Chapter 14 Human Resource Management LEARNING OBJECTIVES

Chapter 14 Human Resource Management

LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain staffing decisions with a focus on expatriates 2. Identify training and development needs for expatriates and host country nationals 3. Discuss compensation and performance appraisal issues 4. Understand labor relations in both home and host countries 5. Discuss how the institution- and resource-based views shed additional light on HRM 6. Participate in three leading debates concerning HRM 7. Draw implications for action

STAFFING human resource management (HRM) activities that attract, select, and manage employees staffing - HRM activities associated with hiring employees and filling positions host country nationals (HCNs) - known as “locals”

STAFFING expatriates (expats) - Nonnative employees who work in a foreign country parent (home) country nationals (PCNs) employees who come from the parent country of the multinational enterprise (MNE) and work at its local subsidiary third country nationals (TCNs) - employees who come from neither the parent country nor the host country

APPROACHES TO STAFFING ethnocentric approach - emphasis on the norms and practices of the parent company (and the parent country of the MNE) by relying on PCNs polycentric approach - emphasis on the norms and practices of the host country geocentric approach - focus on finding the most suitable managers, who can be PCNs, HCNs, or TCNs

ROLES OF EXPATRIATES strategists - representing interests of the MNE’s headquarters daily managers - run operations, to build local capabilities and gain international management experience ambassadors - representing headquarter’s interests in the subsidiaries and representing the interests of the subsidiaries when interacting with headquarters trainers - for their replacements

Expatriate Failure and Selection (1) premature (earlier than expected) return (2) unmet business objectives (3) unfulfilled career development objectives Using the relatively easy-to-observe measure of premature return, studies in the 1980 s reported that 76% of US MNEs have more than 10% expatriates failures, and 41% and 24% of European and Japanese MNEs, respectively, have a comparable number of failure cases

TRAINING EXPATRIATES Øshort stay - short and less rigorous - survival-level language training (such as “Where is the ladies’ room? ” and “I’d like a beer”) suffice Ølong stay (several years) - imperative that longer length and more rigorous training be provided, especially for neophyte expatriates, entails more extensive language training and sensitivity training, preferably with an immersion approach (training conducted in a foreign language/culture environment) Øenlightened firms involve the spouse in expatriate training

REPATRIATION process of facilitating career anxiety experienced by repatriates (returning expatriates) Øpsychological contract - informal understanding of expected delivery of benefits in the future for current services Ørepatriates also experience a loss of status, spouse and children may also find it difficult to adjust back home Ømentor - helps alleviate the “out-of-sight, out-of-mind” feeling by ensuring that the expatriate is not forgotten at headquarters and by helping secure a challenging position for the expatriate upon return

TRAINNG AND DEVELOPMENT FOR HOST COUNTRY NATIONALS To stem the tide of turnover, many MNEs have formal career development plans and processes for HCNs Kodak, for example, strives for the “Four Greats”: (1) great hires (2) great moves (fast promotion) (3) great assignments, and (4) great feedback

PERFORMANCE APPRAISAL performance appraisal - evaluation of employee performance for promotion, retention, or termination purposes Øwhen expatriates evaluate HCNs, cultural differences may create problems Øexpatriates need to be evaluated by their own supervisors Øin some cases, expatriates are the top manager in a subsidiary (such as country manager), and their supervisors are more senior executives based at headquarters Ømany expatriates feel that they are not evaluated fairly

EXPATRIATE COMPENSATION going rate approach - pay expatriates the going rate for comparable positions in a host country balance sheet approach - attempt to balance the cost of living differences based on parent country levels and adds a financial inducement to make the package attractive

HOST COUNTRY NATIONAL COMPENSATION low-level HCNs - especially those in developing countries, have relatively little bargaining power; they have a job at the MNE subsidiaries often because of their low labor cost HCNs in management and professional positions - have increasing bargaining power; high-caliber HCNs, because of their scarcity, will obtain more pay

LABOR RELATIONS AT HOME Øfirms’ key concern is to cut cost and enhance competitiveness Ølabor unions’ declared interest is to help workers earn higher wages and obtain more benefits through collective bargaining Ølabor unions’ bargaining chip is the credible threat to strike, slow down, refuse to work overtime, or some other forms of disruption Ømanagers’ bargaining chip lies in their threat to shut down operations and move jobs overseas Øunions are organized on a country-by-country basis

LABOR RELATIONS ABROAD ØMNEs prefer to deal with nonunionized work forces Øin many developing countries, governments welcome MNEs and at the same time silence unions

INSTITUTIONS AND HRM formal institutions - every country has rules, laws, and regulations governing the do’s and don’ts of HRM informal rules of the game - embodied in cultures, norms, and values, also assert a powerful influence ØHR and expatriate managers need to avoid stereotyping and consider changes

RESOURCES AND HRM VRIO dimensions Ødoes a particular HR activity add value? Labor-intensive chores, such as administering payroll, benefits, and basic training, may not add value - they can be outsourced Øthe relentless drive to learn, share, and adopt “best practices” may reduce their rarity and thus usefulness Øit is relatively easy to imitate a single practice; it is much more difficult to imitate a complex HR system consisting of multiple, mutually reinforcing practices that work together Ødo HR practices support organizational capabilities to help the firm accomplish its performance goals? Too little or too much diversity may hurt performance

BEST FIT vs. BEST PRACTICE A firm needs to search for the best external and internal fit. The quest for the best fit is continuous. The “best fit” school argues: It depends. The “best practice” school begs to differ. Proponents argue that firms should adopt best practices irrespective of context. Critics of the “best practice” school make two points. First, they point out that “there is overwhelming evidence against a universal set of HR practices based on national variations. ” Second, they argue that from a resource-based view, if all firms adopt universal “best practices, ” such practices lose their value.

EXPATRIATION vs. INPATRIATION Addressing the expatriation problem, one solution is inpatriation – relocating employees of a foreign subsidiary to the MNE’s headquarters for the purposes of (1) filling skill shortages at headquarters and (2) developing a global mindset for such inpatriates. Most inpatriates are expected to eventually return to their home country to replace expatriates. Unfortunately, many are ineffective. Inpatriates, just like expatriates, have their fair share of problems and headaches.

ACROSS-THE-BOARD PAY CUT vs. REDUCTION IN FORCE Reduction in force (RIF), a euphemism for mass layoffs, is often used in the United States and United Kingdom. However, outside the Anglo-American world, mass layoffs are often viewed as unethical. One alternative is for the entire firm to have an across-theboard pay cut while preserving all current jobs. Firms that implement across-the-board pay cuts have lost numerous star performers who find “greener pastures” elsewhere. This raises serious concerns as to whether such large-scale sacrifice is worth it, at least in an individualistic culture.