Chapter 14 Establishing HRM Practices in Foreign Countries © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved Chapter Outline • 14-1 Gaining Competitive Advantage • 14-2 HRM Issues and Practices 14-3 The Managers Guide â 2010Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 not allow subsidiaries to be wholly owned by foreign companies Joint ventures allow companies to draw on others’ expertise © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 crosscultural environments © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 realworld 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 High tolerance for uncertainty © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 14-2b The Use of Expatriates (cont.) • Problems appraising expatriates’ job performance  Invalid performance criteria -  Rater competence -  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 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 14-2b The Use of Expatriates (cont.) • HRM interventions for expatriates  Mentoring -  Formalized career planning -  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 Integrate overseas assignments into their succession planning systems Communication systems - Encourage a flow of information between expatriate managers and parent company managers © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 14-2c Developing HRM Practices in HostNational 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 the company’s HR policies and procedures need to be adjusted overseas due to different legal issues and cultural norms?  How 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? © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved  14-3c HRM Skill-Building for Managers • Japan    Japanese business norms are very formal and welldefined 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved 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 © 2010 Cengage Learning. Atomic Dog is a trademark used herein under license All rights reserved  ... 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... license All rights reserved 14-2a Understanding Cultural Differences • Culture: A society s set of assumptions, values, and rules about social interaction • Artifacts: Tangible things that represent... not make sense in the foreign culture Companies must construct criteria according to each subsidiary s unique situation Raters may lack an understanding of the social and business contexts in which