Chapter 3: Ethics and Social Resonsibility

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PowerPoint slides by R. Dennis Middlemist,
Professor of Management, Colorado State University
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Sources of Human Resources

• MNCs can use four basic sources for filling
  overseas positions

Home-country Nationals (Expatriates)

• Expatriate managers who are citizens of the
  country where the multinational corporation is
  headquartered
• Sometimes called headquarters nationals
• Most common reason for using home-country
  nationals, or expatriates, is to get the overseas
  operation under way

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Sources of Human Resources

• MNCs can use four basic sources for filling
  overseas positions

Home-country Nationals (Expatriates)

• Local managers hired by the MNC
• They are familiar with the culture
• They know the language
• They are less expensive than home-country
  personnel
• Hiring them is good public relations

Host-country Nationals
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Sources of Human Resources

• MNCs can use four basic sources for filling
  overseas positions

Home-country Nationals (Expatriates)

• Managers who are citizens of countries other than
  the country in which the MNC is headquartered or
  the one in which the managers are assigned to
  work by the MNC
• These people have the necessary expertise for the
  job

Host-country Nationals
Third-country Nationals
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Sources of Human Resources

• MNCs can use four basic sources for filling
  overseas positions

Home-country Nationals (Expatriates)

• Individuals from a host country or a
  third-country national who are assigned to work
  in the home country
• The use of inpatriates recognizes the need for
  diversity at the home office
• Use of inpats helps MNCs better develop their
  global core competencies
• MNCs can subcontract or outsource to take
  advantage of lower human resource costs and
  increase flexibility

Host-country Nationals
Third-country Nationals
Inpatriates
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Selection Criteria for International Assignments
General Criteria

• Many criteria are used in selecting managers for
  overseas assignments including

• Education
• Knowledge of local language
• Motivation
• Support of spouse children
• Leadership

• Adaptability
• Independence
• Self-reliance
• Physical emotional health
• Age
• Experience

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Rank of Criteria in Expatriate Selection
Adapted from Table 141 Rank of Criteria in
Expatriate Selection
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Selection Criteria for International Assignments
Adaptability to Cultural Change

• Organizations examine a number of characteristics
  to determine whether an individual is
  sufficiently adaptable.
• Work experiences with cultures other than ones
  own
• Previous overseas travel
• Knowledge of foreign languages
• Recent immigration background or heritage
• Ability to integrate with different people,
  cultures, and types of business organizations

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Selection Criteria for International Assignments
Adaptability to Cultural Change

• Organizations examine a number of characteristics
  to determine whether an individual is
  sufficiently adaptable.
• Ability to sense and accurately evaluate
  developments in the host country
• Ability to solve problems within different
  frameworks and perspectives
• Sensitivity to differences of culture, politics,
  religion, and ethics
• Flexibility in managing operations on a
  continuous basis despite lack of assistance and
  gaps in information

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Development of Satisfaction in Host Country
Note Satisfaction scale 1 extremely low 7
extremely high.
Adapted from Figure 141 Development of
Satisfaction in Host Country over Time
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Selection Criteria for International Assignments
Adaptability to Cultural Change

• Those who were best able to deal with their new
  situation had developed coping strategies
  characterized by sociocultural and psychological
  adjustments including
• Feeling comfortable that their work challenges
  can be met
• Being able to adjust to their new living
  conditions
• Learning how to interact well with host-country
  nationals outside of work
• Feeling reasonably happy and being able to enjoy
  day-to-day activities

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Activities That Are Important for Expatriate
Spouses
Adapted from Table 142 Activities That Are
Important for Expatriate Spouses (scale 15, 5
very important)
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Activities That Are Important for Expatriate
Spouses
Adapted from Table 142 Activities That Are
Important for Expatriate Spouses (scale 15, 5
very important)
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Selection Criteria for International Assignments
Other Considerations

• Applicants better prepare themselves for
  international assignments by carrying out the
  following three phases

Phase I

• Focus on self-evaluation and general awareness
  include the following questions
• Is an international assignment really for me?
• Does my spouse and family support the decision
  to go international?
• Collect general information on available job
  opportunities

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Selection Criteria for International Assignments
Other Considerations

• Applicants better prepare themselves for
  international assignments by carrying out the
  following three phases

• Conduct a technical skills assessment Do I have
  the technical skills required for the job?
• Start learning the language, customs, and
  etiquette of the region you will be posted
• Develop an awareness of the culture and value
  systems of the geographic area
• Inform your superior of your interest in the
  international assignment

Phase I
Phase II
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Selection Criteria for International Assignments
Other Considerations

• Applicants better prepare themselves for
  international assignments by carrying out the
  following three phases

Phase I

• Attend training sessions provided by the company
• Confer with colleagues who have had experience in
  the assigned region
• Speak with expatriates and foreign nationals
  about the assigned country
• Visit the host country with your spouse before
  the formally scheduled departure (if possible)

Phase II
Phase III
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International Human ResourceSelection Procedures

• Anticipatory Adjustment
• Training
• Previous experience
• In-country Adjustment
• Individuals ability to adjust effectively
• Ability to maintain a positive outlook, interact
  well with host nationals, and to perceive and
  evaluate the host countrys cultural values and
  norms correctly
• Clarity of expatriates role in the host
  management team
• Expatriates adjustment to the organizational
  culture
• Nonwork matters

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The Relocation Transition Curve
6. Search for Meaning Understanding reasons for
success and failure. New models/personal theories
created
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7. Integration of New Skills and Behavior
Acceptance of the new environment
3. Interest A deeper exploration of the
environment and a realization that it is
fundamentally different from home
1. Unreality The feeling that the relocation is
a dream
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2
5
5. Experimentation and Testing of New
Approaches Practice phase trying to do things
differently Feedback of results success and
failure
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2. Fantasia The feeling of enchantment and
excitement in the new environment
1
4
4. Acceptance of Reality Letting go of past
comfortable attitudes and realizing you are a
stranger in a strange land
Adapted from Figure 142 The Relocation
Transition Curve
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Common Elements of Compensation Packages

• Compensating expatriates can be difficult because
  there are many variables to consider
• Most compensation packages are designed around
  four common elements

Allowances
Taxes
COMPENSATION PACKAGE
Base Salary
Benefits
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Relative Cost of Living in Selected Cities
Tokyo Oslo Zurich Hong Kong Copenhagen Paris
London New York Singapore Stockholm Seoul
Adapted from Figure 143 Relative Cost of Living
in Selected Cities (New York 100)
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Relative Cost of Living in Selected Cities
Frankfurt Beijing Moscow Rome Tel Aviv Mexico
City Toronto Prague Jakarta Warsaw Kuala Lumpur
Adapted from Figure 143 Relative Cost of Living
in Selected Cities (New York 100)
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Relative Cost of Living in Selected Cities
Johannesburg Bangkok Cairo Buenos Aires Sao
Paulo Manila
Adapted from Figure 143 Relative Cost of Living
in Selected Cities (New York 100)
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Common Elements of Compensation Packages

• Base salary
• Amount of money that an expatriate normally
  receives in the home country
• Benefits
• Should host-country legislation regarding
  termination of employment affects employee
  benefits entitlements?
• Is the home or host country responsible for the
  expatriates social security benefits?
• Should benefits be subject to the requirements of
  the home or host country?
• Which country should pay for the benefits?
• Should other benefits be used to offset any
  shortfall in coverage?
• Should home-country benefits programs be
  available to local nationals?

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Common Elements of Compensation Packages

• Allowances
• Cost-of-Living Allowance
• Payment for differences between the home country
  and the overseas assignment.
• Designed to provide the expatriate the same
  standard of living enjoyed in the home country
• May cover a variety of expenses, including
  relocation, housing, education, and hardship
• Incentives
• A growing number of firms have replaced the
  ongoing premium for overseas assignments with a
  one-time, lump-sum premium

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Common Elements of Compensation Packages

• Taxes
• Tax equalization
• An expatriate may have two tax bills for the same
  pay
• Host country
• U.S. Internal Revenue Service
• MNCs usually pay the extra tax burden

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Employer Incentive Practices Around the World
Adapted from Table 143 Employer Incentive
Practices Around the World
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Tailoring the Compensation Packages

• Balance-sheet approach
• Ensure the expatriate is does not lose money from
  the assignment
• Complementary approach
• Negotiate to work out an acceptable ad hoc
  arrangement
• Localization
• Pay the expatriate a salary comparable to local
  nationals
• Lump sum method
• give expatriate a lump sum of money
• Cafeteria approach
• Compensation package that gives the individual a
  series of options
• Regional system
• Set a compensation system for all expatriates who
  are assigned to a particular region

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Individual and Host-Country Viewpoints

• Individual desires
• Why do individuals accept foreign assignments?
• Greater demand for their talents abroad than at
  home
• Host-country desires
• Whom would it like to see put in managerial
  positions?
• Accommodating the wishes of HCOs can be
  difficult
• They are highly ethnocentric in orientation
• They want local managers to head subsidiaries
• They set such high levels of expectation
  regarding the desired characteristics of
  expatriates that anyone sent by the MNC is
  unlikely to measure up

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Quality of Life in Select Major Metropolises, 2002
Zurich Vancouver Vienna Sydney Copenhagen Frankfu
rt Stockholm Amsterdam Brussels San
Francisco Tokyo Paris Singapore
New York 100
Adapted from Figure 144 Quality of Life in
Select Major Metropolises, 2002 (New York 100)
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Quality of Life in Select Major Metropolises, 2002
Madrid New York London Rome Hong Kong Buenos
Aires Kuala Lumpur Johannesburg Sao Paulo Mexico
City Shanghai Moscow New Delhi Belgrade
Adapted from Figure 144 Quality of Life in
Select Major Metropolises, 2002 (New York 100)
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Beliefs of Home-Country Organization Expatriates
Adapted from Table 144 Beliefs of Home-Country
Organization Expats
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Repatriation of Expatriates

• Reasons for returning to home country
• Most expatriates return home from overseas
  assignments when their formally agreed-on tour of
  duty is over
• Some want their children educated in a
  home-country school
• Some are not happy in their overseas assignment
• Some return because they failed to do a good job
• Readjustment problems
• Out of sight, out of mind syndrome
• Organizational changes
• Technological advances
• Adjusting to the new job back home

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Effectiveness of Returning Expatriates
6 Years
5 Years
4 Years
3 Years
2 Years
1 Year
Adapted from Figure 145 Effectiveness of
Returning Expatriates
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Repatriation of Expatriates

• Transition strategies
• Repatriation Agreements
• Firm agrees with individual how long she or he
  will be posted overseas and promises to give the
  individual, on return, a job that is mutually
  acceptable
• Some of the main problems of repatriation
  include
• Adjusting to life back home
• Facing a financial package that is not as good as
  that overseas
• Having less autonomy in the stateside job than in
  the overseas position
• Not receiving any career counseling from the
  company

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Human Resource Management Practices in Select
Countries
Adapted from Table 145 Human Resource
Management Practices in Select Countries
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Training in International Management

• Four basic philosophic positions

• Stresses nationalism and often puts home-office
  people in charge of key international management
  positions

Ethnocentric MNC
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Training in International Management

• Four basic philosophic positions

• Places local nationals in key positions and
  allows these managers to appoint and develop
  their own people

Ethnocentric MNC
Polycentric MNC
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Training in International Management

• Four basic philosophic positions

• Relies on local managers from a particular
  geographic region to handle operations in and
  around that area

Ethnocentric MNC
Polycentric MNC
Regiocentric MNC
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Training in International Management

• Four basic philosophic positions

• Seeks to integrate diverse regions of the world
  through a global approach to decision making

Ethnocentric MNC
Polycentric MNC
Regiocentric MNC
Geocentric MNC
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Training in International Management

• Corporate Reasons for Training
• Ethnocentrism
• The belief that ones own way of doing things is
  superior to that of others
• Personal reasons
• To train overseas managers to improve their
  ability to interact effectively with local people
  in general and with their personnel in particular
• Increasing numbers of training programs address
  social topics these programs also focus on
  dispelling myths and stereotypes by replacing
  them with facts about the culture

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Model for the Development of Multinational
Managers
Overall objective
Increasing effectiveness of expatriate and
repatriated executives
Feedback
Problem recognition
Development objectives
Feedback
Assessment of development needs
How much development?
Feedback
Development method
Feedback
Intermediate result
Feedback
Evaluation
Effectiveness of the expatriate executives
Desired result
Re-entry training
Development method
Feedback
Desired result
Evaluation
Effectiveness of the repatriated executives
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
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model and go on to the next topic
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
Overall Objective
Increasing effectiveness of expatriate and
repatriated executives
Problem Recognition

• Internal relations
• External relations
• Family relations
• Relations with host government
• Headquarters relations
• Relations with home government

Return To Slide 44
Development Objectives
BACK
NEXT
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
Development Objectives

• Review terms and conditions of assignment
• Increase cultural awareness
• Increase knowledge of the host country
• Impart working knowledge of the foreign language
• Increase conflict management skills
• Minimize re-entry problems

Assessment of Development Needs
How much development?
Return To Slide 44
Development Method
BACK
NEXT
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
Development Method

• Knowledge about cultural, political, economic,
  business, legal, and social factors of the host
  country
• Awareness of the needs and expectations of the
  different parties interested in international
  operation
• Awareness of the problems of family relations in
  the host country

Return To Slide 44
Intermediate Result
BACK
NEXT
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
Intermediate Result

• Predeparture training
• Orientation
• Area study
• Language instruction
• Cross-cultural group
• Behavioral simulation
• Case method
• Postarrival training
• Orientation training
• Intergroup problem solving
• Re-entry training

Return To Slide 44
Desired Result
BACK
NEXT
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Model for the Development of Multinational
Managers
Desired Result
How much development?
Development Method
Re-entry training
Desired Result
Effectiveness of the repatriated executives
Return To Slide 44
Continue to the next topic
BACK
NEXT
Adapted from Figure 146 A Model for the
Development of Multinational Managers
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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Provide information about things such as
  geography, climate, housing, and schools

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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Familiarize the individual with cultural
  institutions and value systems of the host country

Cultural Orientation
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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Programmed learning techniques designed to expose
  members of one culture to some of the basic
  concepts, attitudes, role perceptions, customs,
  and values of another culture

Cultural Orientation
Cultural Assimilators
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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Provide information about things such as
  geography, climate, housing, and schools

Cultural Orientation
Cultural Assimilators
Language Training
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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Develop attitudinal flexibility

Cultural Orientation
Cultural Assimilators
Language Training
Sensitivity Training
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Cross-Cultural Training Programs

• Major types of cross-cultural training programs

Environmental Briefings

• Send participant to the country of assignment to
  undergo some of the emotional stress of living
  and working with people from a different culture

Cultural Orientation
Cultural Assimilators
Language Training
Sensitivity Training
Field Experience
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Cross-Cultural Training Programs

• Send participant to the country of assignment to
  undergo some of the emotional stress of living
  and working with people from a different culture

• Steps in cross-cultural training programs
• Local instructors and a translator observe the
  pilot training program or examine written
  training materials
• Educational designer debriefs the observation
  with the translator, curriculum writer, and local
  instructors
• The group examines the structure and sequence,
  ice breaker, and other materials to be used in
  the training
• The group collectively identifies stories,
  metaphors, experiences, and examples in the
  culture that fit into the new training program
• The educational designer and curriculum writer
  make necessary changes in training materials

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Cross-Cultural Training Programs

• A variety of other approaches can be used to
  prepare managers for international assignments
  including
• Visits to the host country
• Briefings by host-country managers
• In-house management programs
• Training in local negotiation techniques
• Analysis of behavioral practices that have proven
  most effective

• Send participant to the country of assignment to
  undergo some of the emotional stress of living
  and working with people from a different culture

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Contingency Approach to Cross-Cultural Training
Cross-Cultural Training Approach
Immersion Approach
Affective Approach
LOW Level of Rigor HIGH
Information Giving Approach
LOW MODERATE HIGH Degree of Integration
Adapted from Figure 147 A Contingency Approach
to Cross-Cultural Training
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Types of Training Programs
Global Leadership Development

• The Global Leadership Program (GLP)
• A consortium of leading U.S., European, and
  Japanese firms, global faculty, and participating
  host countries
• Provide an intensive international experience
• Develop a global mindset
• Instill cross-cultural competency
• Provide an opportunity for global networking

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Tichy Development Matrix
Depth of Change
Adapted from Figure 148 The Tichy Development
Matrix
Deep High Risk Long Time Superfic
ial Low Risk Little Time
Required Approach Action Learning
Organization Individual Pair Team
Target of Change
Emerging Trend
Current Approach Old Way
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Culture Shock
http//www.worldwide.edu/travel_planner/culture_sh
ock.html