Chapter 14 Establishing HRM Practices in Foreign Countries

1. Chapter 14Establishing HRM Practices in Foreign Countries

2. Chapter Outline • 14-1 Gaining Competitive Advantage • 14-2 HRM Issues and Practices • 14-3 The Manager’s Guide

3. 14-1a Opening Case: Losing Competitive Advantage at General Electric • Problem: Trying to “Americanize” a newly purchased French firm. • Solution: “Americanizing” GE-CGR • How the solution hindered competitive advantage • $25 million loss in its first year, instead of gaining $25 million as projected. • Cost-cutting measures including massive layoffs and closing of plants. • Shrink in workforce from 6,500 to 5,000, as managers and engineers left.

4. 14-1b Linking HRM Practices to Foreign Competitive Advantage • International business operations appear in a variety of forms. • Wholly owned subsidiaries: The most common way to ‘‘go international’’ by setting up foreign operations that they own. • Joint venture: Firms may join up with foreign firms to create a new company. Joint ventures have mushroomed for two reasons: • Local laws of some countries do not allow subsidiaries to be wholly owned by foreign companies. • Joint ventures allow companies to draw on others’ expertise.

5. 14-1b Linking HRM Practices to Foreign Competitive Advantage (cont.) • Impact of International HRM practices on employee motivation, satisfaction, and performance • Failure to adjust to the foreign cultural environment is the key reason why expatriates often fail to succeed. • Inappropriate HRM practices can profoundly affect the motivation, satisfaction, and performance of foreign and expatriate employees. • Companies need to properly select, train, manage, compensate, and develop employees to work in cross-cultural environments.

6. 14-2a Understanding Cultural Differences • Culture: A society’s set of assumptions, values, and rules about social interaction. • Artifacts: Tangible things that represent the superficial aspects of a country’s culture. • Values: Rules of societal propriety and impropriety that are shared by people within a culture. • Assumptions: A society’s beliefs that have evolved from its attempts to adjust to the world around it.

8. 14-2a Understanding Cultural Differences (cont.) • How people react to cultural improprieties • When cultural rules are violated, the “guilty party” is often condemned or punished in some manner. • Degree of condemnation depends on two factors: • The extent to which the broken rule is widely shared among a cultural group’s members. • The extent to which the rule is deeply held and viewed as being important or sacred. • When working with people from other cultures, one must attempt to learn the rules of that culture and abide by them.

10. 14-2b The Use of Expatriates • Use of expatriates and competitive advantage • Managers must understand many international aspects of business; they learn this through a real-world foreign experience. • By overseeing foreign operations, managers can help ensure that operations are congruent with corporate strategy and policy. • Expatriates can communicate subsidiaries’ needs and concerns to corporate headquarters in a timely and effective manner. • Effective expatriate managers can communicate their useful market knowledge to corporate managers.

11. 14-2b The Use of Expatriates (cont.) • Expatriate rights under the Civil Rights Act of 1991: • Provides coverage to U.S. citizens employed in a foreign country, provided that compliance with this provision would not cause the employer to violate the law of the foreign country. • The U.S. citizen must be employed overseas by a firm controlled by an American employer. • Control can be determined through interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control of the corporation and the employer.

12. 14-2b The Use of Expatriates (cont.) • Selecting expatriates • Most companies place too much emphasis on technical skills, and too little emphasis on personality. • Personality traits often play a larger role in an employee’s success at adapting to a new culture. • Personality traits that a successful expatriate should possess: • Ability to handle stress. • Reinforcement substitution • Ability to develop relationships. • Perceptual skills.

13. 14-2b The Use of Expatriates (cont.) • Reinforcement substitution: The ability to find substitutes for pleasurable pursuits that are unavailable in a new culture. • Ability to develop relationships: Two skills are associated with expatriates developing relationships with host nationals: • Willing to communicate in the host language. • Conversational currency: An expatriate inserts social and cultural tidbits and trivia into conversations with host-national employees.

14. 14-2b The Use of Expatriates (cont.) • Perceptual skills • Flexibility of one’s belief systems. • Ability to avoid being judgmental about the belief and value systems of the host culture. • Ability to make flexible attributions about why host nationals behave the way they do. • High tolerance for uncertainty.

15. 14-2b The Use of Expatriates (cont.) • Training expatriates: They should be taught to: • Understand and work effectively with people from different cultural, religious, and ethnic backgrounds. • Manage multicultural teams. • Understand global markets, global customers, global suppliers, and global competitors.

16. 14-2b The Use of Expatriates (cont.) • Problems appraising expatriates’ job performance • Invalid performance criteria • Performance criteria are often superimposed onto an expatriate manager even though those criteria might not make sense in the foreign culture. • Companies must construct criteria according to each subsidiary’s unique situation. • Rater competence • Raters may lack an understanding of the social and business contexts in which the work is performed, increasing rating errors. • Rater bias • Misinterpretations of behavior due to cultural differences.

17. 14-2b The Use of Expatriates (cont.) • Overcoming performance appraisal problems • Utilize multiple raters. • Make sure that some of those raters have lived and worked in the country in which the expatriate is working.

18. 14-2b The Use of Expatriates (cont.) • Compensating expatriates • Foreign service premiums • Hardship allowance • Cost of living allowances • Housing allowances • Utility allowances • Furnishing allowances • Education allowances • Home leave allowances • Relocation allowances • Medical allowances • Car and driver allowances • Club membership allowances • Taxes

19. 14-2b The Use of Expatriates (cont.) • Repatriates: Expatriates who return home. • Problems repatriates encounter • Not told what their job assignments will be prior to returning home. • Expatriates return home to jobs that require less autonomy and authority. • Difficulty readjusting to their native culture. • Loss of premiums.

20. 14-2b The Use of Expatriates (cont.) • HRM interventions for expatriates • Mentoring • Keep track of the expatriate’s performance. • Keep expatriates updated about happenings in the parent company. • Help the repatriate find a job in the parent company that would make use of their international expertise. • Formalized career planning • Integrate overseas assignments into their succession planning systems. • Communication systems • Encourage a flow of information between expatriate managers and parent company managers.

21. 14-2c Developing HRM Practices in Host-National Countries • Adjust HRM practices to the norms and culture of the host country. • Develop training programs after considering how the culture views the educational process. • Develop compensation systems after understanding what motivates employees in each culture.

22. 14-3a International HRM Issues and the Manager’s Job • Managing expatriate subordinates • Managers must successfully navigate “long-distance managing” which is a complex and difficult task. • Expatriate service • A manager must be able to adapt his or her management behavior to the culture of the host country.

23. 14-3b How the HRM Department Can Help • Advise management regarding these HRM concerns: • Who should be sent overseas? • What kind of training will they need? • What kind of compensation package will be needed to induce candidates to go overseas? • In what ways do the company’s HR policies and procedures need to be adjusted overseas due to different legal issues and cultural norms? • How do performance appraisal systems need to be modified? • How may global management development programs be created that will successfully integrate career development, training programs, and succession planning?

24. 14-3c HRM Skill-Building for Managers • Japan • Japanese business norms are very formal and well-defined. • Japanese business culture demands that you conduct business at restaurants, clubs, bars, and other off-site locations. • By not observing/following proper cultural proprieties, you will considered as not being well-mannered and may lose the business deal.

25. 14-3c HRM Skill-Building for Managers (cont.) • Mexico • Most Mexican firms have a bureaucratic structure with power vested at the top. • Workers prefer that their managers keep a formal, somewhat distant relationship with them. • Mexicans frown upon such practices as employee empowerment, open communication channels, and employee ownership. • Mexicans value harmony and have a low tolerance for adversarial relations. • Obedience and respect are more important than independence and confrontation. • Pay-for-performance programs should be avoided because they create social distance among employees.