6.3.

Human Resource
Management Strategies

What is human resource

management?
 What Is Human
Resource Management?
• Human resource management (HRM) - the activities
an organization carries out to utilize its human
resources effectively.
• These activities include;
– Determining human resource strategy
– Staffing
– Performance evaluation
– Management development
– Compensation
– Labor relations
• Firms need to ensure there is a fit between their
human resources practices and strategy
 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
– More complex in an international business
• Differences between countries in labor markets,
culture, legal systems, economic systems, etc.
• HRM must also determine when to use expatriate
managers;
– Citizens 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
 What Is A Staffing Policy?

• Staffing policy is concerned with the selection of

employees who have the skills required to perform a
particular job.
– Can be a tool for developing and promoting the firm’s
corporate culture;
• the organization’s norms and value system

– A strong corporate culture can help the firm implement

its strategy
• 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
Why Choose An Ethnocentric Staffing Policy?

• Firms that pursue an ethnocentric policy believe that

– there is a lack of qualified individuals in the host
country to fill senior management positions
– it is the best way to maintain a unified corporate
culture
– value can be created by transferring core competencies
to a foreign operation via parent country nationals
– it makes sense with an international strategy
• But
– it limits advancement opportunities for host country
nationals
– it can lead to "cultural myopia"
 Why Choose A Polycentric
Staffing Policy?
• The polycentric approach
– makes sense for firms pursuing a localization strategy
– can minimize cultural myopia
– may be less expensive to implement than an ethnocentric
policy
• But
– host country nationals have limited opportunities to gain
experience outside their own country and so cannot
progress beyond senior positions in their own subsidiaries
– a gap can form between host country managers and parent
country managers
 Why Choose A Geocentric
Staffing Policy?
• The geocentric approach
– is consistent with building a strong unifying
culture and informal management network
– makes sense for firms pursuing a global or
transnational strategy
– enables the firm to make the best use of its human
resources
– builds a cadre of international executives who feel
at home working in a number of different cultures
• But
– can be limited by immigration laws
– is costly to implement
Which Staffing Policy
Is Best?

Comparison of Staffing Approaches

 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
– each expatriate failure can cost between $40,000 and $1
million
– between 16 and 40% of all American expatriates in
developed countries fail and almost 70% of Americans
assigned to developing countries fail
 Why Do Expatriate
Managers Fail?
• The main reasons for expatriate failure are
– the inability of an expatriate's spouse to adapt
– the manager’s inability to adjust
– other family-related reasons
– the manager’s personal or emotional maturity
– the manager’s inability to cope with larger
overseas responsibilities
 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
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
 Why Is A
Global Mindset Important?
• A global mindset may be the fundamental attribute of
a global manager
– cognitive complexity
– cosmopolitan outlook
• A global mindset is often acquired early in life from
– a family that is bicultural
– living in foreign countries
– learning foreign languages as a regular part of family life
 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
 Why Is Training Important For Expatriate
Managers?
• Training can reduce expatriate failure
– Cultural training - fosters an appreciation for the host
country's culture
– Language training - an exclusive reliance on English
diminishes an expatriate's ability to interact with host
country nationals
– Practical training - helps the expatriate and her family ease
themselves into day-to-day life in the host country
• But, studies show only about 30% of managers sent on one- to
five-year expatriate assignments received training before their
departure
 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
 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
– especially important in firms with a geocentric
staffing policy
• But, most firms still set pay according to the
prevailing standards in each country
 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
– 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
– generally offered as an incentive to accept foreign
assignments
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
– 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