Chapter 16 – Managing Human Resources Globally
Chapter Sixteen: Managing Human Resources
Globally
Welcome to your guide to teaching Chapter Fifteen: Managing Human
Resources Globally!
This guide will provide you with a chapter summary, learning objectives, lecture
outlines, solutions to in-chapter case questions and end of chapter discussion questions
and possible responses.
Chapter Sixteen Roadmap
We hope you find each chapter of your Instructor Manual practical and useful, but also,
exciting! You can adapt the chapter text, the PowerPoints, and the video to work in an online
class environment, a guided independent study environment, or a face to face or on-ground
environment.
When presenting Chapter Sixteen, have the students first read the chapter and
encourage them to absorb the “big picture” of “Managing Human Resources Globally.”
Use the PowerPoint for Chapter Sixteen frame your lecture.
Have students read and discuss the cases and their respective questions.
Have students validate their knowledge of the chapter by working through the discussion
questions at the end of the chapter.
Lastly, have students review, journal, or discuss the Key Vocabulary Terms at the end of
the chapter.
ROADMAP: THE LECTURE
MANAGING HUMAN RESOURCES GLOBALLY
Chapter Summary
This chapter discusses the HR issues that organizations must address in a world of global
competition. The chapter begins by describing how the global nature of business is affecting
human resource management in modern organizations. Then, it identifies the aspects of global
differences that affect the organization’s decisions about human resources. The following
sections explore HR planning, selection, training, and compensation practices in international
settings. Finally, the chapter examines guidelines for managing employees sent on international
assignments.
Learning Objectives
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Chapter 16 – Managing Human Resources Globally
After studying this chapter, the student should be able to:
1. Summarize how the growth in international business activity affects human resource
management.
2. Identify the factors that most strongly influence HRM in international markets.
3. Discuss how differences among countries affect HR planning at organizations with
international operations.
4. Describe how companies select and train human resources in a global labor market.
5. Discuss challenges related to managing performance and compensating employees from other
countries.
6. Explain how employers prepare managers for international assignments and for their return
home.
I. Introduction
This opening vignette discusses the challenges that HR professionals face in trying to get
employees to be as healthy as possible. It is even harder for employees to try to be healthy
when working in a different country where pollution and disease is common. American Express
launched a program called Healthy Living and has made it available in 16 of the 45 countries it
operates in and has plans to expand the program
II. HRM in a Global Environment
1. The environment in which organizations operate is rapidly becoming globalized.
2. Factors behind the trend toward expansion into global markets include:
a. Foreign countries can provide a business with new markets in which there are millions
or billions of new customers
b. Companies can set up overseas operations and operate them with lower labor costs
c. Thanks to advances in telecommunications and information technology, companies
can more easily spread work around the globe, wherever they find the right mix of
labor costs and abilities.
d. Global activities are simplified and encouraged by trade agreements among nations
i. North American Free Trade Agreement (NAFTA)
3. The World Trade Organization (WTO) resolves trade disputes among more than 100
participating nations.
4. As international trade increases, so do the demands on human resource management.
For example, organizations with customers or suppliers in other countries need
employees who understand those customers or suppliers and organizations that operate
facilities in other countries need to understand the laws and customs that apply to
employees in those countries.
5. The various demands of international activities require managers to understand HRM
principles and practices in global markets.
A. Employees in an International Workforce
1. When organizations engage in international activities, their employees are likely to
becitizens of more than one country.
a. Parent country – the country in which the organization’s headquarters is located.
b. Host country – the country (other than the parent country) in which the
organization operates a facility.
c. Third country – refers to a country that is neither the parent country nor the
host country
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Chapter 16 – Managing Human Resources Globally
2. In general, employees assigned to work in another country are called expatriates.
3. The extent to which organizations use host-country and third-country nationals varies,
with the practice more common in some countries.
B. Employers in the Global Marketplace
1. Just as there are different ways for employees to participate in international business
so there are different ways for employers to participate.
2. Figure 16.1, Levels of Global Participation, depicts the major levels of global
participation.
3. Most organizations begin by serving customers and clients within a domestic
marketplace. If it is successful, the organization may expand operations to other
domestic locations. As the organization continues to grow, it often begins to meet the
demands from customers in other countries. The usual way that a company begins to
enter foreign markets is by exporting or shipping domestically produced items to other
countries to be sold there.
4. International organization – an organization that has set up operations in one or
more foreign countries.
5. While international companies build one or a few facilities in another country,
multinational companies go overseas on a broader scale. In general, when
organizations become multinationals, they move production facilities from relatively
high-cost locations to lower-cost locations in an effort to minimize production and
distribution costs.
6. Global organizations – flexible organizations that compete by offering top products
tailored to segments of the market while keeping costs as low as possible. These
organizations utilize cultural differences as an advantage.
7. A global organization needs a transnational HRM system. This is a type of HRM
system that makes decisions from a global perspective, includes managers from
many countries, and is based on ideas contributed by individuals representing a
variety of cultures.
III. Factors Affecting HRM in International Markets
1. Organizations that operate in more than one country must be aware of the differences in
culture, education levels, economic systems, and political-legal systems.
A. Culture
1. The most important influence on international HRM is the culture – a community’s set
of shared assumptions about how the world works and what deals are worth striving
for – in which a facility is located.
2. Culture is important to HRM for two reasons:
a. It often determines the other three international influences and can greatly affect
a country’s laws
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Chapter 16 – Managing Human Resources Globally
b. It influences what people value and often determines the effectiveness of various
HRM practices
3. Five dimensions of culture as identified by Geert Hofstede in his classic study of
culture include:
a. Individualism/collectivism – describes the strength of the relation between an
individual and other individuals in the society.
b. Power distance – concerns the way the culture deals with unequal distribution of
power and defines the amount of inequality that is normal.
c. Uncertainty avoidance – describes how cultures handle the fact that the future is
unpredictable.
d. Masculinity/femininity – describes the amount to which the culture values
characteristics that have traditionally been considered masculine or feminine.
e. Long-term/short-term orientation – describes whether the focus of cultural values
is on the future or the past and present.
4. Cultural characteristics influence the ways members of an organization behave
toward one another, as well as their attitudes toward various HRM practices.
5. Culture also strongly influences the appropriateness of HRM practices.
6. Cultural differences can affect how people communicate and coordinate their
activities.
7. Because of the challenges brought forth by cultural differences, organizations must
prepare managers to recognize and handle cultural differences.
HR Oops!
Cross-Cultural Management Mishaps
Andrew Pickup left the United Kingdom to manage in Singapore. He continued to use his direct
style for getting feedback but soon found the Singapore people found his style to be too
forward. Debbie Nicol, an Australian, took an assignment in Dubai and found that
during a training sessions she needed to allow for prayer breaks to accommodate the
employees. Both situations bring to the forefront the importance of understand the
culture in which you are operating.
B. Education and Skill Levels
1. Countries differ in the degree to which their labor markets include people with
education and skills of value to employers.
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Chapter 16 – Managing Human Resources Globally
2. Educational opportunities vary from one country to another. In general, spending on
education is greater per pupil in high-income countries than in poorer countries.
3. The education and skills levels of a country’s labor force affect the extent to which
companies want to operate there.
C. Economic System
1. A country’s economic system includes whether the economy is based on capitalism
or socialism as well as the government’s involvement in the economy through taxes,
price controls, and other activities.
2. The health of an economic system affects human resource management. In
developed countries with great wealth, labor costs are relatively high.
3. In general, socialist systems take a higher percentage of each worker’s income as
the worker’s income increases. Capitalist systems tend to let workers keep more of
their earnings.
4. Since the amount of take-home pay a worker receives after taxes may differ from
country to country, pay structures are more complicated when they cross national
boundaries.
D. Political-Legal System
1. A country’s political-legal system – its government, laws, and regulations – can
strongly affect human resource management. The country’s laws often dictate the
requirements for certain HRM practices such as hiring, firing, training, layoffs, and
compensation. A country’s laws and regulations often reflect its cultural values.
2. Laws and regulations in other countries reflect the norms of their culture.
3. An organization that expands internationally must gain expertise in the host
country’s legal requirements and ways of dealing with its legal system, often leading
organizations to hire one or more host country nationals to help in the process.
IV. Human Resource Planning in a Global Economy
1. As economic and technological change creates a global environment for organizations,
human resource planning is involved in decisions about participating as an exporter or
an international, multinational, or global company.
2. Decisions about where to locate include HR considerations such as the cost and
availability of qualified workers.
6. Figure 16.2, Emotions Associated with a Foreign Assignment, identifies the cycle of
emotions experienced by individuals involved in overseas assignments.
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Chapter 16 – Managing Human Resources Globally
7. Culture shock – the disillusionment and unfreezing of ideas that occur during the
process of adjusting to a new culture.
VI. Training and Developing a Global Workforce
1. In an organization whose employees come from more than one country, some special
challenges arise with regard to training and development such as:
a. Training and development programs should be effective for participating employees
regardless of their country of origin
b. Employers need to provide the employees with training in how to handle challenges
associated with working in a foreign country
A. Training Programs for an International Workforce
1. To develop effective training programs for an international workforce, the developers
must ask certain questions:
a. What are the objectives of the training and its content?
b. What training techniques, strategies, and media will be used?
c. What other interventions and conditions must be in place for the training to meet
its objectives?
d. Who should be involved in reviewing and approving the training program?
2. The training program should consider international differences such as economic,
educational, and cultural differences. Table 16.1 provides examples of how
cultural characteristics can affect training design.
B. Cross-Cultural Preparation
1. Another aspect of training that applies to a global workforce is preparing employees
to work across national and cultural boundaries.
2. Cross-cultural preparation – training to prepare employees and their families for
an assignment in a foreign country. This training is necessary in all three phases of
an international assignment including preparation for departure, the assignment
itself, and preparation for the return home.
VII. Performance Management Across National Boundaries
1. Organizations have to consider legal requirements, local business practices, and
national cultures when they establish performance management methods in other
countries.
2. The extent to which managers measure performance may vary from one country to
another.
VIII. Compensating an International Workforce
1. Compensation includes decisions about pay structure, incentive pay, and employee
benefits. All of these decisions become more complex when an organization has an
international workforce.
A. Pay Structure
1. Figure 16.3, Earnings in Selected Occupations in Three Countries, identifies how
pay structures can differ substantially across countries in terms of both pay level and the
relative worth of jobs.
2. The differences in pay level and relative worth of jobs create a dilemma for global
companies. Should pay levels and differences reflect what workers are used to in their
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Chapter 16 – Managing Human Resources Globally
own countries or should they reflect the earnings of colleagues in the country of the
facility or earnings at the company headquarters? Dilemmas such as these make a
global compensation strategy important as a way to show employees that the pay
structure is designed to be fair and related to the value that employees bring to the
organization.
3. Cultural and legal differences also can affect pay structure. Some countries, including
Colombia, Greece, and Malaysia, require that companies provide salary increases to
employees earning minimum wage. In Venezuela, employers must provide employees
with a meal allowance. In Mexico and Puerto Rico, employers must pay holiday
bonuses. Organizations with a global pay strategy must adjust the strategy to account
for local requirements and determine how pay decisions for optional practices will affect
their competitive standing in local labor markets.
B. Incentive Pay
1. Organizations must make decisions with regard to incentive pay such as bonuses
and stock options.
2. The United States and Europe differ in the way they award stock options. European
companies usually link the options to specific performance goals. As competition in
European labor markets increases, experts predict that companies not offering
options will have a harder time recruiting the best employees.
C.Employee Benefits
1. Decisions about benefits must take into account the laws of each country involvedas
well as employees’ expectations and values in those countries.
2. Figure 16.4, Normal Annual Hours Worked in Manufacturing Relative to United
States, compares the number of hours the average manufacturing employee works
in various countries.
IX. International Labor Relations
1. Companies that operate across national boundaries often need to work with unions in
more than one country.
2. While the organizations establish policies and goals for labor relations, overseeing
labor agreements and monitoring labor performance, the day-to-day decisions about
labor relations are usually handled by each foreign subsidiary. The reason for this is
that labor relations on an international scale involves differences in laws, attitudes, and
economic systems as well as differences in negotiation styles.
3. International labor relations must take into account that negotiations between labor and
management take place in different social context not just different economic and legal
contexts.
X. Managing Expatriates
1. At some point, most international and global organizations assign managers to
foreign posts.
2. The same kinds of HRM principles that apply to domestic positions can help
organizations avoid mistakes in managing expatriates.
HRM Social
Online Communities to Support Expatriates’ Spouses
A common reason why expatriate assignments fail is because the spouse in dissatisfied.
Employers are now seeing the value of helping expatriate spouses connect and many are using
social network sites to bring the spouses together.
Discussion Questions with Possible Responses
1. What pros and cons do you see in having an organization set up ist own social network
for accompanying spouses?
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Chapter 16 – Managing Human Resources Globally
Answers will vary. Some pros are that it is made easy for spouses to connect and it is a
formal network for sharing information. A con could be that if the spouse isn’t happy, the
person could negatively impact other spouses.
2. What pros and cons to you see in referring an accompanying spouse to an outside
social network?
Answers will vary and be similar to #1
A. Selecting Expatriate Managers
1. The challenge of managing expatriate managers begins with determining which
individuals in the organization are most capable of handling an assignment in
another country.
2. Depending on the nature of the assignment and the culture where it is located, the
selected expatriate needs to possess specific skills, learning styles, and approaches
to problem solving.
3. A successful expatriate manager must be sensitive to the host country’s cultural
norms, flexible enough to adapt to those norms, and strong enough to survive the
culture shock of living in another culture.
4. If the manager has a family, the family members must be able to adapt to a new
culture. Adaptation requires three kinds of skills:
a. Ability to maintain a positive self-image and feeling of well-being.
b. Ability to foster relationships with host-country nationals.
c. Ability to perceive and evaluate the host country’s environment accurately.
5. Table 16.2 identifies topics that should be addressed in assessing a
candidate’s ability to adapt to a new environment.
6. The interviewer should be certain to give candidates a clear and complete preview
of the assignment and the host-country culture.
B. Preparing Expatriates
1. Once the organization has selected a manager for an overseas assignment, it is
necessary to prepare that person through training and development. This process
should include the employee’s spouse and family members.
2. Preparation for expatriate assignments often focuses on cross-cultural training. This
is training in what to expect from the host country’s culture.
3. Figure 16.5, Impressions of Americans: Comments by Visitors to the United
States, identifies some of the perceptions of foreign visitors to the U.S.
4. Employees preparing for foreign assignments need information about housing,
schools, recreation, shopping, and health care facilities in the country where they
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Chapter 16 – Managing Human Resources Globally
will be living. Ability to adequately communicate in the new country is also of
importance.
5. Preparation of the expatriate should include career development activities. The
expatriates should discuss with their managers how the foreign assignments fit into
their career path and what types of positions they can expect upon their return.
6. When the employee leaves for the assignment, the preparation process should
continue. They need the opportunity to discuss their experiences with other
expatriates in order to learn from their successes and failures. The organization
should provide a host-country mentor to help the employees understand their
experiences.
C. Managing Expatriates’ Performance
1. Performance management of expatriates requires clear goals for the overseas
assignment and frequent evaluation of whether the expatriate employee is on track
to meet those goals.
2. HR should work with management to develop criteria measuring the success of the
assignment.
Did You Know?
Priciest Cities Are Spread Over Three Continents
Expatriates spend more for housing, transportation, food, clothing, and other living expenses in
Luanda, Angola, than in any other major city, according to a survey by Mercer Human
Resources Consulting. Rankings are influenced by the relative value of national currencies, as
well as well as by political strife and natural disasters. The least expensive city among those
studied was Karachi, Pakistan, where security concerns have reduced the demand for
housing6.
D. Compensating Expatriates
1. One of the greatest challenges of managing expatriates is determining the
compensation package. Most organizations use a balance sheet approach. This
approach adjusts the manager’s compensation so that it gives the manager the
same standard of living as in the home country plus extra pay for the inconvenience
of locating overseas.
2. Figure 16.6, The Balance Sheet for Determining Expatriate Compensation,
explores the balance sheet process.
3. Compensation packages for expatriates are complex due to determining adequate
base salary because of the difference in currencies, the tax equalization allowance
because of the variance in tax rates, and determining what benefits can be utilized
and are of value in foreign countries.
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Chapter 16 – Managing Human Resources Globally
4. A variety of allowances, such as cost-of-living, educational, and relocation
allowances, are often offered in order for the assignment to be more attractive to the
employee.
5. Figure 16.7, International Assignment Allowance Form, is an example of a
summary sheet for an expatriate manager’s compensation package.
D. Helping Expatriates Return Home
1. The process of preparing expatriates to return home from a foreign assignment is
called repatriation.
2. Culture shock takes place in reverse during repatriation. Companies are increasingly
making efforts to help expatriates through this transition. Two activities help the process
along, communication and validation. Communication refers to the expatriate receiving
information and recognizing changes while abroad. Validation means giving the
expatriate recognition for the overseas service.
ROADMAP: CASE STUDY
Thinking Ethically
Can Offshoring Be Done More Ethically?
Human resource planning involves several options to meet an organization’s needs for talent.
One option is to outsource activities that can be performed more effectively and efficiently by a
contractor. In today’s global marketplace, outsourcing decisions frequently involve offshoring
activities to companies in lower-wage locations. However, the reasons why labor costs are lower
in another country include lower standards for working conditions—even conditions that would
be considered unethical in the parent country. This case explores Nike, which is a company that
has faced criticism for its values related to social responsibility.
Discussion Questions with Possible Responses:
1. In deciding whether to outsource functions, does an organization such as Nike have an
ethical obligation to consider how workers will be treated by the contractor that hires those
workers? Why or why not?
Organizations such as Nike do have an ethical obligation to consider how workers are treated
by their contractors. Nike has a lot of influence over the contractors and without setting high
standards, the contractors could take advantage of workers in poverty stricken areas of the
world. Because in today’s business climate, it is relatively easy for a company to have or obtain
knowledge about its contractors’ business practices and how it treats workers, companies
certainly have an ethical obligation to consider these workers.
2. What ethical standards for human resource management do you think a company should
require from all its operations worldwide? In what areas of HRM, if any, should ethical
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Chapter 16 – Managing Human Resources Globally
standards be relaxed to match the prevailing norms of a particular country?
They should consider the length of hours, the working conditions, the pay rates, the
management treatment of workers, the age of workers, and the safety of the workplace. These
are all ethical issues, because they involve the fair and compassionate treatment of employees
in the workplace. Students may provide varying responses to the question about norms of a
particular country, but in all cases, employees should not be subject to mental, emotional, or
physical harm in the workplace.
ROADMAP: Chapter Vocabulary
Parent country
Host country
Third country
Expatriates
International organization
Multinational organization
Global organization
Transnational HRM system
Culture shock
Cross-cultural preparation
Repatriation
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