GLOBAL HUMAN RESOURCES

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GLOBAL HUMAN RESOURCES

• Challenges of International HR Management

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Topics

• Emerging Globalization of HRM
• The Global Dimension
• Staffing
• Compensation and Benefits
• Expatriation/Repatriation
• Performance Management
• Labor Laws and customs
• The E Dimension

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Cycle Diagram
Organizational Capability
Marketing
Organizational Drivers of Globalization
Information Systems
Corporate Communications
Human Resource Management
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Emerging Globalization of Human Resource
Management

• Two definitions of Global Human Resources
• The job of human resources professionals in any
  organization with operations outside its home
  country.
• The human resources professionals view of the
  world devoid of home country biases.
• (less about what HR professionals do, more about
  how they do it)

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• Defined broadly, global HR is the performance of
  the traditional HR functions, and being a
  strategic business partner within an organization
  that operates internationally.
• John Hofmeister, group HR director of Royal/Dutch
  Shell, states I think what global HR means to
  me is maintaining flexibility and adaptability
  that can easily override home country bias

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• Explosion of international commerce followed WWII
  and led to the proliferation of multinational
  enterprises.
• New discipline of global human resources immerged
  to support multinational enterprises.
• 1950s U.S.-based companies expanded offshore in
  unprecedented numbers.

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• 1960s U.S. accounted for 40 of world
  manufacturing output and 70 of the RD.
• American firms moved abroad through acquisitions,
  followed by investments in acquired subsidiaries.
• Headquarters of US-based international companies
  maintained tight control over local personnel
  policies.

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• Prevailing attitude and approach, When in Rome,
  do as we do at home, creating culture clashes.
• Management development and succession planning
  were hot HR issues.
• Howard Perlmutter introduced a 3-stlye model
  describing the relationship between headquarters
  and the subsidiaries

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Phase 1
Phase 2
Phase 3
Polycentric organizations that hired and
developed local nationals for key positions in
their own countries and gave subsidiaries a high
level of independence.
Geocentric companies who hire and develop the
best people anywhere in the world.
Ethnocentric characterized by strong parent
country orientation and control.
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• Assignments abroad were used as training grounds
  for executives.
• 1970s the jet plane, the new telecommuni-cations
  technology, and the computer contributed to a
  spectacular shrinkage of space.
• GATT trade agreements were established.
• Exchange rates were de-stabilized following the
  dismantling of the Bretton Woods Agreement.

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• Banks started to play international role as
  facilitators of international business.
• Increasingly, subsidiary operations were turned
  over to local management.
• Direct contact increased between local and home
  country personnel functions.
• Corporate personnel departments strove to attain
  worldwide uniformity in personnel policies,
  while, local operations struggled with cultural
  and regulatory conditions the home office simply
  did not understand.

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• Third country nationals became a factor to deal
  with as companies moved mangers from one
  subsidiary to another.
• Personnel departments had to reconcile policies,
  practices and requirements of three or more
  countries instead of just two.
• Recruitment, compensation policies, relocation
  practices, and other functions became more
  complicated.
• Worldwide networking became essential.

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• The World Federation of Personnel Management
  Associations was founded.
• Companies changed the name of the Personnel
  Department to Human Resources Department,
  recognizing people as an organizational resource
  at least in theory.
• 1980s US HR departments began making equal
  opportunity and affirmative action work in their
  organizations it would impact HR policies and
  practices around the world.

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• Diversity concerns begin to affect HR policies
  and practices in a growing number of countries.
• One of the hottest issues for both domestic and
  international HR in the 80s was leadership
  development.
• Leadership training held a double promise for
  international companies
• Instill managers with a set of newly defined
  leadership skills
• Develop a forum to communicate a shared vision,
  set of values, and strategic goals to managers
  from

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• around the world, and,
• prepare managers to translate those things
  meaningfully within their local environments
• Corporate Universities began to pop up all over
  the world, using General Electrics corporate
  business school as the model.
• By the 1990s, only eight of the worlds largest
  corporations were headquartered in the US.
• The flow of investments into the US soared, often
  by acquisitions by foreign companies.

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• Managers from other countries struggled with
  understanding American labor law and attitudes.
• HR professionals in the acquired companies had to
  translate America for their new bosses and
  implement unfamiliar policies and programs among
  American employees.
• Internet technology provided worldwide access to
  hr information systems and information became
  available instantly worldwide.

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• HR professionals began to make a serious
  appearance as strategic business partners.
• Today and looking forward, global HR confronts
  numerous opportunities and challenges
• Recruiting and retaining talent worldwide
• Developing leaders who are capable of thinking,
  inspiring, and acting in the global arena
• Understanding and increasing HRs role as a
  strategic business partner

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The Global Dimension

• Staffing
• A typical progression of staffing international
  operations
• Send a management team from the parent country to
  oversee a staff of largely local employees (PCN)
• Replace PCN with local management talent (HCN) as
  local operation matures
• Look for workers from other countries (TCN) if no
  available pool of skilled labor among local
  nationals

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• Factors that affect sequence
• Host country attitudes and regulations about the
  hiring and placement of HCNs
• Availability of necessary skills among HCNs.
• The staffing philosophy of the organization
• Pressures to promote HCN mangers into corporate
  positions
• Growing Globalization

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• The decision to staff global operations with
  PCNs, HCNs, or TCNs requires balancing the
  advantages and disadvantages of each.
• By using PCNs the organization maintains close
  control of operations in other countries
• Using HCNs helps the company comply with host
  country requirements and preferences
• TCNs may bring the right technical skills, have a
  better understanding of the host countrys
  government, business, and social environments at
  a lower cost than PCNs.

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Expatriates

• Expatriation - international transfers - is one
  of the foundations for the implementation of
  global strategy.
• Managing expatriation is one of the biggest
  challenges for human resource management.
• The US and UK have the highest population of
  resident expatriates.

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• Traditional assumptions about expatriate
  characteristics
• Expatriates were selected from the employees in
  the parent country.
• The expatriate population was homogeneous in
  ethnicity, gender, and experience.
• Expatriate assignments were temporary (3-4 years
  in duration).
• The objective of the assignment was to maintain
  control over the affiliate and to

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• And to transfer know-how from the sophisticated
  parent to the underdeveloped subsidiary.
• After completion of the assignment an expatriate
  was expected to return home, to be replaced by
  another expatriate.
• Today, the expatriate population is increasingly
  heterogeneous.
• Prototypical experienced male executive from the
  parent country is already in a minority.
• Increasingly younger expatriates and women.

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• Expatriates are sent abroad for three primary
  reasons
• to fill positions that cannot be staffed locally
• to support management development
• and, organizational development
• Factors for a successful expatriate assignment
  are
• Selecting expatriates
• Preparing and orienting expatriates
• Adjusting to the expatriate role

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• Managing the performance of expatriates
• Compensation
• Repatriation
• The Role of Expatriates today.
• Expatriation allows the company to avoid
  excessive centralization.
• Expatriates transfer abroad company culture,
  standards and values.

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• What About the Family?
• Impacts willingness to relocate
• General living conditions
• Availability and quality of education for
  children
• Culture adjustment
• Dual career couples?
• Sidelined repatriates and dual career couples
  have made overseas assignments less attractive.

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• Compensation
• Creating compensation plans requires weighing
  these issues
• Expatriates need at least to maintain their
  standard of living in a country where the cost of
  living, currency, cultural expectations (e.g.
  servants), and needs, (e.g. a driver), are not
  only different, but possibly changing.
• The companys need to incentivize the employee to
  make the move.

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• Parity issues among expatriates and locals, can
  be complicated by the presence of TCNs.
• Solving the problem when expatriates are taxed by
  both home country and host country authorities.
• What the competition is paying for HCNs in both
  management and non-management positions and for
  experienced international managers.

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• Most MNEs compensate expatriates (including TCNs
  and HCNs on assignment at headquarters) using
  what is called the balance sheet approach. This
  approach
• Enables expatriates to maintain a standard of
  living roughly equivalent to the standard of
  living in their own country
• Links expatriates base pay to their home country
  salary level
• Provides an additional incentive as an inducement
  to make the move

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• Provides allowances to cover additional
  expenditures cost of living, housing, etc.
• Makes allowances for double taxation, usually by
  paying host country taxes for the employee and
• Usually provides for a portion of the base pay to
  be in local currency and a portion in home
  country currency, modifying the impact of
  currency fluctuations (on both company and
  employee).

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• Balance sheet approach works to maintain
  expatriates standard of living and equity, but it
  can
• Create unsettling disparities between PCNs, HCNs
  and TCNs working together in a host country.
• Requires the company to regularly update its
  cost-of-living data for countries around the
  world, and adjust compensation accordingly.

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• Another approach to compensating expatriates is
  the going rate approach
• links base pay to the going rate in the host
  country, not the home country.
• creates parity between host country nationals and
  expatriates.
• may produce glaring differences between the pay
  for the same job in different countries.

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• Benefits
• Benefits managers are faced with a mind-boggling
  array of government programs and standard
  practices.
• Must assimilate into some semblance of parity.
• Cafeteria approach to benefits is often
  essential.
• Lump-sum payments for short-term assignments.

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• If confined to a specific region, consider a
  regional policy rather than worldwide.
• Must ensure that travel wont cause an employee
  to lose accrued benefits, such as pensions.
• Decisions about expatriates in home country
  social security system or host countrys system.
• Significant issue with perpetual TCNs

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• Studies indicate that multinationals have done
  good job with PCNs but not with TCNs.
• New approaches may be influenced by portable
  pension plans and the decreased expectations
  that employees will stay with one firm until
  retirement.

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• Training and Development
• Training and development programs geared to
  global issues fall into two categories
• Pre-departure training
• Job-related training.
• MNEs provide both Pre-departure training and
  repatriation training to ease the culture shock
  both ways.

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• Pre-departure programs include
• Site visits for relocation
• Orientation to the country and culture
• Job orientation
• Language training
• Counseling on compensation, benefits, taxes,
  housing and other location-specific issues
• Counseling by repatriates

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• Job-related training touches the broader issue of
  developing people for leadership roles in
  international operations.
• An effective leadership development program may
  have several components, including
• A variety of developmental job experiences can
  be from all over the world
• Coaching goes hand in hand with changing job
  assignments technical, interpersonal, cultural

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• Classroom experiences MNEs immersion into
  corporate culture, values, strategies
  international business schools.
• Repatriation often involves renegotiating ones
  identity, rebuilding professional networks, and
  re-anchoring ones career in the organization.
• Best policies emphasize advance planning and
  continuous dialogue.
• Requires dispatching company to take formal
  responsibility to find equal position

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• Performance Management
• Managing performance poses added difficulties
  when employees are spread around the world.
• Conflicts between the strategic goals of the MNEs
  and the goals of the host country.
• Goals set by headquarters that, in the view of
  the local manager, fail to take into account
  local conditions.
• Physical separation that limits ongoing discourse
  and feedback for locals who report

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• to headquarters managers far away.
• Deciding who does the appraisals.
• Cultural differences between headquarters and
  local personnel.
• Working through the performance management
  process forces the organization to confront and
  overcome obstacles that, if ignored, could cause
  unit-wide performance problems rather than
  individual ones.

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• Labor Relations
• Because labor relations practices vary greatly
  among countries, most MNEs leave responsibility
  for managing this function to the local HR
  managers.
• An adamantly union-free company may have to relax
  its stance if it wants to operate in many
  countries.
• Labor relations is far too important for
  headquarters to ignore.

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• HR may monitor or provide oversight for local
  labor negotiations.
• There is a potential for perpetual tension and
  MNEs are responsible to keep tension at a
  productive rather than disruptive level.

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The E-Dimension

• Most companies are striving for the human
  resource information system of their dreams.
• The ideal Web-based system
• Stores each employees job history, pay history,
  performance evaluations, benefits choices, and
  education history.
• Employees anywhere in the world could access
  their own records.

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• Hr professionals can use the database for
  internal recruitment and making training
  decisions.
• User-friendly interfaces would make reporting
  simple
• Data access can be easily controlled.
• Technology is available, but building the system
  is a tremendous undertaking.
• Privacy restrictions in some countries affect
  what personal information can be stored and
  transported across borders.

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• Despite difficulties, global companies are
  building accessible, flexible systems.
• E-learning is the new frontier US companies are
  spending 1.2bn.
• Companies around the world are looking for more
  and better ways to speed along the information
  super highway.
• Studies predict a surge in virtual classrooms,
  once the technology is widely available and more
  user-friendly.

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• Online Recruiting 2001 survey 88 of Fortunes
  Global 500 companies recruiting on Recruitsofts
  Website.
• Monster.com had more than 100,000 executives
  registered on its ChiefMonster.com.
• US government trying to get the EU to relax its
  1998 Data Protection Act that blocks a access to
  personal information outside of the originating
  country.

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• virtual expatriation - employees have
  responsibilities abroad but manage them from the
  home country -is in the pilot stage at companies
  like Nokia and Unilever.
• international commuter - commute across
  countries instead of relocate, i.e. use high
  speed train from Brussels to Paris is a
  variation on post expatriation management.