This Document Contains Chapters 7 to 10 Chapter 7: INTERNATIONAL TRAINING, DEVELOPMENT AND CAREERS Learning objectives Training aims to improve employees’ current work skills and behavior, whereas development aims to increase abilities in relation to some future position or job. In this chapter, students learn how the international assignment is a vehicle for both training and development, as reflected in the reasons why international assignments continue to play a strategic role in international business operations (see Chapter 5). The role of training in preparing and supporting personnel on international assignments is also considered. We examine the following issues: The role of training in supporting expatriate adjustment and on-assignment performance. Components of effective pre-departure training programs such as cultural awareness, preliminary visits, and language skills. Relocation assistance and training for trainers are also addressed. The effectiveness of pre-departure training. The developmental aspect of international assignments. Training and developing international management teams. Trends in international training and development. Reflecting the general literature on this topic, the focus of this chapter is on traditional expatriate assignment. However, where possible, we draw out training and development aspects relating to short-term assignments, nonstandard assignments, and international business travelers. The chapter concludes with what could be called the post-assignment stage and its wider impact on the careers of employees who have been on an international assignment. Re-entry raises issues for both the expatriate and the MNE, some of which may be connected to events that occur during the international assignment. We examine: The process of re-entry or repatriation. Job-related issues. Social factors, including family factors that affect re-entry and work adjustment. MNE responses to repatriate concerns. Staff availability and career issues. Return on investment (ROI) and knowledge transfer. Designing a repatriation program. Broader international career issues. Chapter summary This chapter concentrates on issues relating to training and developing expatriates for international assignments and the repatriation process. With regard to training and development we discuss: The role of expatriate training in supporting adjustment and on-assignment performance. The components of effective pre-departure training programs such as cultural awareness, preliminary visits, language skills, relocation assistance, and training for trainers. How cultural awareness training appears to assist in adjustment and performance, and therefore should be made available to all categories of staff selected for overseas postings, regardless of duration and location. The need for language training for the host country and in the relevant corporate language. The impact that an international assignment may have on an individual’s career. The international assignment as an important way of training international operators and developing the international “cadre”. In this sense, an international assignment involves both training (gaining international experience and competence) and managerial and organizational development. With regard to the repatriation process we discuss: The overall process of repatriation. With re-entry, the broader socio-cultural context of the home country takes a backseat position—unlike in the expatriation adjustment phase, where the foreign culture can be overwhelming. For the majority of repatriates, coming home to the familiar culture may assist in readjustment. Given the more profound effect that job-related factors appear to have, re-entry shock is perhaps a more accurate term to describe the readjustment process experienced upon repatriation. Career issues upon re-entry are of particular importance to repatriates. Factors that affect career anxiety include no post-assignment guarantee of employment, fear that the period overseas had caused a loss of visibility, changes in the home workplace that affect re-entry positions, and the employment relationship. The re-entry position is an important indicator of future career progression and the value placed on international experience. Coping with new role demands is another factor in readjustment, along with loss of status and pay. Social factors can include loss of social standing and the accompanying loss of an expatriate lifestyle. Family readjustment is also important. A specific aspect is the effect of the international assignment upon the spouse/partner’s career, such as being re-employed and having international experience recognized. MNE responses to repatriates’ concerns focus on re-entry procedures. Issues covered include how repatriation affects staff availability, whether companies are measuring and obtaining a return on investment through international assignments, and the contribution of repatriates to knowledge transfer. The concepts of protean and boundary-less careers are introduced in terms of the international assignment and career outcomes. Designing effective repatriation programs, including the use of mentors and available forms of technology. Viewing repatriation as part of the expatriation process, as suggested in Figure 7.5, should remind those responsible for expatriation management of the need to prepare repatriates for re-entry and to recognize the value of the international experience to both parties. Links to other chapters and cases: Due to its focus on training, development, and careers this chapter has a clear link to the chapter on staffing, recruitment, and selection (Chapter 5) and performance management (Chapter 6). In addition, the various issues can be well discussed in the context of international compensation (Chapter 8). This chapter can be linked to various cases, depending on the topic the teacher would like to highlight. Case 8 can be used to highlight the various aspects of training, development, and careers. Furthermore, Case 1 can be used to focus more on training issues in a strategic context, while Case 5 provides some broader insights into the various choices of possible international assignment policies. Discussion Questions Summarize the key challenges faced in training expatriate managers. This question addresses material covered in the whole chapter, but most of the required information is covered in a series of headings in ‘Components of effective pre‐departure training programs’ (p. 182-190). Training: aims to improve employees’ current work skills and behaviors (as opposed to development, where the aim is to increase abilities for some future position or job); a way to build up human capital. Expatriation/international assignment: an important training and development tool. Expatriates: trainers as part of the transfer of knowledge between various units and responsible for the adaptation of systems and processes. Once an employee has been selected for an expatriate position, pre-departure training is considered the next critical step in attempting to ensure the expatriate’s effectiveness and success abroad. Pre-departure training is indicated as a subset of general training. The problem is that a large number of US multinationals in the past have been reluctant to provide even a basic level of pre-departure training. Studies reveal that one reason is that top management did not believe pre-departure training was necessary or effective, although nowadays this is changing. Essential components and challenges of pre-departure training are: Cultural awareness training: criteria for training decisions are the degree of expected interaction and the cultural similarity between the expatriate and the members of the host country. The focus should be on lifelong learning as well as on communication (verbal and nonverbal). Cultural awareness training can be characterized by three key dimensions (training methods, levels of training rigor, and duration of the training relative to the degree of interaction and culture novelty). Training methods can be described in three ways (information-giving, affective, and immersion). Two common problems can be limited time and money resources. Other contextual and situational factors, such as cultural toughness, length of assignment, and the nature/type of the job, may have a bearing on the content, method, and processes involved in the cultural awareness training program. Preliminary visits: problems may arise when the conditions in the host country are so poor that nobody wants to go, or when the aim of the preliminary visit is twofold—as part of a selection decision or as pre-departure training. Language instruction: a potential problem may be the ethnocentrism of Englishspeaking countries that do not see the need to learn the host country’s language. This can result in giving the advantage to the other person who is not English native speaker: ‘The other speaker controls what is communicated and what is understood. The monolingual English speaker has less room to maneuver, no possibility of finding out more than he is given. His position forces him to be reactive rather than proactive in the relationship. What he says and understands is filtered through the other speaker’s competence, over which he has no control’ (p. 186). Relocation assistance: poor HR support, such as a lack of mobility expertise and a poor attitude towards international assignees among locally-trained (host country) HR staff, as well as having no central area or person to go for advice or new information, are challenging points. Security briefings: The consultancy firm ORC found that in companies where expatriates were assigned to dangerous locations, the overwhelming majority (71 per cent) did not pay a danger pay allowance. Training for trainers: problems may arise if there is no fit between individual readiness to transfer knowledge and organizational receptivity. Practical limitations in general may be lack of time or/and resources. Assume you are the HR Director for an SME that has begun to use international assignments. You are considering using an external consulting firm to provide pre-departure training for employees, as you do not have the resources to provide this in-house. What components will you need covered? How will you measure the effectiveness of the pre-departure training program provided by this external consultant? This question is addressed on p. 182 in ‘Components of effective pre-departure training programs’ and on p. 190 in ‘The effectiveness of pre-departure training’. Components to be covered are cultural awareness, preliminary visits, language skills, relocation assistance, and training for trainers (p. 182). The effectiveness of the training program could be measured through interviews with returning expatriates, and could cover aspects such as cultural proficiency and job satisfaction (p. 191). How does an international assignment assist in developing a “cadre” of international operators? Why is it necessary to have such a cadre? This question refers to material covered on p. 192 in ‘Developing international teams’. International assignment: ‘Training ground’ for the international cadre. Team building is achieved by exposing employees to various parts of the global organization. This is accompanied by the development of global networks that often persist after the completion of the assignment. An international assignment contributes to training (gaining international experience and intercultural competence) and thus to managerial and organizational development. Benefits of international teams are: Fostered innovation, organizational learning, and knowledge-transfer. Enhanced horizontal communication and information flow by breaking down functional and national boundaries. Encouragement of diverse inputs into decisions, problem solving, and strategic assessments. Development of a global perspective and of shared values (thus informal, normative control through socialization). Why do some MNEs appear reluctant to provide basic pre-departure training? This question is addressed in various sections. Top management does not believe in the necessity or effectiveness of pre-departure training (p.181). Time and resource constraints (p.190), especially before the start of an international assignment. Effectiveness of programs for the success of an international assignment needs to be proven (see further details on p. 191). What factors contribute to re-entry shock? The text addresses this question in ‘Individual reactions to re-entry’ on pp. 199-205. Also see Figure 7.5 (p. 200). Job-related factors: career anxiety (loss of visibility and isolation, no post-assignment guarantee, workplace changes), work adjustment (re-entry position, employment relationship, devaluing experience), coping with new role demands, and loss of status and pay. Society factors: family adjustment, social networks, and the effect on a partner’s career. What are the objectives of a good mentoring system for international assignees? This question addresses material covered on pp. 211-212. Mentoring duties are considered to include: Maintaining contact with the expatriate throughout the assignment. Ensuring expatriates are kept up to date with developments in the home country. Ensuring expatriates are retrained in existing management development programs. Being responsible for assisting expatriates with the repatriation process, including assisting them to obtain a repatriation position. “Placing value on the international assignment assists repatriate retention”. Discuss this statement. This question is addressed in various sections in the chapter. Opportunities to use experience and recognition are forms of placing value on international assignments and constitute two of the five methods employed to reduce expatriate turnover (p. 199), whereas devaluing the overseas experience, e.g. in form of an inadequate re-entry position, is one factor that negatively influences repatriate adjustment in terms of turnover (p.203). For the MNE, a well-designed repatriation process includes valuing the international assignment and is important for three reasons: staff availability, return on investment of the international assignment, and knowledge transfer (pp. 205-211). o If an MNE does not value expatriate performance, the MNE’s ability to attract high-caliber staff for international assignments is lessened, and this can have a negative effect on the firm’s international activities in the long term (p. 206, see Figure 7.6). Not valuing the experience favors a self-initiated career orientation (i.e. pursuing a protean, global or boundary-less career). o Repatriate turnover represents a substantial financial and human capital loss for the firm (p. 208). If valuing is low and the home unit does not allow opportunities to share knowledge and information, knowledge transfer is a one-way activity and experience will remain person-bound (p. 210). Why is it important to measure return on investment of international assignments? Which indicators can be used? This question is mainly addressed on pp. 208-209 in ‘Return on investment (ROI).’ Expatriates are expensive (US MNEs spend around $1 million on each expatriate over the duration of a foreign investment). At the same time, international assignments are a risky way of developing employees (e.g. in terms of “expatriate failure” and repatriate turnover). Finding indicators is challenging, and there is uncertainty about how to measure ROI. A meaningful definition should include a cost-beneficial analysis of financial and nonfinancial data, measured against the purpose of the assignment: o Direct costs: relocation expenses, an itemized compensation package and other international assignee entitlements are accessible Easy to assess. Indirect, intangible, non-financial costs: these include the non-direct costs of expatriate failure or under-performance and the opportunity cost of not using a HCN More problematical to access. Intangible benefits (intellectual, social and human capital gains = improvements in the stock of knowledge and competence that result from a successful repatriation process): these are, for example, knowledge and skill transfer, management development, and relationship/network building. These results are quite challenging to access, as they are somewhat invisible, often tacit, and person-bound. ROI analysis also focuses on the international assignment period and can be an exercise to justify cost reduction measures (such as replacing expatriates with HCNs) rather than considering gains that accrue to the organization through repatriated staff. References: Dickmann, M. and Baruch, Y. (2011) Global Careers. New York: Routledge. Tharenou, P. and Caulfield, N. (2010) Will I stay or will I go? Explaining Repatriation by SelfInitiated Expatriates, Academy of Management Journal, 53 (5): 1009-1028. Chapter 8: INTERNATIONAL COMPENSATION Learning objectives In the introductory chapter we described international HR managers as grappling with complex issues. International managers must: (1) manage more activities from a broader perspective, (2) be more involved in the lives of their far-flung employees, (3) balance the needs of PCNs, HCNs, and TCNs, (4) control exposure to financial and political risks, and (5) be increasingly aware of and responsive to host country and regional influences. All of these issues and concerns are highlighted in stark contrast in a discussion of compensation issues. In this chapter students learn to: Examine the complexities that arise when firms move from compensation at the domestic level to compensation in an international context. Detail the key components of an international compensation program. Outline the two main approaches to international compensation (going rate and balance sheet approach) and the advantages and disadvantages of each approach. Introduce a third emerging approach to international compensation: Local Plus. Examine the special problem areas of taxation, valid international living cost data, and the problem of managing TCN compensation. They also examine recent developments and global compensation issues. Chapter summary In this chapter we examine the complexities that arise when firms move from compensation at the domestic level to compensation in an international context. It is evident from our review that compensation policy becomes a much less precise process than is the case in the domestic HR context. To demonstrate this complexity, we: Detail the key components of an international compensation program. Outline the two main approaches to international compensation (the going rate and the balance sheet), introduce a third new approach to compensation — Local Plus — and explain components as well as their advantages and disadvantages. Outline special problem areas such as taxation, obtaining valid international living costs data, and the problems of managing TCN compensation. Present global pay model that highlights the complexity and yet familiarity of pay practices in the global context. It is this combination of pay decisions based on strategic global standardization and sensitivity to changing local and regional conditions that characterizes the state of international pay practices. Posit that a strategic yet sensitive balance can only be achieved by creating and maintaining professional networks comprised of home office and local affiliate HR practitioners, outsourcing selected activities through specialist consultants, and close cooperation with local and regional governments and other key local institutions. Links to other chapters and cases: This chapter is strongly linked to the staffing, recruitment, and selection topics raised in Chapter 5, international performance management (Chapter 6), and training, development, and careers issues discussed in Chapter 7. Issues of transnational compensation can be deepened by using Case 3. Details of expatriate compensation can be discussed using Case 6, and compensation issues in the context of an international assignment policy can be discussed using Case 5. Discussion Questions What should be the main objectives for a multinational with regard to its compensation policies? The text addresses material in ‘Objectives of international compensation’ (p. 224) and identifies four objectives: Consistency with overall strategy, structure, and business needs of the MNE. Work to attract and retain staff in areas where the MNE has the greatest needs and opportunities. Policy should facilitate the transfer of international employees in the most costeffective manner for the firm. Give consideration to equity and ease of administration. Describe the main differences in the going rate and balance sheet approaches to international compensation. Regardless of the approach, international compensation has a number of key components: base salary, foreign service inducement and hardship premium, allowances (cost-of-living, housing, home leave, education, relocation allowances, and spouse assistance), and benefits (pp. 224-227). The base salary component can be linked to either the salary structure in the host country (going rate approach), or the home country (balance sheet approach). Examples and details of each can be found in the text on pp. 228-231 in ‘Approaches to international compensation of expatriates.’
Going Rate Approach (Figure 8.1, p.228) Balance Sheet Approach (Figure 8.3, p.229)
• Based on local market rates Relies on survey comparisons among: local nationals (HCNs), expatriates of the same nationality, expatriates of all nationalities Compensation based on the selected survey comparison Base pay and benefits may be supplemented by additional payments for low-pay countries • • • • • Basic objective is maintenance of home country living standards plus financial inducement Home country pay and benefits are the foundations of this approach Adjustments to home package to balance additional expenditure in the host country Financial incentives (expatriate/hardship premium) added to make the package attractive Most common system in usage by multinational firms
What are the key differences in salary compensation for PCNs and TCNs? Do these differences matter? This question addresses material found in ‘Differentiating between PCNs and TCNs’ (p. 239). If the going rate approach is used, there will be little difference between PCN and TCN compensation. Paying based on a balance sheet approach can be less or more expensive for the MNE, depending on the home rates of the respective expatriates. This approach may lead to large differences between different types of expatriates and in comparison to local employees. Justifying these differences can be difficult and should be rethought if the MNE focuses on retaining talented TCNs. Describe Local Plus compensation and explain the major challenges MNEs face when using this approach. This question addresses material found on p. 231 in ‘A third emerging approach to international compensation.’ ‘Local Plus’ is: The driving force behind cost savings in international assignments. Used for long-term assignments, permanent transfers, intra-regional transfers, and for assignments from low to high wage location. Especially suited to junior and middle management who show willingness to relocate. Increasing in use in the Asia-Pacific region. A hybrid version of the balance sheet (home-based) and going rate (host-based) approaches and includes the optimum benefits of both, namely: Based on the going rate (host) approach. Provides some benefits of the developmental policy, but on a greatly reduced basis. o Expatriates are often localized with some additional benefits provided to ensure retention. No tax equalization and ongoing allowances (e.g. cost of living). Initial allowances are typically phased out over the period of assignment (100% benefit year one, 50% benefit year two, 20% benefit year three). Major challenges: It tends to shift the power balance in the employment relationship in a way that increases expatriates’ power. As a result of their greater sacrifice and being forced to rely less on the organization to support some of their fundamental employment needs, which are often not compensated for in other non-financial ways (e.g. through improved career management support), Local Plus compensation can impact on expatriates’ job embeddedness in terms of commitment and loyalty. Tends to decrease the ties that bind expatriates to their firm. What are the main points that MNEs must consider when deciding how to provide benefits? This question is addressed in ‘Benefits’ (pp. 227-228) as well as ‘Taxation’ (pp.234237). Benefits include healthcare, pension plans/social security, life insurance, child allowances, and profit sharing/stock plans. The main points to be considered include: Relating to taxes, the main points to be considered include: Whether or not to maintain expatriates in home country programs, particularly if the MNE does not receive a tax deduction for it. Whether MNEs have the option of enrolling expatriates in host country benefit programs and/or making up any difference in coverage. Whether host country legislation regarding termination affects benefit entitlement. Whether expatriates should receive home country social security benefits or host country social security benefits. Whether benefits should be maintained on a home country or host country basis, who is responsible for the cost, whether other benefits should be used to offset any shortfall in coverage, and whether home country benefit programs should be exported to local nationals in foreign countries. Further benefits are vacations and special leave. Why is it important for MNEs to understand the compensation practices of other countries? MNEs should know about local traditions in compensation practices in order to have international pay politics that are in line with the local customs. They need to take into account local influence factors in order to be able to manage employees and to achieve a competitive advantage on an international level. This knowledge enables them to attract and retain local talents and direct their behavior. Especially if the MNE is likely to employ HCNs, then an understanding of the compensation practices of the host country is essential in order to be aware of the differences of the standardized MNE pay strategy in relation to the localized, traditional, and internalized pay strategy. Strategic necessity and contextual requirements may incrementally and grudgingly “move” pay practices away from a universalized and more toward a localized approach (p. 241). Explain how balancing the interests of global and local, occupational and functional perspectives might play out in a compensation decision scenario. Figure 8.1 (p. 241) provides a useful summary overview of ‘Complexity, challenges, and choices in global pay.’ Competing forces for local adaptation (polycentric strategy) and global standardization (ethnocentric strategy) are likely to be an important issue. Increasingly, we may combine pay packages across the vertical levels of analysis shown in Figure 8.1 and pay for a combination of personal, job, group, national, or corporate purposes. These composite pay systems are more complex, but they are also more flexible and responsive to diverse employee demands and changing global business conditions. References: Festing, M. and Perkins, S. (2008) Rewards for internationally mobile employees. In M. Dickmann, C., Brewster, and Sparrow, P. (Eds.) International Human Resource Management: A European Perspective, 2 ed., pp.150-173. London: Routledge. Festing, M., Engle, A., Dowling, P. and Sahakiants, I. (2012) ‘HRM Activities: Pay and Rewards,’ Chapter 7 in C. Brewster and W. Mayrhofer, (eds.) Handbook of Research in Comparative Human Resource Management, (Cheltenham, UK: Edward Elgar). Festing, M., Eidems, J. and Royer, S. (2007) ‘Strategic Issues and Local Constraints in Transnational Compensation Strategies: An Analysis of Cultural, Institutional and Political Influences,’ European Management Journal, April, Vol. 25, Issue 2: 118-131. Gerhart, B. (2008) ‘Compensation and National Culture,’ in L. Gomez-Mejia and S. Werner (eds.) Global Compensation: Foundations and Perspectives, (New York: Routledge), pp. 142157.
Chapter 9: INTERNATIONAL INDUSTRIAL RELATIONS AND THE GLOBAL INSTITUTIONAL CONTEXT Learning objectives In this chapter students learn to: Discuss the key issues in international industrial relations and the policies and practices of MNEs. Examine the potential constraints that trade unions may have on MNEs. Outline key concerns that trade unions have with regard to the activities of MNEs. Discuss recent trends and issues in the global workforce context. Discuss the formation of regional economic zones, such as the European Union, and the impact of opponents to globalization. Present issues of codes of conduct and nongovernmental organizations as MNEs. Discuss the HR implications of offshoring strategies. Chapter summary In this chapter we cover a range of institutional issues that confront MNEs in the global environment in which they conduct their business. In terms of international industrial relations, the discussion surrounding the formation of regional economic zones such as the European Union and the Asia-Pacific Economic Cooperation (APEC) supports the conclusion that transnational collective bargaining has yet to be attained by trade unions. It is argued that trade unions should opt for less ambitious strategies in dealing with multinationals, such as: (1) strengthening national union involvement in plant-based and company-based bargaining, (2) supporting research on the vulnerability of selective multinationals, and (3) consolidating the activities of company-based ITSs. Despite setbacks, especially with the regional economic integration issues discussed in this chapter, it is likely that trade unions and the ILO will pursue these strategies and continue to lobby, where possible, for the regulation of multinationals via the European Commission and the United Nations. It is also likely that opponents of globalization will continue to attempt to influence public opinion in the developed economies with campaigns against selected MNEs, with industrial relations policies and practices being a particular target. With globalization, what was once a domestic issue has now become in part an international issue and in turn raises public policy questions as to what healthcare costs US can firms be expected to fund in a globalized economy. With continuing change impacting on MNEs, due to globalization and the pressure to reduce costs by offshoring, the risks to corporate reputation inherent in failure to comply with internal and external codes of conduct are unlikely to diminish, and these factors will be ongoing issues in the foreseeable future. Links to other chapters: This chapter covers an important field, which is in the responsibility of the HRM departments of MNEs. While it may have an impact on HR practices it is nevertheless a very specific field, which can also be discussed independently from other HRM practices. Discussion Questions Why is it important to understand the historical origins of national industrial relations systems? This question is addressed in the introduction (p. 259). No industrial relations system can be understood without an appreciation of its historical origin. Industrial relations phenomena are an expression of the society in which they operate, of its characteristic features, and of the power relationships between different interest groups. Industrial relations cannot be understood without an understanding of the way in which rules are established and implemented and decisions are made in the society concerned. An interesting example of the effect of historical differences may be seen in the structure of trade unions in various countries. Underlying factors of these historical differences are: the mode of technology, methods of union regulation, ideological divisions, the influence of religious organizations, and managerial strategies. In what ways can trade unions constrain the strategic choices of multinationals? The text notes three ways in ‘Trade unions and international industrial relations’ (p.255): By influencing wage levels to the extent that cost structures may become uncompetitive. By constraining the ability of multinationals to vary employment levels at will. By hindering or preventing the global integration of multinational operations. Identify four characteristics of MNEs that give trade unions cause for concern. The text addresses this question in ‘The response of trade unions to MNEs’ (pp. 256257). Greater financial resources. Alternative sources of supply. The ability to move production facilities to other countries. A remote locus of authority. Production facilities in many industries. Superior knowledge and expertise in industrial relations. The capacity to stage an ‘investment strike’. How have trade unions responded to MNEs? Have these responses been successful? This question addresses material covered on pp. 258-259 in ‘Regulation of multinationals by international organizations.’ Trade unions have formed international trade secretariats (ITSs) or confederations of different national unions, lobbied for restrictive national legislation, and have attempted to achieve regulation of MNEs via the ILO code of conduct, which influenced the (voluntary) OECD guidelines for multinationals. Recognizing the limitations of voluntary codes of conduct, European trade unions continue to lobby the Commission of the European Union to regulate the activities of multinationals because, unlike the OECD, the commission of the EU can translate guidelines into law and has developed a number of proposals concerning disclosure of information to make multinationals more “transparent.” What evidence is there to show that corporate codes of conduct are effective? Material to this question is found on pp. 259-260. Effectiveness is influenced by the voluntariness of the code of conduct. Concerning the effectiveness of the voluntary OECD guidelines, there is some controversy in the literature (see discussion on p. 259). A weakness in the OECD’s instrument is that it does not represent any sort of formal undertaking on the part of the twenty-four member states which are signatories to it. The social forces of each separate country must apply pressure on their respective governments if they want the guidelines applied. A recent development of the OECD guidelines (May 2011) led to more recent, tougher standards. The updated guidelines include new recommendations on human rights abuse and company responsibility for their supply chains, making them the first intergovernmental agreement in this area. Codes of conduct issued by the Commission of the EU can be translated into law. For many firms this has led to the utility of belonging to an employer association such as the Federation of European Employers (www.fedee.com) to facilitate the challenge of managing across European national boundaries and accessing relevant information. This can be seen as a sign of effectiveness of the code of conduct in terms of its implementation. Material to this question is found on p. 261 in ‘Codes of conduct—monitoring HRM practices around the world.’ Concerning corporate codes of conduct, today we find a universal standard, similar to the ISO 9000 quality standard, called the Social Accountability 8000. The principles of this standard are drawn from UN human rights conventions. Compare the industrial development qualities of India and China from a global HR director's perspective. This question is addressed in ‘Managing human resources in “offshoring countries”.’
India China
- Business process outsourcing (BPO) industry and respective competencies - Good technological infrastructure, qualification and motivation - 3,1 Mio students graduate year at universities 20% of the population speaks English - Low salaries - Inexpensive manufacturing Around 1,5 Mio students graduate year at universities 10% of the population speaks English - Lower salaries than in India
- Recruitment, qualification, and retention problems
- HRM is a major weakness in BPO firms - Indian HRM is influenced by the caste system, social relationships, and politics - HRM system: informalities and less rationality - Strong influence of guanxi Poaching of skilled employees - Frequent change of jobs because of higher wages Previous strong influence of the state - Highly competitive situation
- HRM in the future: Increasing attrition rates Prevention of psychological and stressrelated problems, more flexibility in the workplace, creation of more interesting environment retention of qualified employees - HRM in the future: Take into account guanxi in hiring practices Fair environment and good management practices Link HRM with business strategy - Link systematically performance management, reward, and long-term motivation Coherence and continuity of enterprise training
Invest in RHCN
References: Bamber, G., Lansbury, R., and Wailes, N. (Eds) (2011) International and Comparative Employment Relations, 5th Ed., London: Sage.
Chapter 10: IHRM TRENDS AND FUTURE CHALLENGES Learning objectives In this final chapter we identify and comment on observed trends and future directions regarding: International business ethics and HRM. Mode of operation and IHRM. Ownership issues relating to the IHRM requirements of organizations other than the large multinational, such as non-government organizations (NGOs). Safety, security, and terrorism issues. It is important for the students to understand these issues in addition to the focus on contextual considerations and IHRM practices. Chapter summary and concluding remarks Throughout this textbook we have endeavored to highlight the challenges faced by firms as they confront human resource management concerns related to international business operations. This chapter is concerned with identified trends and future challenges—both managerial and academic—that are likely to have an impact on IHRM as a function and as a scientific field of study. We specifically address: International business ethics and HRM. Modes of operation other than wholly owned subsidiaries, and the IHRM activities that are required, such as training for contractual and project operations. Ownership issues relating to family-owned firms, and non-government organizations (NGOs) and the IHRM challenges specific to these organizations as they grow internationally that have remained relatively under-identified, despite their continuing importance in international business and global activities. The complex assessment and planning activities related to safety, security, and counterterrorist efforts. Research issues in IHRM and developments that are endeavoring to assist in understanding the intricacies and interrelationships between the IHRM function and IHR activities, firm internationalization, and strategic directions and goals. A consistent theme throughout this textbook has been the way in which IHRM requires a broader perspective of what operating internationally involves, and a clear recognition of the range of issues pertaining to all categories of staff operating in different functional, task, and managerial capacities is essential. As Poole41 stated in his editorial in the first issue of the International Journal of Human Resource Management in 1990, ‘international human resource management archetypically involves the world-wide management of people in the multinational enterprise.’ Links to other chapters: This chapter draws on knowledge from all previous chapters and mainly summarizes and outlines trends for future IHRM by highlighting selected fields. Discussion Questions What is your view of international initiatives to criminalize foreign bribery? This question is addressed on pp. 279-280 in ‘New global developments on the criminalization of bribery’: Bribery can be distinguished from so-called “gifts” and “facilitating” or “grease” payments. This question can be answered from different perspectives: ethical relativist, ethical absolutist, and ethical universalist. There is common agreement that bribery has numerous negative effects; for example, it undermines equity, efficiency, and integrity in the public service and undercuts public confidence in markets and aid programs, just to name a few. From an ethical universalist perspective (i.e. believing that there are fundamental principles of right and wrong which transcend cultural boundaries), it is important that international initiatives criminalize the practice of bribery. It might be useful to address multiple sides of bribery in these conventions: the supply side in the public sector, the private sector, as well as the demand side. Finally, it is important to consider loopholes in the law (see the example on p. 280). Identify a number of HRM problems that typically arise with expatriate assignments. In what ways might the core ethical values and guidelines identified in this chapter apply to them? Material can be found in ‘Ethics-related challenges for the HR function of the multinational enterprise’ (pp. 280-283): Questions of ethical relativism, absolutism, and universalism (see p. 279). Being left alone with ethical considerations. Unreasonable pressure to deliver financial results. Issues that may be useful for discussion include respect for cultural diversity, equity between TCNs and HCNs, gender equality with respect to expatriate assignments, the contractual implications of expatriate failure, career promises with respect to expatriate assignments, and the lack of labor- and HR-related legislation in some less developed countries. Beyond checklists and systemic analysis, what actions can MNEs take to reduce risks related to terrorism? What roles can HRM take in these processes? This question addresses material covered in ’External factors: Challenges in an uncertain world: Safety, security and counterterrorism’ (pp. 284-286). Risk assessment categories: disaster preparedness, in‐facility emergency and disaster security, industrial espionage, cyber‐terrorism, and out of facility fire and travel risks. Ways of analysis—ways of assessing potential risk from terrorist threats: Analyses on three levels: primary— ‘at the level of the individual person and firm’—at the micro level—‘specific regions, industries, or levels in international value chains’— and at the macro level— ‘the effect of a terrorist attack on the global environment… the world economy, consumer demand for goods and services, and reactions by supranational organizations such as the United Nations.’ o IHRM professionals may contribute to ‘stabilizing risk’ through recommendations that ‘harden’ processes in the value chain, recruit people with capabilities and skills relevant for these kinds of processes, and train employees in these processes and systems. Partitioning security risk into an external environmental dimension (geographic region of operation) and an internal firm dimension (industry, firm media profile, and national affiliation associated with the MNE). Low-risk firms in low-risk environments do not need to invest as heavily in security systems and protocols. High-risk firms in low-risk environments should follow security strategies that focus on hardening individual sites. Low-risk firms in high-risk environments can follow security strategies that disperse activities across the region and build redundant infrastructure, so that value chain activities in the high-risk region can be provided by out of region units. o High-risk firms in high-risk environments must invest much more in quite elaborate risk management strategies. What IHRM activities would be pertinent to the sending, by Médecins Sans Frontieres, of a medical team into a country such as Bangladesh? This question relates to material found in ‘Non‐government organizations (NGOs)’ (p. 284). Physical risk, such as the danger of staff being taken hostage and of having property damaged, is common to firms operating in hostile contexts. Shared values and beliefs may be internalized to a greater degree by the NGO members than in MNEs due to the nature of the NGO. References: Burke, R. and Coopers, C. (eds.) (2008) International Terrorism and Threats to Security: Managerial and Organizational Challenges. Cheltenham, U.K.: Edward Elgar Publishing. Fortanier, F., Kolk, A., and Pinkse, J. (2011) Harmonization in CSR Reporting: MNEs and Global CSR Standards. Management International Review, 51 (5): 665-696. Lundby, K. and Jolton, J. (2010) (Eds), Going Global: Practical Applications and Recommendations for HR and OD Professionals in the Global Workspace (San Francisco, USA: Jossey-Bass, 2010). Instructor Manual for International Human Resource Management Peter J Dowling, Marion Festing , Allen D. Engle 9781408032091
