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international business: should the firm pay executives in different countries according to the
prevailing standards in each country, or should it equalize pay on a global basis?
C) Over the last decade, many firms have moved toward a compensation structure that is based
upon consistent global standards, with employees being evaluated by the same grading system
and having access to the same bonus pay and benefits structure irrespective of where they work.
management FOCUS: McDonald’s Global Compensation
Practices
Summary
This feature explores McDonald’s efforts to develop a global compensation and performance
appraisal strategy. McDonald’s, which has over 400,000 managers and senior employees
working in 118 different countries, wants its new program to provide some standardization of
compensation and performance appraisal for the firm, but at the same time, allow subsidiaries to
tailor the program to local market conditions.
Discussion Questions
1. What does McDonald’s hope to gain from having a global compensation and performance
appraisal system in place?
2. How does the compensation and performance appraisal system introduced at McDonald’s
allow managers to take local market differences into account? Why is this type of approach
important to employees?
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Base Salary
G) An expatriate’s base salary is normally in the same range as the base salary for a similar
position in the home country.
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Building a Diverse Global Workforce
A) A diverse global workforce, one that has a significant mix of both genders and in which
cultural and ethnic minorities are well represented, can be a source of competitive advantage.
B) A diverse workforce can improve performance in several ways. First, diverse talents bring
insights into the needs of a diverse customer base that (for example) a homogenous management
group composed exclusively of white males cannot. Second, an enterprise with a homogenous
employee base is underutilizing the talent to be found among women and minorities. Third, when
the customer set is diverse (as is often the case for many global businesses), those customers may
appreciate interacting with an enterprise whose employees look like them, and therefore, have a
better understanding of their needs, tastes, and preference. Fourth, a diverse workforce may
improve the brand image of an enterprise, setting up a virtuous circle where it does better among
its customer set and is more able to attract top talent from among women and minorities. Finally,
there is evidence that diversity increases employee satisfaction, which results in higher
productivity, so long as the workforce is diverse enough.
C) Building a diverse workforce is not easy especially in an international business where cross-
cultural differences can create additional challenges; however, companies can take a number of
steps to promote workforce diversity.
D) Efforts to promote diversity must come from the top with a clear vision and goals of what is
to be achieved. Managers must also be held accountable for attaining diversity goals. Diversity
workshops can help employees understand the value of a diverse workforce. Outreach programs
can be used to help in the recruitment process.
Lecture Note: To extend this discussion, consider exploring the link between innovation and
workforce diversity. To learn more, see
https://images.forbes.com/forbesinsights/StudyPDFs/Innovation_Through_Diversity.pdf.
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International Labor Relations
A) A key issue in international labor relations is the degree to which organized labor is able to
limit the choices available to an international business. A firm’s ability to pursue a transnational
or global strategy can be significantly constrained by the actions of labor unions.
Lecture Note: The International Labor Organization (ILO) supports worker issues throughout
the world. To see some of the issues the ILO is currently involved in, go to http://www.ilo.org.
CONNECT
Click and Drag
International Labor Relations
Summary
This activity explores international human resource management with a focus on labor relations.
Managing the potential conflicts between labor and management has significant implications for
the effectiveness of an international business strategy.
Activity
Students are asked to match issues related to international labor relations to whether they reflect
the perspective of the union or management.
Class Discussion
Managing the relationship between labor and management requires an understanding of the
perspectives of both sides. Discuss the relationship between management and labor and the
concerns of each side.
THE CONCERNS OF ORGANIZED LABOR
B) A principal concern of organized labor is that the multinational can counter union bargaining
power by threatening to move production to another country. Another concern is that an
international business will keep highly skilled tasks in its home country and farm out only low-
skilled tasks to foreign plants. A third concern is that multinationals will try to import and
impose unfamiliar labor practices from other countries.
Video Note: To explore the potential labor ramifications of moving lower-skilled tasks
internationally, consider In China, Factory Workers Allege poisoning from iPhone Production in
the International Business Library at http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your
keyboard to search for the video title.
THE STRATEGY OF ORGANIZED LABOR
C) Organized labor has responded to the increased bargaining power of multinational
corporations by taking three actions: trying to set-up their own international organizations,
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Lecture Note: Canada’s labor union recently expressed dismay over GM’s decision to close its
operations in Ontario. To learn more, go to
https://ca.reuters.com/article/topNews/idCAKCN1NV21H-OCATP.
Video Note: Workers in South Korea recently marched in protest of a GM plant closure. To
learn more, consider https://www.youtube.com/watch?v=kkQnUzIfo6I.
APPROACHES TO LABOR RELATIONS
D) Traditionally, labor relations have been decentralized to individual subsidiaries within
multinationals. Now there is a trend towards greater centralization. This enhances the bargaining
power of the multinational vis-à-vis organized labor.
E) There is a growing realization that the way in which work is organized within a plant can be a
major source of competitive advantage.
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End-of-Chapter Resources
Critical Thinking and Discussion Questions
1. What are the main advantages and disadvantages of the ethnocentric, polycentric, and
geocentric approaches to staffing policy? When is each approach appropriate?
2. Research suggests that many expatriate employees encounter problems that limit both their
effectiveness in a foreign posting and their contribution to the company when they return home.
What are the main causes and consequences of these problems, and how might a firm reduce the
occurrence of such problems?
Global Business Today Eleventh Edition Chapter 17
3. What is the link between an international business’s strategy and its human resource
management policies, particularly with regard to the use of expatriate employees and their pay
scale?
4. In what ways can organized labor constrain the strategic choices of an international business?
How can an international business limit these constraints?
5. Reread the Management Focus, “McDonald’s Global Compensation Practices.” How does
McDonald’s approach help the company to consider local differences when reviewing the
performance of different country managers and awarding bonus pay?
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6. Why is diversity good for an international business? What actions can a company take to
foster greater diversity?
globalEDGE™ Research Task
Use the globalEDGE™ site (globaledge.msu.edu) to complete the exercises in the text.
Exercise 1
Search phrase: Labor Statistics
Resource Name: International Labour Organization (ILO): Labor Statistics Database
Website: http://www.ilo.org/ilostat
globalEDGE Category: Global, Statistical Data Sources
Additional Info:
ILOSTAT is a database of labor statistics, providing annual labor market statistics for over 100
indicators and over 200 countries, areas, and territories. It includes data on labor costs,
occupational injuries, strikes and lockouts, union activities, and many other labor-related data.
Exercise 2
Search phrase: Expat Explorer
Resource Name: HSBC Expat Zone
Website: http://www.expat.hsbc.com/1/2/hsbc-expat/expat-experience
globalEDGE Category: Living and Working, Travel/Living Abroad
Additional Info:
HSBC’s website is dedicated to providing resources to expats. The Expat Explorer tool is under
the Destinations section and allows users to compare countries based on rankings by real expats.
One of the tools under the Expat Explorer allows the user to directly compare two countries
based on a large number of criteria important for expatriates.
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Sodexo: Building a Diverse Global Workforce
closing case
Summary
The closing case explores diversity at Sodexo, the worldwide leader in providing quality of life
services. Sodexo believes that a diverse workforce contributes to higher company profits, and so
the company, headquartered in France, is committed to building a globally diverse workforce.
With 425,000 employees spread across 80 countries, Sodexo, seems to be achieving its goal. It
was recently ranked number 6 in the world by Diversity Inc.
Case Discussion Questions
1. How might building a more diverse global workforce help Sodexo to achieve high
performance?
2. What barriers do companies like Sodexo face when trying to increase workforce diversity in
their global operations?
3. How does Sodexo implement its policy of increasing the diversity of its global workforce?
4. Evaluate Sodexo’s diversity policy. Is the company doing the right thing? Are the right
policies in place? Are there other things the company might do?
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5. Sodexo’s strategy is to decentralize authority to develop and fine-tune programs and
implement them to managers in each country. What are the benefits of this approach? What are
the potential drawbacks?
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Continuous Case Concept
French automaker Renault’s Dacia plant in Romania is a study in contrasts. The plant, which
currently operates at near capacity, produces Europe’s cheapest car and fastest growing brand.
Yet despite its positive outlook, changes may be coming. Renault is currently in negotiations
with union workers at the Romanian plant. Renault wants to cut wages or shift production to
Morocco. However, workers at the Romanian plant make only one-third of what workers at
Renault’s French plant make. Even so, the Romanian workers are among the highest paid
workers in their country.
• Discuss the negotiations between Renault and the workers at the Dacia plant. What are
the strengths and weakness of both sides? Who is likely to be the winner in the
negotiations? Why? Is it fair to ask the Dacia workers to accept lower compensation?
• Next, ask students to consider what new challenges come from producing in foreign
locations. How should wage rates be determined? What about other parts of a
compensation plan, such as vacation days and health care packages? Should companies
participate in labor unions?
• Finally, ask students to consider whether expatriates who manage the foreign operations
should be paid according to their home-country levels, or according to host-country rates.
Suppose a plant has two vice presidents, one hired locally and one sent from
headquarters. How should their compensation packages be determined?
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Additional Readings and Sources of Information
Expats Would Rather Live in Bahrain Than in the U.S.
https://www.bloomberg.com/news/articles/2018-09-06/expats-would-rather-live-in-bahrain-than-
the-u-s
Video: Executive Pay Rules: U.S. vs. Europe
http://www.bloomberg.com/news/videos/2015-08-14/executive-pay-rules-u-s-vs–europe
Expatriate Workers Are Leaving Saudi Arabia in Droves
https://www.bloomberg.com/news/articles/2018-07-09/expatriate-workers-are-leaving-saudi-
arabia-in-droves
What’s After Annual Performance Reviews? Never-Ending Performance Reviews
http://www.bloomberg.com/news/articles/2015-10-12/what-s-after-annual-performance-reviews-
never-ending-performance-reviews
GE Scraps Employee Rating Scale as It Rethinks Annual Reviews
http://www.bloomberg.com/news/articles/2016-07-26/ge-scraps-employee-rating-scale-as–it–
rethinks-annual-reviews
Uber and Union Agree to Form Drivers Guild in New York City
https://www.bloomberg.com/news/articles/2016-05-10/uber-and-union-agree-to-form-drivers-
guild-in-new-york-city
Chinese Airlines Wave Wads of Cash to Lure Foreign Pilots
http://www.bloomberg.com/news/articles/2016-08-17/chinese-airlines-lure-expat-pilots-with-
lucrative-pay-perks
Expat Exodus After Islamist Cafe Carnage Imperils Bangladesh
http://www.bloomberg.com/news/articles/2016-07-31/expat-exodus-after-islamist-carnage-
threatens-bangladesh-economy
Expat Exodus: Why Employees Returning from Assignments Abroad Often Choose to Resign
https://www.cartus.com/en/blog/expat-exodus-why-employees-returning-assignments-abroad-
often-choose-resign
5 Things We Learned About Creating a Successful Workplace Diversity Program
https://hbr.org/2018/03/5-things-we-learned-about-creating-a-successful-workplace-diversity-
program
How does your expat package stack up?
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Repatriation Blues: Expats Struggle With the Dark Side of Coming Home
https://blogs.wsj.com/expat/2015/04/15/repatriation-blues-expats-struggle-with-the-dark-side-of–
coming-home
How to Increase Workplace Diversity
http://guides.wsj.com/management/building-a-workplace-culture/how-to-increase-workplace-
diversity