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Global
Human Resource
Management

McGraw-Hill/Irwin
Human Resource Management, 10/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
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Introduction
Integration of the world’s economies and business
globalization continues unabated
 International trade is growing more rapidly than
world output
Foreign direct investment (FDI) flows are increasing
The number of cross-border, inter-firm agreements
has risen dramatically
Social, economic, and political developments
throughout the world changed the way global
business is conducted
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Introduction
The external environment greatly influences HRM
activities
Each country has its own:
Laws
Business customs
Workforce characteristics
Political climate

The most difficult challenge to overcome is the

“people challenge”
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Introduction
Key challenges to international effectiveness:
Finding suitable candidates
Intercultural understanding
Career management
Employee retention
Adjusting to environment
Partner dissatisfaction
Relocation reluctance

Global human resource management has the same

functions as domestic HRM, plus unique aspects
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Introduction
Organizations expand beyond domestic boundaries
to achieve:
Satisfied employees
Competitive products and services
New or broader markets
New, more efficient manufacturing technology
Large, inexpensive labor forces
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Introduction
Maquiladoras are Mexican assembly
plants used by international companies
Sometimes called “twin plants”
Most owned by American,
Japanese, and Korean manufacturers
Savings outweigh extra shipping costs
After a slowdown in recent years, the maquiladora
industry is showing strong growth
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Introduction
Mexico is not the only area popular with American
firms, nor is inexpensive labor the only driving force
Intel built a manufacturing facility in Ireland in
exchange for a guaranteed tax break
Foreign direct investment in developed countries has
decreased since 2001
Developing countries are seeing increases in foreign
direct investment
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The Cultural Nature of Global HRM
Cultural differences between nations can influence
the effectiveness of HRM policies and practices
HRM must be congruent with the cultural orientation
of the workers
Hefstede says cultures vary in five dimensions:
Individualism versus collectivism
Power distance
Avoidance of uncertainty
Masculinity
Long-term versus short-term orientation
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The Concept of “Fit” in Global HRM
“Fit” is the degree to which HRM
policies are congruent with the:
Strategic plan of the organization
Work-related values of the foreign
culture
Internal fit: making sure HRM policies facilitate the
work values and motivation of employees
External fit: the degree to which HRM matches the
context in which the organization is operating
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Multinational and Global Corporations
Multinational corporations (MNCs) are usually in
the early stages of an international strategy
Operations in many nations, but each is a separate
enterprise
Each enterprise adapts products to the local culture
Most control remains with the home office or with
an expatriate from the home country
Most employees and managers are from the home
country (polycentric staffing)
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Multinational and Global Corporations
Global corporations (GC) are structured so that
national boundaries disappear
The best people are hired, regardless of national
origin (geocentric staffing)
Subsidiaries are not limited to serving the local
culture
The national affiliation of an employee becomes less
important than his/her area of expertise
GHRM in the 21st century will be challenging for
both MNCs and GCs
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Multinational and Global Corporations

Three sources of employees for an international

assignment:
Host country nationals (HCNs)
Parent country nationals (PCNs)
Third country nationals (TCNs)
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Multinational and Global Corporations
MNCs generally take an ethnocentric perspective
They use HRM policies from home with minor
adaptations
They believe key personnel should be PCNs

Ethnocentricity is strong in many foreign

organizations conducting business in the U.S.
Nearly every executive in Japanese-owned businesses
in the U.S. is a Japanese national
The geocentric organization ignores national
boundaries for staffing overseas operations
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Multinational and Global Corporations
The biggest HR challenge facing any globally
oriented corporation is finding competent managers
An expatriate manager (PCN) comes from the
corporation’s home nation
Relocation can be troublesome, regardless of the
managers country of origin
The challenge is to capitalize on the diversity of a
global workforce without suppressing cultural
heritage
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Multinational and Global Corporations
Thebiggest mistake global organizations make is:
Assuming there is “one best way” to structure HRM
policies and practices
There are 120 critical differences between Japanese
and American workplace norms
 These differences impact issues related to:
Feedback and performance evaluation methods
Lines of authority
Information management
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The Expatriate Manager in the MNC
Managing the expatriate’s adjustment process is a
primary focus of GHRM
The difficulty of this task has increased because:
Sales and production shifted closer to markets
There is higher use of host country and third
country management
There is a concurrent increase in the number of
“inpats”
Both inpats and expats can have a difficult time
adapting to their new surroundings
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The Expatriate Manager in the MNC
80 percent of all middle- to large-size companies use
expatriates
Many companies are not effectively selecting and
preparing employees for overseas assignments
American expatriates fail more often than their
Japanese and European counterparts
Only 57 percent of companies provide cross-cultural
training
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Selecting the Expatriate Manager
Factors associated with expatriate failure:
Uncertain technical competency
Weak language skills
Unsure about going overseas
Family problems
Low spouse support
Behavioral rigidity
Inability to adapt
Poor relational ability
Weak stress management skills
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Selecting the Expatriate Manager
Factorsassociated with expatriate success:
Good technical and language skills
Strong desire to work overseas
Specific knowledge of overseas culture
Well-adjusted family situation
Complete support of spouse
Behavioral flexibility
Adaptability and open-mindedness
Good relational ability
Good stress management skills
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Selecting the Expatriate Manager
Success in domestic operations may have little to do
with success overseas
Many expatriates believe too little attention is paid to
other critical factors during the selection process
Expatriate selection should focus on the manager’s:
Self-image
Normal way of interacting
with others
Perceptual orientation
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Selecting the Expatriate Manager
The role of the expatriate’s family should not be
underestimated
Dual career marriages are another difficult issue
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Culture Shock
Exposure to a foreign culture can produce a
predictable series of reactions:
A period of fascination
Culture shock
Adaptation

Dealing with culture shock involves:

Preparation
Language skills
Preparing the host country personnel who will work
with the expatriate
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Training the Expatriate Manager
Intercultural training improves the odds for success
on an overseas assignment
According to Tung, two things determine the training
an expatriate should receive:
Level of contact the person will have with the host
culture
Degree of dissimilarity between the home and host
cultures
Self-awareness is an important aspect of successfully
preparing for an international assignment
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Training the Expatriate Manager
The second phase of training occurs at the host
country site
Language training continues
Mentoring relationships may
be established
Local support groups may
help the entire family
Getting involved with daily
experiences as soon as possible
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Training the Expatriate Manager
The final phase occurs when the manager prepares
to return to the parent country (repatriation)
Repatriation can result in more culture shock than
was experienced while overseas
Repatriates are more likely to leave the parent
company than their domestic counterparts
Many returning managers feel they have lost ground
in terms of career advancement
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Training the Expatriate Manager
To help managers deal with such issues:
Actively plan how the international assignment will
fit with the manager’s career aspirations
Identify prospective international managers early in
their careers
Treat every new hire as a prospective global
employee
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Compensating the Expatriate Manager
A middle- to upper-level expatriate can cost two to
three times more than a domestic manager
This is often due to the compensation practices of
multinational organizations
The balance-sheet approach ensures that the
expatriate maintains a similar standard of living
“Extras” are often provided as an incentive
Foreign service premiums adjust the expatriate’s base
salary for the inconvenience the assignment causes
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Compensating the Expatriate Manager
The cost of living in foreign cities can be very high
Expatriates usually receive a cost-of-living premium
to offset these differences, plus optional:
Home furnishings and maintenance allowances
Help with maintaining or selling a current home
Transportation differential allowances
Educational allowances
To combat these
Hardship premiums costs, some firms
have shifted to
using more short-
term assignees
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Host Country Nationals and the GNC
Global corporations use fewer expatriates
HCNs have greater cultural sensitivity and better
understand local employees’ motivations and needs
More companies are giving key managerial positions
in their foreign operations to HCNs and TCNs
Careful recruitment, selection, and training can
reduce or eliminate many problems with HCNs
Expatriates must learn to be more culturally sensitive
Host country managers must learn to accept greater
responsibility
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Host Country Nationals and the GNC
When an organization recruits HCNs:
Its HRM policies must be more flexible
It must strive for a reasonable fit between HRM
policies and cultural values
Suggestions that can help:
Use the same methods/sources as host country
organizations
Use a recruiting liaison
Write job ads consistent with local custom and jargon
Allow HCNs to use native language during
interviews
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Global Corporate Boards of Directors
Boards of directors of most American corporations
have been slow to include foreign members
A survey of 589 America businesses found a global
representative on these boards:
24 percent of manufacturing firms
14 percent of financial firms
9 percent of other, non-financial firms

European companies are progressing more quickly

Nestlé, Unilever, Fiat, and Volvo all have global
representation on their boards
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Legal and Ethical Climate of GHRM
International business is conducted in a maze of:
International trade agreements
Parent country laws
Host country regulations
Ethical behavior challenges
The Foreign Corrupt
may also be encountered: Practices Act of 1977
(FCPA) makes it illegal
Environmental regulation for employees of
American corporations
may be weaker to offer money or other
“Gift giving” or “greasing” items to foreign officials
in order to gain an unfair
may be common practice competitive advantage
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Legal and Ethical Climate of GHRM
Regulations regarding employment discrimination
vary from country to country
The U.S. has some of the more stringent
anti-discrimination laws
Many countries have not created this kind of
enforcement
The Civil Rights Act of 1991
applies to the overseas
operations of American
corporations
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Legal and Ethical Climate of GHRM
Ethical dilemmas between profits and the
preservation of basic human rights may also exist
Example: The clash between business, morality, and
politics that occurred in South Africa during apartheid
Similar dilemmas occur around the globe in
developing countries
Resolving ethical issues is not an easy task
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Legal and Ethical Climate of GHRM
The first African American on the board of General
Motors proposed his Sullivan Principles:
Non-segregation in all work facilities
Equal and fair employment practices for all
Equal pay for all employees performing equal work
Training programs to prepare blacks and other
nonwhites for supervisory and technical jobs
Increasing the number of blacks and other nonwhite
minorities in management
Improving the quality of employees’ lives outside of
the work environment
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Labor Relations & the International Corp.
Labor relations issues that may arise in the
international environment:
Unions
Labor laws
Less emphasis on written contracts
How much participation employees
are entitled to in HRM policies
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Labor Relations & the International Corp.
Employee participation is guaranteed in Germany
South Korea’s giant industrial firms, the chaebol,
control every aspect of worker’s lives
Government business regulations may differ
In Singapore, annual wage adjustments are set by a
national council and strikes are nearly impossible
There is no simple solution to the labor relations
problems with which MNCs and GCs are confronted
Labor has been trying to establish global labor
organizations