Managing human resources in an international business chapter 13

CHAPTER 13

HRIS and International HRM

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REGIONAL TRADE ZONES

Asia-Pacific Economic Cooperation

Members account for nearly 25% of world trade

North American Free Trade Agreement

Created a free trade zone among Canada, Mexico, and the U.S.

European Union

Single largest market

ASEAN and SAARC

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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INCREASING IMPORTANCE OF HR TECHNOLOGY

Imported products increase competition.

Deregulation changes the business environment.

U.S. companies must expand their markets globally.

Globalization means managing human resources around the world.

The aggregate world exports as a percentage of world gross domestic products (GDP) increased from 11.6% in 1970 to 30.7% in 2006.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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INCREASING IMPORTANCE OF HR TECHNOLOGY

Deregulation has increased market accessibility.

There has been an increase in international mergers and acquisitions.

Increased awareness of the existence of talented human capital throughout the world

Availability and cost-effectiveness of computer technology

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TYPES OF INTERNATIONAL BUSINESS OPERATIONS

International Corporation – Uses its existing core competencies to expand operations into foreign markets. These organizations compete in the global marketplace by exporting existing products and eventually opening facilities in other countries.

Multinational Corporation – More complex international business operation that operates as fully autonomous units in multiple countries in an attempt to capitalize on lower production and distribution costs.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TYPES OF INTERNATIONAL BUSINESS OPERATIONS

Global Corporations – Similar to multinational corporations. However, global corporations integrate their operations worldwide through a centralized home office. Global corporations emphasize flexibility and mass customization to meet differing customer needs worldwide.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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GOING GLOBAL

The top IHRM-related challenges facing global organizations:

Cultural differences (47%)

Lack of resources (40%)

Technology/systems issues (39%)

Time zone differences (35%)

Top HR global data being maintained in HR systems:

Core HR (86%)

Compensation (71%)

Performance (45%)

Payroll (42%)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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DIFFERENCES IN HR MANAGEMENT IN MULTINATIONAL ENTITIES

More functions and activities

Broader perspective

More involvement in personal lives

Changes due to workforce mix

Risk exposure

More external influences

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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MANAGING DIFFERENT TYPES OF EMPLOYEES IN MNEs

Global diversity and inclusion

Education

Political/legal system

Economic system

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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MANAGING EMPLOYEES IN A GLOBAL CONTEXT

Types of employees

Expatriates

Parent-country nationals (PCN)

Host-country nationals (HCN)

Third-country nationals (TCN)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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HR PROGRAMS IN GLOBAL ORGANIZATIONS

Major issues include the following:

International staffing

Selecting global managers: managing expatriates

Training for expatriates and other employees

Performance appraisals in MNEs

Managing international compensation

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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INTERNATIONAL STAFFING

Home-Country Nationals

Staffing the organization with expatriates (PCNs) is advantageous because the organization can rely on the talent currently available.

Host-Country Nationals

Staffing positions with HCNs provides a number of advantages for the MNE. HCNs are less costly, in terms of both time and money.

Third-Country Nationals

TCNs bring a different and often broad experience to the organization. TCNs add an international outlook to the workforce.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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SELECTING GLOBAL MANAGERS: MANAGING EXPATRIATES

Success in selecting expatriates is difficult due the following factors:

The cultural environment of countries

Expatriate failure and its causes

Selection criteria and procedures for expatriates

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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CULTURAL ENVIRONMENT OF COUNTRIES

Country culture will have an effect on all of the activities and programs administered by HR.

Hofstede’s five dimensions on which the cultures of countries differ

education/human capital

values/ideologies

social structure

religious beliefs

communication

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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EXPATRIATE FAILURE AND ITS CAUSES

Defined as the return of an expatriate to the home country before the period of the assignment has been completed.

Two categories of costs: direct and indirect

Major factor affecting expatriate failure is the inability to adjust to the new situation and culture by the expatriate and her or his family.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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WHY DO EXPATRIATES FAIL?

Family adjustment

Lifestyle issues

Work adjustment

Bad selection

Poor performance

Other opportunities arise

Business reasons

Repatriation issues

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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SELECTION CRITERIA AND PROCEDURES FOR EXPATRIATES

Two general categories: individual and situational

Individual

Technical ability

Cross-cultural suitability – language ability, cultural empathy, adaptability, and a positive attitude toward the assignment in the specific country

Family requirements – adjustment of the accompanying spouse/partner and children

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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SELECTION CRITERIA AND PROCEDURES FOR EXPATRIATES

Situational factors

Country/cultural requirements could include work permits and visas

Opportunity for the expatriate, spouse/partner, and the children to learn another language

MNE requirements could involve getting permission from the host country for the selection of any expatriate

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TRAINING AND DEVELOPMENT OF EXPATRIATES

Purposes of expatriate training

To supplement the selection process and assist the expatriate and family to adjust to the new situation

Economic: the potential direct and indirect costs of expatriate failure relative to the amount of the investment is obvious.

Predeparture training

Repatriation training

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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EMPHASIS IN CROSS-CULTURAL TRAINING PROGRAMS

Expatriates must be clear about their own cultural background.

Expatriates must understand the particular aspects of culture in the new work environment.

Expatriates must learn to communicate accurately in the new culture.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TOPICS FOR PREDEPARTURE TRAINING FOR EXPATRIATES

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TOPICS FOR PREDEPARTURE TRAINING FOR EXPATRIATES

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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TRANSFER OF TRAINING

The training methods would attempt to immerse the expatriate in the host country’s culture through assessment centers, simulations, sensitivity training, and extensive language training.

The use of the HRIS to analyze the success or failure of these training programs will enable the MNE to make more effective decisions about expatriates and their training in the future.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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APPRAISING EXPATRIATE PERFORMANCE IN MNEs

What performance criteria should be appraised?

The specific job-related competencies of the expatriate manager

Three non-job-related qualities they need to possess to perform their role effectively

Possess cross-cultural interpersonal skills

To understand and have sensitivity to differences in norms, laws, and cultures

Capable of adapting to uncertain and unpredictable circumstances

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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APPRAISING HCNs AND TCNs PERFORMANCE IN MNEs

PCN managers need to be sensitive to cultural differences in appraising performance (e.g., in Japan, discussing the negative aspects of an employee’s performance may be taken as an insult).

Appraisals are used to determine pay increases and promotional decisions, training opportunities, and dismissal decisions for HCNs and TCNs.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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MANAGING INTERNATIONAL COMPENSATION

Most complex but critically important function of the IHRM department

IHRM compensation manager must be aware of differences in taxation, labor laws affecting compensation and benefits, currency fluctuations, and cost-of-living differences within and between countries where the MNE has a presence.

Critical importance of compensation management in subsidiaries is its link to the strategy of the MNE

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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COMPENSATION POLICY OBJECTIVES IN MNEs

First objective for an MNE is to align its compensation administration with the strategy of the firm.

Second objective is to motivate employees’ behaviors, which is complicated since multiple countries and cultures are involved.

Third objective of compensation policy for an MNE is that it must be perceived as fair by the employees.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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THE COMPONENTS OF INTERNATIONAL COMPENSATION

Base salary and a set of benefits

Foreign service or hardship premium for expatriates

Other premiums for “risk level” of the assignment in the country

Between- and within-country cost of living adjustments (COLAs)

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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APPROACHES TO INTERNATIONAL COMPENSATION

Going rate approach or “host-country” approach: The base salary for international employees is tied to the salary levels in the host country. Expatriate would earn pay that is comparable with the salaries of employees in the host country.

“Balance sheet” approach: Has as its goal the maintenance of a home-country living standard plus a financial inducement for accepting an international assignment.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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HRIS APPLICATIONS IN MNEs

HRM in an MNE is exceedingly more complex than in a domestic firm.

Organizational structure for effectiveness

IHRM-HRIS administrative issues

HRIS applications in MNEs

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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HRIS APPLICATIONS: STRUCTURE FOR EFFECTIVENESS

The issue of the most effective structure for the operation of an HRIS in an MNE has been a “moving target.”

“Structure does not drive success—people do.” In building an organizational structure for an HRIS in an MNE, it would seem very reasonable to consider “thinking locally and acting globally” to create an HRIS structure for the entire MNE that is sensitive to local concerns first.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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HRIS APPLICATIONS IN IHRM: ADMINISTRATIVE ISSUES

Service-oriented architecture (SOA) – The SOA is focused on providing a service for a function that is well-defined, self-contained, and context and platform independent that adds value to the organization’s business purpose.

Outsourcing, offshoring, and insourcing – MNEs were the first organizations to outsource many of their jobs that required low levels of skills (e.g., call centers).

Data privacy and security – The MNE has to create additional safeguards to be in compliance with security and privacy laws and regulations in different countries.

Kavanagh, Human Resource Information Systems 4e. SAGE Publications, 2018.

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