in the United States (2 of 2)
Because the U.S. selection process is heavily based on personal achievements, applicants for jobs typically have to present themselves in such a way as to impress the recruiters.
This focus on impression management may also result in self-presentation behaviors.
Self-presentation simply refers to the applicant’s efforts to present him- or herself in a more positive light by focusing on positive attributes or minimizing negative attributes.

Selection in
Collectivist Cultures
Hiring always takes the in-group into account.
Preference is given to hiring relatives of first, the employer, then relatives of employees.
This selection values potential trustworthiness, reliability, and loyalty over performance-related background.
High school and university ties may substitute for family membership.

Implications for the Multinational: Recruitment and Selection (1 of 2)
Recruitment and selection of host country workers requires that managers of MNCs understand and adapt to local practices.
If local norms are not followed, the MNC may not get the best employees, and may offend cultural norms or break host country laws.
Many firms now using Electronic Human Resources (eHR).

Implications for the Multinational: Recruitment and Selection (2 of 2)
Cultural factors affect selection fairness perception on how potential employees view employers as attractive.
When potential employees go through the selection process, they develop an idea of how fair they are being treated.
Those who have high fairness perception tends to develop a more attractive view of the organization.
In situations where employers are competing for the best talent, those who perceive being treated more fairly are more likely to find the employer attractive and this have higher intentions to take the job.

Training and Development
Within a country, the need for training and development varies widely industry, technology, etc., but broad national differences exist.
Differences in training and development are due to:
Differences in educational systems
Emphasis on training placed by national governments
Cultural values regarding other personnel practices

Training and Development
in the United States
Companies with over 100 employees invest more than $60 billion in training costs.
Management development and computer skills are the most popular.
There is growing pressure on U. S. businesses to supplement basic educational training.
The transition to a service sector economy means the need for specialized skills training will increase.

Training and Vocational Education in Germany (1 of 4)
A sophisticated and standardized national system provides two major forms of vocational education:
General and specialized vocational schools and professional and technical colleges
Dual system: A combination of in-house apprenticeship training with part-time vocational-school training leads to a skilled worker certificate.
With advanced training, one can achieve the status of Meister: a master technician.

Training and Vocational Education in Germany (2 of 4)
The German Dual System
Stems from collaboration among employers, unions, and the state
Costs are shared between companies and the state.
Employers have an obligation to release employees for training.
Produces a well-trained national labor force with skills that are not company specific
Dual System under stress due to economic downturn

Training and Vocational Education in Germany (3 of 4)
Germany is not the only country that mandates such training.
The type of vocational training provided in a country is dependent on the type of support provided by the government.
There are three different types of vocational training.

Training and Vocational Education in Germany (4 of 4)
Types of vocational training around the world
Market-oriented system: Vocational training with no or minimal government role
Examples: UK, US, Japan
Institution system: the government is solely in charge
Examples: France and Italy
Dual system: the government works with industries to shape the vocational training system
Examples: Germany, Australia, Switzerland

Implications for the Multinational: Training and Development
Before operating in a host foreign country, multinational managers must:
Consider the quality of workers and managers there
Examine the feasibility of exporting training to them
Adaptation of management-development to different national contexts depends on intended use of host country managers.

Performance Appraisal
Performance Appraisal: Identifying people to reward, promote, demote, develop & improve, or terminate
Not everyone can move up the corporate ladder.
Assumption in individualistic cultures is that performance appraisal systems provide rational and fair solutions to these HR problems.

Performance Appraisal
in the United States (1 of 2)
U.S. system values links among individual rights, duties and rewards, and equal opportunity.
The ideal U.S. system is rational, logical and legal.
Such systems have four elements:
Performance standards
Performance measures
Performance feedback
Human resource decisions

Performance Appraisal
in the United States (2 of 2)
U.S. requirements for appraisals:
Appraisals must relate clearly to the job and performance.
Performance standards must be provided in writing.
Supervisors must be able to measure the behaviors they rate.
Supervisors must be trained to use evaluation measures.
Supervisors and subordinates must discuss appraisals openly.
Appeals procedures must be in place.

Performance Appraisal Around the World (1 of 3)
Australia, Canada, and the United States
These 3 are among the top five countries for all performance-appraisal purposes.
Very high on individualism, with heavy emphasis on the individual development of the employee
Performance appraisals are seen as the most effective method to gauge how well an employee is doing and how their performance can be improved.

Performance Appraisal Around the World (2 of 3)
Taiwan and Latin America
Also figure prominently on the list
Possible effects of social institutions such as government and trade agreements
May be emulating Western-based systems because of a desire to satisfy trade agreements and other competitiveness requirements

Performance Appraisal Around the World (3 of 3)
In Collectivist Societies, performance appraisals may not be as important:
Age and in-group memberships provide a large component of the psychological contract with the organization.
Human resource decisions take into account personal background characteristics more than achievement.
Managers indirectly sanction poor performance, and often avoid direct performance appraisal feedback.

Compensation
Compensation: includes wages and salaries, incentives such as bonuses, and benefits such as retirement contributions.
There are wide variations among countries and organizations on how to compensate workers.
A country’s economic development, cultural traditions, labor unions, and legal institutions all affect compensation.

Compensation Practices in the United States
In the U.S., wages and salaries differ based on two major factors:
External: includes local and national wage rates, government legislation, and collective bargaining
Internal: includes the importance of the job to the organization, its affluence and its ability to pay, and the employee’s relative worth to the business
94% of firms use comparative wage data to determine compensation.

Compensation Around the World
(1 of 2)
In a study of 10 countries, all managers believed:
Pay incentives should be important.
Pay should be contingent on group performance.
Pay should be contingent on company performance.
Incentives should be a significant amount of pay.
Job performances should be the basis of pay raises.
Benefits should be important.
Benefits should be more generous.
Pay should be based on long-term results.

Compensation Around the World
(1 of 2)
Russian compensation practices require an understanding of Soviet era compensation practices.
During that time, employees were guaranteed jobs and compensation levels were determined by the government to ensure low wage differentiation.
There are still some similarities with the Soviet model.
Wages and benefits are still determined by influential individuals rather than objectively determined by the HR department.

Compensation in Japan (1 of 2)
Like U.S. firms, Japanese firms determine base salaries largely by classification of positions.
Seniority has two effects:
Each position has minimum age requirements in addition to educational requirements. As the employee gains seniority, eligible to move up.
Seniority factors into pay decisions, but at a declining rate, diminishing after age 45.

Compensation in Japan (2 of 2)
More recently, the Japanese view of merit affects pay, a major shift.
Economic pressures have led to adoption of the Nenpo System, an evaluation based on yearly performance evaluations that emphasize goals.
Bonus system: Workers often receive as much as 30% of base salary, usually given twice a year, during traditional gift giving seasons.

Implications for the Multinational: Performance Evaluation and Compensation
Multinational companies must match their performance evaluation system to their multinational strategies.
If a multinational is located in many nations, it may need several different compensation packages for host country nationals.
Multinationals seeking location advantages in wages may consider Eastern Europe and India.

A Comparative View of
Labor Relations
Variations of labor relations arise from cultural differences, but also:
Historical factors
Ideological reasons
Management views of unions

Union Membership Density
Union-Member Density is the proportion of workers in a country who belong to unions.
In the U.S., union membership has declined considerably over the past 30 years.
Union membership in industrialized countries generally averages over 50%.
In South Africa with the opening of unions to the formerly barred black population, membership has more than doubled in size.

Some Historical and
Institutional Differences (1 of 2)
Britain
Unions developed without government interference.
Lack of government intervention led management and workers to develop strong adversarial relationships that remain in existence today.
Germany
Labor relations are formalized, legalistic, and low-conflict with centralized bargaining among unions and corporations; government is an intermediary.

Some Historical and
Institutional Differences (2 of 2)
French
Unions began late, and developed slowly.
The lack of legal protection of French workers and difficulties of unionization led to highly militant unions, some with ideological orientations.
U.S.
Legal protection for unions passed in 1935.
Unions focused on “Bread and butter” issues: wages, benefits, and working conditions

Union Structures (1 of 3)
Several types of unions exist:
Enterprise Union: represents all people in one organization, regardless of occupation or location
Craft Union: represents people from one occupational group, such as plumbers
Industrial Union: represents all people in a particular industry, regardless of occupational type

Union Structures (2 of 3)
Several types of unions exist: (cont’d)
Local Union: represents one occupational group in one company
Ideological Union: represents all types of workers based on some particular ideology or religious orientation
White collar or professional Union: represents particular occupational group, similar to craft union

Exhibit 12.15:
Popular Form of Unions in Selected Countries
SOURCE: Adapted from Poole, M. 1986. Industrial Relations: Heritage and Adjustment. Oxford: Oxford University Press
Country Craft General Industrial White-Collar Professional Enterprise
Australia ✓ ✓ ✓ ✓ ✓
Belgium ✓ ✓
Canada ✓
Denmark ✓ ✓
England ✓ ✓ ✓
Finland ✓ ✓
Germany ✓ ✓
Japan ✓
The Netherlands ✓ ✓
Norway ✓ ✓
Sweden ✓ ✓ ✓
Switzerland ✓ ✓ ✓
United States ✓ ✓

Union Structures (3 of 3)
German unions favor the industrial form of organization.
An elected works council negotiates working conditions directly with the employer, and industry unions negotiate wages at the national or regional level
Works council: A German employee group that shares plant-level responsibility with managers with issues such as working conditions
Codetermination: Surrender by management to workers of a share of control of the organization traditionally reserved for management and owners.

Implications for the Multinational: The Search for Harmony
When they use local workers, multinational companies must deal with local labor practices, traditions and laws.
These must be considered in any strategic decision regarding locating in another country.
Example: In the U.S., Japanese companies have avoided locations in the more union-friendly Northern states, favoring instead Southern locations with less union activism.

Summary and Conclusions
Chapter 12 highlighted fundamental national differences in the various HRM functions.
Chapter 12 discussed how national context affects HRM.
The Chapter compared the U.S. with many other countries on recruitment, selection, training, performance appraisal and compensation.
Chapter 12 also dealt with differences in labor relations.

11
International Human Resource Management

Learning Objectives (1 of 3)
Know the basic functions of human resource management.
Define international human resource management.
Understand how international human resource management differs from domestic human resource management.
Know the types of workers that multinational companies use.

Learning Objectives (2 of 3)
Explain how and when multinational companies decide to use expatriate managers.
Know the skills necessary for a successful expatriate assignment.
Understand how expatriate managers are compensated and evaluated.
Appreciate the issues regarding expatriate assignments for female managers.

Learning Objectives (3 of 3)
Know what companies can do to make the expatriate assignment easier for their female expatriates.
Understand the relationship between choice of a multinational strategy and international human resource management.

International Human Resource Management Defined (1 of 3)
Human Resource Management (HRM): deals with the overall relationship of the employee with the organization
Major goals of HRM are managing and developing human assets.

International Human Resource Management Defined (2 of 3)
Basic HRM functions are:
Recruitment: identification of qualified individuals for a vacant position
Selection: process of filling vacant positions in the organization
Training: providing opportunities to help the individual to perform
Performance Appraisal: assessing the individual’s performance

International Human Resource Management Defined (3 of 3)
Basic HRM functions are: (cont’d)
Compensation: providing the adequate reward package
Labor Relations: the relationship between the individual and the company

International Human
Resource Management and International Employees
When applied to the international setting, the HRM functions make up International Human Resource Management (IHRM).
In the international arena, the basic HRM activities take on an added complexity, for two reasons:
Employees of MNCs include a mixture of workers of different nationalities.
HR Managers must decide the necessary extent of adaptation to local business & national cultures.

Types of Employees in Multinational Organizations (1 of 4)
Expatriate: Employees who come from a country that is different from the one in which they are working
Home Country Nationals: Expatriate employees who come from the parent firm’s home country
Third Country Nationals: Expatriate workers who come from neither the host nor the home country.
Host Country Nationals: Local workers who come from the host country where the MNC unit is located.

Types of Employees in Multinational Organizations (2 of 4)
Inpatriate: Employees from foreign countries who work in the country where the parent company is located.
Flexpatriates: Employees who are sent on frequent but short-term international assignments.
International Cadre (Globals): Managers who specialize in international assignments.
Commuter Assignments Employees: Employees who live in one country, but spend part of the work week in another country.

Types of Employees in Multinational Organizations (3 of 4)
Recent research suggests the rise of the self-initiated expatriates.
Self-initiated expatriates: employees who independently decide to move to another country to work
They are professionals or managers who seek work in other countries and decide to stay there for an indefinite amount of time.
They provide many advantages.

Types of Employees in Multinational Organizations (4 of 4)
Advantages of self-initiated expatriates:
They are experts in the local culture.
They do not require the same expensive packages as regular expatriates.
Many of the emerging markets have severe shortages of qualified locals, so using self-initiated expatriates may provide the multinational with local experts at minimal costs.

Multinational Managers:
Expatriate or the Host Country
(1 of 2)
Deciding whether to use expatriate or local mangers depends mostly on a firm’s multinational strategy.
Transnational strategists see their managerial recruits as employable anywhere in the world.
Multidomestic strategists tend to favor local managers.
For a particular position, the firm should ask:
Given our strategy, what is our preference for this position (host, home, or third country national)?

Multinational Managers:
Expatriate or the Host Country
(2 of 2)
For expatriate managers (parent or third country):
Is there an available pool of managers with appropriate skills for the position?
Are they willing to take expatriate assignments?
Do any laws affect the assignment of expatriate managers?
For host country managers:
Do they have the expertise for the position?
Can we recruit them from outside our firm?

Exhibit 11.1:
Percent of Millenials Who Want to Work Outside of their Home Country

Is the Expatriate Worth It? (1 of 5)
IHRM decisions regarding use of expatriate managers must take into account the costs of such assignments.
The total compensation of expatriate managers is often 3-4 times higher than home-based salaries.
In addition to high costs of relocating expatriates, more multinationals are now concerned with expatriate safety worldwide.
Also, the failure rate of U.S. expatriates is higher than those from Europe and Japan.

Is the Expatriate Worth It? (2 of 5)
Reasons for U.S. expatriate failure:
Individual:
Personality of the manager
Lack of technical proficiency
No motivation for international assignment
Family:
Spouse or family members fail to adapt to local culture.
Spouse or family members do not want to be there.

Is the Expatriate Worth It? (3 of 5)
Reasons for U.S. expatriate failure (con’t.):
Cultural:
The Manager fails to adapt to local culture or environment.
The Manager fails to develop relationships with key people in the new country because of the complexity of cultivating networks with diverse people.

Is the Expatriate Worth It? (4 of 5)
Reasons for U.S. expatriate failure (con’t.):
Organizational:
Excess of difficult responsibilities in the assignment
Failure to provide cultural and other important pre-assignment training, like language and culture
Failure of company to pick the right person
Company’s failure to provide the level of technical support that domestic managers are used to
Failure of the company to consider gender equity

Is the Expatriate Worth It? (5 of 5)
Benefits of international assignments:
Help managers acquire skills necessary to develop successful strategies in a global context
Help the company coordinate and control operations that are dispersed geographically and culturally
Provide important strategic information.
Provide crucial information about local markets
Provide opportunities for management development
Provide important network knowledge

Selecting Expatriate Managers (1 of 4)
Selecting the wrong person for the job leads to failure.
Selecting the wrong person can be a major expense, costing more than $1 million per expatriate failure.
Improperly selected employees who cannot perform but who remain on assignment can be more damaging to the firm than those who leave prematurely.
Domestic performance does not predict expatriate performance. Selection criteria may differ.

Selecting Expatriate Managers (2 of 4)
Key success factors for expatriate assignments:
Technical and managerial skills
Personality traits (flexible, willing to learn)
Relational abilities (ability to adapt to other cultures)
Family situation (spouse & family willingness to go)
Stress tolerance (ability to maintain composure)
Language ability (speak, read & write the language)
Emotional intelligence (empathize, relate to others)

Selecting Expatriate Managers (3 of 4)
Experts also agree that another key success factor for expatriates is cross-cultural social intelligence.
Cross-cultural social intelligence: the ability of an individual to gauge and understand verbal and non verbal cues from a variety of cultures.
Cross-cultural intelligence implies that the individual can make accurate social inferences from the cultural situation and is able to behave in appropriate ways to address the verbal and non verbal cues.

Exhibit 11.4:
What Percentage of Companies are Using More Short Term Assignments?

Selecting Expatriate Managers (4 of 4)
Success factor priorities for expatriate assignments
The importance of success factors for a particular assignment depends on four assignment conditions:
Assignment length
Short assignments focus on technical and professionals skills
Cultural similarity
Required interaction and communication with locals
Job complexity and responsibility

Training and Development (1 of 4)
Predeparture cross-cultural training reduces expatriate failure rates and increases job performance.
The main objective of cross-cultural training is to increase the relational abilities of the future expatriate and the spouse and family.
The training rigor depends on the assignment.
Training rigor: The extent of effort by both trainees and trainers to prepare the expatriate for work abroad

Training and Development (2 of 4)
Low rigor training
Short time period
Consists of lectures and videos on local cultures
Briefings on company operations
High rigor training
Lasts over a month
More experiential learning
Extensive language training
Includes interactions with host country nationals

Training and Development (3 of 4)
Training cannot fully prepare expatriates to face life in the new country.
Challenges faced by expatriates:
Choosing schools for their children
Finding housing
Opening bank accounts
Finding grocery stores
Getting a driver’s license
Learning about the community

Training and Development (4 of 4)
Experts thus suggest mentorship and even buddy programs for expatriates who face these challenges.
Host country mentors:
Positively impact expatriates’ organizational knowledge, job performance, promotability, and teamwork.
Home country mentors:
Beneficial but have a positive impact only on the expatriates’ organizational knowledge, job performance, and promotability.

Exhibit 11.7:
Training Needs and
Expatriate Assignment Characteristics

Performance Appraisal
for the Expatriate (1 of 3)
Conducting reliable performance appraisal for the expatriate is very challenging.
Seldom can the firm use same performance criteria.
Challenges:
Fit of international operation in multinational strategy
Unreliable data
Complex and volatile environments
Time differences and distance separation

Performance Appraisal
for the Expatriate (2 of 3)
Without intensive and direct contact, performance appraisals can fail to demonstrate a comprehensive understanding of the expatriate manager’s situation.
To overcome these difficulties:
Fit the evaluation criteria to the strategy.
Fine-tune the evaluation criteria.
Use multiple sources of evaluation with varying periods of evaluation.

Performance Appraisal
for the Expatriate (3 of 3)
Compensation packages must be attractive to skilled managers, but also consider the increasing costs.
Compensation packages have many common factors:
Local market cost of living
Housing
Taxes
Benefits

The Balance-Sheet Approach
(1 of 2)
Provides a compensation package that attempts to balance purchasing power in the host country with that in the home country.
The expatriate should not be in a better or worse position financially because of the assignment.
The firm provides allowances for adjustments for differences in taxes, cost of living, housing, food, recreation, personal care, clothing, education, home furnishing, transportation, and medical care.

The Balance-Sheet Approach
(2 of 2)
In addition to matching purchasing power, firms may provide additional allowances:
Foreign service premiums (often 10-20% of base pay)
Hardship allowance (extra money for difficult postings)
Relocation allowances (miscellaneous costs of move)
Home-leave allowances (transportation costs to return home once or twice per year)

Exhibit 11.9:
The Balance Sheet Approach
To Expatriate Compensation

Other Approaches (1 of 3)
The high cost of expatriate compensation and the trend toward worldwide workers has resulted in modifications of the balance sheet approach. Some variations:
Headquarters-based Compensation: paying home country wages regardless of location
Host-based Compensation: adjusting wages to local lifestyles and costs of living
Global pay systems: worldwide job evaluations, performance appraisal methods, and salary scales

Other Approaches (2 of 3)
MNCs should take into consideration the following issues when designing compensation systems:
Compensation systems should be attractive enough to encourage managers to take on expatriate assignments in areas critical to the multinational.
MNCs must be mindful of costs associated with compensation plans and implement the most effective and efficient programs
MNCs must try to provide systems ensuring that expatriates have stability in terms of lifestyle and economic status.

Other Approaches (3 of 3)
MNCs should take into consideration the following issues when designing compensation systems (con’t.):
Multinationals must treat all of its employees fairly and consistently.
Multinationals must also be consistent with the overall direction and strategy of where the multinationals want to be in the future.
Multinationals must also implement systems that are easy to administer.

The Repatriation Problem (1 of 2)
Repatriation Problem: the difficulties that mangers face coming back to their home countries and reconnecting with their old jobs.
Three cultural problems “reverse culture shocks:”
Adapting to new work environment and culture of home office
Relearning to communicate with others in home and organizational cultures
Adapting to their basic living environment

The Repatriation Problem (2 of 2)
These strategies may help firms to successfully repatriate their managers:
Provide a strategic purpose for the repatriation.
Establish a team to aid the expatriate.
Provide parent country information sources.
Provide training and preparation for the return.

International Assignments
for Women (1 of 2)
Women in international assignments are strikingly rare.
Estimates are that women represent only 12% of expatriate managers, but 45% of management.
Women face a glass ceiling at home, and an expatriate glass ceiling worldwide, because of 2 myths:
Myth 1: Women do not wish to take international assignments.
Myth 2: Women will fail because of the foreign culture’s prejudices against local women.

International Assignments
for Women (2 of 2)
Don’t assume that people from foreign cultures apply the same gender role expectations to foreign workers that they do to local women.
Successful women expatriates emphasize nationality, not gender.
The issues that arise in cross-cultural interactions depend more on how foreigners react to those of a different nationality.

The Woman’s Advantage and Disadvantage (1 of 2)
Women may have advantages in expatriate positions:
Being unique means she becomes more visible.
Local business people from traditional cultures assume that she is the best person for the job.
Women are more likely to excel in relational skills, a major factor in expatriate success.
Local men speak at ease with a woman about more topics than men, leading to more interaction.
Women have higher self-transcendence scores than men.

The Woman’s Advantage and Disadvantage (2 of 2)
Women also suffer disadvantages worse than males:
Face the glass ceiling, isolation and loneliness; need to work harder to prove themselves.
Seldom given an international assignment until later in their careers.
Need to balance work and family responsibilities
Need to worry about accompanying spouse

What Can Companies Do
to Ensure Female Expatriate Success? (1 of 2)
Despite the disadvantages they face, opportunities for women as expatriate managers are expected to grow:
Shortage of high-quality multinational managers.
Fewer men are willing to take the assignments.
Because women expatriates are likely to increase in number and are as motivated and willing to take international assignments as men, companies must take the necessary steps to ensure that their female expatriates are successful.

What Can Companies Do
to Ensure Female Expatriate Success? (2 of 2)
What firms can do to ensure the success of women:
Provide mentors
Offer opportunities for interpersonal networks as a form of organizational support
Remove sources of barriers
Provide support to cope with dual-career issues

Multinational Strategy
and IHRM (1 of 4)
Multinational companies have several options for developing the appropriate IHRM policies for the implementation of their multinational strategies.
One way is to examine its IHRM orientation, or philosophy.
IHRM Orientation: A company’s basic tactics and philosophy for coordinating IHRM activities for managerial and technical workers.

Multinational Strategy
and IHRM (2 of 4)
There are four basic IHRM orientations:
Ethnocentric: All aspects of HRM tend to follow the parent organization’s home country HRM practices.
Regiocentric & Polycentric: HRM is more responsive to the host country differences in HRM practices.
Global: The firm assigns its best managers to international assignments, recruiting worldwide.

Multinational Strategy
and IHRM (3 of 4)
Ethnocentric IHRM benefits:
Little need to recruit qualified host country nationals for higher management
Greater control and loyalty of home country nationals
Little need to train home country nationals
Key decisions centralized

Multinational Strategy
and IHRM (4 of 4)
Ethnocentric IHRM costs:
Possibly limited career development for host country nationals
Host country nationals may never identify with the home company
Expatriate managers are often poorly trained for international assignments and make mistakes

Regiocentric and Polycentric IHRM Orientations (1 of 3)
Firms with regiocentric or polycentric IHRM orientations are more responsive to the host country differences in HRM practices.
Regiocentric IHRM: Regionwide HRM policies are adopted.
Polycentric IHRM: Firm treats each country-level organization separately for HRM purposes.

Regiocentric and Polycentric IHRM Orientations (2 of 3)
Benefits of polycentric and regiocentric IHRM policies are as follows:
Reduces training expenses
Fewer language and adjustment issues
Lessened hiring and relocation costs

Regiocentric and Polycentric IHRM Orientations (3 of 3)
Costs of polycentric and regiocentric IHRM policies are as follows:
Coordination problems with headquarters based on cultural, language, and loyalty differences
Limited career-path opportunities for host country and regional managers
Limited international experiences for home country managers

Global IHRM Orientations (1 of 2)
Organizations with truly global IHRM orientations assign their best managers to international assignments.
Global IHRM: Recruiting and selecting worldwide, and assigning the best managers to international assignments regardless of nationality.
In companies with global orientations, managers are selected and trained to manage cultural diversity inside and outside the company.

Global IHRM Orientations (2 of 2)
Global IHRM benefits:
Bigger talent pool
High international expertise
Development of transnational organizational cultures
Global IHRM costs:
Difficulty in importing managerial and technical employees
Added expense

Finding a Fit: IHRM Orientation and the Multinational Strategy (1 of 2)
Properly matching IHRM to the selected multinational strategy is a major requirement for successful strategy implementation.
Some IHRM decisions show a concern for local responsiveness when companies need people with a superior understanding of host country issues.
Other IHRM decisions reflect globalization pressures when companies need managers with world-class competence regardless of nationality.

Finding a Fit: IHRM Orientation and the Multinational Strategy (2 of 2)
The success of any multinational strategy requires the careful assessment of a firm’s IHRM practices.
Usually no one orientation exactly fits a company’s multinational strategy, and few companies follow any one orientation completely.
Each multinational company selects a general approach, combined with specific IHRM practices and procedures from other orientations that, all together, fit its strategic needs.

Exhibit 11.11:
IHRM Orientation and Multinational Strategies

Summary and Conclusions
When basic HRM practices are applied to a company’s international operations, they become IHRM.
Chapter 11 focused on HRM practices for expatriates.
Expatriates present special challenges for MNCs.
Successful IHRM is a 21st century challenge.
Globalization allows MNCs to hire from a worldwide pool of talent.
It is important for multinationals to find ways to properly manage expatriates successfully.

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