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Chapter 13: Managing Human Resources Globally
Chapter Outline
LO1: Explain staffing decisions, with a focus on expatriates.
1. Key Concepts
In multinational enterprises (MNEs), there are two types of employees: host-country
nationals and expatriates. Among expatriates, there are two types: (1) Parent-country
nationals (PCNs) and (2) Third-country nationals (TCNs). There are three primary
approaches for making staffing decisions for top positions at subsidiaries:
ethnocentric, polycentric, and geocentric. Expatriates play four important roles. They
are (1) strategists representing the interests of the MNE’s headquarters, (2) daily
managers who run operations and build local capabilities where local management
talent is lacking, (3) ambassadors, and (4) trainers for their replacements. Expatriate
failure can be measured in three ways: (1) premature (earlier-than-expected) return,
(2) unmet business objectives, and (3) unfulfilled career development objectives.
2. Key Terms
Ethnocentric approach: A staffing approach that emphasizes the norms and
practices of the parent company (and the parent country of the MNE) by
relying on PCNs
3. Discussion Exercise
Since expatriates face a lot of problems, companies have started to rely on a policy
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known as “inpatriation,” wherein firms relocate foreigners to the host country
expecting that, after a certain period of time, these foreigners will replace the
expatriates. Relocated employees are not subjected to cultural obstacles, but they still
have to face a few other problems. Inpatriates are often unhappy when the salaries
offered in the host country are much lower. In addition, due to their ambiguous
position, the role of inpatriates tends to become ineffective. While headquarters
considers inpatriates as one among them because of their tenure in the home country,
other HCNs also consider them as one among them because of their ethnic values.
According to you, when managing a work force globally, which policy (expatriation
or inpatriation) would yield better results? Does the selection of policy depend totally
on the phase a company is going through? What measures can companies take to
reduce the problems faced by inpatriates?
LO2: Identify training and development needs for expatriates and host-country
nationals.
1. Key Concepts
2. Key Terms
3. Discussion Exercise
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Chapter 13: Managing Human Resources Globally
LO3: Identify and discuss compensation and performance appraisal issues.
1. Key Concepts
2. Key Terms
3. Discussion Exercise
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Chapter 13: Managing Human Resources Globally
LO4: List factors that affect labor relations in both home and host countries.
1. Key Concepts
2. Key Term
3. Discussion Exercise
LO5: Discuss how the institution-based and resource-based views shed additional
light on human resource management.
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Chapter 13: Managing Human Resources Globally
1. Key Concepts
Every country has formal rules, laws, and regulations governing the dos and don’ts
of HRM. Informal rules of the game embodied in cultures, norms, and values also
assert powerful influence. As HRM becomes more strategic, the VRIO dimensions
are increasingly at center stage. To start, managers have to ask the following
questions: Does a particular HR activity add value? Next, are particular HR activities
rare? Further, how imitable are certain HR activities? Finally, do HR practices
support organizational capabilities to help accomplish performance goals?
2. Discussion Exercise
The informal institutions that affect hiring decisions stem from two sources: the
regional culture in which the firm operates and the norms and values of the firm. The
HRM decisions that a company makes are likely to be influenced by how it views its
role in business, its stance on moral or social issues, and the kind of atmosphere it
wants to establish. In many ways, these cultural norms function as a filter that
separates ideal candidates from the rest of the pool. The recession of 2008–2009
caused a significant increase in unemployment rates in the United States. However,
in spite of this surplus of available employees, firms that were hiring during this
recession largely targeted people who already had jobs. Why did they take such an
approach? Though there are a number of reasons, chief among them is the belief that
those who were still employed in such an economic climate must be more skilled,
more qualified, and of more value than those who lost their jobs. It is assumed that
by hiring these people, rather than those who were terminated, a firm can establish
and maintain a culture of success in difficult economic conditions.
(Source: Dana Mattioli, “Only the Employed Need Apply,” The Wall Street Journal,
June 30, 2009, D1)
How effective can this approach toward hiring be? Why have companies decided to
stick to such an approach? According to the approach, an employed person holds
greater skills than a person who isn’t employed. How valid do you think this
approach is? Explain your answer.
LO6: Identify the five Cs of human resource management.
1. Key Concepts
First, savvy HR managers need to be curious. Second, HR managers must be
competent. Finally, HR managers must be courageous and caring. In addition, there
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is a fifth “C” for non-HR managers: Proactively manage your career in order to
develop a global mindset.
Debate: Ethical Dilemma
A Radical Proposal
1. Key Concepts
Ram Charan is one of the most influential consultants in the world. He finds most
HR executives to have expertise in compensation, benefits, and labor relations. They
tend to focus on internal matters, such as engagement, empowerment, and cultural
sensitivity. But they do not seem to do well as advisors to CEOs on the talent
implications of firms’ strategy. In response, in 2014 Charan proposed a radical
solution in Harvard Business Review.
In his own words: “It is radical, but it is grounded in practicality. My proposal is to
eliminate the position of chief human resource officer (CHRO) and split HR into two
strands. One—we might call it HR-A (for administration)—would primarily manage
compensation and benefits. It would report to the CFO, who would have to see
compensation as a talent magnet, not just a major cost. The other, HR-LO (for
leadership and organization), would focus on improving the people capabilities of the
business and would report to the CEO.”
According to Charan, the ideal candidates to serve as HR-LO would not be
traditional HR managers. Instead, HR-LO positions ideally would be better served by
high-potential line managers from operations or finance. They can develop people
skills and link the HR system with operational or financial performance.
Closing Case Discussion Guide
Chicago versus Shanghai
1. Key Concepts
Richard Wang is president (country manager) for Dream Hotel China, whose
corporate headquarters is in Chicago. Wang worked at Dream Hotel Chicago and
picked up a green card (U.S. permanent residency) while maintaining his Chinese
passport. In 2005, when Dream Hotel opened its first location in China—in Wang’s
hometown Shanghai—he was tapped to be one of the first managers sent from the
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United States. As a manager, Wang has shined in Shanghai. He has been promoted to
replace an expat to be the number one executive in charge of all Dream Hotel
locations in China. His wife and two children are also happy. Shanghai is not perfect,
but the Wangs feel good about coming back.
At the end of 2017, president of Dream Hotel Asia Pacific, an American expat who is
co-located with Wang in the same building in Shanghai, has a conversation with him:
Richard, I have great news for you! Headquarters wants you to move back to
Chicago. You’ll be in charge of strategy development for global expansion, working
directly under the Group Vice President. Isn’t that exciting?! Let me know what you
think in a week.
Instead of calling his wife immediately, Wang has decided to wait till he gets home in
the evening so that he can have a few hours to think about this. Going from Chicago
to Shanghai, Wang, with his Chinese passport, is a host-country national (HCN).
However, with his green card, he is also considered a U.S. national and thus an
expatriate. He thinks this will be an exciting career move for him, but he is not sure
if his family will like it.
Video Case
Watch “Getting the Best out of a Diverse Team” by Clive Mather of Shell Canada.
1. In describing his experience in dealing with a diverse group in Africa, Mather stated
that not only did the group change but he also changed. What valuable lesson does
that suggest for those who may assume a management position in a different country
or culture?
2. Mather stressed that although groups differ, group members should be treated as
individuals who may not be exactly identical to the rest of the group. How does one
do that in a collectivistic society that places more emphasis on the group than on the
individual?
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3. Mather pointed out that starting with projects and problems that people can be
involved in may help build relationships that will ultimately produce greater
teamwork. Shouldn’t one build relationships first before getting a diverse group
together to work on something? What do you think?
4. Some countries have very little diversity. In contrast, people are continually
migrating to the United States from around the world. If you were to expand a U.S.-
based company into overseas markets, how could experience with U.S. diversity be
of value to you?
Additional Discussion Material
(From Prep Cards)
Critical Discussion Questions
1. You have been offered a reasonably lucrative expatriate assignment for the next three
years, and your boss will have a meeting about the assignment with you next week.
How would you discuss the assignment with your boss?
2. On Ethics: If you were an HCN, do you think pay should be equal between HCNs
and expatriates in equivalent positions? Suppose that you were president of a
subsidiary in a host country, and as a PCN your pay is five times that of the highest
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paid HCN (your vice president). What do you think?
3. On Ethics: As the HR director for an oil company, you are responsible for selecting
15 expatriates to go to work in Iraq. However, you are personally concerned about
their safety. How do you proceed?
Review Question
1. What are the three main approaches to staffing?
The following are the three main approaches to staffing:
2. What are the four key roles that expatriates typically play?
Expatriates play the following four important roles:
3. Why do a high percentage of expatriates fail abroad?
4. In expatriate compensation, what are the differences between the going rate approach
and the balance sheet approach?
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5. Why have efforts to establish multinational labor organizations been unsuccessful?
6. Describe some of the problems experienced by repatriates and how training and
development might alleviate them.
7. In what ways does a career development plan benefit an expatriate?
8. What are some of the problems inherent in evaluating an expatriate’s job
performance?
9. Which side is currently winning when labor unions and management bargain with
each other, and why?
10. How can an understanding of informal institutions help an HR manager avoid
problem-causing stereotypes?
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11. Of the four dimensions in the VRIO analysis of HR activities, which one is most
likely to give a firm a competitive edge?
12. How do HR managers benefit from the four Cs as described by Susan Meisinger?
13. What steps can you take to proactively develop a global mindset in your career?
Students’ answers will vary.