Global Human Resource Management
In a way, no matter where you do business, HR (Human Resources) is HR. Human Resource Management (HRM) is the coordinated activities of several HR functions, including:
- Staffing
- Recruiting and Hiring
- Training and Motivating
- Evaluating and Managing Performance
- Compensating
- Terminating and Repositioning
Regardless of where you find yourself doing business, you will need to consider these HR functions to be successful. So in that way, HR is HR, in that it concerns itself with the same things no matter where you are. However, that is where the similarities end.
Every country and culture approaches these HR functions differently, and smart organizations work to understand these differences and work them into their HR policies and practices. Below are just a few examples of how HR has different flavors as you move around the globe:
Recruiting and Hiring
Recruiting practices differ from country to country. For example, in South Korea companies like Samsung have what is essentially a Samsung exam that one must pass to even be eligible to be considered for employment.
“Every six months, some 100,000 Koreans swarm campus test centers for a shot at Samsung glory. About 7,000 pass and 4,000 get jobs after this rigorous sitting that includes math, science, [and] reasoning…. That’s about one in 20 applicants. At Apple or Google, you’d get a shot with a glistening curriculum vitae and a spirited interview. But in Confucian South Korea, exams are a far graver prerequisite, determining just about everything important in life. University admissions, corporate and government jobs, and even entrance to the right preschool can require a strong testing score. Fail the test, and you potentially fail at life in the eyes of your family — a common reason for suicide in this nation where soaring numbers of young people are taking their own lives.”
https://www.usatoday.com/story/news/world/2015/01/26/samsung-good-life/22344393/
Training and Motivating
Employees are motivated by different things around the world. For example, motivating employees in China is different from motivating employees in the West.
“Problems of productivity and retention of employees have been reported which reflect on the ways foreign companies attempt to motivate Chinese employees, often relying on practices drawn from concepts which work in the West.”
https://www.researchgate.net/publication/235291500_Foreign_companies_and_Chinese_workers_Employee_motivation_in_the_People’s_Republic_of_China
“Chinese employees felt that good wages were most important, followed by good working conditions and personal loyalty from the boss and organization. Interesting work was relatively unimportant, especially to older employees, and ‘being in on things’ was not at all important.”
https://www.researchgate.net/publication/233271676_What_motivates_employees_A_comparison_of_US_and_Chinese_responses#:~:text=Chinese%20employees%20felt%20that%20good,was%20not%20at%20all%20important.
Evaluating and Managing Performance
How one country gauges success may differ significantly from another. For example, in India, the long-held caste system can influence decision-making and employee evaluations as they pertain to promotions.
“The nature of the workplace as a form of competitive environment means caste discrimination has the potential to play an insidious role in day-to-day decision-making, in the recruitment process, and in considering promotions and management”
Caste discrimination and the workplace
Compensating
Levels of compensation, as well as the mix between pay and benefits, can differ greatly between countries. For example, CEOs in Japan make substantially less than CEOs in the United States and other countries.
“Sometimes culture dictates business The Washington Post’s Ezra Klein sighs, ‘It’s a reminder that CEOs aren’t just paid what the market will bear, they’re paid what the culture will accept.’”
https://www.theatlantic.com/business/archive/2010/07/5-lessons-of-japan-s-rock-bottom-ceo-salaries/344948/
GRAPHIC
https://www.willistowerswatson.com/en-US/Insights/2019/12/ceo-pay-landscape-in-japan-the-us-and-europe-2019-analysis
Terminating and Repositioning
Some countries have very strong organized labor. For example, organized labor in Sweden wields a great deal of power—far more than most organizations in the U.S.
“The level of union membership in Sweden is high – at 71%….There are three main union confederations, LO, TCO and Saco, which are divided along occupational and educational lines in line with the traditional way in which Swedish employees are grouped, and there is considerable co-operation between them. There are some 3.5m trade unionists in Sweden and, although there are a number of non-employed members, particularly students and pensioners, the level of union organisation is high. Figures from the official National Mediation Office put union density at 70% in 2011. Similarly, the ICTWSS database of union membership put union density at 68.9% in 2010.”
https://www.worker-participation.eu/National-Industrial-Relations/Countries/Sweden/Trade-Unions
GRAPHIC
https://www.worker-participation.eu/National-Industrial-Relations/Across-Europe/Trade-Unions2
Other countries such as France have strict legal conditions that must be met in order to fire an employee. As a result, U.S. companies operating in France will often hire part-time workers to avoid hiring full-time employees who would be difficult to fire should the need arise.
Staffing
When it comes to staffing a global organization, there are three main approaches companies can take, each with their own pros and cons. Let’s have a look:
Ethnocentric Approach
A company follows an ethnocentric approach when it fills all key management positions with parent-company nationals.
Pros:
•Fill skills gaps in the host country.
•Can help transfer core competencies to the host country.
•Helps maintain a unified corporate culture.
Cons:
•Produces resentment in the host country.
•Can lead to cultural myopia.
This approach can work, when done well and for the right reasons. For example:
“Typical examples of the ethnocentric approach are Japanese firms such as Panasonic, Sony and Hitachi. In [these companies], the staffing approach for subsidiaries in Thailand, Vietnam and India adopted an ethnocentric system due to lack of competency…and the need for corporate communication. Most of the customers in India and Thailand are Japanese manufacturers, therefore an expatriate with Japanese language ability to communicate with the customer’s parent company in Japan is still vital.”
https://www.ukessays.com/essays/management/process-of-internationalization-of-japanese-manufacturing-company-management-essay.php
However, this approach is fraught with risks, as this example demonstrates:
“Wal-Mart’s experience in Germany, where it lost hundreds of millions of dollars since 1998, has become a sort of template for how not to expand into a country.”
“Some of Wal-Mart’s problems stem from hubris, a uniquely powerful American enterprise trying to impose its values around the world.”
https://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html
Polycentric Approach
A company follows a polycentric approach when it requires that host-country nationals manage subsidiaries while parent-company nationals occupy key positions at corporate headquarters.
Pros:
•Reduces the risk of cultural myopia.
•Less expensive to implement than an ethnocentric approach.
Cons:
•Produces resentment if local managers have low career mobility.
•Isolates foreign subsidiaries from corporate headquarters.
Geocentric Approach
A company pursues a geocentric approach when it simply seeks the best way to fill key positions across the entire organization, regardless of nationality.
Pros:
•Uses human resources efficiently.
•Helps build strong culture.
•Helps build informal management networks.
Cons:
•Immigration laws can be complicated (e.g., H1-B visas).
•Can be expensive to implement.
Expatriates
An expatriate or expat is a citizen of one country working abroad in another.
While the use of expatriate managers can help the company maintain a unified corporate culture and fill host country positions with skilled managers as described above, the attrition rate among expatiate managers is nearly twice as high as that of domestic managers. Common reasons U.S. expatiate managers fail and return home early include:
•Inability of spouse to adjust.
•Manager’s inability to adjust.
•Manager’s personal or emotional maturity.
•Inability to cope with larger overseas responsibilities.
Hill, C. W. L. (2014). Global business today (8th ed.). New York, NY: McGraw-Hill Irwin.
Companies can offer training to expat managers in order to improve their odds of success. This involves cultural training, language training, and practical training.
Cultural Training
•Cultural training involves helping the manager develop an appreciation for the host country’s culture, including its history, politics, economics, religion, and social business practices. Managers who develop an affinity and familiarity with the host country culture are likely to perform better and more easily relate to customers, employees, and business partners.
Language Training
•English may be the main business language around the world, but learning a little bit of the host language can build trust and relationships, as well as increase communication effectiveness. In certain countries where English is not widely spoken, language training is a must.
Practical Training
•Practical training involves helping expat families ease into day-to-day life in the host country by establishing routines, connecting with communities, and navigating life in this new country. It is important that businesses help both the manager and their family (spouse and children) adjust to life abroad.
Expatriate Compensation
In general, companies can compensate their expatriate managers working abroad in host countries in one of two ways:
Sims, R.H., & Schraeder, M. (2005). Expatriate compensation: An exploratory review of salient contextual factors and common practices, Career Development International, Vol. 10(2), pp. 98-108
•Balance sheet approach
Under a balance sheet approach, the company compensates their expatriate managers at a similar level as their domestic managers, possibly with cost-of-living adjustments.
“The balance sheet approach is the most widely used approach by organizations and its main idea is to maintain the expatriate’s standard of living throughout the assignment at the same level as it was in his/her home country. In other words, it is about ensuring the same purchasing power, which helps to maintain the home country lifestyle. Another important notion is that the balance sheet approach implies matching the expatriate’s salary with home-country peers, not with the host-country colleagues.”
https://blog.iese.edu/expatriatus/2011/11/05/expatriate-compensation-a-review/
The main advantages and disadvantages of the balance sheet approach are:
Pros:
•Creates equity across expatriate assignments in different countries and between expatriate managers from the same home country.
•Easy to communicate to employee.
Cons:
•Can result in different pay for managers from different home countries in the same host country.
Reiche, S., Harzing, A.-W., & García, C. (2009). Management of International Staff. IESE Technical Note, DPON-79-E, IESE Publishing.
•Going rate approach
Under a going rate approach, the company compensates their expatriate managers at the same rate as managers of similar rank in the host country. This is also known as a localization, destination, or host country based approach. For example, a Korean manager working in the U.S. would receive a salary similar to his or her U.S. counterparts, whereas a U.S. manager working in Korea would receive a salary similar to typical Korean managers.
The main advantages and disadvantages of the going rate approach are:
Pros:
•Establishes equity with local managers.
•Easy to administer.
•Helps expats identify with the host country.
Cons:
•Same employee can be paid very differently in different assignments (i.e., as they move from country to country).
•Pay may differ among colleagues from same home country depending on the host country to which they are assigned.
Reiche, S., Harzing, A.-W., & García, C. (2009). Management of International Staff. IESE Technical Note, DPON-79-E, IESE Publishing.
Repatriation
Repatriation occurs when managers return to their home country after serving for a period in a host country position. Repatriated managers may find that they have acquired valuable skills by working abroad which qualify them for higher positions within the organization when they return. For example, they may have gained greater knowledge of the company’s international operations or held broader managerial responsibilities in the host country, thereby preparing them for broader responsibilities in the headquarters operation.
On the other hand, repatriates may face several challenges upon returning to their home country. These include:
•Uncertainty about the position they will hold upon return.
The supervisor who encouraged an employee to work abroad may have moved on, or managers who remain in the home country may be able to forge closer relationships with their supervisors, leaving them in better standing for promotion.
•Uncertainty about how and whether foreign experience will be valued by other managers in the company.
Home country managers may view managerial actions taken in the host country as less consequential than actions taken at the company’s headquarters, especially if they are ethnocentric in their worldview.
•Lower status within home country operations than in the foreign operation.
A manager might be in charge of the entire operation in a host country, only to return home to a more limited managerial role.
•Difficulties faced by the manager’s family.
Spouses and children may have trouble adjusting to life back home, especially after extended periods abroad.
Peng, M.W. (2014). Global business (3rd ed.). Mason, OH: South-Western Cengage Learning.
References
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