Professional Documents
Culture Documents
CHAPTER 15
Chapter Summary
This chapter discusses the HR issues that organizations must address in a world of global
competition. The chapter begins by describing how the global nature of business is affecting
human resource management in modern organizations. Then, it identifies the aspects of global
differences that affect the organizations decisions about human resources. The following
sections explore HR planning, selection, training, and compensation practices in international
settings. Finally, the chapter examines guidelines for managing employees sent on international
assignments.
Learning Objectives
1. Summarize how the growth in international business activity affects human resource
management.
2. Identify the factors that most strongly influence HRM in international markets.
4. Describe how companies select and train human resources in a global labor market.
6. Explain how employers prepare managers for international assignments and for their return
home.
Note: Key terms are boldface and are listed in the Chapter Vocabulary section.
I. Introduction
2. Factors behind the trend toward expansion into global markets include:
a. Foreign countries can provide a business with new markets in which there are millions
or billions of new customers
b. Companies can set up overseas operations and operate them with lower labor costs
c. Global activities are simplified and encouraged by trade agreements among nations
3. The World Trade Organization (WTO) resolves trade disputes among more than 100
participating nations.
b. Host country - the country (other than the parent country) in which the
organization operates a facility
c. Third country refers to a country that is neither the parent country nor the host
country
3. The extent to which organizations use host-country and third-country nationals varies,
with the practice more common in some countries.
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1. Just as there are different ways for employees to participate in international business
so there are different ways for employers to participate.
2. Figure 15.1, Levels of Global Participation, depicts the major levels of global
participation.
1. Organizations that operate in more than one country must be aware of the differences in
culture, education levels, economic systems, and political-legal systems.
A. Culture
a. It often determines the other three international influences and can greatly affect a
countrys laws
b. It influences what people value and often determines the effectiveness of various
HRM practices
b. Power distance concerns the way the culture deals with unequal distribution of
power and defines the amount of inequality that is normal
c. Uncertainty avoidance describes how cultures handle the fact that the future is
unpredictable
4. Figure 15.3, Five Dimensions of Culture, summarizes the five cultural dimensions.
7. Cultural differences can affect how people communicate and coordinate their
activities.
1. Countries differ in the degree to which their labor markets include people with
education and skills of value to employers.
3. The education and skills levels of a countrys labor force affect the extent to which
companies want to operate there.
C. Political-Legal System
2. Laws and regulations in other countries reflect the norms of their culture.
D. Economic System
1. In order to meet the need of understanding a regions business and social culture,
organizations often hire host-country nationals to fill most of their foreign positions.
Host-country nationals more easily understand the values and customs of the local
workforce than someone from another part of the world can. Additionally, training and
transporting families to foreign assignments tends to be more expensive than hiring
people in the foreign country.
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2. Some organizations will fill many key foreign positions with parent-country or third-
country nationals. This is in part because individuals possessing necessary technical and
human relations skills are not readily available.
3. Of the two largest categories of foreign workers employed in the United States, one group
consists of professionals with the particular qualifications needed to fill a job. The other
group comprises employees of multinational companies who are transferred to the United
States from their employers facilities in another country.
e. Willingness to learn about the foreign countrys culture, language, and customs
5. In previous research, the factor most strongly influencing whether an employee completed
a foreign assignment was the comfort of the employees spouse and family.
7. Figure 15.4, Emotions Associated with a Foreign Assignment, identifies the cycle of
emotions experienced by individuals involved in overseas assignments.
8. Culture shock the disillusionment and unfreezing of ideas that occur during the process
of adjusting to a new culture.
1. In an organization whose employees come from more than one country, some special
challenges arise with regard to training and development such as:
b. Employers need to provide the employees with training in how to handle challenges
associated with working in a foreign country
c. What other interventions and conditions must be in place for the training to meet
its objectives?
B. Cross-Cultural Preparation
1. Organizations have to consider legal requirements, local business practices, and national
cultures when they establish performance management methods in other countries.
2. The extent to which managers measure performance may vary from one country to
another.
1. Compensation includes decisions about pay structure, incentive pay, and employee
benefits. All of these decisions become more complex when an organization has an
international workforce.
A. Pay Structure
1. Figure 15.5, Earnings in Selected Occupations in Seven Cities, identifies how pay
structures can differ substantially across countries in terms of both pay level and the
relative worth of jobs.
2. The differences in pay level and relative worth of jobs create a dilemma for global
companies. Should pay levels and differences reflect what workers are used to in
their own countries or should they reflect the earnings of colleagues in the country of
the facility or earnings at the company headquarters? Typically, companies have
resolved this dilemma by linking pay and benefits more closely to those of the
employees country.
B. Incentive Pay
1. Organizations must make decisions with regard to incentive pay such as bonuses and
stock options.
2. The United States and Europe differ in the way they award stock options. European
companies usually link the options to specific performance goals. As competition in
European labor markets increases, experts predict that companies not offering
options will have a harder time recruiting the best employees.
C. Employee Benefits
1. Decisions about benefits must take into account the laws of each country involved as
well as employees expectations and values in those countries.
1. Companies that operate across national boundaries often need to work with unions in
more than one country.
2. While the organizations establish policies and goals for labor relations, overseeing labor
agreements and monitoring labor performance, the day-to-day decisions about labor
relations are usually handled by each foreign subsidiary. The reason for this is that labor
relations on an international scale involves differences in laws, attitudes, and economic
systems as well as differences in negotiation styles.
3. International labor relations must take into account that negotiations between labor and
management take place in different social context not just different economic and legal
contexts.
X. Managing Expatriates
1. At some point, most international and global organizations assign managers to foreign
posts. Out of every hundred U.S. expatriates, between 16 and 40 return before their
assignments are complete. This is a rate almost 2 to 3 times that of foreign nationals.
2. Depending on the nature of the assignment and the culture where it is located, the
selected expatriate needs to possess specific skills, learning styles, and approaches to
problem solving.
4. If the manager has a family, the family members must be able to adapt to a new
culture. Adaptation requires three kinds of skills:
5. Table 15.2 identifies topics that should be addressed in assessing a candidates ability
to adapt to a new environment.
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6. Selection decisions are not just concerned with finding employees who can do the
job; the organization also needs to select people who want an expatriate assignment.
7. Organizations must address the concerns of employees that have arisen as a result of
increased terrorist activities. Evacuation plans should be prepared and
communicated to the employees, strong channels of communication must be
provided for their use, and adequate training should be given to the expatriates prior
to their departure.
B. Preparing Expatriates
6. When the employee leaves for the assignment, the preparation process should
continue. They need the opportunity to discuss their experiences with other
expatriates in order to learn from their successes and failures. The organization
should provide a host-country mentor to help the employees understand their
experiences.
C. Compensating Expatriates
2. Culture shock takes place in reverse during repatriation. Companies are increasingly
making efforts to help expatriates through this transition. Two activities help the
process along, communication and validation. Communication refers to the
expatriate receiving information and recognizing changes while abroad. Validation
means giving the expatriate recognition for the overseas service.
Chapter Vocabulary
Parent Country
Host Country
Third Country
Expatriates
International Organization
Multinational Company
Global Organization
Transnational HRM System
Culture Shock
Cross-Cultural Preparation
Repatriation
1. Identify the parent country, host country (ies), and third country (ies) in the following
example: A global soft-drink company called Cold Cola has headquarters in Atlanta,
Georgia. It operates production facilities in Athens, Greece and in Jakarta, Indonesia.
The company has assigned a manager from Boston to head the Athens facility and a
manager from Hong Kong to manage the Jakarta facility.
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2. What are some HR challenges that arise when a U.S. company expands from domestic
markets by exporting? When it changes from simply exporting to operating as an
international company? When an international company becomes a global company?
HR challenges facing companies that expand into foreign markets by exporting include
the need to be prepared to draw from a larger labor market that will include individuals
with diverse backgrounds and education levels. As the organizations continue to expand
into the international marketplace, HR challenges become more intense. These
challenges include deciding on choices for location and determining availability of
suitable human resources. If the companies become global, there is an increased need for
HRM practices that encourage flexibility and are based on an in-depth knowledge of
differences among countries. Global organizations must be able to recruit, develop,
retain, and use managers who can get results across national boundaries.
3. In recent years, many U.S. companies have invested in Russia and sent U.S. managers
there in an attempt to transplant U.S.-style management. According to Hofstede (see
Figure 15.3), U.S. culture has low power distance, uncertainty avoidance, and long-term
orientation and high individuality and masculinity. Russias culture has high power
distance and uncertainty avoidance, low masculinity and long-term orientation, and
moderate individuality. In light of what you know about cultural differences, how well
do you think U.S. managers can succeed in each of the following U.S.-style HRM
practices? Explain your reasons.
The responses provided by the individual students will vary, but all the responses should
demonstrate comprehension of the chapter information.
4. Besides cultural differences, what other factors affect human resource management in an
organization with international operations?
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5. Suppose you work in the HR department of a company that is expanding into a country
where the law and culture make it difficult to lay off employees. How should your
knowledge of that difficulty affect human resource planning for the overseas operations?
While responses will vary, suggested answers may include: (1) development of extensive
preparation for prevention of possible lay offs, (2) planning alternatives to lay offs, and
(3) providing employees with job/position options.
Possible responses could include the fact that host-country nationals will already be
familiar with the countrys laws, culture, and values as well as possessing proficiency in
the language.
While the responses provided will vary, all answers given should stimulate a lively class
discussion of the topic. Suggestions for possible cultural issues that should be taken into
account may include: educational level, religious beliefs, and availability of all workers
to receive the training.
8. For an organization with operations in three different countries, what are some
advantages and disadvantages of setting compensation according to the labor markets in
the countries where the employees live and work? What are some advantages and
disadvantages of setting compensation according to the labor market in the companys
headquarters? Would the best arrangement be different for the companys top executives
and its production workers? Explain.
Pay structures can differ substantially among countries in terms of pay level and the
relative worth of jobs. Organizations must carefully decide whether to set pay levels and
differences in terms of what workers are used to in their own countries or in terms of
what employees colleagues earn at headquarters. Advantages of setting compensation
according to the labor markets in the countries where the employees live and work may
include maintaining human resource availability for vacant positions, while
disadvantages may include decreasing the candidate pool. Advantages of setting
compensation according to the labor market in the companys headquarters may include
availability of the best potential candidates, while disadvantages may include excessive
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costs being incurred. Most likely, the best arrangement would be different for the
companys top executives and its production workers. This is due in part to the fact that
these positions/jobs are distinctly different from the other one.
10. In the past, a large share of expatriate managers from the United States have returned
home before successfully completing their foreign assignments. Suggest some possible
reasons for the high failure rate. What can HR departments do to increase the success of
expatriates?
Some possible reasons for high expatriate failure rates include: insufficient preparation
before departure, lack of family support, and feeling isolated. HR departments could
prevent potential failure by: providing a mentor for the relocating employee, keeping the
expatriate well-informed of home-country changes, and providing training to family
members to help with the adjustment.
Case Summary:
This case study discusses the costs that can be associated with a clash between economic
downturns and layoff avoidance.
Questions:
1. According to this case, how does Frances political-legal system affect HRM decisions?
(Consider, for example, human resource planning and decisions about operating and
retaining employees.)
Frances political-legal system dictates lengthy negotiations with unions over planned job
reductions and expensive severance packages for laid-off workers. This results in delays
for organizations needing to immediately cut back expenditures. It can also result in more
stringent and selective hiring practices being enforced.
2. What cultural values might be at the root of Frances laws limiting job cuts? What
reasons do French managers give for wanting to loosen the legal requirements? Which
point of view is more like your own?
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Frances methodology bespeaks of being civilized and demonstrates that they highly
value their workers. French managers claim they would like to see changes in order for
the French companies to remain competitive in the marketplace.
3. In the United States, employers have much wider latitude in making layoff decisions than
in France. Still, some U.S. companies have no-layoff policies, which help them attract
and keep talented workers. Suppose two U.S. companies are operating French
subsidiaries and one of those companies has a no-layoff policy. Would the company with
a no-layoff policy have an advantage in France? Explain.
There is a strong possibility that the organization with a no-layoff policy would have some
advantage over the other. This is in line with the current French methodology on
employment.
This case scenario examines how organizations address the issues surrounding world events.
Questions:
1. Give an example of how the experience of the September 11 attacks and the U.S. war on
terrorism might affect each of the HRM functions of recruiting, training, and
compensating employees for a global company.
The student responses will vary. Suggested answers may include (respectively to the
above listed items) more intense screening of candidates, training that is inclusive of
cultural diversity, and increased compensation costs to entice individuals to seek foreign
assignments.
2. Do the issues in Question 1 differ depending on the countries where employees are
located? (For example, would the issues and HRM practices have the same effect on
employees in Germany, Columbia, and Saudi Arabia?) Explain.
The issues in Question 1 may differ depending on the countries where the employees are
located. For instance areas with more unrest, such as those in the Middle East, may
require very different HRM practices to be applied than countries with U.S. affinity.
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3. The case points out that although people in different parts of the world condemn
terrorism, they do not necessarily view events in the same context. For a global or
international organization, what challenges to HRM do these different viewpoints
present? In a U.S.-based organization with subsidiaries in Muslim-dominated countries,
how might HR staff address these challenges?