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CHAPTER 11 Strategic International HRM Chapter Learning Outcomes After reading this chapter, you should be able to: • Identify key challenges influencing human resources (HR) practices and processes within an international context. • Identify key characteristics of strategic international HRM (SIHRM). • Understand the relationship between different approaches of SIHRM and corporate business strategy options. • Understand the impact of globalization and internationalization on key HR practices and processes. Chapter Summary This chapter addresses many of the strategic issues and decisions that must be taken into consideration when managing employees internationally. Organizations seeking to expand their businesses should (1) recognize the strategic decision issues inherent in managing the HR function in an international context; (2) strive to make decisions by taking into account the firm’s strategic objectives, considering the firm’s plans for the international market when making decisions and recognizing the complexity added by international context; and (3) arrange career development and job roles starting from expatriate selection including training and career positions upon return. All SIHRM practices and issues should be implemented and a global competence pool developed strategically. Class Outline Instructor’s Teaching Notes Students’ Learning Activities When entering new markets, organizations are confronted with a wide range of challenges, mostly related to socioeconomic, political, and technological aspects. Key Challenges Influencing HR Practices and Processes within an International Context Workforce Diversity • Integration and accommodation of an increasing number of older workers, individuals with disabilities, LGBT (lesbian, gay, bisexual, transgender) individuals, or workers with ethnic and cultural differences. • The complexity of workforce diversity grows with each foreign market organizations enter. • Employers benefit from a diverse labour force and tailor international HR policies and practices accordingly. Employment Legislation • HR managers are faced with a complex legislation framework. • When crossing national borders, Canadian HR managers face placement country employment legislation. Security • Afghanistan and Iraq are known for unsafe business environments. • Social upheavals have occurred in Egypt, Bahrain, Tunisia, Algeria, Libya, and Syria. • All raise concerns about expatriate employees’ security and safety, including risk assessment, precautions and contingency planning. • Organized crime and kidnappings have increased in Venezuela, Mexico, Honduras, Nigeria, Somalia, and Sudan. • HR can help support employee security and safety, including risk assessments, precautions, safety procedures, and contingency planning for employees and their families. • Establishing relationships with Canadian government representatives in embassies, chambers of commerce, consulates and high commissions, is essential, etc. Strategic International Human Resources Management Strategic international HR planning: projecting global competence supply, forecasting global needs, and developing a blueprint to establish global competence pools within companies Management issues, functions, policies, and practices that result from the strategic activities of multinational enterprises and that affect the international concerns and goals of those enterprises. • HR departments are often understaffed, underfunded, and limited to a supporting role with little key decision-making power. • Employment legislation and socioeconomic and technological differences in local markets demand sophisticated SIHRM systems. The Domestic Stage and Strategy Domestic strategy: internationalizing by exporting goods abroad as a means of seeking new markets. Multidomestic strategy: a strategy that concentrates on the development of foreign markets by selling to foreign nationals. • HRM systems for foreign subsidiaries that will be consistent with the local economic, political, and legal environment. • Companies are striving to introduce culturally sensitive products at the lowest cost. • Resources and materials within regional branches are reallocated globally to make quality products at the least cost. • Company management at this stage takes a geocentric perspective. Domestic Strategy • The firm is focusing on domestic markets and exporting its products without altering them for foreign markets. • An export manager may be assigned to control foreign sales. Multinational strategy: standardizing the products and services around the world to gain efficiency. Exportive IHRM approach: transferring home HRM systems to foreign subsidiaries without modifying or adapting to the local environment. Global strategy Introducing culturally sensitive products in countries with the least amount of cost. As a firm develops expertise in international markets, the foreign market grows in importance. Integrative IHRM approach: combining home HR practices with local practices and selecting the most qualified people for the appropriate positions no matter where they come from. • Also need to be culturally sensitive and move HR resources strategically around subsidiaries and headquarters. • Disadvantage is that the complexity is great and, in difficult economies, political persuasion might still prevail. Key HR Practices and Processes Within an International Context International Assignments Purpose of International Assignments • Strategic control—This category of assignment is intended to retain the culture, structure, and decision processes of the home country. • Transfer of knowledge and skills—As described earlier in the Life Time Fitness example, the firm uses this type of assignment to bring necessary skills to the host country firm. Types of International Assignments: • Frequent flyers • International commuters • Short-term assignment • Expatriate assignment • Permanent transfer International Human Capital Demand and Supply • Labour market data • External human capital demand and supply • Tthe environment • Flexible labour strategies International Recruitment and Selection Home-country nationals (HCNs): Individuals from the subsidiary country who know the foreign cultural environment well. Parent-country nationals (PCNs): Individuals from headquarters who are highly familiar with the firm’s products and services, as well as its corporate culture. Third-country nationals (TCNs): Individuals from a third country who have intensive international experience and know the corporate culture from previous work experience with corporate branches in a placement country. Determine if internal or external recruitment will be used. Will HCNs, PCNs, or TCNs be recruited? Prior to adapting to the local environment: • MNCs will have standardized HR systems across subsidiaries all over the world. • Transaction costs are reduced, corporate policies are consistent, and control over subsidiaries is maintained. • Advantage is that the HR managers at headquarters have a “tried and true” HR system the firm can readily implement at subsidiaries across the world. Integrative IHRM Approach • Combining home HR practices with local practices and selecting the most qualified people for the positions no matter where these candidates come from. • The best HR policies and practices will be chosen for foreign subsidiaries. • HR practices will be transferred to subsidiaries. • Decision making regarding HR policies and practices will be performed by headquarters and foreign subsidiaries. • A disadvantage is that the local environment will not have been considered in the HR system and fit with the local system of the relocation country. Compensation 1. Home-based policy—Links the TCN’s base salary to the salary structure of the individual’s relevant home country. 2. Host-based policy—Links the base salary to the salary structure of the placement country but retains the home-country salary structure for other international supplements such as housing and schooling. 3. Region-based policy—Compensates expatriates working in their home regions at somewhat lower levels than those who are working in placements far from home. Special Considerations • The extent of interaction that the position requires—the more interaction required, the stronger the expatriate’s cross-cultural skills need to be. • The expected financial performance of the subsidiary. • The volatility of the foreign labour market, for example, labour costs or education and skill levels of HCNs. Note: International employees and their families should understand that telecommunication and transportation infrastructures are severely lacking in many placement countries. Pre-Assignment Training The researchers found that effective training should emphasize five points: • Assess and evaluate training needs for expatriates. • The purpose and relevant goals of training applicable to participants’ daily activities. • Plan and design the training programs to meet training goals. • Implement the training plan. • Use several techniques to increase the effectiveness of training programs. Typically, cultural training involves the following: • Area studies program that includes environmental briefings and cultural orientations. • Culture assimilators—essentially multiple-choice questions about cultural characteristics. 1. Language training. 2. Sensitivity training (which could include role-playing exercises and behavioural modelling videos designed to raise awareness of cultural differences in behaviour). 3. Field experiences, such as visits to the restaurants of the nationality or actual visits to the placement country itself. These activities are not only useful for the global managers but also helpful for their spouses and children. Review “The Would-Be Pioneer” in the chapter-opening vignette. What was the major problem encountered by Linda Myers? (Being female, non-Korean, and most importantly a poor “fit”). Ask Students: What issues do you think are different in HR planning for international business as opposed to HR planning in Canada? Ans. • There is a significant challenge to recruiting and retaining managers and professionals who are competent to represent the company in a global arena. • Cultural values and political, economic, and legal systems vary from country to country and change over time. • Internal factors (such as a firm’s strategies, competencies, and existing HR system) need to be balanced with external factors, such as local economic, political, social, cultural, legal and HR systems). Ask Students: Increasingly, employers are finding they need employees who have emergent skills that might not be necessary currently but may be in the future. How does this relate to international human resources? Ans. • When a company is starting a location overseas, it may not know exactly what staff is needed. Hiring employees who are able to adapt is important. • If other locations are opened in the area, employees able to learn leadership skills can help with those startups. • As a business grows, employees with potential can move into higher-level roles. Review HR Planning Today 11.1—UPS Around the World. Given the weak U.S. economy, Canada needs to rely less on exports to the United States and export to other countries instead. Ask Students: What are three countries or regions Canada should focus on? Ans. China, India, Europe Learning Activity Ask students to do their own search through their own business contacts or through the Internet to identify a multinational company that is doing business globally. Which of these four stages of growth does this MNC seem to fit? Ask Students: What policies and practices will they have to consider when preparing to hire international staff? Ans. • Language skills. • Ability to learn. • Fit between expats working and the new location and local hires. • Employment regulations regarding hours of work, health and safety, and unions. • Compensation and benefit strategies. What Does WTO Have to Do with Trade? WTO is the World Trade Organization. The General Agreement on Tariffs and Trade (GATT) covers international trade in goods as a part of the WTO. The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) made up of representatives from WTO member countries. The Goods Council has 10 committees on specific subjects (i.e., agriculture, market access, subsidies, anti-dumping measures and so on). It works with state trading enterprises. https//www.wto.org/english/tratop_e/inftec_e/inftec_e.htm Learning Activity As a class, brainstorm what employees should consider before accepting an international assignment. Ans. Duties and Responsibilities: • Request a detailed listing of all the things the new job entails. • Consider your ability to adapt to new ways to conduct business. Family Impact • Find out if the company provides housing or if you will have to make arrangements. • Find out about access to medical care, English-language schools, public transportation. Costs of Living Abroad • Be sure you understand the costs involved with living in another country and the move. Health and Security Considerations • Research the health and safety environments of the country you’re considering. Long-Term Impact • To career • Personal life • Family life Web-based Activity Ask students, in groups of three, to go to the website of the Organisation for Economic Co operation and Development (OECD) at www.oecd.org/about. Have students briefly scan the profiles of three countries to compare the figures for agriculture, innovation, and trade. http://www.oecd.org/els/oecd-employment-outlook-19991266.htm Ask Students: What aspects of labour relations in different countries might affect employment? Ans. • Presence and power of unions • Attitude of union representatives • Collective agreements • Local legislation Review HR Planning Today 11.2—Four Seasons’ Golden Rule. Ask Students: What is the difference between the way Sharp considers the rule to be used and the way the BP manager of HR global operations for Europe sees it for employees and managers? Ans. While Sharp promotes the Golden Rule as a successful Global HR tool at Four Seasons, BP’s manager of HR global operations for Europe considers the Golden Rule inappropriate for his human resources management philosophy. Review HR Planning Today 11.3—International Planning at Fleet Complete. • Make use of social networks. • Build trust within your networks and with employees. Listen to local partners and potential acquisitions. • They probably know more than you do about the local market, its political and regulatory environment, and the culture. • Pay attention to culture. Even when partners agree, there may be differences in what buy in to a project looks like in terms of processes and outcomes. Understanding the source of potential differences can build higher levels of consensus around objectives, leading to much more efficient use of human capital. • Keep communicating. Developing a presence in a new market involves a high degree of risk and uncertainty. As situations change, differences in assumptions and expectations emerge. It is extremely important to keep all parties informed. Ask Students: An example of third country nationals is translators from nearby countries being used by the Canadian army to assist in Iraq. What skills would HR professionals need in order to hire translators in this circumstance? Ans. • Language tests to verify workers’ skills. • Some basic knowledge of language shared with applicants is helpful. • Basic knowledge about the culture in local countries and areas. • Expectations of interactions between male and female workers, staff and supervisors, employers and the government. Review HR Planning Notebook 11.1—Strategic Advantages and Disadvantages of Key Recruitment Options. Ask Students: What are some of the strategic advantages and disadvantages of recruiting PCNs, HCNs, or TCNs? Ans. Many suggestions are at http://open.lib.umn.edu/ humanresourcemanagement/ chapter/14-2-staffing-internationally/ See HR Notebook 11.2—Guidelines for Effective Training. Ask Students: Are business relationships in the relocation country more casual or formal? 1. How will the employee fit into the particular location? 2. Will the worker form a positive relationship with the supervisor? Review HR Planning Today 11.5—Once Abroad, Always Abroad? Ask Students: Why they think employees leave after international assignments. Ans. 1. Most expatriates leave to pursue other expatriate assignments that they view as beneficial to their careers. Expatriates anticipate a lack of attractive positions to return to in the home country and seek better opportunities outside the company. 2. Three months after returning to their home country, one-third of repatriates were still in temporary positions, and of those who had a job, 75% felt it was a demotion. Review HR Planning Today 11.7—International Relocation Activities and Policies of Companies Operating in Canada. Ask Students: Is sending employees abroad done a lot by Canadian companies? Ans. A 2013 study shows 50% of companies have sent employees abroad. Ask Students: In HR Planning Today 11.4—International Selection and Preparation. What are some of those challenges? Ans. 1. The size and geographical distribution of UPS creates a wide range of HR implications and challenges: respecting and adjusting to 200 or more different employment and human rights legislations. 2. Industrial relations; selecting the right level or mix of centralizing and decentralizing UPS’s HR function across countries, companies, and business units. Post-assignment Activities Repatriation: The process of PCNs, TCNs, or even HCNs returning to their home headquarters or home subsidiaries 1. Prior to the return home, the employee may become anxious at the thought of having no appropriate position to return to. 2. The employee may become dissatisfied with his or her standard of living upon return. 3. Co-workers may not be interested in hearing about the repatriate’s experience. 4. The repatriate’s job may not make as much use of internationally acquired KSAOs as it could; in this case, “out of sight, out of mind” is the operative phrase. 5. Feelings of anxiety, uncertainty, and disorientation upon reintegration to one’s home country and culture may occur. There is a high rate of turnover among expatriates. Two issues are of great importance for the long-term career development of global managers. 1. Regard the international assignment as merely one step in an overall career development plan. 2. Ensure that the next step (i.e., the candidate’s subsequent assignment) makes good use of the KSAOs developed, as these are a source of competitive advantage to the firm. Expatriate training should emphasize five points: 1. Assess and evaluate the needs of training for expatriates. 2. Clarify the purpose and goals of the training relevant to the participants’ daily activities. 3. Plan and design the training programs to meet goals. 4. Implement the training plan. 5. Use several methods to increase the effectiveness of the training. Knowledge of the unions in the placement country and the rate of unionization is critical information. • Union activities in the placement country definitely influence HRM practices. • Four types of unions exist: industry, craft, conglomerate, and general unions. • Understanding of unionization rates in various countries is necessary because nations vary in their rates of unionization (see text for this information). International HR managers must devise strategies to improve the fit between their labour relations activities and the external environment. Review HR Planning Today 11.4—International Selection and Preparation. Global compensation packages create significant challenges for international HR departments. Ask Students: What are some of those challenges? Ask Students: Ask students what incidents they have heard about in the news regarding businesses that contract manufacturing to overseas companies. For businesses with poor reputations such as safety issues, suggest possible solutions. For companies with good reputations, discuss what they may be doing correctly. Businesses that Outsource Overseas Poor Reputations • Nike—poor reputation before 2015 http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5 • Walmart https://www.theguardian.com/commentisfree/ 2012/dec/13/apparel-industry- outsourcing-garment-workers-bangladesh • Trump clothes lines https://www.cnn.com/2016/05/26/politics/trump-clothing-foreign-made/index.html • Nestlé water controversy http://www.rcinet.ca/en/2017/11/27/protests-continue-over-nestle-pumping-and-sale-of-ground-water/ Positive Reputations • The Body Shop https://www.thebodyshop.com/en-us/commitment/30-years-community-trade?clear=true • Me to We (Enterprise) https://shop.metowe.com/ Review HR Planning Today 11.6—An Effective Repatriation Policy. Homework: Ask students to interview someone they know who has worked abroad. What were some of the experiences or reactions this person experienced when he or she returned from the international assignment? Ask Students: What are some of the special considerations that may affect the performance of someone working internationally as opposed to someone working domestically? Ans. • Working hours, if different from those in the parent country. • Working conditions such as climate. • Transportation issues affecting absenteeism. In 2013, unionization rates were found to be: U.S. 10.8% Japan 17.8% Germany 17.7% Canada 27% Some of the highest rates of unionization are in Scandinavian countries such as Sweden (68%) and Denmark (67%). Review HR Planning Notebook 11.1— Strategic Advantages and Disadvantages of Key Recruitment Options. Instructor Manual for Strategic Human Resources Planning Monica Belcourt 9780176798086, 9780176570309
