6.

3 Human Resource Management

Strategies

1
What Is Human Resource Management?
 Human resource management (HRM) - the
activities an organization carries out to utilize its
human resources effectively
 These activities include
odetermining human resource strategy
oStaffing
operformance evaluation
omanagement development
oCompensation
olabor relations

2
What is The Strategic Role of HRM in
International Firms?
 HRM can help the firm reduce the costs of value
creation and add value by better serving customer
needs.
 HRM is more complex in an international
business, where staffing, management
development, performance evaluation, and
compensation activities are complicated by
profound differences between countries in labor
markets, culture, legal systems, economic systems
etc.

3
HRM must also determine when to use
expatriate managers
ocitizens of one country working abroad
 who should be sent on foreign
assignments
 how they should be compensated
 how they should be trained
 how they should be reoriented when
they return home

4
 What Is A Staffing Policy?
 Staffing policy is concerned with the selection of
employees who have the skills required to
perform a particular job
o can be a tool for developing and promoting
the firm’s corporate culture
o the organization’s norms and value system
o a strong corporate culture can help the firm
implement its strategy
5
Three main approaches to staffing policy
1.The Ethnocentric Approach: fill key management
positions with parent-country nationals

2.The Polycentric Approach: recruit host country

nationals to manage subsidiaries in their own country,
and parent country nationals for positions at
headquarters

3.The Geocentric Approach: seek the best people,

regardless of nationality for key jobs
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1.Why Choose An Ethnocentric Staffing
Policy?
 Firms that pursue an ethnocentric policy believe that:
o there is a lack of qualified individuals in the host
country to fill senior management positions
o it is the best way to maintain a unified corporate
culture
o value can be created by transferring core
competencies to a foreign operation via parent
country nationals
o it makes sense with an international strategy
 But
o it limits advancement opportunities for host country
nationals
o it can lead to "cultural myopia“ the firm's failure to
understand host-country cultural differences that
require different approaches to marketing and
management. 7
2.Why Choose Polycentric Staffing Policy?
 The polycentric approach
o makes sense for firms pursuing a localization
strategy
o can minimize cultural myopia
o may be less expensive to implement than an
ethnocentric policy
 But
o host country nationals have limited opportunities to
gain experience outside their own country and so
cannot progress beyond senior positions in their own
subsidiaries
o a gap can form between host country managers and
parent country managers 8
3.Why Choose Geocentric Staffing Policy?
 The geocentric approach
o is consistent with building a strong unifying
culture and informal management network
o makes sense for firms pursuing a global or
transnational strategy
o enables the firm to make the best use of its
human resources
o builds a squad of international executives who
feel at home working in a number of different
cultures
 But
o can be limited by immigration laws
o is costly to implement

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Which Staffing Policy Is Best?

10
What Is Expatriate Failure?
 Firms using an ethnocentric or geocentric staffing
strategy will have expatriate managers
 Expatriate failure is the premature return of an
expatriate manager to the home country
o each expatriate failure can cost between $40,000
and $1 million
o between 16 and 40% of all American expatriates
in developed countries fail and almost 70% of
Americans assigned to developing countries fail

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Why Do Expatriate Managers Fail?
The main reasons for expatriate failure are
othe inability of an expatriate's spouse to
adapt
othe manager’s inability to adjust
oother family-related reasons
othe manager’s personal or emotional
maturity
othe manager’s inability to cope with larger
overseas responsibilities

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How Can Firms Reduce Expatriate Failure?
 Firms can reduce expatriate failure through
improved selection procedures
 Four dimensions that predict expatriate success are:

1.Self-orientation - the expatriate's self-esteem, self-

confidence, and mental well-being
2.Others-orientation - the ability to interact effectively
with host-country nationals. Develop long-lasting
friendships with host country nationals. Willingness to
use the host-country language.
3.Perceptual ability - the ability to understand why
people of other countries behave the way they do.
4.Cultural toughness – the ability to adjust to the
posting 13
What is Training and Management
Development?
After selecting a manager for a position, training
and development programs should be implemented
 Training focuses upon preparing the manager for a
specific job
 Management development is concerned with
developing the skills of the manager over time
◦ gives the manager a skill set and reinforces
organizational culture
Historically, most firms focus more on training than
on management development

14
Why Is Training Important for Expatriate
Managers?
 Training can reduce expatriate failure
o Cultural training - fosters an appreciation for the
host country's culture
o Language training - an exclusive reliance on
English diminishes an expatriate's ability to
interact with host country nationals
o Practical training - helps the expatriate and her
family ease themselves into day-to-day life in the
host country
o But, studies show only about 30% of managers
sent on one- to five-year expatriate assignments
received training before their departure
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What Are The Key Issues In Compensating
Expatriates?
Two key issues on compensation

1.How to adjust compensation to reflect differences

in economic circumstances and compensation
practices

2.How to pay expatriate managers

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How Should National Differences in
Compensation be Treated?
 Question: Should pay be equalized across
countries?
 Many firms have recently moved toward a
compensation structure that is based on global
standards
o especially important in firms with a geocentric
staffing policy
 But, most firms still set pay according to the
prevailing standards in each country

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How Should Expatriates be Paid?
 A compensation package has five components
1.Base salary - normally in the same range as the
base salary for a similar position in the home
country
o can be paid either in the home currency or in
the local currency
2.Foreign service premium - extra pay the expatriate
receives for working outside his country of origin
o generally offered as an incentive to accept
foreign assignments

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3.Various allowances - hardship, housing,
cost-of-living, education
4.Tax differentials - may have to pay income
tax to both the home country and the host-
country governments no reciprocal tax treaty
exists
o company usually covers extra tax
assessments
5.Benefits – many firms provide the same
level of medical and pension benefits abroad
that employees receive at home
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