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Human Resource Management

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Published in: Management Subjects
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This presentation is about Global Human Resource Management.

Anamika S / Mumbai

6 years of teaching experience

Qualification: MBA/PGDM (Mumbai University - 2013)

Teaches: CA - CPT, CS - Foundation, All Subjects, English, EVS, Mathematics, Business Studies, Commerce Subjects, Economics, Education, BCA Tuition, BMS Tuition, Mass Communication, BBA Subjects, Management Subjects, MBA Entrance

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  1. Global Human Resource Management
  2. Human resource management (HRM) - the activities an organization carries out to utilize its human resources effectively These activities include determining human resource strategy staffing performance evaluation management development compensation labor relations need to ensure there is a fit between their human resources practices and strategy
  3. Strategic Role Of HRM HRM can help the firm reduce the costs of value creation and add value by better serving customer needs more complex in an international business differences between countries in labor markets, culture, legal systems, economic systems, etc.
  4. Strategic Role Of HRM In International Firms HRM must also determine when to use expatriate managers citizens of one country working abroad who should be sent on foreign assignments how they should be compensated how they should be trained how they should be reoriented when they return home
  5. Staffing Policy Staffing policy is concerned with the selection Of employees who have the skills required to perform a particular job can be a tool for developing an promoting the firm's corporate culture the organization's norms and value system a strong corporate culture can help the firm implement its strategy
  6. 2. 3. Staffing Policy Three main approaches to staffing policy The ethnocentric approach - fill key management positions with parent-country nationals The polycentric approach recruit host country nationals to manage subsidiaries in their own country, and parent country nationals for positions at headquarters The geocentric approach seek the best people, regardless of nationality for key jobs
  7. Ethnocentric Staffing Policy Firms that pursue an ethnocentric policy believe that there is a lack of qualified individuals in the host country to fill senior management positions it is the best way to maintain a unified corporate culture value can be created by transferring core competencies to a foreign operation via parent country nationals it makes sense with an international strategy But > it limits advancement opportunities for host country nationals it can lead to "cultural myopia"
  8. Polycentric Staffing Policy The polycentric approach makes sense for firms pursuing a localization strategy can minimize cultural myopia may be less expensive to implement than an ethnocentric policy But host country nationals have limited opportunities to gain experience outside their own country and so cannot progress beyond senior positions in their own subsidiaries a gap can form between host country managers and parent country managers
  9. Geocentric Staffing The geocentric approach is consistent with building a strong unifying culture and informal management network makes sense for firms pursuing a global or transnational strategy enables the firm to make the best use of its human resources builds a cadre of international executives who feel at home working in a number of different cultures But can be limited by immigration laws is costly to implement
  10. Comparison of Staffing Approaches Staffing Approach Ethnocentric Polycentric Geocentric Strategic Appropriateness International Localization Global standardization and transnational Advantages Overcomes Ilack of qualified managers in host nation Unified culture Helps transfer core competencies Alleviates cultural myopia Inexpensive to implement Uses human resources efficiently Helps build strong culture and informal management networks Disadvantages Produces resentment in host country Can lead to cultural myopia Limits career mobility Isolates headquarters from foreign subsidiaries National immigration policies may limit implementation Expensive
  11. Approaches to Staffing Factors affecting approaches to staffing General staffing policy on key positions at headquarters and subsidiaries Constraints placed by host government Staff availability •Ethnocentric polycentric •Geocentric *Regiocentric
  12. Ethnocentric Strategic decisions are made at headquarters; Limited subsidiary autonomy; Key positions in domestic and foreign operations are held by headquarters' personnel;
  13. Polycentric Each subsidiary is a distinct national entity with some decision-making autonomy
  14. GeocentriC A global approach - worldwide integration; View that each part of the organization makes a unique contribution; Nationality is ignored in favor of ability: Best person for the job; Color of passport does not matter when it comes to rewards, promotion and development.
  15. Geocentric Staffing Requirements Globalization momentum • Staff availability Top management commitment Search for global operators Staff transfers International team Geocentric staffing policy Momentum maintained • Time and cost constraints • Host government requirements • HRM policies
  16. Regiocentric Reflects a regional strategy and structure; Regional autonomy in decision making; Staff move within the designated region, rather than globally; Staff transfers between regions are rare.
  17. Ethnocentric Approach Advantages: To ensure new subsidiary complies with overall corporate objectives and policies Has the required level of competence Assignments as control Disadvantages: Limits the promotion opportunities of HCNs, leading to reduced productivity and increased turnover among the HCNs Longer time for PCNs to adapt to host countries, leading to errors and poor decisions being made High cost Considerable income gap, high authority, and increased standard of living may relate to lack of sensitivity
  18. Polycentric Approach Advantages: • Employment of HCNs eliminates language barriers, avoids adaptation of PCNs, reduces the need for cultural awareness training programs • Employment of HCNs allows a multinational company to take a lower profile in sensitive political situations • Employment of HCNs is less expensive • Employment of HCNs gives continuity to the management of foreign subsidiaries (lower turnover of key managers)
  19. Polycentric Approach Disadvantages: Difficult to bridge the gap between HCN subsidiary managers and PCN managers at headquarters ( language barriers, conflicting national loyalties, cultural differences) HCN managers have limited opportunities to gain experience outside their own country PCN managers have limited opportunities to gain international experience Resource allocation and strategic decision making will be constrained when headquarter is filled only by PCNs who have limited exposure to international assignment
  20. Geocentric Approach Advantages: Ability of the firm to develop an international executive team Overcomes the federation drawback of the polycentric approach Support cooperation and resource sharing across units Disadvantage: Host government may use immigration controls in order to increase HCNs employment Expensive to implement due to increased training and relocation costs Large numbers of PCNs, HCNs, and TCNs need to be sent across borders Reduced independence of subsidiary management
  21. Regiocentric Approach Advantages: Allow interaction between executives transferred to regional headquarters from subsidiaries in the region and PCNs posted to the regional headquarters Provide some sensitivity to local conditions Help the firm to move from a purely ethnocentric or polycentric approach to a geocentric approach Disadvantages: Produce federalism at a regional rather than a country basis and constrain the firm from taking a global stance Staff's career advancement still limited to regional headquarters, not the parent country headquarters
  22. Parent-Country Nationals Advantages Organizational control and coordination is maintained. Rising stars are given international experience. PCNs may be the best people for the specific job due to special skills and experience. An assurance that the subsidiary will comply with company objectives & policies. Disadvantages Promotional opportunities of HCNs are limited. Time and performance costs associated with adaptation to the host country. PCNs may impose an inappropriate HQ style. Compensation for PCNs and HCNs may differ.
  23. Host-Country Nationals Advantages Language and other barrier eliminated Reduced hiring costs Continuity of management Government policy may require hiring HCNs Possible increased morale because of increased career potential Disadvantages Hiring of HCNs may encourage a federation of national rather than global units HCNs have limited career opportunity outside the subsidiary Control and coordination of HQ may be impeded Hiring HCNs limits opportunities for PCNs to gain foreign experience
  24. Third-Country Nationals Advantages Salary and benefit requirements may be lower than for PCNs. T CNS may be better informed than PCNs about host-country environment. Disadvantages Transfers must consider national animosities. Host government may resent hiring TCNs. TCNs may not want to return to their own countries after assignment.
  25. Determinants of IHRM Approaches and Activities Country A Contextual variables Legal system Cultural distance Country B Country C etc. Approach to staffing (i.e. ethnocentric, polycentric, regiocentric, geocentric) Firm-specific variables Stage in internationalization • Type of industry Strategy and structure Organization Situation variables Staff availability Location of assignment Need for control Locus of decision IHRP•JI activities Selection Training and development • Compensation
  26. Expatriate Failure Firms using an ethnocentric or geocentric staffing strategy will have expatriate managers Expatriate failure is the premature return of an expatriate manager to the home country each expatriate failure can cost between $40,000 and $1 million between 16 and 40% of all American expatriates in developed countries fail and almost 70% of Americans assigned to developing countries fail
  27. What Is The Rate Of Expatriate Failure? Recall Rate Percent LIS. multinationals 20-40% 10=20 < 10 European multinationals 11 6—10 Japanese multinationals 11-19% 6—10 Expatriate Failure Rates Percent of Companies 69 24 38 59 10 76
  28. Why Do Expatriate Managers Fail? The main reasons for U.S. expatriate failure are >the inability of an expatriate's spouse to adapt >the manager's inability to adjust other family-related reasons >the manager's personal or emotional maturity >the manager's inability to cope with larger overseas responsibilities
  29. Why Do Expatriate Managers Fail? The reason for European expatriate failure is the inability of the manager's spouse to adjust The main reasons for Japanese expatriate failure are the inability to cope with larger overseas responsibility difficulties with the new environment personal or emotional problems a lack of technical competence the inability of spouse to adjust
  30. 2. 3. 4. How Can Firms Reduce Expatriate Failure? Firms can reduce expatriate failure through improved selection procedures Four dimensions that predict expatriate success are Self-orientation - the expatriate's self-esteem, self- confidence, and mental well-being Others-orientation - the ability to interact effectively with host-country nationals Perceptual ability - the ability to understand why people of other countries behave the way they do Cultural toughness — the ability to adjust to the posting
  31. why Is A Global Mindset Important? A global mindset may be the fundamental attribute of a global manager cognitive complexity cosmopolitan outlook A global mindset is often acquired early in life from a family that is bicultural living in foreign countries learning foreign languages as a regular part of family life
  32. What Is Training And Management Development? After selecting a manager for a position, training and development programs should be implemented Training focuses upon preparing the manager for a specific job Management development is concerned with developing the skills of the manager over time gives the manager a skill set and reinforces organizational culture Historically, most firms focus more on training than on management development
  33. Why Is Training Important For Expatriate Managers? Training can reduce expatriate failure Cultural training - fosters an appreciation for the host country's culture Language training - an exclusive reliance on English diminishes an expatriate's ability to interact with host country nationals Practical training - helps the expatriate and her family ease themselves into day-to-day life in the host country But, studies show only about 30% of managers sent on one- to five-year expatriate assignments received training before their departure
  34. What Happens When Expatriates Return Home? Training and development should include preparing and developing expatriate managers for reentry into their home country organization need good programs for re-integrating expatriates back into work life within their home country organization utilizing the knowledge they acquired while abroad
  35. Why Is Management Development Important To Firm Strategy? Management development programs increase the overall skill levels of managers through ongoing management education rotations of managers through jobs within the firm to give them varied experiences Management development can be a strategic tool to build a strong unifying culture and informal management network support both transnational and global strategy
  36. How Should Expatriates Be Evaluated? Evaluating expatriates can be especially complex typically, both host nation managers and home office managers evaluate the performance of expatriate managers But, both types of managers are subject to unintentional bias home country managers tend to rely on hard data when evaluating expatriates host country managers can be biased towards their own frame of reference
  37. How Can Performance Appraisal Bias Be Reduced? To reduce bias in performance appraisal more weight Should be given to an on-site manager's appraisal than to an off-site manager's appraisal a former expatriate who has served in the same location should be involved in the process home office managers should be consulted before an on-site manager completes a formal termination evaluation
  38. 2. What Are The Key Issues In Compensating Expatriates? Two key issues on compensation How to adjust compensation to reflect differences in economic circumstances and compensation practices How to pay expatriate managers
  39. How Should National Differences In Compensation Be Treated? Currently, there are substantial differences in executive compensation across countries Research shows a top U.S. executive made an average of $525,923 in the 2005-2006 period, compared to $278,697 in Japan, and $158,146 in Taiwan
  40. How Should National Differences In Compensation Be Treated? Question: Should pay be equalized across countries? Many firms have recently moved toward a compensation structure that is based on global standards especially important in firms with a geocentric staffing policy But, most firms still set pay according to the prevailing standards in each country
  41. How Should Expatriates Be Paid? Most firms use the balance sheet approach equalizes purchasing power across countries so employees have the same living standard in their foreign posting as at home and adds a financial incentive to take the position
  42. How Should Expatriates Be Paid? A compensation package has five components Base salary - normally in the same range as the base salary for a similar position in the home country can be paid either in the home currency or in the local currency Foreign service premium - extra pay the 2. expatriate receives for working outside his country of origin generally offered as an incentive to accept foreign assignments
  43. 3. 4. 5. How Should Expatriates Be Paid? Various allowances - hardship, housing, cost- of-living, education Tax differentials - may have to pay income tax to both the home country and the host-country governments no reciprocal tax treaty exists company usually covers extra tax assessments Benefits — many firms provide the same level of medical and pension benefits abroad that ernployees receive at
  44. Why Are International Labor Relations Important? Question: Can organized labor limit the choices available to an international business? Labor unions can limit a firm's ability to pursue a transnational or global strategy HRM needs to foster harmony and minimize conflict between management and organized labor
  45. What Are The Concerns Of Organized Labor? Organized labor is concerned that 2. 3. Multinationals can counter union bargaining power by threatening to move production to another country Multinationals will farm out only low-skilled jobs to foreign plants making it easier to switch production locations Multinationals will import employment practices and contractual agreements from their home countries and reduce the influence of unions
  46. How Does Organized Labor Respond To MNC Power? Organized labor has responded to the increased bargaining power of multinational corporations by Trying to set-up their own international organizations Lobbying for national legislation to restrict 2. multinationals Trying to achieve regulation of multinationals through 3. international organizations such as the United Nations So far, these efforts have had only limited success
  47. How Are MNCs Responding To Organized Labor? Many firms are centralizing labor relations to enhance the bargaining power of the multinational vis-a-vis organized labor in the past, labor relations were usually decentralized to individual subsidiaries The way in which work is organized within a plant can be a major source of competitive advantage so it is important for management to have a good relationship with labor

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