Market, product, and production plans must be coordinated on a worldwide basis, for instance, and organization structures capable of balancing centralized home-office control with adequate local autonomy must be created. For example, Ford Motor Company today is managed as a global business. Activities such as product development and vehicle design are conducted on a worldwide basis, rather than in regional development centers. Manufacturing and purchasing are also handled globally.
Ford approaches HR on the same global basis, “moving employees from anywhere to anywhere if they’re the best ones to do the job. ” At Ford and at other global companies, this kind of global HR perspective “requires understanding different cultures, what motivates people from different societies, and how that’s reflected in the structure of international assignments. ” As a result, some of the most pressing challenges companies face concern the impact of “going global” on the employers’ human resource management systems.
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This is because all those HR activities are complicated by the sorts of cultural and political differences that characterize different countries around the world. HR and the International Business Challenge Companies have gone global, the number of their employees abroad has increased. In terms of employees overseas, for lnstance, a recent survey of 351 companies found that virtually every firm had at least one employee on international assignment; about 67% of the firms had between 1 and 40 employees abroad, while the remaining firms have 41 or more employees on international assignment.
About 20% of the assignments were short term, up to 1 year, while 50% were for up to 3 years, and about 30% were for up to 5 years or more. With more employees abroad, HR departments have had to tackle new global challenges. For example, senior international HR managers in eight large companies were recently asked questions such as, “What are the key global pressures affecting human resource management practices in your firm currently and for the projected future? The three broad global HR challenges that emerged were as follows: • Deployment: Easily getting the right skills to where they are needed in the organization regardless of geographicallocation; • Knowledge and innovation dissemination: Spreading state-of-the art. kowledge and practices throughout the organization regardless of where they originate; and • Identifying and developing talent on a global basis: Identifying who has the ability to function effectively in a global organization and developing these bilities. Dealing with such challenges means most employers have had to scramble to develop HR policies and procedures just for handling global assignments. This process itself can be very complex: For example, consider some of the factors you? d need to address just in deciding who to deploy to an overseas assignment and how to pay that person. From a practical point of view, you’ d have to address issues such as: 1. Candidate identification, assessment, and selection.
In addition to the required technical and business skills, key traits to consider for global assignments include, for instance: cultural sensitivity, interpersonal skills, and flexibility. 2. Cost projections. The average cost of sending an employee and familyon an overseas assignment is reportedly between three and five times the employee’s predeparture salary; as a result, quantifying total costs for a global assignment and deciding whether to use an expatriate or a local employee are essential in the budgeting process. 3. Assignment letters.
The assignee’s specific job requirements and associated pay will have to be documented and formally communicated in an assignment letter. 4. Compensations, benefits and tax programs. We’ll see there are many ways to compensate employees who are transferred abroad, given the vast differences in living expenses around the world. Some common approaches to international pay include home-based plus a supplement and destination-based pay. 5. Relocation assitance. The assignee will probably have to be assisted with such matters as maintenance of the person’ s home and automobiles, shipment and storage of household goods, and so forth. . Family suppot. Cultural orientation, language training, education assistance, and emergency provisions are just some of the matters to be addressed here before the family is shipped abroad. And that’ s just the tip of the iceberg. Cross-cultural, technical, and language training programs will probably be required. The complex and differentiated tapestry oflabor laws and rules from country to country and provisions for reassimilating the expatriate when he or she returns home are some of the other issues you’ll have to address. How Intercountry Differences Affect HRM
To a large extent, companies operating only with in the borders of the United States have the luxury dealing with a relatively limited set of economic, cultural, and legal variables. While the different states and municipalities certainly have their own laws affecting HRM, a basic federal law framework also helps produce a fairly predictable set of legal guidelines regarding matters such as employment discrimination, labor relations, and safety and health. A company operating multiple units abroad is generally not blessed with such relative homogeneity.
For example, minimum legally mandated holidays may range from none in the United Kingdom to 5 weeks per year in Luxembourg. And while there are no formal requirements for employee participation in Italy, employee representaives on boards of directors are required in Denmark for companies with more than 30 employees. The point is that the management of the HR function in multinational companies is complicated enormously by the need to adapt personnel policies and procedures to the differences among countries in which each subsidiary is based.
The following are some intercountry differences that demand such adaptation. CULTURAL FACTORS For instance, incentive plans in Japan still tend to focus on the work group, while in the West the more usual prescription is still to focus on individual worker incentives. Similarly, in a study of about 330 managers from Hong Kong, the People’s Republic of China, and the United States, U. S. managers tended to be most concerned with getting the job while Chinese managers were most concerned with maintaining a harmonious environment.
In Mexico, individualism is not valued as highly as it is in the United States. As a result, workers don’t place as much importance on self-determmation as do those in the United States, and tend to expect to receive a wider range of services and benefits (such as food baskets and medical attention for themselves and their families). In fact, the list of cu1tural differences from country to country is almost endless. In Germany, for instance, you should never arrive even a few minutes late and should always address senior people formally, with their titles.
Such cultural differences are a two-way street, and employees from abroad similar1y need to be oriented to avoid the culture shock of coming to work in the United States. For example, in the Intel book1et “Things You Need to Know About Working in the U. S. A. ” topics covered include sexual harassment, recognition of gay and lesbian rights, and Intel’s expectations about behavior. ECONOMIC FACTORS Differences in economic systems among countries also translate into intercountry differences in HR practices.
In free enterprise systems, for instance, the need for efficiency tends to favor HR policies that value productivity, efficient workers, and staff cutting where market forces dictate. Moving along the scale toward more socialist systems, HR practices tend to shift toward preventing unemployment, even at the expense of sacrificing efficiency. LABOR COST FACTORES INDUSTRIAL RELATIONS FACTORS THE EUROPEAN COMMUNITY. In 1992 the 12 separate countries of the European community (EC), were unified into a common market for goods, services, capital and even labor.
Generally speaking, tariffs for goods moving across borders from one EC country to another disappeared, and employees (with some exceptions) now find it easier to move freely between jobs in the EC countries. The 1999 introduction of single currency-the euro-further blurred many of these differences. However, differences remain. Many countries have minimum wages while others do not, and hours permitted in the workday and workweek vary from no maximum in the UK to 48 per weekin Greece and Italy. Other differences exist in matters like minimum “number of annual holidays and minimum notice of termination to be given by employers. t’s true the European Unions impact will be to gradually reduce these sorts of differences. However, cultural differences will still undoubtedly lead to differences in HR practices from country to country. Into the near future, in other words, and even just within Europe, managing human resources ultinationally will entail tricky problems for HR managers. In summary, intercountry differences in cultures, economic systems, labor costs and legal and industrial relations systems complicate the task of selecting, training, and managing employees abroad.
Such differences translate into corresponding differences in management styles and practices from country to country, and such differences “may strain relations between headquarters and subsidiary personnel or make a manager less effective when working abroad than at home. ” International assignments thus run a relatively high risk of failing unless special steps are taken to select, train, and compensate international assignees. IMPROVING INTERNATIONAL ASSIGNMENTS THROUGH SELECTION Why International Assignments Fail The selection process is fundamentally flawed. . .
Expatriate assignments rarely fail because fhe person cannot accommodate to the technical demands of the job. The expatriate selections are made b line managers based on technical competence. They fail. because of family and personal issues and lack of cultural skills that haven? t been part of the process. International Staffing: Sources of Managers Multinationals utilize several types of international managers. Locals are citizens of the countries where they are working. Expatriates are noncitizens of the countries in which they are working. Home-country nationals are the citizens of the country in which the multinational company? headquarters is based. Third-country nationals are citizens of a country other than the parent or the host country-for example, a British executive working in a Tokyo subsidiary of a U. S. multinational bank. There my also be a fear that expatriates, knowing they? re posted to the foreign subsidiary for only a few years, may overemphasize short-term projects rather then focus on more necessary long-term tasks. • From a practical point of view, the distances involved and the fact that you are probably unfamiliar with the college abroad make it easier to be misled ,by bogus credentials.
Some suggestions: • Don’t rush into accepting a credential if you have reservations; • If you have any questions about a document, try to get the original; • Confirm the existence of the institution through references such as the “Intenational Handbook of Universities,” or the “Commonwealth Universities Handbook. ” You can also call the appropriate foreign consulate or embassy in New York or Washington; • Write or fax the institution named and enclose a copy of the document submitted for verification; • If you must accept documents from countries not diplomatically related to the U.
S. (such as Iran), have the applicant sign a form declaring that the document’s information is true and have his or her signature notarized; • Verify the applicant’ s foreign credentials even if the person is now transferring from a school in your country, such as a U. S. school; • Beware of telltale signs that may indicate fraudulent credentials: poor copies, stains over key information, type erasures, evidence of substituted names, credentials received too late to make proper verification possible, or typed material that’s added on at an angle, for instance. International Staffing Policy
Multinational firms’ top executives are often classified as either ethnocentric, polycentric, or geocetntric, and these values translate into corresponding corporate policies. In an ethnocentric corporation, “the prevailing attitude is that home country attitudes, managemnt style, knowledge, evaluation criteria, and managers are superior to anything the host country might have to offer. ” In the polycentric corporation, “there is a conscious belief that only host country managers can ever really understand the culture and behavior of the host country market; therefore, the foreign subsidiary should be managed by local people. Geocentrism assumes that management candidates must be searched for on a global basis, on the assumption that the best manager for any specific position anywhere on the globe may be found in any of the countries in which the firm operates. These three sets of multinational value translate into three broad international staffing polic. With an ethnocentric staffing policy all key management positions are filled by parent-country nationals. A polycentric-oriented firm would staff foreign subsidiaries with host-countly nationals and its home-office headquarters with parent-country nationals.
This may reduce the local cultural misunderstandings that might occur when expatriate managers are used. It will also almost undoubtedly be less expensive. One expert estimates that-an expatriate executive can cost a firm up to three times as much as a domestic executive because of transfer expenses and other expenses such as chooling for children, annual home leave, and the need to pay income taxes in two countries. A geocentric staffing policy »seeks the best people for key jobs throughout the organization, regardless of nationality« similar to what Ford Motor Company is doing today. 7 Thls may lenhe global firm use its human resource s more efficiently by transferring the best person to the open job, wherever he or she may be. It can also help build a stronger and more consistent culture and set of values among the entire global management team. Team members here are always interacting, networking, and building ‘bonds with each other, as they move from assignment to assignment around the globe and participate in global development activities. Selecting International Managers
There are common traits that managers to be assigned domestically and overseas will obvioously share. Wherever a person is to be posted, he or she will need the technical knowledge and skills to do the job and the intelligence and people skills to be a successful manager, for instance. However foreign assignments are different. There is the need to cope with a workforce and management colleagues whose cultural inclinations may be drastically different from one? s own, and the stress that being alone in a foreign land can bring to bear on the single manager.
And, of course, if spouse and children will share the assignment, there are the complexities and pressures that the family will have to confront, from learning a new language, to shopping in strange surroundings, to finding new friends and attending new schools. RESEARCH INSIGHT Selecting managers for expatriate assignments therefore means screening them for traits that predict success in adapting to what may be dramatically new environments, and here the research suggests several things to look for. One recent study identified five factors perceived by international assingnees to contribute to success in a foreign assignment.
They were job knowledge and motivation, relational skills, flexibility/adaptability, extracultural openness, and family situation. “Flexibility/adaptability” included such items as resourcefulness, ability to deal with stress, flexibility, and emotional stability. “Extracultural openness” included variety of outside interests, interest in foreign countries, and openness. Finally, several items including adaptability of spouse and family, spouse’s positive opinion, willingness of spouse to live abroad, and stable marriage comprise the “family situation” factor.
As the researchers conclude, »Family situation was generally found to be the most important factor. So, while all five factors were se en as important to the expatriate’s success, the company that ignores the candidate’s family situation does so at its peril. “Sensitivity to cultural differences” could be used to distinguish between managers who had high potential as international executives and those whose potential was not as high. ADAPTABILITY SCREENING Aims to assess the family? s probable success in hanling the foreign transfer, and to alert the couple to personal issues (such as the impact on childre) the foreign move may involve.
Even several successful summers spent traveling overseas or participating in foreign student programs would seem to provide some concrete basis for believing that the potential transferee can accomplish the required adaptation when he or she arrives overseas. There are also paper-and-pencil test that can be used to help select employees for overseas asslgnments. INTERNATIONAL SELECTION IN PRACTICE The importance of factors such as “adaptabi1ity” notwithstanding, job skills or competencies are stilI the major factor in selecting employees for international assignments. TRAINING AND MAINTAINING INTERNATIONAL EMPLOYEES
Orienting and Training Employees for International Assignments What sort of special training do overseas candidates need? One firm specializing in such programs prescribes a four step approach. LEVEL1 training focus on the impact of cultural differences, and on raising trainees awareness of such diferences and their impact on business outcomes. LEVEL 2 aims and getting participants to understand how attitudes are formed and how they influence behavoir. (For example, unfavorable stereotypes may subconsciously influence how a new manager responds to and treats his or her new foreign subordinates).
LEVEL 3 training provides factual knowledge about the target country. LEVEL 4 provide skill building in areas like language and adjustment and adaption skills. Beyond these special training practices there is also the need for more traditional training and development of overseas employees. At IBM, for instance, such development includes a series of rotating assignments that permits overseas IBM managers to grow professionally. IBM and other firms have also established management development centers around the world where executives can hone their skills.
Beyond that, classroom programs (such as those at the London Busines Schoool, or at INSEAD in Fountainebleu, France) provide overseas executives the sorts of opportunities to hone their functional skills that similar stateside programs do for their U. S. -based colleagues. International Compensation The whole area of international compensation management presents some tricky problems. On the one hand, there is a certain logic in maintaining companywide pay scales and policies so that, for instance, divisional marketing directors throughout the world are all paid within the same narrow range.
This reduces the risk of perceived inequities and dramatically simplifies the job of keeping track of disparate country-by-country wage rates. The fact is that it can be enormously more expensive to live in some countries (like Japan) than others (like Greece); if these cost-of-living differences aren’t considered, it may be almost impossible to get managers to take “high-cost” assignments. Determining equitable wage rates in many countries is no simple matter. We’ve seen that there is a wealth of “packaged” compensation survey data already available in the United States, but such data are not so easy to co me by overseas.
As a result, “one of the greatest difficulties in managing total compensation on a multinational level is establishing a consistent compensation measure between countries that builds credibility both at home and abroad.? Some multinational companies deal with this problem by conducting their own local annualcompensation surveys. For example, Kraft conducts an annual study of total compensation in Belgium, Germany, Italy, Spa in, and the United Kingdom. Kraft tries to maintain a fairly constant sample group of study participants (companies) in its survey. It then focuses on the total compensation paid to each of 10 senior management ositions held by local nationals in these firms. The survey covers all forms of compensation including cash, short- and long-term incentives, retirement plans, medical benefits, and perquisites. 80 Kraft then uses these data to establish a competitive value for each element of pay. This information in turn becomes the input for annual salary increases and proposed changes in the benefit package. THE BALANCE SHEET APPROACH The most common approach to formulating expatriate pay is to equalize purchasing power across countries, a technique known as the balance sheet approach. 1 The bask idea is that each expatriate should enjoy the same standard of living he or she would have had at home. With the balance sheet approach, four main home-country groups of expenses-income taxes, ho using, goods and services, and reserve-are the focus of attention. The employer estimates what each of these four expenses is for the expatriate’s home country and also what each is expected to be in the expatriate’s host country. Any differences-such as additional iricome taxes or ho using expenses-are then paidby the employer. INCENTIVES One trend todayis to award long-term incentive pay to overseas managers.
While it may not seem particui;dy logical, many U. S. mu1unatinationals only permited the top managers at corporate headquarters to participate in long-term incentive programs like stock option plans. Equally problematical was the fact that many of the multinationals that did offer overseas managers long-term incentives (80% in one survey) used only overall corporate performance criteria when awarding incentive pay. Since the performance of the company’s stock on a U. S. stock market may have little relevance to, say, a manager in a German subsidiary, the incentive value of such a reward was highly suspect. BEYOND COMPENSATION
Particularly for employees in less-industrialized countries, HR managers should take non monetary factors. For example, a Johnson & Johnson HR manager points out that after losing professional talent at a rate of over 25% per year, “1 talked to lots of our people and people in other companies and I found that most of them joined a multinational to enhance their career through training and development. If they didn’t get that, they left. ” As a result, many companies induding ABB, P&G, and Siemens have established corporate-style campus training centers to provide local employees with state-of-the-art training and development programs.
Performance Appraisal of International Managers Several things complicate the task of appairising an expatriate’s performance. For one thing, the question of who actually appraises the expatriate is crucial. Obviously local management must have some input, but the appraisals may then be distorted by cultural diferences. Two experts make these five suggestions for improving the expatriate appraisal process: 1. Stipulate the assignment’s difficulty level. For example, being an expatriate manager in China is generally considered more difficult than working in England, and the appraisal should take such difficulty-Ievel differences into account. . Weigh the evaluation more toward the on-site manager’s appraisal than toward the home-site manager’s distant perceptions of the employee’s performance. 3. lf, however (as is usually the case), the home-site manager does the actual written appraisal, have him or her use a former expatriate from the same overseas location to provide background advice during the appraisal process. This can help ensure that unique local issues are considered during the appraisal process. 4. Modify the normal performance criteria used for that particular position to fit the overseas position and characteristics of that particular locale.
For example, “maintaining positive labor relations” might be more important in Chile, where labor instability is more common, than it would be in the United States. 5. Attempt to give the expatriate manager credit for his or her insights into the functioning of the operation and specifically the interdependencies of the domestic and foreign operations. In other words, don’t just appraise the expatriate manager in terms of quantifiable criteria like profits or market share. His or her recommendations regarding how home office/foreign subsidiary communications might be enhanced and similar insights should affect the appraisal, too.
International Labour Relations Firms opening subsidiaries abroad will find substantial differences in labor relations practices among the world’s countries and regions. This is important; remember that while union membership is dropping in most countries around the world, as a percentage of wage and salary earners it is still relatively high in most countries compared with the United States’ 14%: for example, Brazil, 44%; Argentina, 39%; Germany, 29%; Denmark, 80%; Japan, 24%; Egypt, 39%; and Israel, 23%. Any firm going abroad therefore must pay particu1ar attention to its labor relations plans.
The following synopsis illustrates some of these labor relations differences by focusing on Europe. However, keep in mind that similarly significant differences would exist as we move, say, to South and Central America, and to Asia. Some important differences between labor relations practices in Europe and the United States include: Centralization. In general, coUective bargaining in Western Europe is likely to be industrywide or regionally oriented, whereas U. S. coUective bargaining generally occurs at the enterprise or plant level. Union structure.
Because collective bargaining is relatively centralized in most European countries, local unions in Europe tend to have much less autonomy and decision-making power than in the United States, and they basically concentrate on administrative and service functions. Employer organization. Due to the prevalence of industrywide bargaining, the employer’s collective bargaining role tends to be performed primarily by employer associations in Europe; individual employers in the United States generally (but not always) represent their own interests when bargaining collectively with unions.
Union recognition. Union recognition for collective bargaining in Western Europe is much less formal than in the United States. For example, in Europe there is no legal mechanism requiring an employer to recognize a particular union; even if a union claims to represent 80% of an employer’s workers, another union can try to organize and bargain for the other 20%. Union security. Union security in the form of formal dosed-shop agreements is largelyabsent in continental Western Europe. Labor-management contrads.
As in the United States, most European labormanagement agreements are legally binding documents, except in Great Britain, where such collective agreements are viewed as “gentlemen’s agreements” existing outside the law. Content and scope of bargaining. U. S. labor-management agreements tend to focus on wages, hours, and working conditions. European agreements, on the other hand, tend to be brief and simple and to specify minimum wages and employment conditions, withemployers free to institute more generous terms.
The relative brevity of the European agreements is a function of two things: Industrywide hargaining makes it difficult to write detailed contracts applicable to individual enterpises, and in Europe the government is much more heavily involved in setting terms of employment such as vacations and working conditions. Grievance handling. In Western Europe, grievances occur much less often than in the U. S. , when raised, they are usually handled by a legislated machinery outside the union’s formal control. Srikes.
Strikes generally occur less frequently in Europe. This is probably due to industrywide bargaining, which generally, elicits lass management resistance than in the United States, where union demands «cut deeper into the individual enterprise’s revenues. ” Worker participation. Worker participation has a long history in Western Europe, where it tends to go far beyond matters such as pay and working conditions. The aim is to create a system by which workers can participate in a meaningful way in the direct management of the enterprise.
Determining wages, hours, and working conditions is not enough; employees should participate in formulating all management decisions. In many countries in Western Europe, works councils are required. A works councils a committee in which plant workers consult with management about certain issues or share in the governance of the workplace. Codetermination is a second form of European worker participation. Codetermination means that there is mandatory worker representation on an enterprise’ s board of directors.
It is especially prevalent in Germany. Safety and Fair Treatment Abroad Making provisions to ensure employee safety and fair treatment doesn’t stop at a country? s borders. Whi1e the D. S. has often taken the lead with respe to matters such as occupational safety, other countries are also quick1y adopting such laws, and, in any event, it’s hard to make a legitimate case for being less safety conscious or fair wIth workers abroad than you are with those at home. Having employees abroad does raise some unique safety and fair treatment issues, however.
It’s crucial for a company to understand local environment, local conditions and what threat exists. Keeping business travelers out of crime’s way is a specialty all its own, but suggestions here indude: Provide expatriates with general training about trave1ing, living abroad, and the place they’re going to, so they’re more oriented when they get there; • Tell them not to draw attention to the fact they’re Americans by wearing flag emblems or t-shirts with American names, or by using American cars, for instance; • Have travelers arrive at airports. s dose to departure time as possible and wait in areas away from the main flow of traffic where they’re not as easily observed; • Equip the expat’s car and home with adequate security systems; • Tell employees to vary their departure and arrival times and take different routes to and from work; • Keep employees current on crime and other problems by regularly checking, for example, the State Department’s travel advisory service and consular information sheets.
These provide up-to-date information on possible threats in almost every country of the world; • Advise employees to remain confident at all times: body language can attract perpetrators, and those who look like victims often become victimized. Wages paid to foreign non-management workers abroad are a well-publicized aspect of employee fair treatment today. Many companies, including Nike, have therefore taken steps to lift wages and improve the foreign workers’ lot.
Also currently under discussion is a plan to create the Fair Labor Association. This would be a private entity controlled by both corporate and human rights or labor representatives, with a mandate to take steps such as accrediting a uditors to certify whether or not companies comply with their codde of conduct. Repatriation: Problems and Solutions Repatriation, the process of moving back to the parent company and country from the foreign assignment, is often a bittersweet experience for the returning expatriate.
It means returning one’ s family to familiar surroundings and old friends. But the returning employee all too often learns that in many respects his or her employer has ignored the manager’s career and personal needs. Several repatriation problems are quite common. One is the expatriate’s fear that he or she has been “out of sight, out . of mind” during an extended foreign stay and thus has lost touch with the parent firm’s culture, top executives, and those responsible for the firm’s pro motion processes.
Indeed, such fears can be well founded. Many repatriates are temporarily placed in mediocre or makeshift jobs. Many are shocked to find that the executive trappings of the overseas job (pnvate schools for the children and a company car and driver, for instance) are lost upon return, and that the executive again is just a small fish in a big pond. Perhaps more exasperating is discovering that some of the expatriate’s former colleagues have been more rapldly promoted while he or she was overseas.
Even the expatriate’s family may undergo a sort of reverse culture shock, as spouse and children face the often daunting task of picking up old friendships and habits or starting new schools upon thelr return. Progressive multinationals anticipate and avoid these problems by taking several sensible steps. They can be summarized as follows: • Write repatriation agreements. • Assign a sponsor. • Provide career counseling. • Keep communications open. • Ofter financial support. • Develop reorientation programs. • Build in return trips.