International HRM summary.docx

Chapter 14 International HRM 0635000Section 1 Learning Objectives 08636000 1. Be able to explain the terminology related to international HRM. 2. Define Global HRM strategies. 3. Explain the impact of culture on HRM practices. 0635000Section Notes 08636000 A domestic market is one in which a product or service is sold only within the borders of that country. An international market is one in which a company may find that they have saturated the domestic market for the product, so they seek out international markets in which to sell their product. Since international markets use their existing resources to expand, they do not respond to local markets as well as a global organization. A global organization is one in which a product is being sold globally, and the organization looks at the world as its market. The local responsiveness is high with a global organization. A multinational is a company that produces and sells products in other markets, unlike an international market in which products are produced domestically and then sold overseas. A transnational company is a complex organization with a corporate office, but the difference is that much of the decision making, research and development, and marketing are left up to the individual foreign market.   A trade agreement is an agreement between two or more countries to reduce barriers to trade. For example, the European Union consists of twenty-seven countries (currently, with five additional countries as applicants) with the goal of eliminating trade barriers. The North American Trade Agreement (NAFTA) lifts barriers to trade between Canada, the United States, and Mexico. The level of education in the countries in which business operates is very important to the HR manager. Before a business decides to expand into a particular country, knowledge of the education, skills, and abilities of workers in that country can mean a successful venture or an unsuccessful one if the human capital needs are not met. Economics heavily influences HRM. Because there is economic incentive to work harder in capitalist societies, individuals may be more motivated than in communist societies. The motivation comes from workers knowing that if they work hard for something, government cannot take it away, through direct seizure or through higher taxes. The legal system practiced in a country has a great effect on the types of compensation; union issues; how people are hired, fired, and laid off; and safety issues. Rules on discrimination, for example, are set by the country. Transnational scope means that HRM decisions can be made based on an international scope; that is, HRM strategic decisions can be made from the global perspective rather than a domestic one. A transnational representation means that the composition of the firm’s managers and executives should be a multinational one. A transnational process, then, refers to the extent to which ideas that contribute to the organization come from a variety of perspectives and ideas from all countries in which the organization operates. Understanding Hofstede’s Cultural dimensions can help us understand another culture better and as a result, make better decisions when creating a transnational strategy. Individualism-collectivism, In this dimension, Hofstede describes the degree to which individuals are integrated into groups. For example, in the United States, we are an individualist society; that is, each person looks after him- or herself and immediate family. Power distance, Hofstede’s second dimension, refers to the extent to which the less powerful members of organizations accept that power is not distributed equally. For example, some societies may seek to eliminate differences in power and wealth, while others prefer a higher power distance. From an HRM perspective, these differences may become clear when employees are asked to work in cross-functional teams. A Danish manager may have no problem taking advice from employees because of the low power distance of his culture, but a Saudi Arabian manager may have issues with an informal relationship with employees, because of the high power distance. Uncertainty avoidance refers to how a society tolerates uncertainty. Countries that focus more on avoidance tend to minimize the uncertainty and therefore have stricter laws, rules, and other safety measures. Masculinity and femininity refers to the distribution of emotional roles between genders, and which gender norms are accepted by society. For example, in countries that are focused on femininity, traditional “female” values such as caring are more important than, say, showing off. Long term–short term orientation, which refers to the society’s time horizons. A long-term orientation would focus on future rewards for work now, persistence, and ordering of relationships by status. A short-term orientation may focus on values related to the past and present such as national pride or fulfillment of current obligations. 0635000Key Takeaways 08636000 Offshoring is when a business relocates or moves part of its operations to a country different from the one it currently operates in. Outsourcing is when a company contracts with another company to do some work for another. This can occur domestically or in an offshoring situation. Domestic market means that a product is sold only within the country that the business operates in. An international market means that an organization is selling products in other countries, while a multinational one means that not only are products being sold in a country, but operations are set up and run in a country other than where the business began. The goal of any HRM strategy is to be transnational, which consists of three components. First, the transnational scope involves the ability to make decisions on a global level rather than a domestic one. Transnational representation means that managers from all countries in which the business operates are involved in business decisions. Finally, a transnational process means that the organization can involve a variety of perspectives, rather than only a domestic one. Part of understanding HRM internationally is to understand culture. Hofstede developed five dimensions of culture. First, there is the individualism-collectivism aspect, which refers to the tendency of a country to focus on individuals versus the good of the group. The second Hofstede dimension is power distance, that is, how willing people are to accept unequal distributions of power. The third is uncertainty avoidance, which means how willing the culture is to accept not knowing future outcomes. A masculine-feminine dimension refers to the acceptance of traditional male and female characteristics. Finally, Hofstede focused on a country’s long-term orientation versus short-term orientation in decision making. Other aspects of culture include norms, values, rituals, and material culture. Norms are the generally accepted way of doing things, and the values are those things the culture finds important. Every country has its own set of rituals for ceremonies, but also for everyday interactions. Material culture refers to the material goods, such as art, the culture finds important. Other HRM aspects to consider when entering a foreign market are the economics, the law, and the level of education and skill level of the human capital in that country. 0635000Exercises and Solution 08636000 1. Visit http://www.geert-hofstede.com/ and view the cultural dimensions of three countries. Then write a paragraph comparing and contrasting all three. Answer: Of course answers will vary with the countries that students pick. For an additional exercise, consider having the students break into groups (understanding that some will have picked the same country) and compare the cultural dimensions. Then ask them what the HR function should consider, based on the dimensions, for each country the group has chosen. 0635000Extra Discussion Questions 08636000 What are the advantages to a transnational strategy versus a multinational strategy? Answer: Responsiveness to the market needs and employee needs would be the big advantage. In a transnational strategy, each location has its own autonomy to make decisions that work best for the locale. In multinational strategies, often “corporate” decisions are made on pay, benefits, etc., not taking into consideration local needs as well as a transnational strategy would. 0635000Key Terms 08636000 offshoring When a business relocates or moves some or part of its operations to another country. outsourcing Involves contracting with another company (onshore or offshore) to perform some business-related task. domestic A market in which a product or service is sold only within the borders of that country. international A company may find that they have saturated the domestic market for the product, so they seek out international markets in which to sell their product. global A type of organization in which a product is being sold globally, and the organization looks at the world as its market. multinational A company that produces and sells products in other markets, unlike an international market in which products are produced domestically and then sold overseas. transnational A complex organization with a corporate office, but the difference is that much of the decision making, research, and development and marketing is left up to the individual foreign market. trade agreement An agreement between two or more countries to reduce barriers to trade. transnational scope When HRM decisions can be made based on the international scope rather than the domestic one. transnational representation When the composition of the firm’s managers and executives is a multinational one. transnational process Refers to the extent to which ideas that contribute to the organization come from a variety of perspectives and ideas from all countries in which the organization operates. individualism-collectivism One of Hofstede’s cultural dimensions; describes the degree to which individuals are integrated into groups. power distance One of Hofstede’s cultural dimensions; refers to the extent to which the less powerful members of organizations accept that power is not distributed equally. uncertainty avoidance One of Hofstede’s cultural dimensions; refers to how a society tolerates uncertainty. masculinity and femininity One of Hofstede’s cultural dimensions; refers to the distribution of emotional roles between genders, and which gender norms are accepted by society. long term–short term orientation One of Hofstede’s cultural dimensions; refers to the society’s time horizons. culture Refers to the socially accepted ways of life within a society. norms Shared expectations about what is considered correct and normal behavior. values In a culture, the classification of things as good or bad within a society. rituals Scripted ways of interacting that usually result in a specific series of events. material culture The items a culture holds important, such as artwork, technology, and architecture. 0635000Section 2 Learning Objectives 08636000 1. Be able explain the three staffing strategies for international businesses and explain advantages and disadvantages for each. 2. Explain the reasons for expatriate failures. 0635000Section Notes 08636000 Home-country national strategy: This staffing strategy uses employees from the home country to live and work in the country. These individuals are called expatriates. Host-country national strategy: which means to employ people who were born in the country in which the business is operating. Third-country national strategy means to employee people from an entirely different country from the home country and host country Expatriate success is determined by five factors. They include job factors, relational dimensions, motivational state, family situation, and language skills. Job Factors Technical skills Familiarity with host country and headquarters operations Managerial skills Administrative competence Relational Dimensions Tolerance for ambiguity Behavioral flexibility Non-judgmentalism Cultural empathy and low ethnocentrism Interpersonal skills Motivational State Belief in the mission Congruence with career path Interest in overseas experience Interest in specific host-country culture Willingness to acquire new patterns of behavior and attitudes Family Situation Willingness of spouse to live abroad Adaptive and supportive spouse Stable marriage Language Skills Host-country language Nonverbal communication Most expatriates go through four phases of adjustment when they move overseas for an assignment. They include elation/honeymoon, resistance, adaption, and biculturalism. In the elation phase, the employee is excited about the new surroundings and finds the culture exotic and stimulating. In the resistance phase, the employee may start to make frequent comparisons between home and host country and may seek out reminders of home. Frustration may occur because of everyday living, such as language and cultural differences. During the adaptation phase, the employee gains language skills and starts to adjust to life overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this phase, the expatriate is embracing life overseas. In the last phase, biculturalism, the expatriate embraces the new culture and begins to appreciate their old life at home equally as much as their new life overseas. Many of the problems associated with expatriate failures, such as family life and cultural stress, have diminished. Family stress, cultural inflexibility, emotional immaturity, too much responsibility, and longer work hours (which draw the expatriate away from family, who could also be experiencing culture shock) are some of the reasons cited for expatriate failure. 0635000Key Takeaways 08636000 There are three types of staffing strategies for an international business. First, in the home-country national strategy, people are employed from the home country to live and work in the country. These individuals are called expatriates. One advantage of this type of strategy is easier application of business objectives, although an expatriate may not be culturally versed or well accepted by the host-country employees. In a host-country strategy, workers are employed within that country to manage the operations of the business. Visas and language barriers are advantages of this type of hiring strategy. A third-country national staffing strategy means someone from a country, different from home or host country, will be employed to work overseas. There can be visa advantages to using this staffing strategy, although a disadvantage might be morale lost by host-country employees. 0635000Exercises and Solutions 08636000 1. Choose a country you would enjoy working in, and visit that country’s embassy page. Discuss the requirements to obtain a work visa in that country. Answer: Answers will vary, but for example, India requires a passport, Indian application form, photos, proof of residential address, letter of invitation from India and a business letter from the US company stating the business in which the employee will be engaged in. Visas are granted for one year but may be issued for five or ten years at the discretion of the Indian consulate. 2. How would you personally prepare an expatriate for an international assignment? Perform additional research if necessary and outline a plan. Answer: Given the factors for success discussed in this section, they should address how they will prepare for the job factors, relational dimensions. Language skills should also be addressed; for example, take a language course. In addition, consideration of current family situation, spouse, children and understanding their current motivational state, such as ensuring the assignment would align with career plans and goals. 0635000Extra Discussion Question 08636000 As an expatriate, when moving through the four phases of adjustments, what strategies can be used to ensure the expatriate moves through to biculturalism more quickly? Why is this a concern? Answer: During the resistance phase, the employee may make frequent comparisons between home and host country. Learning cultural differences and language ahead of time can help an expatriate go through this phase more quickly. It is important to note because the longer the expatriate stays in the resistance phase, the less likely that the assignment will be successful. 0635000Key Terms 08636000 elation/honeymoon A phase of expatriate adjustment; the employee is excited about the new surroundings and finds the culture exotic and stimulating. resistance A phase of expatriate adjustment; the employee may start to make frequent comparisons between home and host country and may seek out reminders of home. Frustration may occur because of everyday living, such as language and cultural differences. adaption A phase of expatriate adjustment; the employee gains language skills and starts to adjust to life overseas. Sometimes during this phase, expatriates may even tend to reject their own culture. In this phase, the expatriate is embracing life overseas. biculturalism A phase of expatriate adjustment; biculturalism, the expatriate embraces the new culture and begins to appreciate their old life at home equally as much as their new life overseas. Many of the problems associated with expatriate failures, such as family life and cultural stress, have diminished. home-country national strategy This staffing strategy uses employees from the home country to live and work in the country. expatriate An employee from the home country who is on international assignment in another country. host-country national strategy To employ people who were born in the country in which the business is operating. third-country national strategy To employ people from an entirely different country from the home country and host country. 0635000Section 3 Learning Objectives 08636000 1. Be able explain how the selection process for an expatriate differs from a domestic process. 2. Explain possible expatriate training topics and the importance of each. 3. Identify the performance review and legal differences for international assignments. 4. Explain the logistical considerations for expatriate assignments. 0635000Section Notes 08636000 Recruitment and selection process of an expatriate Selecting an expatriate is an important part of the process and the right person has the right skills: managerial competence, training and adaptability. Costs associated with the failure of an expatriate might include: Damage to host-country relationships Motivation of host-country staff Costs associated with recruitment and relocation Possible loss of that employee once they return Missed opportunities to further develop the market The job analysis for the expatriate assignment should be different than the one for the same job at home, since the skills and abilities required to be a success overseas will likely be different. Training topics for the expatriate and his or her family might include: Language Cultural Goal setting Managing family and stress Repatriation Language and nonverbal communication training can be useful. For example, consider these differences: In the United States, we place our palm upward and use one finger to call someone over. In Malaysia, this is only used for calling animals. In much of Europe, calling someone over is done with palm down, making a scratching motion with the fingers (as opposed to one finger in the United States). In Columbia, soft handclaps are used. In many business situations in the United States, it is common to cross your legs, pointing the soles of your shoes to someone. In Southeast Asia, this is an insult since the feet are the dirtiest and lowest part of the body. Spatial differences is an aspect of nonverbal language as well. In the United States, we tend to stand thirty-six inches (an arm length) from people, but in Chile, for example, the space is much smaller. Proper greetings of business colleagues differ from country to country. The amount of eye contact varies. For example, in the United States, it is normal to make constant eye contact with the person you are speaking with, but in Japan it would be rude to make constant eye contact with someone with more age or seniority. Cultural training might also be appropriate. Possible topics include: Etiquette Management styles History Religion The arts Food Geography Logistics aspects such as transportation and currency Politics Repatriation is the process of helping employees make the transition to their home country. Many employees experience reverse culture shock upon returning home, which is a psychological phenomenon that can lead to feelings of fear, helplessness, irritability, and disorientation. Balance Sheet Approach to compensation: One possible option is to pay a similar base salary companywide or region wide and offer expatriates an allowance based on specific market conditions in each country. With this compensation approach, the idea is that the expatriate should have the same standard of living that he or she would have had at home. Four groups of expenses are looked at in this approach: Income taxes Housing Goods and services Base salary Overseas premium The HR professional would estimate these expenses within the home country and costs for the same items in the host country. The employer then pays differences. In addition, the base salary will normally be in the same range as the home-country salary, and an overseas premium might be paid owing to the challenge of an overseas assignment. While it might make sense to have the host-country employees and managers rate the expatriate, cultural differences may make this process ineffective. Cultural challenges may make the host country rate the expatriate more harshly, or in some cases, such as Indonesia, harmony is more important than productivity, so it may be likely an Indonesia employee or manager rates the expatriate higher, to keep harmony in the workplace. If the home-country manager rates the performance of the expatriate, they may not have a clear indication of the performance, since they do not work together on a day-to-day basis. Balanced set of sources might be the best approach for performance evaluations. It is important to check the laws of the country in which you are sending an employee, for example: Worker safety laws Worker compensation laws Safety requirements Working age restrictions Maternity/paternity leaves Unionization laws Vacation time requirements Average work week hours Privacy laws Disability laws Multiculturalism and diverse workplace, antidiscrimination law Taxation Logistics can include things like: Visas Housing Moving of belongings Return trips home Schooling Spousal job 0635000Key Takeaways 08636000 Personality traits are a key component to determining if whether someone is a good fit for an overseas assignment. Since 73 percent of overseas assignments fail, ensuring the right match up front is important. The ideal expatriate is able to deal with change, is flexible, and has the support of his or her family. They are also organized, take risks, and are good at asking for help. The adjustment period an expatriate goes through depends on his or her initial preparation. Blakeney said there are two levels of adjustment: psychological adjustment and sociocultural adjustment. Although the psychological may take less time, it is the sociocultural adjustment that will allow the assignment to be successful. Training is a key component in the HRM global plan, whether expatriates or host-country nationals are to be hired. Both will require a different type of training. Training can reduce culture shock and stress. Consideration of the expatriate’s family and their ability to adjust can make a more successful overseas assignment Compensation is another consideration of a global business. The balance sheet approach pays the expatriate extra allowances, such as living expenses, for taking an international assignment. Other considerations such as vacation days, health-care benefits, and profit-sharing programs are important as well. Laws of each country should be carefully evaluated from an HRM strategic perspective. Laws relating to disabilities, pregnancy, and safety, for example, should be understood before doing business overseas. Labor unions have different levels of involvement in different parts of the world. For example, Germany has codetermination, a policy that requires companies to have employees sit on various boards. The United States has treaties with forty-two countries to share information about expatriates. The United States offers foreign tax credits to help expatriates avoid double taxation. However, US citizens must file taxes every year, even if they have not lived in the United States during that year. Logistical help can be important to ensuring the success of an overseas assignment. Help with finding a place to live, finding a job for a spouse, and moving can make the difference between a successful assignment and an unsuccessful one. The Visa Waiver Program (VWP) is a program in which nationals of thirty-six countries can enter the United States for up to a ninety-day period. This type of visa may not work well for expatriates, so it is important to research the type of visa needed from a particular country by using that country’s embassy website. 0635000Exercise and Solution 08636000 1. Research the country of your choice. Discuss at least five of the aspects you should know as an HRM professional about doing business in that country. Answer: Answers will vary greatly. You can make this a team project and ask them to prepare PowerPoint slides as if they were presenting to an expatriate in training. Ask students to touch on things such as nonverbal language differences, language, laws, rules, and societal expectations. 0635000Extra Discussion Question 08636000 Discuss the importance of repatriation training and give five examples of repatriation planning. Answer: Repatriation planning should happen before the employee leaves on assignment. This ensures the person you send on an assignment will stay with the company and share the knowledge they gained. Some examples of repatriation training can include guarantee of a job within the organization upon returning, mentor programs, understanding of goals before leaving, training for expatriate and family, allow the expatriate the ablity to conduct business with people in their home country and home office. 0635000Key Terms 08636000 repatriation The process of helping employees make the transition to their home country. reverse culture shock Refers to the psychological phenomenon that can lead to feelings of fear, helplessness, irritability, and disorientation when an expatriate returns home. localized compensation strategy A international compensation strategy that uses regional or local cost-of-living information to pay employees. balance sheet approach Expatriates are offered a similar base salary companywide or region wide and are given an allowance based on specific market conditions in each country. overseas premium An extra amount paid to an expatriate for accepting an overseas assignment. codetermination The practice and legal requirement of company shareholders’ and employees’ being represented in equal numbers on the boards of organizations. foreign tax credit A tax credit in the United States that allows expatriates working abroad to claim taxes paid overseas on their US tax forms, reducing or eliminating double taxation. visa Permission from the host country to visit, live, or work in that country. Visa Waiver Program (VWP) Allows some nationals of thirty-six participating countries to travel to the United States for stays of less than ninety days. 0-6921500Chapter Case 08636000 The Author discusses the case for Chapter 14: http://blip.tv/play/sDyCwL4AAA.html 0635000Additional Case Study Exercise 08636000 Using the balance sheet approach, create compensation for the following expatriate who will be moving to Hong Kong: Seattle, WA Hong Kong Allowance Tax rate 25% 25% Housing $1,500 $2,500 Base salary $3,750 $3,750 Overseas premium 10% Total allowance Total salary and allowance Answer: Seattle, WA Hong Kong Allowance Tax rate 25% 25% 0 Housing $1,500 $2,500 $1000 Base Salary $3,750 $3,750 0 Overseas premium 10% $375 Total allowance $1,375 Total salary and allowance $3,750 $5,125 0635000Useful Outside Resources 08636000 The Human Resource Certification Institute: http://www.hrci.org/ Society for Human Resource Management: http://www.shrm.org/Pages/default.aspx YouTube videos: Avoiding assignment failure in Asia: http://www.youtube.com/watch?v=17BnS74ux5w Example of an HR Global Management software system: http://www.youtube.com/watch?v=X2n--9EEqbE&feature=related Cultural differences: http://www.youtube.com/watch?v=Xp2dEM1jJOM Reverse culture shock: http://www.youtube.com/watch?v=wl2qux6Gezw Hofstede’s Cultural Dimensions: http://www.youtube.com/watch?v=wl2qux6Gezw Hofstede’s low and high power distance explained: http://www.youtube.com/watch?v=sqaa42gbqhA&feature=related Hofstede’s individualism and collectivism explained: http://www.youtube.com/watch?v=CW7aWKXB5J4&feature=related Hofstede’s uncertainty avoidance explained: http://www.youtube.com/watch?v=757-r3qmcp8&feature=related Funny cultural bloopers: http://www.youtube.com/watch?v=29b68Nrt3Vo