06 Nov 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: https://learn.umgc.edu/d2l/le/content/334779/viewContent/11902932/View
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
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
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
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
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.
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.
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.
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.
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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