CHAPTER 11
Global Human Resource Management
Chapter Outline
• Introduction
• Global Strategic Human Resource Management
• Statistical Overview
• Cultural Issues and Differences
• Regulatory Issues Including Immigration and Border Security
• Outsourcing and Offshoring
• Staffing Policies
• Virtual Staffing
• Expatriate Issues in Staffing
• What Are Training and Development?
• Needs Assessment
• Types of Training and Development
• Expatriate Needs in Training and Development
• Performance Appraisal and Compensation
• Assessing Performance
• Cultural Differences in Performance Appraisal
• Compensation and National Differences in Cost of Living
• Expatriate Issues in Compensation
• Executive Pay
• International Trade, Labor Relations, and HRM
o The North American Agreement on Labor Cooperation (NAALC)
o International Labor Relations
o Comparative Labor Relations
Teaching Objectives
After covering this chapter, the student should be able to:
• Explain the basic cultural and regulatory issues involved in global human resource
management including outsourcing and offshoring.
• Describe the challenges involved in staffing foreign operations, assessing needs for
training and development, and designing appropriate strategies to meet those needs.
• Discuss performance appraisals and employee compensation issues around the world,
including cultural differences, cost of living, and how expatriate issues are handled.
• Explain the interplay between international labor standards and free trade, the free trade
and labor concerns presented by NAFTA, and the functions of labor unions.
COMPREHENSIVE LECTURE OUTLINE
I. Introduction. The Internet has helped “flatten” the world of work throughout the globe.
Today there is a world market for labor and human resources in many ways. Companies in the
U.S. are more likely to have at least some operations in other countries. Technology has made it
much easier for US companies to conduct business in other countries.
CLASS ACTIVITY: Use the Cultural Perspective case as an opportunity to allow students to
explore the importance of cultural norms on HRM decisions in different countries.
II. Global Strategic HRM. The conduct of HRM differs throughout the world. Many of
these differences are related to cultural factors, while other differences derive from regulations.
• Statistical Overview. One way to gain an understanding of strategic HRM on a
global scale is the examine recent statistical analyses: the percentage of female
participation in the workforce, the type of work people do throughout the world,
the ability of foreign-born individuals to work in a given country, self-
employment, part-time vs. full-time employment, and unemployment rates are
some of the statistics to watch. Global HR statistics provide helpful information
about establishing and running operations in various countries.
• Cultural Issues and Differences. Considerable cultural differences around the
world have a profound impact on the practices of international HRM:
▪ Power Distance. In countries with more egalitarian cultures efforts may
be made to eliminate overt workplace hierarchical differences. In such
countries workplace employee committees or other mechanisms that give
employees direct input into the management of the organization are
common. In high power distance countries more centralized, hierarchical,
and even autocratic decision-making structures are common.
▪ Uncertainty Avoidance. High uncertainty avoidance cultures prefer clear
rules procedures and structures. They value orderliness and predictability.
Countries with low uncertainty avoidance have a more “hang loose”
attitude towards things.
▪ Individualism vs. Collectivism. In highly individualistic cultures
employees tend to be evaluated and rewarded in great measure for their
individual achievements and performances. Society places a high value
upon individual success. In collectivistic countries people tend to think of
themselves as part of a group and measure their success according to the
success of the group. In such countries it is more common for workers to
be paid based on the performance of their work team. Workers in such
countries may expect their community to help take care of them.
▪ Masculinity vs. Femininity relates to values and traits that are
traditionally associated with one gender or the other. Highly masculine
cultures place a high value on things such as competition, assertiveness,
and achievement. More feminine cultures place a high value on care for
the weak and relationships. HR practices and policies in more feminine
countries may likely be more liberal with respect to sick days, disability
pay, and parental leave than those in masculine countries.
▪ Long-term vs. Short-term Orientation. HR practices in longer-term-
oriented countries may place greater emphasis on worker retirement
savings programs and pensions.
• Regulatory Issues Including Immigration and Border Security. Countries
have vastly different regulatory legal-political systems and structures which
govern the conduct of HRM. Some of these regulations pertain to the ability of
employees to form labor unions and engage in collective bargaining.
Governmental regulations related to immigration and border security are among
the most important in the field of international HRM.
• Outsourcing and Offshoring. Outsourcing involves the process of a company
subcontracting a certain production function to a third party. Offshoring involves
the process of transferring an organizational function to another country,
regardless of whether this function is outsourced or stays within the same
company. Offshoring and outsourcing practices have been extremely
controversial among U.S. workers and labor unions because these practices
involve transforming U.S. jobs into jobs with other companies overseas. The
primary reason for these activities is cost. If companies can have quality work at a
lower price completed by overseas workers, they can charge less for these
products. The counterarguments include the fact that the quality of outsourced or
offshored goods and services may not be the same as domestic ones, since it is
much harder to monitor quality of operations in another country.
DISCUSSION STARTER: REALITY CHECK 1.
Do you know anyone who has lost a job because his or her position has been outsourced or
offshored?
III. Staffing Policies. A key initial decision a company will have to make is how to staff the
office. Headquarters or parent company employees who are being sent to work overseas for their
companies are parent country nationals. Workers already living in the foreign or host country
are known as host country nationals. Employees from other countries are known as third
country nationals. Parent country nationals and third country nationals are known as
expatriates.
• Virtual Staffing. Technological advances have made it possible for someone to work as
a virtual expatriate today. This might be accomplished via trips to the foreign office,
supplemented by extensive ongoing emailing, videoconferencing, web-based
collaboration, etc. Arrangements of this kind have some drawbacks: it is difficult for
virtual expatriates to build strong relationships with people in the foreign office.
Consequently, companies in global situations frequently require expatriates to live in the
place of their foreign assignments.
• Expatriate Issues in Staffing. Despite the inherent cost and cultural advantages that
often exist for hiring locally, a local labor market may not have enough qualified
workers. One reason for hiring expatriates relates to control. Staffing foreign operations
with workers from the parent country will help impose the values and structures of the
headquarters upon foreign operations. The risks of an expatriate staffing policy relate to
expatriate failure, a situation in which the expatriate does not complete the assignment
and returns home early. Family issues often play a part because either the family
members fail to adjust to the new environment, or because the expatriate does not take
the family along. Short-term expatriate assignments appear to be an increasing trend.
Repatriation, the process that takes place when an expatriate returns home, can also
present some problems. Employees sometimes face “culture shock” upon repatriation.
• What are Training and Development?
o Training involves providing employees with skills specific to the jobs they will
be doing.
o Development involves preparing employees for new future assignments or higher
level positions.
• Needs Assessment. Assessing company training and development needs in the
international HRM context is directly related to strategic planning. A corporation that
sends executives from the U.S. to work overseas usually needs to provide them with
training in foreign language and culture. Corporations establishing operations in foreign
countries also must focus on the potential training and development needs of the host
country nationals.
• Types of Training and Development. The types of training and development differ
depending on the situation and vary from Internet-based training to personal training and
development programs.
• Expatriate Needs in Training and Development. Special training and development
needs are likely necessary for expatriates.
ECONOMIC PERSPECTIVES: Expatriates in Qatar. Qatar is one of the richest countries of
the world due to its oil and gas revenues. All Qatari citizens receive first-class government
provided health, education, and other social benefits. Due to Qatar’s incredible growth Qatari
citizens account for only 15% of the workforce. They complain that foreigners are crowding
them out.
Suggestion: You could ask students to do this case as individuals or in teams as a class activity.
Have the students read the case presented in the text and answer the questions at the end of the
case.
Questions:
1. Why are Qatari citizens complaining about getting a lot of material benefits without
2. What are some possible solutions that Qatar’s government can implement to provide
IV. Performance Appraisal and Compensation. Performance appraisal involves the
process of assessing employee performance. A direct link between performance appraisals and
compensation usually exists. Determining compensation for workers in a variety of countries and
cultures is complex.
• Assessing Performance. A key purpose of performance appraisal is to provide
employees with performance feedback. Assessment also helps identify areas for potential
training and development. In some jobs, performance is relatively easy to measure. In
other jobs, measuring overall performance might be difficult. Other relevant issues
include who conducts the performance appraisal and how feedback is presented.
• Cultural Differences in Performance Appraisal. Cultural norms, rules, and legal
differences help to influence how performance appraisals are conducted.
• Compensation and National Differences in Cost of Living. Compensating employees
presents a major challenge in MNCs because the cost of living varies dramatically from
country to country. Differentials in cost of living are important factors considered by
corporate HR and other executives when determining where to establish foreign
operations and the compensation necessary to provide employees with livable wages in
different locations. There are also national differences in the forms of compensation
employees receive in different parts of the world. Among benefits that differ from
country to country are housing allowances and retirement benefits.
• Expatriate Issues in Compensation. When it comes to establishing compensation
packages for expatriates, complications may arise. The base rate of which country should
be used? How do taxes figure into compensation levels? In which currency should
employees be paid? In compensating expatriates, most MNCs use a balance sheet
approach, which involves keeping the expatriate on the home country’s salary structure
and also providing various additional allowances so that the expatriate can maintain a
home country standard of living.
• Executive Pay. Executive compensation has recently become a controversial issue.
Increased reporting requirements with respect to total top executive compensation have
heightened the scrutiny of compensation differences between workers and top managers.
The U.N. International Labor Organization’s World of Work Report focused directly on
the internationally widening gap between executive pay and employee pay. In response to
these concerns and recent global financial conditions, a number of major corporations
have recently frozen top executive salaries. Furthermore, US companies have turned to
executive pay strategies focused on tying pay to performance by using performance stock
awards and bonuses based on meeting target goals.
DISCUSSION STARTER: REALITY CHECK 3.
Have you received and/or given a performance appraisal in your job? In what ways did you
think the appraisal was fair? Are there ways in which its fairness could have been increased?
V. International Trade, Labor Relations, and HRM. Certain countries have a
comparative advantage when it comes to abundant low-wage workers. As a result, ethical and
other managed trade concerns have arisen, specifically regarding the abuse of workers in some
countries around the world. The UN ILO has engaged in considerable efforts to develop a set of
minimal labor standards for all UN members as well as other countries. Such minimal standards
involve prohibitions against slave or forced labor, restrictions on the use of child labor, certain
basic job safety protections, and the right of workers to form labor unions. These global
standards, however, are difficult to enforce. There has also been a growing trend to establish
labor standards for countries that have entered into bi- or multi-national free trade agreements,
such as NAFTA.
• The North American Agreement on Labor Cooperation (NAALC). During the
negotiation of NAFTA there was considerable discussion about the low wages paid to
workers in Mexico and the perceived lack of enforcement of labor rights in that country.
To address these concerns proposals were made about a possible trilateral labor
commission which would establish and regulate labor standards for all three countries.
Instead, the countries created a special labor side agreement, which simply requires each
of the three countries to strongly enforce its own existing labor laws and regulations. This
labor side agreement has an unusual enforcement mechanism whereby parties in any of
the NAFTA countries can approach the labor department in their own country and file a
formal complaint about labor standards in another NAFTA country. The formal
complaint would then trigger intense mediation efforts among the countries to try and get
better enforcement of the complained-about labor standards.
• International Labor Relations. A central tenet of the UN ILO’s global labor standards
is the right of workers to have freedom of association, form labor unions, and engage in
collective bargaining. A labor union is a formal organization representing a group of
employees. The primary goal of labor unions is to engage in negotiations with employers
to attempt to reach collective bargaining agreements—agreements that
comprehensively set forth employee terms and conditions of employment at a workplace.
Agreements usually last three years, after which a new round of negotiations typically
results in a new contract. Collective bargaining agreements also generally have extensive
grievance procedures whereby employees with complaints regarding the administration
of the labor contract can have their grievances effectively heard.
• Comparative Labor Relations. Relations between labor and management are governed
and conducted very differently around the globe. A very interesting labor relations
system exists in Germany, where multi-employer bargaining is much more common than
in the U.S. Also, co-determination allocates seats for employees on German corporate
boards of directors. Within larger German companies employees and unions are allowed
to select one-half of the members of corporate boards of directors or supervisory boards.
ETHICAL PERSPECTIVES: Stranded by a Volcano. Use the Ethical Perspectives case as an
opportunity to discuss the impact of different employment systems on ethics. American workers
are predominantly not covered by collective bargaining agreements or represented by labor
unions. Instead, they are subject to the doctrine of “employment at will” that states they can be
fired or disciplined by their employer for any reason and at any time. This became a problem for
some 40,000 American travelers stranded in European airports during the eruption of an
Icelandic volcano in mid-2010.
Suggestion: You could ask students to do this case as individuals or in teams as a class activity.
Have the students read the case presented in the text and answer the questions at the end of the
case.
Questions:
1. Why is refraining from disciplining employees the arguable “right thing” or ethical thing
2. How does new technology, such as remote email, laptop computers, Skype, and so forth,
Assignments
End-of-Chapter Discussion Questions
1. What are some of the potential problems global businesses face when they
outsource or subcontract their manufacturing work to companies in other
countries? (e.g., a U.S. sneaker company outsourcing the manufacturing of
its sneakers to a separate company in China or Vietnam)? Answer: It
2. What are the pros and cons of using the Internet for the “virtual staffing” of
3. Why is it often very difficult for supervisors, in any culture, to provide
4. If you were president of the United States and trying to negotiate better
labor standards for NAFTA, what new provisions might you try and
Mini-Case Synopsis and Questions
Laws prohibiting sexual harassment in the workplace are relatively new in the
U.S., having begun with the 1964 Civil Rights Act. The global workplace has
followed; with many countries, including Hong Kong, India, Israel, Japan, South
Korea, and Vietnam, writing similar provisions into the law.
Questions:
1. How will the expansion of sexual harassment laws globally affect company
2. How will companies handle the increase in possible lawsuits stemming from
Point/Counterpoint, Interpreting Global Business News, and Portfolio Projects
Students’ answers to these assignments will vary widely. Their writing should
reflect an understanding of the chapter’s basic concept, thorough research, and
logic and critical thinking skills.