CMS1 Assignment 9: International Human Resources and Compensation Management – Flashcards

(1) free trade (2) service-based business (3) integrated technology platforms

- There has been a great deal of criticism about NAFTA and its effect on the U.S. job market: (1) loss of jobs to Mexico (2) loss of foreign companies coming into the United States (3) lower salaries for American manufacturing jobs (4) increased illegal migration from Mexico -Other than increased illegal migration from Mexico, these criticisms are not supported by research data - The free trade agreement has resulted in lower product prices for Americans overall, giving them more money to spend, thereby stimulating other parts of the U.S. economy.

The communications, religion, values and ideologies, education, and social structure of a country

A country in which an international corporation operates

A domestic firm that uses its existing capabilities to move into overseas markets

A firm with independent business units operating in multiple countries

A firm that has integrated worldwide operations through a centralized home office

A firm that attempts to balance local responsiveness and global scale via a network of specialized operating units

International HRM differs from domestic HRM in several ways. In the first place, it necessarily places a greater emphasis on functions and activities such as relocation, orientation, and translation services to help employees adapt to new and different environments outside their own countries and to help local employees adapt and integrate into the foreign companies in which they were hired.

(1) The company can send people from its home country (often referred to as expatriates, or home-country nationals) (2) It can hire host-country nationals (3) It can hire third-country nationals

Employees from the home country who are on international assignment

Employees who are natives of the host country

Employees who are natives of a country other than the home country or the host country

(1) Hiring local citizens is generally less costly than relocating expatriates. Local citizens also know the cultural and political landscape of the country and are often more likely to be able to gain the support of local staff members. (2) Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally (3) Most customers want to do business with companies (and people) they perceive to be local versus foreign

(1) personal integrity (2) a drive for results (3) respect for others (4) capability

A government document granting a foreign individual the right to seek employment

Foreign workers invited to perform needed labor

Teams composed of members of multiple nationalities working on projects that span multiple countries

(1) International HR managers should get to know the universities, technical schools, and primary schools in the area (2) International HR managers should develop networks in the business and government communities (3) To effectively select employees in a local environment, international HR managers must understand the employees of the firm's competitors

1. The ability to seize strategic opportunities 2. The ability to manage highly decentralized organizations 3. An awareness of global issues 4. Sensitivity to diversity issues 5. Competence in interpersonal relations 6. Community-building skills

A manager equipped to run an international business

Skills considered critical to an employee's success abroad

Skills helpful in facilitating the efforts of expatriate managers

Step 1: Begin with self-selection Step 2: Create a candidate pool Step 3: Assess candidates' core skills Step 4: Assess candidates' augmented skills and attributes

The percentage of expatriates who do not perform satisfactorily

(1) the country where they are going (2) that country's culture (3) the history, values, and dynamics of their own organization

1. language training 2. cultural training 3. assessing and tracking career development 4. managing personal and family life 5. repatriation

1. Do the organization's senior executives view the firm's international business as a critical part of their operation? 2. Within top management, how many executives have a foreign-service assignment in their background. and do they feel it important for one to have overseas experience?

Perpetual stress experienced by people who settle overseas

The process of transition for an employee home from an international assignment

A centralized pay system whereby host-country employees are offered a full range of training programs, benefits, and pay comparable with a firm's domestic employees but adjusted for local differences

1. Provide an incentive to leave the United States 2. Allow for maintaining an American standard of living 3. Provide for security in countries that are politically unstable or present personal dangers 4. Include provisions for good health care 5. Reimburse the foreign taxes the employee is likely to have to pay (in addition to having to pay domestic taxes) and help him or her with tax forms and filing 6. Provide for the education of the employee's children abroad, if necessary 7. Allow for maintaining relationships with family, friends, and business associates via trips home and other communication technologies 8. Facilitate the expatriate's reentry home 9. Be in writing

Pay based on an expatriate's home country's compensation practices

A compensation system designed to match the purchasing power in a person's home country

Step 1: Calculate base pay Step 2: Figure cost-of-living adjustment (COLA) Step 3: Add incentive premiums Step 4: Add assistance programs

A system whereby expatriates are given a portion of their pay in the local currency to cover their day-to-day expenses and a portion of their pay in their home currency to safeguard their earnings from changes in inflation or foreign exchange rates

Expatriate pay comparable to that earned by employees in a host country

Adapting pay and other compensation benefits to match that of a particular country

1. Defining the assignment's objectives 2. Agreeing on the quantifiable measurements for the assignment 3. Developing an equation that converts qualitative behavior into quantifiable measurements 4. Evaluating the expatriate's performance against these measurements 5. Calculating the ROI. This can be a complex cost accounting or a simple calculation to see if the expatriate covered the cost of keeping them on assignment.

1. They help expatriates reestablish old ties with the home organization and may prove to be important for setting new career paths 2. The interview can address technical issues related to the job assignment itself 3. The interview can address general issues regarding the company's overseas commitments, such as how relationships between the home and host countries should be handled 4. The interview can be very useful for documenting insights an individual has about the region. These insights can then be incorporated into training programs for future expatriates. However, if the learning is not shared, then each new expatriate to a region may have to go through the same cycle of adjustment

the level of employee participation, per capita labor income, mobility between management and labor, homogeneity of labor (racial, religious, social class), and unemployment levels.

Representation of labor on the board of directors of a company

Key factors such as (1) free trade, (2) service-based business, and (3) integrated technology platforms have increased the economic integration across countries and emphasized the need for human resources management (HRM) practices and systems to be more globally linked and consistent across countries.

Twenty-seven member countries now comprise EU, whose goal is to facilitate the flow of goods, services, capital and human resources across national borders in Europe in a manner similar to the way they cross state lines in the United States. A similar transition occurred within North America with the passage of NAFTA in 1994. NAFTA created the world's largest free market. Since its passage, commerce between the United States, Canada and Mexico has more than tripled. Also, many trade agreements among Asian countries have significantly facilitated commerce integration and made Asia the fastest-growing region in the world with China as the dominant trade leader.

political-legal cultural

(a) An international corporation is essentially a domestic firm that builds on its existing capabilities to penetrate overseas markets. (b) A multinational corporation (MNC) is a firm with fully autonomous units operating in multiple countries. (c) A global corporation is a multinational firm that maintains control of its international units through a centralized home office. (d) A transnational corporation is a firm that attempts to obtain the local responsiveness of an MNC and the efficiencies of a global firm. It seeks this through the use of a network structure that coordinates specialized facilities positioned around the world.

International human resources management differs from domestic human resources management in several ways. Functions and activities that are unique to international human resources management 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 human resources department. Also, the human resources department in an overseas unit must be particularly responsive to cultural, political and legal aspects of the external environment.

(a) Basically, there are three sources of managers to staff overseas units. The firm can send managers from the home country or expatriates. It can hire host-country nationals, natives of the host country, to be managers. Also, it can hire third-country nationals— natives of a country other than the home country or the host country. (b) In recent years, there has been a trend to send expatriates on shorter, project-based assignments (two to 12 months versus one to three years) and to shift more quickly toward hiring host-country nationals. This has three main advantages: (1) Hiring local citizens is generally less costly than relocating expatriates. Local citizens also know the cultural and political landscape of the country and are often more likely to be able to gain the support of local staff members. (2) Since local governments usually want good jobs for their citizens, foreign employers may be required to hire locally. (3) Most customers want to do business with companies (and people) they perceive to be local versus foreign.

Historically, recruitment in foreign countries has been subject to more government regulation than in the United States. Virtually all countries have work permit or visa restrictions that apply to foreigners. A work permit or visa is a document issued by a government granting authority to a foreign individual to seek employment in that government's country, and there usually are laws requiring the employment of local people when available.

Since the tragic events of 9/11/2011, there has been a backlash against immigration and a backup in the number of visas granted to foreign workers and students entering the United States. U.S. managers complain that this is making it harder for them to hire top talent. U.S. firms lament that they are experiencing a "reverse brain drain" as skilled foreign workers leave the United States and seek work in other countries. Some other countries have become less restrictive than the United States in granting foreign residents citizenship and work permits. For instance, the United Kingdom gives graduates of the world's top 50 business schools an automatic right to work in the United Kingdom for a year.

In addition to focusing on individuals, companies are increasingly using transnational teams to conduct international business. Transnational teams are composed of members of multiple nationalities working virtually on projects that span multiple countries. These teams are especially useful for performing tasks that the firm as a whole is not yet structured 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.

In selecting individuals for an international assignment, the following steps should be followed and in the sequence presented. Step 1: Begin with self-selection. This way companies can more easily avoid the problems of forcing otherwise promising employees into international assignments that are bad for them. Step 2: Create a candidate pool. After employees have self-selected, organizations can build a database of candidates for international assignments. Step 3: Assess candidates' core skills. From the short list of potential candidates, managers can assess each candidate in terms of his or her technical and managerial readiness relative to the needs of the assignment. Step 4: Assess candidates' augmented skills and attributes. Organizations should pay attention to an individual's ability to adapt to different environments.

language cultural development repatriation

For an international assignment, in addition to preparing often for a different language and for practical matters such as different currency, transportation, time zones, and the like, an individual should become acquainted with the following characteristics of the host country: (a) Social and business etiquette (b) History and folklore (c) Current affairs, including relations between the host country and the United States (d) Cultural values and priorities (e) Geography (f) Sources of pride and great achievement of the culture (g) Religion and the role of religion in daily life (h) Political structure and current players.

Language and communications differ among cultures. The following list reflects this: (a) In England, to table a subject means to put it on the table for present discussion, whereas in the United States, it means to postpone discussion. (b) Information flows to managers in the United States, whereas in Europe, South Africa and other centralized cultures, managers must take the initiative to seek out information. (c) Arabs, Europeans and many other cultures resent the tendency of Americans to be direct in their communications and to get to the point. (d) There are 16 ways to avoid saying "no" in Japan. (e) When something is described as "inconvenient" by the Chinese, this means that it is impossible. (f) Expressions of anger are unacceptable in some countries, and in others public displays of anger are taboo. (g) In many foreign countries, silence is treated as "communication space" that belongs to the message sender, whereas in the United States, it is not discourteous to interrupt or break silences. (h) Gesturing with one's hands is acceptable in the United States, but not in many foreign countries.

(a) Employee work attitudes and motivations vary among cultures. In Japan, for example, employees have tended to be highly loyal to their employer, although there are indications that this may be changing. Latin Americans tend to be loyal to their individual managers rather than to their employing firm or job. In the United States, competition has been the name of the game; in Japan, Taiwan and other Asian countries cooperation is more the underlying philosophy. (b) Participative decision making varies among managers from different cultures, with U.S. managers somewhere in the middle of the continuum between autocratic and highly participative. Managers from South America and Europe, especially those from France, Germany and Italy, tend to be highly autocratic. Far Eastern cultures tend to stress harmony and lean more toward group decision making.

Although international assignments provide some definite developmental and career advantages, there can sometimes also be certain career development risks. To maximize the career benefits of a managerial assignment, a candidate should ask two key questions before accepting an international post. These questions are: (1) Do the organization's senior executives view the firm's international business as a critical part of their operation? Research shows that expatriates with clear goals that truly need to be accomplished are likely to find their assignments more rewarding. Realizing this, fewer companies are sending expatriates abroad for career development purposes only. (2) Within top management, how many executives have a foreign service assignment in their background, and do they feel it important for one to have such experience?

disorienting catastrophic

Employee compensation practices of firms operating internationally vary according to the practices of the host country. In industrialized countries, pay generally is by the hour, whereas in developing countries, it is by the day. Also, piecework is quite commonly used. In some countries, seniority is an important element in determining the pay rates of employees. Employee benefits often are much higher in foreign countries than in the United States. Also, the benefits often are required by government legislation or order. Lump-sum payments equal to one or two months' pay are made semiannually or annually in some countries as part of the total compensation package. Additionally, profit sharing is quite common in several foreign countries, too. Compensation of managers has differed for host-country and expatriate managers. Hostcountry managers traditionally were paid primarily according to local custom. This typically produced a lower salary than that paid to expatriate managers; however, increased competition among different companies with subsidiaries in the same country has led to a gradual upgrading of host-country managers' salaries. Today more companies are offering their host-country employees a full range of training programs, benefits and pay comparable with their domestic employees but adjusted for local differences. These programs are known as global compensation systems.

(a) Expatriate managers generally are paid in a manner that is consistent with the overall compensation policy of the employer. This includes an incentive to accept the overseas post; the ability to maintain their American standard of living; a factor to facilitate reentry into the United States; consideration of the education of children abroad; and an allowance for maintaining relationships with family, friends and business associates via trips home and other communication technologies. Additionally, expatriate compensation packages provide for security in countries that are politically unstable or present personal dangers, the packages include provisions for good health care, and they reimburse for additional foreign taxes and provide assistance with these tax filings. (b) The balance sheet approach is a system that is used by internationally operating firms to compensate expatriate managers overseas. It is designed to equalize the purchasing power of employees at comparable position levels living overseas and in the home country and to provide incentives to offset qualitative differences between assignment locations. It has four elements which are as follows: (1) Base pay that is essentially equal to that of domestic managers in comparable jobs (2) A cost-of-living adjustment to the base pay, differentials that are designed to offset the higher costs of overseas goods, services and housing. Typically, companies do not subtract when the international assignment has a lower cost of living. (3) Incentives of about 15% of base pay to compensate a person for his or her separation from family, friends and domestic support systems. Incentive premiums are also paid to compensate expatriates for hazardous duty or harsh conditions. (4) Company assistance programs to cover the added costs of moving and storage, automobiles and education expenses.

One of the disadvantages of not localizing an expatriate's pay is that in low-cost countries, this can breed resentment among local staff members if they are earning significantly less. This can affect the amount of cooperation they are likely to give an expatriate and adversely affect the success of an assignment.

Domestic managers who have not worked abroad are frequently unable to understand an expatriate or host-country manager's experiences, value them or accurately measure their contribution to the organization. Geographical distances create communication problems for expatriates and home-country managers, although e-mail, and other human resources information systems technologies have begun to help close the gap. Still, local managers with daily contact with the person are more likely to have an accurate picture of his or her performance. Host-country evaluations can sometimes be problematic. First, local cultures can influence a person's perception of how well an individual is performing. Second, participative decision making may be viewed either positively or negatively, depending on the culture. Such cultural biases may not have any bearing on an individual's true level of effectiveness. In addition, local managers sometimes do not have enough of a perspective on the entire organization to know how well an individual is truly contributing to the firm as a whole. Even if the formal appraisal is conducted in the home office and promotion, pay and other administrative decisions are made there, most human resources experts agree that performance evaluations should try to balance the two sources of appraisal information. Multiple sources of appraisal information can be extremely valuable for providing independent points of view.

Individuals serving in foreign countries should provide ongoing feedback to the home office. This includes information concerning the support they are receiving, obstacles they face and suggestions for changes. In addition, debriefing interviews are conducted with individuals upon their return to the home country for several purposes: (a) To help expatriates reestablish old ties with the home organization and engage in career path reevaluations (b) To address technical issues related to the foreign job assignment itself (c) To address general issues regarding the firm and its overseas commitments (d) To document insights of the interviewees and incorporate them into training programs for expatriates.

There are major differences among industrial countries with respect to the labor environment. Wages and benefits vary dramatically across the world as do safety, child labor and other legal regulations. In many countries, the regulation of labor contracts is profound and extensive. Labor unions around the world differ significantly as well. Differences exist not only in the collective bargaining process, but also in the political-legal conditions. For example, the EU prohibits discrimination against workers in unions, but in many other countries, including countries in Central America and Asia, labor unions are illegal. Union strength depends on many factors, such as the level of employee participation, per capita labor income, mobility between management and labor, homogeneity of labor (racial, religious, social class), and unemployment levels. In the United States, generally a union is selected by a majority of employees and subsequently bargains only with a single employer; whereas in many European countries the unions have a great deal of political power and are often allied with a particular political party. When employers in these countries deal with unions, they are, in effect, dealing indirectly with governments.

skilled

ITUC is an international union organization with headquarters in Brussels. ITUC is a confederation of over 300 national trade union centers, representing 175 million trade union members in about 155 countries and territories. The ITUC's mission is to promote worker rights and interests through international cooperation between trade unions, campaigning and advocacy with governments and global institutions.

ILO is a specialized agency of the United Nations. It engages in considerable research on an international basis and endorses standards for various working conditions set forth within the International Labor Code. This code often is used to reflect the international labor standards that employers are expected to follow. ILO has redefined its mission based on the "Decent Work Agenda." The Decent Work Agenda promotes the idea that there is an ethical dimension of work. This ethical dimension includes decent homes, food, education, the right to organize and social programs to protect workers when they are elderly, disabled or unemployed. Moreover, the agenda pertains to workers worldwide, including the self-employed—a situation common in agricultural-based, developing countries.

Provisions for employee representation are established by law in many European countries. For example, an employer may be legally required to provide for employee representation on safety and hygiene committees, worker councils or even on boards of directors. Their responsibilities vary, but worker councils basically provide a communication channel between employers and workers. The legal codes that set forth the functions of worker councils in France are very detailed. Councils are generally concerned with grievances, problems of individual employees, internal regulations and matters affecting employee welfare. In Germany, representation of labor on the board of directors of a company is required by law. This arrangement is known as codetermination. While sometimes puzzling to outsiders, the system is fairly simple. Company shareholders and employees are required to be represented in equal numbers on the supervisory boards of large corporations. Power is generally left with the shareholders, and shareholders are generally assured the chairmanship. Other European countries and Japan either have or are considering minority board participation.