Chapter 19 – Global Human Resource Management
19-1
Global Human Resource Management
Learning objectives
• Summarize the strategic role
of human resource
management in the
international business.
• Identify the pros and cons of
different approaches to
staffing policy in the
international business.
• Explain why managers may
fail to thrive in foreign
postings.
• Recognize how management
development and training
programs can increase the
value of human capital in the
international business firm.
• Explain how and why
performance appraisal
systems might vary across
nations.
• Understand how and why
compensation systems might
vary across nations.
• Understand how organized labor can influence
strategic choices in the international business firm.
Human resource management is key to the
competitiveness of international firms.
HRM refers to those activities undertaken by an
organization to effectively apply its human resources.
These activities include human resource strategy, staffing,
performance evaluation, management development,
compensation, and labor relations.
Firm success requires that HRM policies are congruent
with strategy and with formal and informal structure and
controls. Strategies like “think globally and act locally”
sound good, but to be successfully implemented, effective
HRM policies are necessary.
The closing case describes the struggles of a U.S. manager
to improve operations in his firm’s Chinese joint venture
and to encourage his boss to use performance criteria that
reflect the challenges of the Chinese market place. The
closing case explores the HRM policy at AstraZeneca, a
British pharmaceutical firm.
19
Chapter 19 – Global Human Resource Management
19-2
OUTLINE OF CHAPTER 19: GLOBAL HUMAN RESOURCE
MANAGEMENT
Opening Case: MMC China
Introduction
The Strategic Role of International HRM
Staffing Policy
Types of Staffing Policy
Expatriate Managers
The Global Mindset
Management Focus: Managing Expatriates at Royal Dutch/Shell
Training and Management Development
Training for Expatriate Managers
Repatriation of Expatriates
Management Development and Strategy
Management Focus: Monsanto’s Repatriation Program
Performance Appraisal
Performance Appraisal Problems
Guidelines for Performance Appraisal
Compensation
National Differences in Compensation
Expatriate Pay
Management Focus: Global Compensation Practices at McDonald’s
International Labor Relations
The Concerns of Organized Labor
The Strategy of Organized Labor
Approaches to Labor Relations
Chapter Summary
Critical Discussion Questions
Closing Case: AstraZeneca
Chapter 19 – Global Human Resource Management
19-3
CLASSROOM DISCUSSION POINT
Try to invite a couple of managers who have had experience working on foreign markets
to be guest speakers. Ask them to discuss why they were selected for the assignment and
about the training they may have received prior to their foreign assignments. Then, ask
OPENING CASE: MMC China
The opening case explores the challenges faced by the manager assigned to oversee
electronics maker MMC’s Chinese joint venture. Charged with improving the company’s
performance in China, John Ross, who has successfully complete several other foreign
assignments, finds himself struggling to find a way to explain to his boss why the policies
and goals established at headquarters were not appropriate for the company’s Chinese
operations. Discussion of the case can revolve around the following questions:
1. John Ross believes that he is being unfairly treated by headquarters. How can he
convince his boss that his efforts in China have actually been successful given the
situation there?
2. Why did the two U.S. specialists assigned to help John Ross in China fail to complete
their assignments? What steps might the company have taken to minimize the likelihood
that the two managers would return early?
3. What can MMC learn from John Ross with regard to evaluating performance in
foreign markets? How should the company adjust its performance appraisal criteria
going forward?
Chapter 19 – Global Human Resource Management
19-4
LECTURE OUTLINE FOR CHAPTER
This lecture outline follows the Power Point Presentation (PPT) provided along with this
instructor’s manual. The PPT slides include additional notes that can be viewed by
clicking on “view”, then on “notes”. The following provides a brief overview of each
Power Point slide along with teaching tips, and additional perspectives.
Slides 19-3 What Is HRM?
Human resource management (HRM) refers to the activities an organization carries out
to utilize its human resources effectively.
The four major tasks of HRM are
1. staffing
2. management training and development
3. performance evaluation
4. compensation
Slides 19-4-19-6 The Strategic Role of International HRM
Firms need to ensure there is a fit between their human resources practices and strategy.
Slides 19-7-19-8 Staffing Policy
A firm’s staffing policy is concerned with the selection of employees who have the skills
required to perform a particular job.
Slides 19-9-19-12 Types of Staffing Policy
Three staffing policy choices at the international level are: ethnocentric, polycentric, and
geocentric.
1. The ethnocentric approach to staffing fills key management positions with parent-
country nationals
2. The polycentric staffing policy recruits host country nationals to manage subsidiaries
in their own country, and parent country nationals for positions at headquarters
3. The geocentric staffing policy seeks the best people, regardless of nationality for key
jobs
Slides 19-13-19-17 Expatriate Managers
Expatriate failure is the premature return of an expatriate manager to his or her home
country. Expatriate failures impact the company, as do near-failures.
Another Perspective: Until the advent of the Internet, expatriates often felt isolated.
Today numerous sites exist where expatriates can communicate with each other and share
Four dimensions that predict expatriate success are
Chapter 19 – Global Human Resource Management
19-5
• Self-orientation – the expatriate’s self-esteem, self-confidence, and mental well-
being
• Others-orientation – the ability to interact effectively with host-country nationals
• Perceptual ability – the ability to understand why people of other countries
behave the way they do
• Cultural toughness – the ability to adjust to the posting
Slide 19-18 The Global Mindset
A global mindset may be the fundamental attribute of a global manager.
Slide 19-19 Training and Management Development
Training focuses upon preparing the manager for a specific job.
Management development is concerned with developing the skills of the manager over
his or her career with the firm.
Slide 19-20 Training for Expatriate Managers
Cultural training (seeks to foster an appreciation for the host country’s culture),
language training (an exclusive reliance on English diminishes an expatriate manager’s
Another Perspective: Numerous companies offer expatriate training services. One great
example is Kwintessential {http://www.kwintessential.co.uk/cultural-
Slide 19-21 Repatriation of Expatriates
HRM needs to develop good programs 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.
Slide 19-22 Management Development and Strategy
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.
Slide 19-23 Performance Appraisal
Evaluating expatriates can be especially complex.
Chapter 19 – Global Human Resource Management
19-6
Slide 19-24 Guidelines for Performance Appraisal
Firms need to seek ways to reduce bias in performance appraisals.
Slide 19-25 Compensation
Should executive pay in different countries reflect the standards in each country or be
equalized on a global basis? How should expatriates be paid?
Slide 19-26-19-27 National Differences in Compensation
Slides 19-28-19-30 Expatriate Pay
An expatriate’s compensation package is made up of:
1. base salary
2. a foreign service premium
Slide 19-31 International Labor Relations
The key issue in international labor relations is the degree to which organized labor is
able to limit the choices available to an international business.
Slide 19-32 The Concerns of Organized Labor
The bargaining power of unions comes from their ability to threaten to disrupt production
by striking or protesting.
Slide 19-33 Strategy of Organized Labor
Organized labor has responded to the increased bargaining power of multinational
corporations by:
• setting-up their own international organizations
• lobbying for national legislation to restrict multinationals
Chapter 19 – Global Human Resource Management
19-7
Slide 19-4 Approaches to Labor Relations
Many firms are recognizing that the way in which work is organized within a plant can be
a major source of competitive advantage.
CRITICAL THINKING AND DISCUSSION QUESTIONS
QUESTION 1: What are the main advantages and disadvantages of the ethnocentric,
polycentric and geocentric approaches to staffing policy? When is each approach
appropriate?
ANSWER 1: An ethnocentric staffing policy is one in which key management positions
are filled by parent country nationals. The advantages of the ethnocentric approach are:
(1) Overcomes lack of qualified managers in host country, (2) Unified culture, and (3)
Helps transfer core competencies. The disadvantages of the ethnocentric approach are:
polycentric approach is typically appropriate for firms utilizing a multidomestic strategy.
A geocentric staffing policy seeks the best people for key jobs throughout the
organization, regardless of nationality. The advantages of a geocentric approach are: (1)
QUESTION 2: Research suggests that many expatriate employees encounter many
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?
ANSWER 2: The primary causes of expatriate problems are the inability of the spouse to
adjust, inability of the employee to adjust, other family problems, personal/emotional
maturity, and an inability to cope with the larger overseas responsibilities. The
Chapter 19 – Global Human Resource Management
19-8
QUESTION 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?
ANSWER 3: In firms pursuing a localization strategy, a polycentric staffing approach is
most common and there are relatively few expatriates or the associated pay issues.
Expatriates are more common in firms with international strategies, and when an
QUESTION 4: In what ways can organized labor constrain the strategic choices of an
international business? How can an international business limit these constraints?
ANSWER 4: Organized labor can significantly constrain the choices firms make with
respect to location. International firms (or domestic ones for that matter) often choose to
locate new facilities in places where there is relative labor peace and harmonious working
relations. Labor can also raise objections and threaten disruptive behavior if a firm
Chapter 19 – Global Human Resource Management
19-9
QUESTION 5: Reread the Management Focus on McDonald’s global compensation
practices. How does McDonald’s approach help the company to take local differences
into account when reviewing the performance of different country managers and
awarding bonus pay?
ANSWER 5: When McDonald’s revamped its global compensation practices it asked for
input from local managers on how the new system should work. By doing so,
CLOSING CASE: AstraZeneca
The closing case explores the HRM policies of AstraZeneca, a pharmaceutical company
based in London. AstraZeneca believes that it is important to have a global workforce
with managers who are comfortable in a variety of cultures and countries. To develop
such managers, AstraZeneca moves executives to other countries for three year
assignments. AstraZeneca carefully selects individuals to participate in the program, and
then provides extensive preparation for the foreign assignment. Discussion of the case
can revolve around the following questions:
QUESTION 1: What international staffing policy is AstraZeneca pursuing with regard to
its “high potential” employees?
ANSWER 1: AstraZeneca’s strategy for foreign assignments involves selecting only
QUESTION 2: Why does AstraZeneca limit this policy to just high potential employees?
Can you see a drawback in doing this?
ANSWER 2: AstraZeneca sends only “high potential” employees on foreign assignments because
of the high cost involved with expatriates. AstraZeneca believes that it is critical to not only
Chapter 19 – Global Human Resource Management
19–10
some individuals who could be quite effective in a more home-based assignment are overlooked.
QUESTION 3: What staffing policy is AstraZeneca adopting with regard to its
subsidiaries in places like China? Is this an appropriate policy?
ANSWER 3: AstraZeneca has found staffing policy particularly challenging in China
where its operations have more than tripled in the last decade. Because skilled
employees are hard to find, AstraZeneca has focused on raising local skill levels and
QUESTION 4: Do you think the company is doing enough to limit the well known risks
and costs associated with high expatriate failure rates? Is there anything else it might do?
ANSWER 4: Beginning with its selection process, AstraZeneca devotes considerable
resources to ensuring that its managers are in the best position possible to be successful in
their foreign assignments. AstraZeneca chooses only those managers with proven track
INTEGRATING iGLOBES
There are several iGLOBE video clips that can be integrated with the material presented
in this chapter. In particular, you might consider the following:
Title: Stakes High At Start of UAW–Big Three Talks, But ‘Both Sides Want
This To Go Well’
Run Time: 5:42
Abstract: This video explores the negotiations between the Big Three automakers and
the UAW as the companies emerge from their financial crises and begin once again to
compete with foreign automakers.
Chapter 19 – Global Human Resource Management
19–11
Key Concepts: labor, competitive strategy, global production, competitive advantage,
globalization, global economy
Notes: The UAW and Big Three automakers sat down together recently to hammer out a
new contract. The meeting was a milestone in and of itself given the challenges the
companies have faced as they struggled to survive during the recent global economic
downturn. During the recession, two of the Big Three, General Motors and Chrysler,
were forced to accept government bailouts just to stay operational. Now that all three are
on firmer footing however, the UAW is hoping to renegotiate wages and benefits for its
members who have made considerable concessions to help the companies remain in
business. The UAW itself has gone through a transition losing about half its members in
the last five years thanks to early retirements and layoffs forced in part by the poor
economic conditions that have slowed global demand for new vehicles.
When General Motors and Chrysler were forced into bankruptcy two years ago, workers
agreed to significant cuts in their wages and benefits in an effort to help the companies
survive. Now, they would like to negotiate a more favorable package. However, workers
are cognizant of the fact that the economic recovery is still a work in progress and despite
Discussion Questions:
1. Reflect on the current negotiations between the UAW and the Big Three. Why do
these negotiations represent such a landmark between the two parties? How has the
approach to the negotiations changed on the part of each party?
Chapter 19 – Global Human Resource Management
19–12
2. Why are the Big Three automakers still using a less competitive cost structure than
their foreign competitors? How does this impact the bargaining table?
3. Discuss the current state of the UAW. How has it changed in recent years? What does
this suggest for its future?
4. How does the lack of unions at foreign transplant companies change the competitive
landscape for the Big Three? How might the situation change if workers at the foreign
transplants unionize?
INTEGRATING VIDEOS
There are also several longer video clips that can be integrated with the material
presented in this chapter. In particular, you might consider the following from
International Business DVD Volume 6:
Title: Rise of Twitter
Learning Objectives
The purpose of this video is to help you:
❖ Understand the role of technology in the globalization of markets.
❖ Identify how social media may be a force for cultural change.
❖ Explore how social media can provide insight into global trends and markets.
❖ Recognize how companies can leverage social media platforms in their marketing
strategies.
Key Words
❖ Globalization
❖ Globalization of markets
❖ Technological change
❖ Culture
❖ Cultural change
❖ International marketing
Synopsis
Twitter appears to have caught the attention of the entire world. Politicians joke about it,
yet use it to communicate their perspectives on the issues. Companies use Twitter to
encourage consumers to try new products. Activist groups Tweet about their causes
Chapter 19 – Global Human Resource Management
19–13
while lawmakers Tweet about the President’s speech to Congress. Even protesters in
Iran used Twitter to get their message out to the rest of the world. But it is the average
person who may be the most important user of the technology. Twitter has captured the
imagination of millions of people everywhere who use it to provide their opinion on just
about anything, let people know what they are doing at any given time, and generally
provide information about themselves to others. Indeed, Twitter is changing the way the
world communicates.
Twitter was created just a few short years ago by then 29 year old Jack Dorsey. It began
with just fiver Tweeters, and now has a global following of some 40 million people, and
it is gaining more users everyday. Twitter is essentially an instant messaging system that
enables users to text messages to a single person or to thousands of other people
While some may wonder whether Twitter has created a monster in which everyone can
provide steady streams of information and opinions that are often of little interest to most
people, Dorsey disagrees. According to Dorsey, because the technology is controlled by
Discussion Questions
1. Consider the role of technology in the process of globalization. How does technology
like Twitter facilitate globalization? In your opinion, can Twitter be an agent of cultural
change across nations?
2. Consider the use of Twitter by lawmakers and other government officials. How can
policymakers use Twitter in their decision making? What are the implications of social
media for trade policies?
3. How are social media platforms changing the way companies and consumers interact
with each other? What does your response tell you about how companies might
incorporate Twitter into their marketing strategies? What are the advantages of using
Twitter as part of the selling process?
4. While social media like Twitter offer companies new ways to reach their customers,
they also create new challenges for companies. Discuss some of the disadvantages of
Twitter from a company’s perspective. What unique challenges might multinational
companies using Twitter as part of their marketing program face?
Chapter 19 – Global Human Resource Management
19–14
INCORPORATING globalEDGE™ EXERCISES
Use the globalEDGE™ site {http://globalEDGE.msu.edu/} to complete the following
exercises:
Exercise 1
The impact of strikes and lockouts on business activities can be substantial. Since your
company is planning to develop operations in the Asian market, you have been tasked
with identifying the countries least likely to have strikes and lockouts which could
introduce instability at any future facilities. Using information from the International
Labour Organization (ILO) to develop your report, locate the ILO’s yearbook of labor
statistics and identify the three Asian countries with the lowest rate of strikes and
lockouts. Be sure to use the most recent data available and include details for each
country concerning the sectors most impacted.
Exercise 2
You work in the human resources department at the headquarters of a multinational
corporation. Your company is about to send managers overseas as expatriates (or, expats)
to France, Russia, Singapore, and Thailand. To evaluate the possible issues each expat
may encounter, you have been advised to use the Expat Explorer survey conducted by
HBSC and found at the company’s Expat Zone. Prepare a report indicating the potential
issues your department may encounter during each expat’s stay in these countries.
Answers to the Exercises
Exercise 1
The International Labour Organization’s Labor Statistics Database can be accessed by
searching the terms “International Labour Organization” at
http://globaledge.msu.edu/ResourceDesk/. The resource is titled “International Labour
Exercise 2
Information related to expatriate life in each country can be accessed by HSBC’s survey
of expats at its Expat Zone. These resources can be reached by searching for the term
Chapter 19 – Global Human Resource Management
19–15
website, click on the Expat Zone tab. This will lead to the Expat Explorer Survey. Three
general themes were included in the survey: Economics, Experience, and Offspring. As
such, answers from students will vary. However, there may be discussion around the