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Please see the attached documents. Each class material has both the link and the book title in order to help with the in-text citations and references.?IntroductiontoGlobalHR.pdfGlobalizatio

Please see the attached documents. Each class material has both the link and the book title in order to help with the in-text citations and references.?IntroductiontoGlobalHR.pdfGlobalizatio

Please see the attached documents. Each class material has both the link and the book title in order to help with the in-text citations and references. 


UMUC Resource, 2018

This text was adapted by Liliana Meneses under a Creative Commons

Attribution-NonCommercial-ShareAlike 3.0 License without attribution as

requested by the work’s original creator or licensee.

UMGC (2018). Introduction to Global HR.

Retrieved from:



We are quickly moving toward a global economy. While estimates vary widely, ap-

proximately 70 to 85 percent of the U.S. economy today is affected by international competition.

Recent popular books have suggested that many U.S. companies need to reassess their approach

to doing business overseas, particularly in the area of managing human resources. To a large

degree, the challenge of managing across borders boils down to the philosophies and systems we

use for managing people. We will observe that much of what is discussed throughout this text can

be applied to foreign operations, provided one is sensitive to the requirements of a particular

international setting.

1. Global Business

Global business operations can take several different forms. There are four basic types of

organizations and they differ in the degree to which international activities are separated to

respond to the local regions and integrated to achieve global efficiencies. The international

corporation is essentially a domestic firm that builds on its existing capabilities to penetrate

overseas markets. Companies such as Honda, General Electric, and Procter & Gamble used this

approach to gain access to Europe-they essentially adapted existing products for overseas

markets without changing much else about their normal operations.

A multinational corporation (MNC) is a more complex form that usually has fully

autonomous units operating in multiple countries. Shell, Philips, and ITT are three typical

MNCs. These companies have traditionally given their foreign subsidiaries a great deal of

latitude to address local issues such as consumer preferences, political pressures, and economic

trends in different regions of the world. Frequently these subsidiaries are run as independent

companies, without much integration. The global corporation, on the other hand, can be viewed

as a multinational firm that maintains control of operations back in the home office. Japanese

companies such as Matsushita and NEC, for example, tend to treat the world market as a unified

whole and try to combine activities in each country to maximize efficiency on a global scale.

These companies operate much like a domestic firm, except that they view the whole world as

their marketplace.

Finally, a transnational corporation attempts to achieve the local responsiveness of an

MNC while also achieving the efficiencies of a global firm. To balance this “global/local”

dilemma, a transnational uses a network structure that coordinates specialized facilities

positioned around the world. By using this flexible structure, a transnational provides autonomy

to independent country operations, but brings these separate activities together into an integrated

whole. For most companies, the transnational form represents an ideal, rather than a reality.

However, companies such as Ford, Unilever, and British Petroleum have made good progress in

restructuring operations to function more transnationally.


The United States, of course, has no monopoly on international business. International

enterprises are found throughout the world. In fact, some European and Pacific Rim companies

have been conducting business on an international basis much longer than their U.S.

counterparts. The close proximity of European countries, for example) makes them likely

candidates for international trade. About half of the top fifty corporations in the world are

headquartered in countries outside the United States.

These companies are in a strong position to affect the world economy in the following ways: (1)

Production and distribution extend beyond national boundaries, making it easier to transfer

technology; (2) They have direct investments in many countries, affecting the balance of

payments; and (3) They have a political impact that leads to cooperation among countries and to

the breaking down of barriers of nationalism. Despite the successes of foreign competition, the

United States remains a formidable foe in international business; in virtually every major global

industry) American business continues to be a leader.

2. The Environment of International Business

Understanding the external environment is critical to the success of managing any international

business. The dramatic changes that have occurred in recent years in Russia and eastern Europe

will have their effects on HRM. Of probably even greater influence is the unification of markets

in the European Union (EU). In concept, the EU will turn Europe into a unified buying and

selling power that will compete as a major economic player with the United States and Japan.*

(*Originally, the EU was composed of twelve nations: Belgium, Denmark, France, Germany,

Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain , and the United Kingdom.

Recently, these countries voted to add Sweden, Finland, and Austria to their ranks.) Highlights in

HRM 1 describes some of the effects that unification may have on HRM practices within Europe.

Though there are many obstacles to complete unification, the goal of the EU is for goods,

services, capital, and human resources to flow across national borders in Europe in a manner

similar to the way they cross state lines in the United States. A similar transition will likely occur

within North America with the passage of NAFTA. In the years ahead we will have a unique

opportunity to observe the effects of globalization on HRM.

Certainly the economic environment and the physical environment (population, climate,

geography, and so on) are important factors in the making of managerial decisions. Of special

importance in international business, however is the cultural environment (communications,

religion, values and ideologies, education, social structure). Culture is an integrated phenomenon,

and by recognizing and accommodating taboos, rituals, attitudes toward time, social

stratification, kinship systems, and the many other components, managers will pave the way

toward greater harmony and achievement in the host country (the country in which an

international business operates).

Different cultural environments require different managerial behaviors. Strategies,

structures, and technologies that are appropriate in one cultural setting may lead to failure in

another. Managing relations between an organization and its cultural environment is thus a

matter of accurate perception, sound diagnosis, and appropriate adaptation. Several techniques

and approaches are available to assist employees in coping with demands imposed by the cultural

environment. Interestingly, companies in one location often push aside interorganizational


differences to share experiences and to assist each other in resolving conflicts that arise with the

host country’s culture.

3. Domestic versus International HRM

The internationalization of U.S. corporations has grown at a faster pace than the

internationalization of HRM. Executives in the very best companies around the world still lament

that their HR policies have not kept pace with the demands of global competition. And

unfortunately, the academic community has not been a particularly good source for ready-made

answers to international HRM problems. While various journals on international business have

published articles on HRM over the years, it was not until 1990 that a journal specifically

devoted to this area–the International Journal of Human Resource Management–was started.

International HRM differs from domestic HRM in several ways. In the first place, it

necessarily places a greater emphasis on certain functions. As shown in Figure 19-4, functions

and activities of significance to international HRM include relocation, orientation, and translation

services to help employees adapt to a new and different environment outside their own country.

Assistance with taxation matters, banking, investment management, home rental while on

assignment, and coordination of home visits is also usually provided by the HR department.

The HR department in an overseas unit must be particularly responsive to the external

environment. The human consequences of failure in an international business are often more

severe than in a domestic business. International HR managers are also exposed to other risks.

Political events may result in such as the possibility of terrorist attacks on personnel. There is

also the need to change emphasis in HR operations as a foreign subsidiary matures. To their

success, most larger corporations have a full-time staff of HR managers devoted solely to

assisting globalization. McDonald’s, for example, has a team of five HR directors who travel as

internal consultants. Their job is to keep local directors in over fifty countries updated on

international concerns, policies, and programs. Other companies, such as Down Chemical, are

working rapidly to develop worldwide HR information systems that electronically link personnel

records and other forms of information.

4. International Staffing

International management poses many problems in addition to those faced by a domestic

operation. Because of geographic distance and a lack of close, day-to-day relationships with

headquarters in the home country, problems must often be resolved with little or no counsel or

assistance from others. It is essential, therefore, that special attention be given to the staffing

practices of overseas units.

There are three sources of employees with whom to staff international operations. First,

the company can send people from its home country. These employees are often referred to as

expatriates, or home-country nationals. Second, it can hire host-country nationals (natives of

the host country) to do the managing. Third, it can hire third-country nationals, natives of a

country other than the home country or the host country.


Use of each of the three sources of overseas personnel involves certain advantages and

disadvantages. Some of the more important advantages are presented in Figure 19-5. Most

corporations use all three sources for staffing their multinational operations, although some

companies exhibit a distinct bias for one of the three sources. Over the years, and especially as

MNCs have evolved, many have steadily shifted to the use of local personnel. There are three

reasons for this trend: (1) Hiring local citizens is less costly because the company does not have

to worry about the costs of home leaves, transportation, and special schooling allowances. (2)

Since local governments usually want good jobs for their citizens, foreign employers may be

required to hire them. (3) Using local talent avoids the problem of employees having to adjust to

the culture.

At early stages of international expansion, many businesses prefer to use host-country

nationals, since these individuals can best help the company respond to local customs and

concerns. As the company’s international presence grows, home-country managers are frequently

expatriated to stabilize operational activities (particularly in less developed countries). At later

stages of internationalization, different companies use different staffing strategies; however, most

employ some combination of host-country, home-country, and third-country nationals in the top

management team.

Recently, there has been a trend away from putting expatriates in the top management

positions. In many cases, U.S. companies want to be viewed as true international citizens. To

avoid the strong influence of the home country, companies frequently change staffing policies to

replace U.S. expatriates with local managers. In Honeywell’s European Division, for example,

twelve of the top executive positions are held by non-Americans. Over the years, U.S.-based

companies, in particular, have tended to use more third-country expatriates. For example, when

Eastman Kodak recently put together a launch team to market its new Photo-CD line, the team

members were based in London, but the leader was from Belgium.

It should be recognized that while top managers may have preferences for one source of

employees over another, the host country may place pressures on them that restrict their choices.

Such pressure takes the form of sophisticated government persuasion through administrative or

legislative decrees to employ host-country individuals.

5. Recruitment

In general, employee recruitment in other countries is subject to more government regulation

than it is in the United States. Regulations range from those that cover procedures for recruiting

employees to those that govern the employment of foreign labor or require the employment of the

physically disabled, war veterans, or displaced persons. Many Central American countries, for

example, have stringent regulations about the number of foreigners that can be employed as a

percentage of the total workforce. Virtually all countries have work-permit or visa restrictions

that apply to foreigners. A work permit or work certificate is a document issued by a government

granting authority to a foreign individual to seek employment in that government’s country.

As in the United States, various methods are used to recruit employees from internal and

external sources. In any country, but particularly in the developing countries, a disadvantage of

using current employees as recruiters is that considerations of family, similar social status,

culture, or language are usually more important than qualifications for the vacant position. More

than one manager depending on employees as recruiters has filled a plant with relatives or people


from the same hometown. In small towns much of the recruiting is done by word of mouth. Thus,

having locals involved is critical. Churches, unions, and community groups also play a role.

MNCs tend to use the same kinds of external recruitment sources as are used in their

home countries. While unskilled labor is readily available in the developing countries,

recruitment of skilled workers is more difficult. Many employers have learned that the best way

to find workers in these countries is through radio announcements because many people lack

sufficient reading or writing skills. The solution is to have a recruiter who uses local methods

within the context of the corporation's culture and needs or to put an expatriate in charge of


The laws of almost all countries require the employment of local people if adequate

numbers of skilled people are available. Thus, recruiting is limited to a restricted population.

Specific exceptions are granted (officially or unofficially) for contrary cases, as for Mexican

farmworkers in the United States and for Italian, Spanish, Greek, and Turkish workers in

Germany and the Benelux countries (i.e., Belgium, Netherlands, Luxembourg). Foreign workers

invited to come to perform needed labor are usually referred to as guest workers. The employ-

ment of nonnationals may involve lower direct labor costs, but indirect costs–language training,

health services, recruitment, transportation, and so on–may be substantial.

6. Selection

American corporations have had a very significant impact on foreign HRM practices. The

success of U.S.-based international businesses has caused many local firms and corporations

based in other countries to study the methods of the American firms. Employment selection

practices in U.S. corporations emphasize merit, with the best-qualified person getting the job. In

other countries, firms have tended to hire on the basis of family ties, social status, language, and

common origin. The candidate who satisfies these criteria gets the job even if otherwise

unqualified. There has been a growing realization among foreign organizations, however, that

greater attention must be given to hiring those most qualified.

In the industrialized countries, most businesses follow standard procedures of requesting

employee information, including work experiences, in interviews and on application forms.

Prospective employees may be given a physical examination and employment tests. In many

European countries an employer is forbidden to make unfavorable statements about former

employees. In Belgium and France, this prohibition was established by legislation; in Germany,

by court decision.

The Selection Process

The selection process should emphasize different employment factors, depending on the extent of

contact that one would have with the local culture and the degree to which the foreign

environment differs from the home environment. For example, if the job involves extensive

contacts with the community, as with a chief executive officer, this factor should be given

appropriate weight. The magnitude of differences between the political, legal, socioeconomic,

and cultural systems of the host country and those of the home country should also be assessed.

If a candidate for expatriation is willing to live and work in a foreign environment, an

indication of his or her tolerance of cultural differences should be obtained. On the other hand, if


local nationals have the technical competence to carry out the job successfully, they should be

carefully considered for the job before the firm launches a search (at home) for a candidate to fill

the job. As stated previously, most corporations realize the advantages to be gained by staffing

foreign subsidiaries with host-country nationals wherever possible.

Selecting home-country and third-country nationals requires that more factors be

considered than in selecting host-country nationals. While the latter must of course possess

managerial abilities and the necessary technical skills, they have the advantage of familiarity with

the physical and cultural environment and the language of the host country. The discussion that

follows will focus on the selection of expatriate managers from the home country.

Selecting Expatriates

The problem facing many corporations is to find employees who can meet the demands of

working in a foreign environment. Unfortunately, the failure rate among expatriates has been

estimated to range from 25 to 50 percent, with an average cost per failure of $40,000 to

$250,000. Many of these causes extend beyond technical and managerial capabilities and include

personal and social issues as well. Interestingly, one of the biggest causes of failure is a spouse’s

inability to adjust to his or her new surroundings.

There are no screening devices to identify with certainty who will succeed and who will

fail. But there are requirements that one should meet to be considered for a managerial position

in an international location. Historically, expatriate selection decisions have been driven by an

overriding concern with technical competency. And this is an important criterion for success.

However, the ability to adapt to a different type of environment frequently overshadows technical

competence in the selection decision. Satisfactory adjustment depends on flexibility, emotional

maturity and stability, empathy for the culture, language and communication skills,

resourcefulness and initiative, and diplomatic skills. Companies such as Colgate-Palmolive,

Whirlpool, and Dow Chemical have identified a set of core skills that they view as critical for

success abroad and a set of augmented skills that help facilitate the efforts of expatriate

managers. These skills and their managerial implications are shown in Highlights in HRM 3. It is

worth noting that many of these skills are not significantly different from those required for

managerial success at home.

Women Going Abroad

Traditionally, companies have been hesitant to send women on overseas assignments. Executives

may either mistakenly assume that women do not want international assignments, or they assume

that host-country nationals are prejudiced against women. The reality is that women frequently

do want international assignments–at least at a rate equal to that of men. And while locals may

be prejudiced against women in their own country, they view women first as foreigners (gaijin in

Japanese) and only secondly as a women. Therefore, cultural barriers that typically constrain the

roles of women in a male-dominated society may not totally apply in the case of expatriates.

Importantly, in those cases where women have been given international assignments, they

generally have performed quite well. The success rate of female expatriates has been estimated to

be about 97 percent–a rate far superior to that of men. Ironically, women expatriates attribute at


least part of their success to the fact that they are women. Because locals are aware of how

unusual it is for a women to be given a foreign assignment, they frequently assume that the

company would not have sent a woman unless she was the very best. In addition, because women

expatriates are novel (particularly in managerial positions), they are very visible and distinctive.

In many cases, they may even receive special treatment not given to their male colleagues.

Staffing Transnational Teams

In addition to focusing on individuals, it is also important to note that companies are increasingly

using transnational teams to conduct international business. Transnational teams are composed

of members from multiple nationalities working on projects that span multiple countries. These

teams are especially useful for performing tasks that the firm as a whole is not yet designed to

accomplish. For example, they may be used to transcend the existing organizational structure to

customize a strategy for different geographic regions, transfer technology from one part of the

world to another, and communicate between headquarters and subsidiaries in different countries.

The fundamental task in forming a transnational team is assembling the right composition

of people who can work together effectively to accomplish the goals of the team. Many

companies try to build variety into their teams in order to maximize responsiveness to the special

needs of different countries. For example, when Heineken formed a transnational team to

consolidate production facilities, it made certain that team members were drawn from each major

region within Europe. Team members tended to have specialized skills, and additional members

were added only if they offered some unique skill that added value to the team.

Selection Methods

The methods of selection most commonly used by corporations operating internationally are

interviews, assessment centers, and tests. While some companies interview only the candidate,

others interview both the candidate and the spouse, lending support to the fact that companies are

becoming increasingly aware of the significance of the spouse’s adjustment to a foreign

environment and the spouse’s contribution to managerial performance abroad. However, despite

the potential value of considering a spouse’s adjustment, the influence of such a factor over the

selection/expatriation decision raises some interesting issues about validity, fairness, and

discrimination. For example, if someone is denied an assignment because of concerns about their

spouse, there may be grounds for legal action. This is particularly true now that the Civil Rights

Act of 1991 makes it clear that U.S. laws apply to employees working for U.S. companies


To ensure validity, selection interviews are best conducted by senior executives who have

had managerial experience in foreign countries. For example, at Mobil Oil the manager of

international placement and staffing and two assistants with foreign experience conduct a four-

hour interview with the candidate and the spouse to discuss all phases of the job. Emphasis is

placed on the culture and the adaptability demands made on the candidate and the spouse.

Assessment centers typically use individual and group exercises, individual interviews

with managers and/or psychologists, and some personality and mental ability tests to evaluate

candidates. Exercises that reflect situations characteristic of the potential host culture are usually


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