Global Business Today Eleventh Edition Chapter 17
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Global Human Resource Management
Table of Contents
Learning Objectives
Chapter Summary
Chapter Opening Activity
Chapter Outline
Opening Case: Global Mobility at Shell
Introduction
Strategic Role of Global HRM: Managing a Global Workforce
Staffing Policy
Training and Management Development
Performance Appraisal
Compensation
Building a Diverse Global Workforce
International Labor Relations
End-of-Chapter Resources
Critical Thinking and Discussion Questions
globalEDGE™ Research Task
Closing Case: Sodexo: Building a Diverse Global Workforce
Continuous Case Concept
Additional Readings and Sources of Information
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Learning Objectives
17-1 Summarize the strategic role of human resource management in international business.
17-2 Identify the pros and cons of different approaches to staffing policy in international
business.
17-3 Explain why management may fail to thrive in foreign postings.
17-4 Recognize how management development and training programs can increase the value of
global human capital in the international business firm.
17-5 Explain how and why performance appraisal systems might vary across nations.
17-6 Understand how and why compensation systems might vary across nations.
17-1 Understand how organized labor can influence strategic choices in international business.
Chapter Summary
This chapter focuses on the challenging topic of global human resource management (HRM).
The term “expatriate manager” is introduced and the task of staffing foreign subsidiaries is
discussed. In this area, firms typically pursue either an ethnocentric, polycentric, or geocentric
approach. This section is followed with an explanation of the challenges involved in selecting
expatriate managers. Expatriate managers often fail in their overseas assignments for a variety of
reasons, ranging from the inability of their spouses to adjust to living overseas to a manager’s
personal or emotional maturity. Techniques that can be used to reduce expatriate failure are
presented and discussed. The chapter also discusses other HRM topics in the context of global
management, including training and management development and performance appraisal and
compensation. The chapter concludes with a discussion of labor issues in international business.
Chapter Opening Activity
The cornerstone of Johnson & Johnson’s (J&J) six-decade-old Credo is its high regard for its
people. It is a good example of the importance of world-class human resource (HR) management
for international firms.
J&J is a leading global manufacturer of consumer products, medical devices, and
pharmaceuticals, with well-known brands such as Band-Aid, Tylenol, Neutrogena, Listerine, and
Rolaids. Worldwide sales in 2017 exceeded $76 billion, about half of which came from North
America, one quarter from Europe, fifteen percent from Asia-Pacific and Africa, and the rest
from Latin America and other regions. J&J’s 134,000 employees work in over 250 business units
worldwide. J&J is proud of its “best and the brightest” employees who have served long tenures,
benefit from a “total rewards” compensation system, and receive educational opportunities. J&J
emphasizes diversity by hiring minorities, women, and people from varied cultural backgrounds
to build leadership initiatives among staff in foreign and emerging markets.
In class, emphasize that J&J’s HR strategy matches its corporate international strategy. It uses a
decentralized decision-making approach in its international business units and in its hiring and
retention strategies. The J&J Credo sets policy for delegating decision making to HR directors
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worldwide. For example, in India, HR managers may approve employee expenses and many
other local employee decisions, without soliciting authorization from headquarters.
Ask students to consider the cultural issues that might arise as a result of such a progressive HR
strategy. For example:
• How might J&J’s decentralized approach be perceived in a culture that values centralized
authority (i.e., Hofstede’s high power distance)? How might the active promotion of
women and minorities be perceived in a culture that values traditional gender roles (i.e.,
Hofstede’s high masculinity)?
• How might MNCs such as J&J mitigate any conflict or misunderstandings that might
arise as a result of these perceptions?
Teaching Tip: For more on Hofstede’s national cultural dimensions, visit
https://geerthofstede.com/landing-page.
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Chapter Outline
Global Mobility at Shell
opening case
Summary
The opening case examines how Royal Dutch Shell, a global petroleum company employing
about 90,000 people, of which are some 6,000–7,000 expatriates. Managing this workforce is a
complex task. Shell wants to meet its commercial goals and also transfer valuable knowledge
across its operations. Given that the company operates in more than 70 countries, this is not easy.
The company often finds it difficult to recruit skilled managers to work in different locations and
is working to better understand employee concerns and develop ways to respond to them.
Discussion Questions
1. Shell’s commitment to the success of its foreign assignments is demonstrated by its efforts to
uncover expatriate concerns. Discuss the results of Shell’s survey to its present and past
expatriates and families. How do these results compare to the results of other studies exploring
expatriate failure?
Shell discovered that there were five key issues that were important to its expatriates. First, the
2. Shell has implemented several changes to its expatriate program including providing
education assistance to families with children and establishing programs to help locate
employment opportunities for spouses. In your opinion, will these programs “solve” Shell’s
problems, or is there still more to be done?
Global Business Today Eleventh Edition Chapter 17
Lecture Note: Students might be interested to know that Shell’s employees appear to be happy
with the company’s expatriate programs as the company was recognized as a top company for
expatriates. To learn more, go to https://www.forbes.com/2008/07/25/best-expat-postings-
forbeslife-cx_vr_0725realestate.html#658e41c23314.
Introduction
A) Human resource management (HRM) refers to the activities an organization carries out to
utilize its human resources effectively. These activities include determining the firm’s human
resource strategy, staffing, performance evaluation, management development, compensation,
and labor relations.
B) The role of HRM is complex enough in a purely domestic firm, but it is more complex in an
international business, where staffing, management development, performance evaluation, and
compensation activities are complicated by the profound differences between countries in labor
markets, culture, legal systems, economic systems, and the like.
C) The HRM function must also deal with a host of issues related to expatriate managers
(citizens of one country working abroad).
Did You Know Video Clip
The video clip asks: “Did You Know the world population is now 7 billion?”
Discussion Questions
1. Where might be the best place to find out the current world population?
2. Using Dr. Hult’s idea of “100,” ask students to find data and draw pie graphs to illustrate the
demographic characteristics of today’s world population:
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3. What does this data tell you about the possibilities for global business?
Lecture Note: To learn more interesting things about how the world population shakes out,
consider https://worldpopulationhistory.org/map/1/mercator/1/0/25.
CONNECT
Video Case
World Population
Summary
This activity focuses on international human resource management and in particular how
changes in the world population will impact the pool of applicants available for companies. As
the population changes, so will the type and number of qualified applicants.
Activity
Students are asked to watch a video on the world population as it relates to international human
resource management and then respond to a series of questions related to the video.
Class Discussion
Understanding how changes in the world population could influence the selection process of
qualified job applicants is important for international human resource managers. Discuss current
trends in the world population and what they mean for international businesses.
Strategic Role of Global HRM: Managing a Global Workforce
A) Success in international business requires that HRM policies be congruent with the firm’s
strategy (see Figure 17.1 in the text).
Staffing Policy
A) Staffing policy is concerned with the selection of employees who have the skills required to
perform a particular job. Staffing policy can be viewed as a major tool for developing and
promoting a corporate culture (the organization’s norms and value systems).
Global Business Today Eleventh Edition Chapter 17
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TYPES OF STAFFING POLICES
B) Research has identified three main approaches to staffing policy within international
businesses. These have been characterized as an ethnocentric approach, a polycentric approach
and a geocentric approach.
The Ethnocentric Approach
C) An ethnocentric staffing policy is one in which key management positions in an
international business are filled by parent-country nationals. The policy makes most sense for
firms pursuing an international strategy.
D) Firms pursue an ethnocentric staffing policy for three reasons: First, the firm may believe
there is a lack of qualified individuals in the host country to fill senior management positions.
Second, the firm may see an ethnocentric staffing policy as the best way to maintain a unified
corporate culture. Third, if the firm is trying to create value by transferring core competencies to
a foreign operation, as firms pursuing an international strategy are, it may believe that the best
way to do this is to transfer parent-country nationals who have knowledge of that competency to
the foreign operation.
Video Note: Training employees can be multifaceted in an international marketplace. To learn
more about this, consider Audi Trains Mexican Auto Workers in Germany. Find it in the
International Business Library at http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your keyboard to
search for the video title.
Additionally, our McGraw-Hill Education International Business Video Library at
http://bit.ly/MHEIBVideo provides an ongoing stream of updated video suggestions correlated
by key concept and major topic. Every new clip posted is supported by teaching notes and
discussion questions. Please feel free to leave comments in the library that you feel might be
helpful to your colleagues.
E) Despite the rationale for pursuing an ethnocentric staffing policy, the policy is now on the
wane in most international businesses. There are two reasons for this. First, an ethnocentric
staffing policy limits advancement opportunities for host-country nationals. Second, an
ethnocentric policy can lead to cultural myopia (a failure to understand host-country cultural
differences that require different approaches to marketing and management).
The Polycentric Approach
F) A polycentric staffing policy is one in which host-country nationals are recruited to manage
subsidiaries in their own country, while parent-country nationals occupy the key positions at
corporate headquarters. While this approach may minimize the dangers of cultural myopia, it
may also help create a gap between home- and host-country operations. The policy is best suited
to firms pursuing a localization strategy.
G) There are two advantages of the polycentric approach. First, the firm is less likely to suffer
from cultural myopia, and second, this staffing approach may be less expensive to implement
than an ethnocentric policy. There are two important disadvantages to the polycentric staffing
approach, however. Host-country nationals have limited opportunities to gain experience outside
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their own country and thus cannot progress beyond senior positions in their own subsidiaries. A
gap can form between host-country managers and parent-country managers.
The Geocentric Approach
H) A geocentric staffing policy is one in which the best people are sought for key jobs
throughout the organization, regardless of nationality. This approach is consistent with building a
strong unifying culture and informal management network. It is well suited to firms pursuing
either a global or transnational strategy. The immigration policies of national governments may
limit the ability of a firm to pursue this policy.
I) The advantages of a geocentric approach to staffing include enabling the firm to make the best
use of its human resources and build a cadre of international executives who feel at home
working in different cultures. The disadvantages of geocentric approach include difficulties with
immigration laws and costs associated with implementing the strategy.
Types of Staffing Policies Summary
J) The advantages and disadvantages of each of the three main approaches to staffing policy are
summarized in Table 17.1 in the text.
CONNECT
Click and Drag
Global Staffing Policies
Summary
This activity explores international human resource management and specifically the staffing
policies used by international businesses. Firms doing business internationally generally choose
from one of three staffing policies: ethnocentric; polycentric, or geocentric.
Activity
Students are asked to match aspects of staffing policies with the correct type of staffing policy.
Class Discussion
Managers working in international human resources need to consider the type of global staffing
policy that makes the most sense for their organization. Discuss the three types of staffing
policies and the advantages and disadvantages of each policy.
CONNECT
Video Case
Living in Different Countries is Invaluable
Summary
This activity focuses on international human resource management and the value that an
international assignment can bring to a manager. Living and working in a foreign country
contributes to the development of a global mindset, allowing managers to better understand their
customers, their colleagues, and the global business environment.
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Activity
Students are asked to watch a video on working in a foreign country and then respond to a series
of questions related to the video.
Class Discussion
Living and working in a foreign country contributes to the development of managers. Discuss the
benefits that this type of experience can provide to a manager.
EXPATRIATE MANAGERS
K) A prominent issue in the international staffing literature is expatriate failure—the premature
return of an expatriate manager to his or her home country.
Lecture Note: The Mercer Human Resource Consulting group conducts studies and webcasts on
a variety of issues related to expatriate managers. To learn more, go to
http://www.mercer.com/events/webcasts.html.
Lecture Note: Vienna recently topped the list of the most attractive destinations for expatriate
managers. To see more about the study, go to https://www.relocatemagazine.com/international-
assignments-vienna-still-best-city-for-international-assignments-dsapsted.
Expatriate Failure Rates
L) The costs of expatriate failure can be substantial. According to a study by Rosalie Tung, the
main reasons for expatriate failure among U.S. firms seem to be an inability of an expatriate’s
spouse to adapt to a foreign culture, an inability of the employee to adjust, other family-related
reasons, the manager’s personal or emotional maturity, and an inability to cope with larger
overseas responsibilities (see Table 17.2 in the text for expatriate failure rates).
M) Managers of European firms gave only one reason consistently to explain expatriate failure:
the inability of the manager’s spouse to adjust to a new environment. For Japanese firms, the
reasons for failure, in descending order of importance, were an inability to cope with larger
overseas responsibility, difficulties with new environment, personal or emotional problems, a
lack of technical competence, and the inability of a spouse to adjust.
CONNECT
Click and Drag
Preventing Expatriate Failure
Summary
This activity explores international human resources management and specifically how to
prevent expatriate failure. The failure of an expatriate to successfully complete a foreign
assignment can be very costly to an international business.
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Activity
Students are asked to match factors related to expatriate experiences to whether they contribute
to expatriate failure or expatriate success.
Class Discussion
Understanding the factors that can contribute to the success or failure of a manager on a foreign
assignment is an important part of international human resource management. Discuss how
expatriate failure can be prevented.
Expatriate Selection
N) One way of reducing expatriate failure rates is through improved selection procedures.
Mendenhall and Oddou identified four dimensions that seem to predict success in a foreign
posting: self-orientation, others-orientation, perceptual ability, and cultural toughness.
O) Self-orientation attributes strengthen the expatriate’s self-esteem, self-confidence, and mental
well-being. Others-orientation refers to how the attributes of this dimension enhance the
expatriate’s ability to interact effectively with host-country nationals. Perceptual ability refers to
the ability to understand why people of other countries behave the way they do. Cultural
toughness refers to how well an expatriate adjusts to a particular posting in the country of
assignment.
GLOBAL MINDSET
P) A global mindset, one that is characterized by cognitive complexity and a cosmopolitan
outlook, may be the fundamental attribute of a global manager. Managers with a global mindset
can deal with high levels of complexity and ambiguity and are open to the world.
Q) Most firms fail to test employees for the attributes that have been shown to improve
expatriate success, and instead select expatriate managers primarily on the basis of technical
expertise.
Training and Management Development
A) Selection is just the first step in matching a manager with a job. Training begins where
selection ends and it focuses upon preparing the manager for a specific job.
B) Management development is a broader concept. Management development is concerned with
developing the skills of the manager, reinforcing the firm’s culture, and facilitating the creation
of an informal network for knowledge sharing within the organization.
TRAINING FOR EXPATRIATE MANAGERS
C) Cultural training, language training, and practical training all seem to reduce expatriate
failure. However, according to one study, only about 30 percent of managers sent on one- to
five-year expatriate assignments received training before their departure.
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Cultural Training
D) Cultural training seeks to foster an appreciation for the host country’s culture.
Lecture Note: To extend this discussion, consider https://www.shrm.org/hr-today/news/hr-
magazine/pages/010215-cross-cultural-training.aspx and
http://www.bloomberg.com/news/articles/2014-03-19/gate-b22-in-the-frankfurt-airport-offers-a-
lesson-in-cultural-differences.
Language Training
E) Despite the prevalence of English, an exclusive reliance on English diminishes an expatriate
manager’s ability to interact with host-country nationals.
Practical Training
F) Practical training is aimed at helping the expatriate manager and his or her family ease
themselves into day-to-day life in the host country.
Lecture Note: Numerous sites exist where expatriates can communicate with each other and
share their experiences. One example of this type of site is http://www.expat.or.id. Students can
explore the site, or it can be an in-class activity to see some of the issues facing expatriates.
CONNECT
Click and Drag
Training for Expatriate Managers
Summary
This activity explores international human resource management as it pertains to expatriate
training. Training programs to help expatriates prepare for their international assignments can
have a significant effect on the success of the assignment.
Activity
Students are asked to match descriptions of expatriate training to the type of training it
represents.
Class Discussion
Understanding the value of expatriate training is important for managers.
REPATRIATION OF EXPATRIATES
G) A largely overlooked but critically important issue in the training and development of
expatriate managers is to prepare them for reentry into their home-country organization.
H) The HRM function needs to develop a good program for re-integrating expatriates back into
work life within their home-country organization once their foreign assignment is over, and for
utilizing the knowledge they acquired while abroad.
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Lecture Note: Some companies have expressed anger over expatriates returning home and then
leaving the organization. To learn more, go to http://www.bloomberg.com/news/articles/2014-
04-23/we-gave-you-a-sweet-job-overseas-dot-then-we-brought-you-home-dot-now-you-re–
quitting and http://www.bbc.com/capital/story/20140115-returning-expat-discontent.
MANAGEMENT DEVELOPMENT AND STRATEGY
I) Management development programs are designed to increase the overall skill levels of
managers through a mix of ongoing management education and rotations of managers through a
number of jobs within the firm to give them varied experiences.
J) Management development is often used as a strategic tool to build a strong unifying culture
and informal management network, both of which are supportive of a transnational and global
strategy.
management FOCUS: Monsanto’s Repatriation Program
Summary
This feature describes Monsanto’s repatriation program for its expatriate managers. The program
is very sophisticated and is designed to provide a supportive environment for the company’s
managers who are returning from overseas assignments. The feature describes the details of the
repatriation program, which is a model program for the repatriation of expatriate managers.
Discussion Questions
1. How does Monsanto’s repatriation program provide an incentive for high-potential managers
to accept overseas assignments?
2. After they return home, Monsanto’s expatriate managers are given the opportunity to
showcase their experience to their peers, subordinates, and superiors, in a special information
exchange. Why is this important? What function does this serve in the repatriation process?
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3. How does Monsanto’s repatriation program help an expatriate manager adjust his personal life
to returning home? Is this an important component of a firm’s repatriation program?
Teaching Tip: To learn more about Monsanto and its international operations, go to
https://monsanto.com/company/locations.
Performance Appraisal
A) Performance appraisal systems are used to evaluate manager performance. It can be
particularly difficult to evaluate the performance of expatriate managers.
PERFORMANCE APPRAISAL PROBLEMS
B) Unintentional bias makes it difficult to evaluate the performance of expatriate managers
objectively. In most cases, two groups evaluate the performance of expatriate managers―host-
nation managers and home-office managers―and both are subject to bias.
C) Frequently home-country managers must rely more on hard data when evaluating expatriates,
and host-country managers can be biased towards their own frame of reference.
GUIDELINES FOR PERFORMANCE APPRAISAL
D) There are several ways to reduce bias in performance appraisals. First, most expatriates
appear to believe more weight should be given to an onsite manager’s appraisal than to an offsite
manager’s appraisal. Second, a former expatriate who served in the same location should be
involved in the appraisal process to help reduce bias. Finally, when the policy is for foreign
onsite managers to write performance evaluations, home-office managers should probably be
consulted before an onsite manager completes a formal termination evaluation.
Compensation
A) There are two key issues to consider regarding compensation in an international business.
First, how compensation should be adjusted to reflect national differences in economic and
compensation practices. The second issue refers to how expatriate managers should be paid.
NATIONAL DIFFERENCES IN COMPENSATION
B) Substantial differences exist in the compensation of executives at the same level in various
countries. These differences in compensation practices raise a perplexing question for an