12. Human Resources in
International business
FM : FM : Anis Gunawan, MBA,MM,SP
Anisg @pmbs.ac.id
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International business
12. Human Resources in
International business
V. Functional Area excellence
IV. Entering and operating in
International Markets.
III.Strategy and opportunity
assessment
II.The environment of International Business
I.Foundation concepts of
International
business
International Business:
Strategy,
Management, and the New Realities
Chapter 19
International Business: The New Realities, Global Edition, 3rd Edition
by
Cavusgil, Knight, and Riesenberger
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Challenges of International
Human Resource Management
1. Recruiting, managing, and retaining human
resources at a firm with extensive global operations
are especially challenging.
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2. For example, German firm Siemens has more than
400,000 employees in some 190 countries: 230,000
throughout Europe, 90,000 in the Americas, 70,000 in
the Asia-Pacific region, and 12,000 in Africa, the
Middle East, and Russia.
3. Each of Volkswagen, Nestle, IBM, Unilever, Walmart,
McDonald’s, and Matsushita has more than 150,000
employees outside the firm’s home country.
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International Human
Resource Management
1. The planning, selection, training, employment, and evaluation
of employees for international operations.
2. How a firm recruits, trains, and places skilled personnel in its
worldwide value chains sets it apart from competition.
3. The combined knowledge,
skills, and experiences of
employees are distinctive
and provide myriad
advantages to the firm’s
operations worldwide.
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Three Employee Categories in the MNE
1. Host-country nationals (HCNs): Citizens of the country
where the subsidiary or affiliate is located. HCNs make up
the largest proportion of employees that the firm hires
abroad. Examples: the labor force in manufacturing,
assembly, basic service activities, clerical work, and other
non-managerial functions.
2. Parent-country nationals (PCNs): Also known as homecountry nationals, PCNs are citizens of the country where
the MNE is headquartered.
3. Third-country nationals (TCNs): Employees who are
citizens of countries other than the home or host country.
Most work in management; have unique skills
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Factors Contributing to the Complexity of International
Human Resource Management
Wm
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Differences between
Domestic and International IHRM
1. New HR responsibilities, such as international
taxation, international relocation and orientation,
services for expatriates, host government relations,
language translation services.
2. Need for a broader perspective, such as
establishing fair, comparable compensation when
there is a mix of PCNs, HCNs, and TCNs.
3. Greater involvement in employees’ personal lives,
such as regarding housing arrangements, health
care, children’s education, safety, security,
appropriate compensation, and higher living costs.
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Differences between
Domestic and International IHRM (cont.)
4. Managing the mix of expatriates versus locals.
Each location may be staffed with a mix of HCNs,
PCNs, and TCNs depending on the firm’s
international experience, cost-of-living abroad,
local laws, and the availability of qualified local
staff.
5. Greater risk exposure. Exposure to political risk
and terrorism may require increased compensation
and security arrangements.
Somalia
6. External influences of government and culture,
such as taxes, local work regulations, traditional
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work practices,Copyright
and© cultural
conditions.
Key Tasks of IHRM
1. International staffing policy – activities directed at recruiting,
selecting, and placing employees
2. Preparation, training of international employees
3. International performance appraisal – providing feedback for
employees’ professional development
4. Compensation of employees – including formulation of benefit
packages that vary greatly from country to country.
5. International labor relations – managing relationships with
unions; collective bargaining processes, known as industrial
relations
6. Diversity in the international workforce
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Staffing: Searching for Talent
1. Recruitment: searching for and locating
potential job candidates to fill the firm’s needs.
2.
3. Selection: gathering information to evaluate and
decide who to employ in particular jobs.
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4. Managers must proactively identify potential
candidates and groom them to become corporate
leaders, train personnel to meet evolving
business needs, and ensure the talent supply
keeps pace with the growth of the firm.
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Employee Characteristics That
Facilitate International Effectiveness
1. Technical Competence. Must have adequate
managerial and technical capabilities.
2. Self-Reliance. Entrepreneurial, proactive
mindset; expatriate managers function with
considerable independence and limited support
from headquarters.
3. Adaptability. Ability to adjust
to foreign cultures; cultural
empathy, flexibility, diplomacy,
and a positive attitude.
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Characteristics That Facilitate International
Effectiveness (cont’d)
• Interpersonal Skills. Ability to build relationships is key.
• Leadership Ability. Must view change positively, and
proactively manage threats and opportunities.
• Physical and Emotional
Health. Life abroad is
stressful.
• Spouse / Dependents
Prepared for Living Abroad
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Expatriate
1. An employee who goes to work abroad for an extended
period, usually years
2. Repatriation: return of the expatriate to the home country.
Requires advance preparation. Unless managed well,
returning expatriate may encounter problems, such as career
disruptions and ‘reverse culture shock’.
3. Expatriate assignment failure: the premature return of an
expatriate due to an inability to perform well abroad. Costly to
the firm (lost productivity and relocation costs) and to
expatriates themselves (family stress and career disruption).
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Culture Shock
1. The confusion and anxiety, often akin to mental
depression, that can result from living in a foreign culture
for an extended period. Often affects family members
most.
2. A leading cause of expatriate failure.
3. Especially a factor for those assigned to culturally
dissimilar countries, such as China or Yemen.
4. Can be reduced via advance preparation, training,
language skills, deep interest in the new country.
5. Regular exercise, relaxation techniques, or keeping a
detailed journal of experiences are helpful.
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Three Components of Training
Personnel for International Assignments
1. Area studies: factual knowledge of the historical,
political, and economic environment of the host
country;
2. Practical information: knowledge and skills
necessary to function effectively in a country,
including housing, health care, education, and daily
living;
3. Cross-cultural awareness: ability to interact
effectively and appropriately with people from different
language and cultural backgrounds.
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Training
1. In order of increasing rigor, training methods include:
videos, lectures, assigned readings, case studies, books,
Web-based instruction, critical incident analyses,
simulations, role-playing, language training, field
experience, and long-term immersion.
2. Role-playing and simulations involve the employee
acting out typical encounters with foreigners.
3. Long-term immersion places
the employee in the country for
several months or more, often
for language and cultural training.
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Cultivating a Geocentric Orientation
1. Ethnocentric views are common in many
MNEs.
2. More progressive MNEs follow a geocentric
orientation, staffing HQ and subsidiaries with
the most competent personnel, regardless of
nationality. Characterized by an openness to
and articulation of multiple cultural and strategic
realities on both global and local levels.
3. Best to hire, develop, nurture, and recognize
employees who possess a global mindset and
offer global leadership potential.
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Performance Appraisal
1. Performance appraisal: formal process of assessing
how effectively employees perform their jobs.
2. Helps identify problem areas where an employee needs
to improve and additional training is warranted.
3. Determines compensation and firm performance.
4. MNEs devise procedures to assess the performance of
individual employees; ascertain if any problems are
attributable to inadequate skill levels; provide additional
training and resources; and terminate employees who
consistently fail to achieve goals.
5. Often very challenging in international business.
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Compensation of Personnel
1. Compensation varies internationally due to
differences in legally mandated benefits, tax
laws, cost of living, local tradition, and culture.
2. Employees posted abroad expect to be
compensated at a level that allows them to
maintain their usual standard of living, which can
make compensating expatriates very costly.
3. Includes base remuneration, benefits (e.g.,
health care plans), allowance (e.g., for housing,
children’s education, travel), and incentives
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Ethical Connections
1. Executive compensation varies around the world.
2. In China, the annual compensation of the president of
a big bank is typically $300,000. In the United
Kingdom, the pay may reach $3 million. In the United
States, the compensation may exceed $10 million.
3. Ethicists argue that CEOs should not earn salaries
hundreds of times greater than entry-level employees.
Lopsided compensation can hurt employee morale.
4. Others argue that pay should be tied to company
profitability, and firms cannot attract top talent unless
they pay top wages.
Legacy
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