58

CHAPTER 20
International
Human Resource Management and
Labor relations
After studying this chapter, students should be able to:

> Describe the nature of human resource management in international

business.
> Detail how firms recruit and select managers for international
assignments.
> Explain how international businesses train and develop expatriate
managers.
> Discuss how international firms conduct performance appraisals and
determine compensation for their expatriate managers.
> Analyze retention and turnover issues in international business.
> Explain basic human resource issues involving nonmanagerial
employees.
Describe labor relations in international business.

LECTURE OUTLINE

OPENING CASE: Training for the World

The opening case examines the process many Japanese companies use to staff their
American operations.

Key Points

• All firms that open new facilities in foreign countries must determine how many
employees they will need to run the operation, what skills they should have, where
they will be hired, how they will be compensated, and so forth.

• Japanese companies are thought to be the most careful and thorough

companies in the world when it comes to staffing foreign operations. For example,
when Toyota staffed its plant in Kentucky, it wanted to hire individuals that would
conform to the Japanese tradition of company loyalty, teamwork, and flexibility
along the production line.
59 > Chapter 20

• To ensure that the right type of employees were found, Toyota subjected
applicants to a battery of tests, simulation exercises, and still more tests.
Individuals who made it through the process were invited for an interview. Finally,
prospects were required to take a physical exam and a drug test.

• The hiring process is so extensive that by the time an individual is hired, the
company has spent $13,000. Mazda and Mitsubishi also invest heavily in their
hiring process. Nissan even requires applicants to go through 40 hours of non-paid
pre-employment training.

Case Questions

1. What employee qualities are most important to Toyota?

Most students will probably agree that there are two specific groups of qualities that
are essential for all Toyota employees. First, an employee must be able to conform
to the traditional Japanese use of teamwork, be very loyal to the company, and
demonstrate versatility on the production line. Second, an employee must be
physically capable of performing production line jobs. Most students will probably
conclude that the first set of qualities appear to be more important than the second
set of qualities.

2. How might the role of unions in the U.S. affect Toyota’s staffing decisions?

The relationship between unions and management in the U.S. tends to be fairly
adversarial. Toyota, like most Japanese firms, appears to have a very cordial
relationship with its employees. Hence, the company is likely to avoid American
individuals who have strong sentiments toward unions.

Additional Case Application

The case notes that by the time an individual is hired by Toyota, the company has
already spent some $13,000 testing and evaluating the individual, and thousands of
additional dollars eliminating other applicants. Most American companies devote
considerably fewer resources to the staffing process. Students can be asked to
evaluate Toyota’s staffing strategy and compare it to the procedures followed by
most American companies. Issues to consider include whether the costs incurred
by Toyota are really necessary to ensure a quality workforce, and how Toyota’s
policy affects its competitiveness.

CHAPTER SUMMARY

Chapter Twenty explores international human resource management. The chapter

begins by discussing the strategic significance of human resource management, and
then goes on to consider staffing needs, recruitment and selection, training and
development, performance appraisal and compensation, and retention and turnover.
The chapter concludes with a discussion of issues related to nonmanagerial
employees.
 International Human Resource Management and Labor Relations > 60

I. THE NATURE OF HUMAN RESOURCE MANAGEMENT

• Human resource management (HRM) is the set of activities directed at

attracting, developing, and maintaining the effective workforce necessary to achieve
a firm’s objectives. Recruiting and selecting employees, providing training and
development, appraising performance, and providing compensation and benefits
are all part of HRM.
• International HR managers face a more complex task than their domestic
counterparts because differing cultures, levels of economic development, and legal
systems among countries may require companies to adapt their hiring, firing,
training, and compensation programs to each country.
• Firms must decide whether managers will be selected from the home country,
from the host country or from third countries. Training and development in an
international firm may be more complex than in a domestic firm. Finally,
compensation systems must be adapted to meet the needs of each country’s labor
market.

Teaching Note:
Students often find it interesting to learn about the
international HRM practices of local firms. Instructors may
wish to ask students that work for international firms to describe how their
companies recruit, select, and train individuals for foreign assignments.

Strategic Significance of HRM

• The international HRM process involves understanding the strategic context of

HRM within the firm’s overall strategy, recruiting and selecting appropriate
managerial personnel, providing necessary training and development, assessing
performance, providing compensation, and evaluating managerial retention and
turnover. Show Figure 20.1 here.

II. INTERNATIONAL MANAGERIAL STAFFING NEEDS

There are two broad categories of staffing needs facing international human resource
managers: (1) recruiting, training, and retaining managerial and executive employees;
and (2) recruiting, training, and retaining nonmanagerial employees such as blue-collar
production workers and white-collar office staff.

Scope of Internationalization

Teaching Note:
Instructors may want to review the evolution of organizational
structure (see Chapter 13) before discussing issues related to
recruiting, training, and retaining managers.
61 > Chapter 20

• Most firms begin their international expansion with small-scale exporting. Thus,
during a firm's initial foray into foreign markets a home-country citizen, who may or
may not have special training in working in foreign markets, usually manages the
firm’s international transactions. Later when the firm establishes an international
department, subsidiary managers (usually host country citizens) report to the vice-
president of the international division (usually a home country citizen).
• As a firm further expands its operations in a global organization, a team of
managers with expertise in the firm’s product lines, necessary functional skills,
individual country markets, and the firm’s global strategy is usually assembled.

Centralization versus Decentralization of Control

• Firms that centralize decision making at headquarters typically favor home-

country managers while firms that decentralize decision making to the subsidiary
level often employ host country nationals. Since most companies do not fall at one
extreme or the other, most companies have a combination of both home and host
country managers.

Staffing Philosophy

• Managers can be hired from three groups: parent country nationals; host
country nationals; and third country nationals. Parent country nationals (PCNs)
are residents of the international business’s home country who are transferred to
one of its foreign operations. Communications and coordination with corporate
headquarters is typically facilitated when PCNs are employed because they
normally share a common culture and education background with headquarters’
staff.
• PCNs may however, lack knowledge of local laws, culture, economic conditions,
social structure, and political processes. Moreover, they may be expensive to
relocate and maintain in the host country. In addition, because a host country may
impose restrictions on the number of employees that can be transferred, a company
may not have the freedom to hire whom it wants.
• Host country nationals (HCNs) are residents of the host country, and are the
most common choice for mid-level and lower-level jobs. Employing HCNs is
popular because they are already familiar with local laws, culture, and economic
conditions. Furthermore, HCNs may be cheaper than PCNs because a firm can
avoid the costs such as relocation expenses that are associated with PCNs.
However, because an HCN may not be familiar with the firm’s corporate culture nor
its business practices, a company could lose out on opportunities. The text
provides an example of how Andersen Consulting attempts to minimize this
problem.
• Third country nationals (TCNs) are citizens of neither the firm’s home country
nor of the host country. TCNs are most likely to be employed in upper-level or
technical positions. TCNs and PCNs are collectively known as expatriates (people
working and residing in countries other than their native country).
• An ethnocentric staffing model may be used to help a firm choose among
HCNs, PCNs, and TCNs for various positions. The model indicates that PCNs staff
most higher-level positions. Other firms may follow a polycentric staffing model
where, based upon the belief that HCNs know the local market best, the use of
HCNs is high. Finally, firms that want to hire the most qualified person for the job,
regardless of the individual’s nationality, follow the geocentric staffing model.
 International Human Resource Management and Labor Relations > 62

• European firms are more likely to use the geocentric model than either U.S. or
Japanese companies. In fact, Japanese companies prefer the ethnocentric model.

III. RECRUITMENT AND SELECTION

• The skills and abilities needed by international managers fall into two general
categories: those needed to do the job; and those needed to work in a foreign
location. Show Figure 20.2 here.

Discuss Wiring the World: The Global Talent Hunt

This Going Global Box discusses the difficulty firms have in
finding good technical employees. Some firms find that rather
just looking in the domestic marketplace for such employees,
they have to recruit on multiple continents. This Box fits in well with the discussion
of recruiting managers, as well as with Review Question 4.

Recruitment of Managers

• Recruitment of Experienced Managers. Experienced managers can be

recruited from within the firm itself or from other firms. In some cases, headhunters
(recruiting firms that actively seek qualified managers and other professionals for
possible placement in positions in other organizations) may be called on to assist in
the process.
• Today, as businesses globalize, the market for executive talent is also
globalizing. The text notes, for example, that at Britain’s Imperial Chemical
Industries, PLC, fewer than half of the 150 highest ranking executives are British.
• Recruitment of Younger Managers. While most MNCs do not hire new college
graduates for foreign positions, many hire graduates with the intention of sending
them abroad in the future. The text provides examples of how Coca-Cola and
Colgate-Palmolive follow this strategy.

Selection of Managers

• When selecting from a pool of prospective managers, HR managers typically

look for those individuals who are competent managers, have appropriate training,
and can adapt to new situations.
• The selection process in international firms is particularly important because of
the high cost of expatriate failure. Expatriate failure is the early return of an
expatriate manager to his or her country because of an inability to perform in the
overseas assignment. The cost of expatriate failure ranges between $40,000-
$250,000.
• Expatriate failure rates may be as high as 20-50 percent in many U.S.
companies, higher than for either European or Japanese companies. In most
cases, expatriates fail to complete their foreign assignments because of an inability
of the expatriate manager, or his or her spouse and family, to adapt to the new
location.
• Firms often spend both time and money selecting and training managers for
foreign assignments in an effort to avoid expatriate failure. The text provides an
example of how AT&T selects and prepares its managers for foreign positions.
Show Table 20.1 here.
63 > Chapter 20
 International Human Resource Management and Labor Relations > 64

Expatriation and Repatriation Issues

• Managers sent on foreign assignments may experience culture shock, a

psychological phenomenon that may lead to feelings of fear, helplessness,
irritability, and disorientation. Acculturation typically proceeds through four phases.
Discuss Figure 20.3 here.
• Because an expatriate suffering from culture shock may be less effective and
productive, companies typically take measures to limit its effects such as providing
pre-departure language and cultural training.
• Firms are now beginning to pay more attention to repatriation--bringing a
manager back home after a foreign assignment has been completed. Individuals
that successfully adapted to the foreign environment may experience culture shock
upon returning to their own country.
• Firms can minimize problems associated with expatriation and repatriation by
providing organizational career development programs for managers. Managers
tend to be more successful in foreign assignments if they can freely decide whether
or not to accept a foreign assignment, if they have a realistic understanding of the
new job and assignment, if they have a realistic expectation of a repatriation
assignment, if they have a mentor in the parent firm who will look out for their
careers, and if there is a clear link between the foreign assignment and the
manager’s long-term career path.

IV. TRAINING AND DEVELOPMENT

Training is instruction directed at enhancing specific job-related skills and abilities.

Development is general education concerned with preparing managers for new
assignments and/or higher-level positions.

Assessing Training Needs

• Firms assess training and development needs by determining the difference

between what managers and employees can do and what the firm feels they ought
to do. This assessment should take place before training or development programs
are implemented. The text notes that firms that underestimate the need for training
can run into serious problems in foreign markets. Discuss Figure 20.4 here.

Basic Training Methods and Procedures

• Firms must decide whether to use standardized training and development

programs such as language courses or to develop their own programs. Developing
a customized program, although more expensive than using a standardized
program, may better meet the needs of the firm.

Developing Younger International Managers

• Most MNCs now recognize the importance of internationalizing their managers

early in their careers. The text provides several examples of how various firms
including GE, American Express, and Samsung are handling this process.

V. PERFORMANCE APPRAISAL AND COMPENSATION

65 > Chapter 20

Assessing Performance in International Business

• Performance appraisal is the process of assessing how effectively a person is

performing his or her job. Performance appraisal has several important objectives.
It is a source of feedback to individuals as to their performance, it provides a basis
by which top performers can be rewarded, it highlights areas where additional
training and development may be required, and it identifies problem areas that may
require changes.
• In many cases, firms must employ different standards when evaluating the
performance of subsidiaries and their employees because each subsidiary is likely
to have a unique set of circumstances and outcomes. Performance appraisals in
international firms may not be conducted as frequently as in a domestic firm.

Determining Compensation in International Business

Teaching Note:
Prior to discussing the material on compensation, instructors may
wish to develop a scenario in which a manager from a developed
country with a high cost of living is transferred to a lesser-developed country. Students
can be asked to determine what the expatriate manager’s compensation should be--
what the manager made at home, what the expatriate’s counterpart in the lesser-
developed country receives, and so forth.

• Competitive international firms provide prevailing compensation packages for

their managers in each market. The text provides examples of common
components in a compensation package in Germany, Japan, Britain, and the U.S.
• Compensating Expatriate Managers. Compensating expatriate managers can
be a complex process because factors such as differences in currency valuation,
standards of living, lifestyle norms, and so forth must be taken into consideration.
Show Table 20.2 here.
• A cost-of-living allowance may be given to managers to offset differences in
the cost-of-living in the home and host countries. A hardship premium (also
known as a foreign service premium) may be paid to mangers that accept
assignments in relatively unattractive locations.

Discuss Venturing Abroad: Seeing Opportunity in Security

Employees on foreign assignment often face security risks.
Foreign employees have been kidnapped in Columbia, and
political instability in places such as China, Indonesia, and the
Middle East have put expatriate workers at risk. Air Partner, a British company,
specializes in evacuating people when trouble erupts unexpectedly. Air Partner has
gotten MNC employees out of Chechnya, Kuwait, Saudi Arabia, Albania, the West
Indies, and Indonesia.

• A tax-equalization program is a means of ensuring that the expatriate’s after

tax income in the host country is similar to what the person’s after-tax income would
be in the home country. The text illustrates this concept with a discussion of how
Amoco creates compensation packages for its expatriates. Show Figure 20.5 here.
 International Human Resource Management and Labor Relations > 66

• Benefits Packages for Expatriate Managers. Special benefits packages that

may be provided to expatriate managers include housing, education, medical
treatment, travel to the home country, and club memberships. The text provides
specific examples of how and why firms provide these benefits.
• Equity in Compensation. In many cases the total compensation package
offered to an expatriate is much more lucrative than the package offered to his or
her local counterpart.

VI. RETENTION AND TURNOVER

• Retention is the extent to which a firm is able to retain employees. Turnover,

the opposite, is the rate at which people leave a firm. Turnover can be controlled
by reducing expatriate failure and repatriate failure.
• An exit interview is an interview with an employee who is leaving a firm. Exit
interviews can be a source of important information as to why an individual decided
to leave the firm. Such information can be used to minimize future employee
departures.

VII. HUMAN RESOURCE ISSUES FOR NONMANAGERIAL EMPLOYEES

Recruitment and Selection

• In most MNCs nonmanagerial employees are HCNs. Employing HCNs is

cheaper than employing PCNs or TCNs, and may enable firms to avoid laws limiting
opportunities for PCNs or TCNs.
• Firms hiring HCNs must adapt to laws in the host country. The text notes that
Toyota had to select and hire its U.S. workers in accordance with U.S. law.

Training and Development

• Training and development required by a host country’s workforce depends in

part on the location of the foreign operation. For example, training needs are
typically higher in underdeveloped regions, and lower in developed country
locations. The text provides an example of how Quality Colis, Inc. handles this
complex issue.

Compensation and Performance Appraisal

• International firms normally adapt their compensation and performance

appraisal systems to local laws, customs, and cultures. The text notes for example,
that while U.S. workers appreciate feedback from an appraisal system, German
workers are resentful of feedback.
• Firms must make their wage skills consistent with local norms if they expect to
attract workers. In most cases, firms must not only pay wages, but also provide
incentive programs and/or benefits packages. The text notes that depending on the
country in question, wages may make up between 56 and 85 percent of workers’
total compensation packages.

Discuss Bringing the World into Focus:

Not Everything can be Exported
67 > Chapter 20

Lincoln Electric, a firm headquartered in Cleveland, Ohio, is known for the success
of its incentive system at its Cleveland plant. However, Lincoln found that its
incentive system did not work when it expanded into Venezuela, Brazil, and Japan.
Cultural differences required that Lincoln adapt its incentive system to each country.

VIII. LABOR RELATIONS

In many companies, a separate organizational function is established for labor

relations.

Comparative Labor Relations

• A country’s laws, culture, social structure, and economic conditions may impact
labor relations. The text notes, for example, that the role of unions varies greatly
among countries. In the U.S., membership in unions has been steadily decreasing,
but over half the world’s workforce outside the U.S. belong to unions.
• Unions in the European countries tend to be aligned with political parties, but in
Japan are created and run by the firms themselves. In fact, labor relations in Japan
are so cordial that strikes are rare.

Collective Bargaining

• Collective bargaining is the process used to make agreements between

management and labor unions. The text notes that while collective bargaining in
the U.S. is highly regulated, the government plays a relatively benign role in
establishing labor agreements. In contrast, government officials take a much more
active role in the process in some European countries.

Union Influence and Codetermination

• The premise of industrial democracy--the belief that workers should have a

voice in how businesses are run--is an important influence in labor unions in
Europe. In fact, in Germany an approach called codetermination provides for
cooperation between management and labor in running a business.
• The EU has advocated codetermination for all members, but at this point in
time, most member countries are unlikely to adopt it. In fact, some countries have
little or no mandated labor participation.
• The EU’s implementation of its social charter (or social policy) whereby
employment conditions and practices will be standardized throughout the
community is addressing issues such as maternity leave, job training, and pension
benefits.
 International Human Resource Management and Labor Relations > 68

CA

OS
SE

CL
IN
G
“You Americans Work Too Hard”

The closing case examines the differences in work ethic between a German
department store employee and an American department store employee.

Key Points

• Andreas Drauschke and Angie Clark hold positions at similar levels in

department stores, and receive similar pay. However, Drauschke, who works in
Germany, works far fewer hours than Clark who works in the U.S.

• In fact, Drauschke works just 37 hours a week, and receives six weeks vacation
each year, while Clark works at least 44 hours a week, and takes off only a week at
a time. Clark notes that Germans see leisure time as being more important than
work time.

• The difference between the German work style and the American work style
extends into other areas. For example, turnover at the German store is all but
nonexistent, while at the American store it is 40 percent a year. In addition,
German employees receive extensive training, while workers at the American store
receive minimal instruction.

• Many employees at the American store also have a second job, however
Drauschke values his free time, and works no longer than absolutely necessary.
His view point is shared by other Germans, who fiercely protested the recent
mandate that department stores would stay open one evening each week.
Germany also prohibits working second jobs during vacation time.

Case Questions

1. How does HRM in the United States differ from HRM in Germany?

HRM refers to the activities directed at attracting, developing, and maintaining an

effective workforce to achieve an organization’s objectives. Students will probably
conclude that at least in the retailing industry, American HR managers spend less
time both in recruiting and selecting managers, and preparing them for their jobs
than their German counterparts. As a result, turnover is very high in the U.S. as
compared to Germany. While the case does not provide information regarding how
employees in either country are evaluated, the total compensation package
received by Germans seems to be preferable to that which American workers
receive.
69 > Chapter 20

2. What do you see as the basic advantages and disadvantages of each system?

Most students will probably suggest that the extensive effort that appears to go into
selecting and training German workers is a clear advantage of the German system.
Students taking this perspective are likely to support their contention by pointing to
the high turnover rate in the U.S. as compared to Germany. Many students may
see the restriction faced by German workers regarding second jobs as being an
intrusion in an individual’s private life, and therefore see it as a disadvantage.
Finally, most students will probably agree that the compensation package received
by German workers is far more likely to improve employee morale than the package
received by American workers.

3. If you were the top HRM executive for an international department store chain with
stores in both Germany and the United States, what basic issues would you need
to address regarding corporate HR policies?

A primary issue that would have to be addressed is the difference in compensation

packages between the U.S. and Germany. German workers have shorter work
weeks and far more vacation time than their American counterparts, yet receive
similar pay. A second issue that would have to be addressed is the difference in
worker training and development. German department stores may spend two or
three years preparing employees, while American stores might spend just two or
three days. Furthermore, recruiting and selection issues would have to be
addressed, not only because German employees frequently complete an
apprentice program prior to becoming full-time employees, and thus require very
careful selection, but also because turnover is much higher in the U.S. than in
Germany.

4. Are the issues more or less acute in the retailing industry versus other industries?

Most students will probably suggest that the issues outlined in question 3 above are
probably important in all industries. One area that might be different is the issue of
turnover. While turnover is very high in U.S. retailing, it is likely to be less of a
problem in industries where workers receive extensive training and/or belong to
unions.

5. Under which system would you prefer to work?

Most students will probably suggest that the German work system is far more
preferable than the American work system. Students taking this perspective will
probably point out that American workers frequently appear to be stressed out on
the job, and do not have enough time with family. Other students, however, might
object to some of the constraints of the German system, such as the prohibition of
second jobs during vacation time. Students taking this perspective are likely to
suggest that there should be no limits to working as hard as possible in order to get
ahead.
 International Human Resource Management and Labor Relations > 70

Additional Case Application

Case question 3 asks students to identify issues that would be faced by an
American HR manager who worked for an international department store chain with
branches in both the U.S. and Germany. Students can carry this exercise one step
further by holding a round table discussion regarding compensation packages.
Each student can be assigned to take on the role of either the American executive,
a German worker or an American worker.

VI

R
R

A
H
C
E

P
T
1. What is human resource management?

Human resource management is comprised of the set of activities directed at attracting,

developing, and maintaining the effective workforce necessary to achieve a firm’s goals.

2. Along what dimensions does domestic HRM differ from international HRM?

International HRM differs from domestic HRM in several ways. First, firms may have to
adapt hiring, firing, training, and compensation practices on a country-by-country basis to fit
with local cultures, levels of economic development, and legal systems. Second, firms
must decide whether employees will be recruited locally, from the home country, or
globally. Third, training and development may be more complex for international firms as
compared to domestic firms.

3. How does the degree of centralization or decentralization affect international staffing?

Firms that are highly centralized (decision making is mainly done at corporate
headquarters) typically hire home country managers, while firms that are very decentralized
(decision making is delegated to subsidiaries) tend to favor hiring host country employees.

4. What are the basic issues involved in recruiting and selecting managers for foreign
assignments?

When recruiting and selecting managers for foreign assignments, firms must initially identify
a pool of employees with the necessary skills and abilities for the assignment. Potential
employees may be identified within or outside the firm. Firms must then decide which
candidate is best qualified for the position. Key considerations in the selection process
include managerial competence, appropriate training, and adaptability to new situations.

5. What issues are at the core of expatriation and repatriation problems?

A primary concern of firms with expatriate mangers is culture shock. Culture shock may
affect employees who are working in and coping with a foreign culture and may reduce an
employee’s effectiveness and productivity. In some cases, culture shock may result in a
failure to complete a foreign assignment. Employees who have grown comfortable with a
foreign culture may encounter culture shock when they return to their home country at the
end of their foreign assignment. In fact, the repatriation period can be as troublesome for
some individuals as the expatriation period.
71 > Chapter 20

6. How does a firm go about assessing its training needs?

A firm assesses its training needs by examining the difference between what its employees
can do and what the firm feels they need to be able to do. This assessment should
highlight areas that need to be incorporated into a training and/or development program.

7. Why is performance appraisal important for international firms?

Performance appraisal is important for international firms because it indicates how well an
individual is performing his or her job. The process not only identifies areas where
additional training and/or development is needed, it is also a source of feedback for
individuals. In addition, performance appraisal identifies problem areas that require
attention, and provides a basis for rewarding outstanding employees

8. What special compensation and benefits issues arise in international HRM?

There are several special compensation and benefits issues in international HRM. For
example, because of differences in standards of living, currency valuations, lifestyle norms,
and so on, most firms find that it is necessary to provide international managers with
differential compensation. In addition, because home country nationals frequently receive
larger compensation packages than their host country counterparts, firms must deal with
equity issues.

9. How does international HRM for nonmanagerial employees differ from that for managerial
employees?

A primary difference between international HRM for managerial employees and

international HRM for nonmanagerial employees is the fact that nonmanagerial employees
are typically recruited on a local basis. Thus, firms must comply with local regulations
regarding hiring and firing and so on. In addition, compensation and performance
appraisal practices for nonmanagerial employees are typically conducted on a country-by-
country basis.

10. What is codetermination?

Codetermination involves cooperation between management and labor in running a

business. Codetermination is used extensively in Germany. Other European countries
require a modified version of codetermination.
 International Human Resource Management and Labor Relations > 72

Questions for Discussion

1. How does HRM relate to other functional areas such as marketing, finance, and operations
management?

Most students will probably recognize that HRM is strongly interrelated with other functional
areas such as marketing, finance, and operations management. Each of the other
functional areas will be directly impacted by the overall strategy followed by the firm. In
turn, the HRM strategy will be affected by the strategies followed in each functional area.
For example, if the firm were to follow an overall strategy of product differentiation, the HR
manager may hire an individual from the foreign market to provide input on the likes or
dislikes of consumers in the foreign location.

2. Why and how does the scope of a firm’s internationalization effort affect its HRM practices?

A firm’s internationalization effort affects its HRM process in several ways. When a firm
initially begins its internationalization effort, a citizen of the home country typically handles
international activities. However, as the firm continues its foreign expansion and becomes
a global organization, a team of managers may be assembled to handle international
sales.

3. How are the different approaches to recruiting and selecting managers for foreign
assignments similar and dissimilar?

Managers for foreign assignments can be recruited in several ways. Potential managers
may be found within the firm, at another firm, or with the assistance of a headhunter.
Regardless of where potential managers are found, a pool of managers will probably share
certain characteristics including managerial competence, appropriate training, and
adaptability to new situations. In some cases, inexperienced managers may be selected;
however, at the present time, most managers that are recruited and selected for a foreign
assignment have experience.

4. Which are easier to assess, business skills or international skills? Why?

Most students will probably agree that it is far easier to assess business skills as compared
to international skills. Business skills refer to technical knowledge, marketing knowledge,
and so forth. International skills refer to the ability to work and function effectively in a
foreign culture. As such, business skills are much more definable than international skills,
and therefore can probably be more easily measured.

5. If you were being assigned to a foreign position, what specific training requests would you
make of your employer?

Most students will probably suggest that foreign language skills and information on the
foreign country would be helpful. Some students will probably suggest that a program that
focuses on how to conduct business in the foreign country would be invaluable. Still other
students may suggest that language and culture training be extended to their spouse and
family.
73 > Chapter 20

6. Do you agree or disagree with the idea that some international assignments require special
compensation?

Most students will probably agree that in some cases a hardship payment is necessary, but
might be rather vague about what constitutes hardship. Instructors should try to get
students to nail down exactly which situations require special compensation and which do
not, and what form the special compensation should take.

7. How easy or difficult do you think it is to handle the equity issue in international
compensation?

The equity issue in international compensation refers to whether expatriate managers and
HCN managers with the same responsibilities should receive the same compensation.
Most students will probably agree that the issue is a complicated one, with no clear
solution.

8. What does the high cost of replacing an international manager suggest regarding staffing
philosophy?

Most students will probably agree that the high cost of replacing an international manager
suggests that the recruiting and selection process be done very carefully, and that the firm
should devote resources to ensuring that management turnover is minimized. Students
may note that turnover is frequently associated with expatriation, and could cost a firm
between $40,000 and $250,000. Programs devoted to reducing expatriate failure such as
career development counseling or cross-cultural training could help to minimize turnover as
a result of expatriation or repatriation.

9. Which do you think is easier, HRM for managerial employees or HRM for nonmanagerial
employees? Why?

Most students will probably suggest that HRM for managerial employees is more difficult
than HRM for nonmanagerial employees. Students taking this perspective are likely to
point out that HRM for managerial employees involves recruiting, selecting, and training an
individual to work in another country (except when a local manager is hired). Whereas,
HRM for nonmanagerial employees involves recruiting, selecting, and training
nonmanagers to work in their own country. While the latter case does require a firm to
adapt to local practices, there is much more potential for problems in the former case since
it involves an individual working in a foreign country who may have problems speaking the
local language, adapting to the local culture, and so forth.

10. Do you think codetermination would work in the United States? Why or why not?

Most students will probably suggest that codetermination would not work in the U.S.
because it appears to require a greater amount of government involvement in the business
sector than currently exists. Students taking this perspective are likely to point to the anti-
government sentiment that is shared by a large group of Americans. Other students
however, may see codetermination as a means of reducing the conflict that frequently
exists between management and labor in the U.S., and might, therefore, suggest that the
concept could attract a strong following.
 International Human Resource Management and Labor Relations > 74

11. Given South Korea’s current financial difficulties, would you recommend that Samsung end
its program of sending young managers on foreign assignments early in their careers?

Students will probably approach this question in different ways. Some might argue that
Samsung could save a lot of money by keeping its younger managers at home, and that its
senior managers could be more productive on foreign assignments than their younger
counterparts. Other students, however, might suggest that the program should be
continued because it is representative of a proactive strategy that will set Samsung apart
from its competitors in the future. Students taking this perspective will probably agree that
having a cadre of managers well versed in foreign cultures and business practices can only
help the firm’s competitive advantage in the future.

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Essence of the exercise
This exercise requires students to assume the role of a manager for a growing international
firm that has recently been asked to take a position in the firm’s London office. Using the
Internet, students should find out about issues and questions related to the move such as
London housing costs, career options for spouses, the tax implications of the move, and so
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Essence of the exercise

This exercise asks students to assume the role of a top human resource manager for an
international firm. The manager must make a quick decision as to who might best fill the
position of head of the Japanese operations.

Answers to the follow-up questions.

1. Working alone, carefully consider the strengths and weaknesses of each of the four
leading candidates for the job. Select the individual that you think is the best qualified
candidate.

Students will probably have differences of opinion regarding who is the best qualified
individual. For example, some might suggest that Henderson’s long and distinguished
tenure with the firm clearly puts him ahead of the other candidates, while others may
suggest that his plans to retire shortly make him an unsuitable replacement. Similarly,
some students will argue that Moin’s international experience sets him apart from the pack,
but other students may feel that he is overqualified for the position.
75 > Chapter 20

2. Form small groups of four. Share with each other your individual choices for the job in
Japan, along with the reasons for making those choices.

Students will probably get involved in considerable debate as they share their views of who
should be selected for the post in Japan. Professors may encourage each group to come
to a conclusion as to who should be offered the position.

Other Applications
This exercise involves a scenario in which a manager has been asked to select a
replacement from a pack of well-qualified individuals. Each candidate has both strengths
and weaknesses. Students can be asked to chart out an ideal career path that indicates
when and why foreign assignments would be most appropriate.