HRM 460

INTERNATIONAL HUMAN
RESOURCE MANAGEMENT

Lecture 1 to Lecture 10

Copyright
Muhammad Faisol Chowdhury
Senior Lecturer, School of Business
North South University
Email: faisol.chowdhury@me.com

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CONTENT
Lecture 1 - Globalization
Lecture 2 - Internationalization of Firms
Lecture 3 - Internationalization of Cultures
Lecture 4 - Internationalization of Management Systems
Lecture 5 - International Human Resource Management
Lecture 6 - Global Employee Acquisition
Lecture 7 - Global Performance Management
Lecture 8 - Global Employee Development
Lecture 9 - Expatriate Remuneration Management
Lecture 10 - International Industrial Relations

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1. GLOBALIZATION
... has it been a true meaning of economic liberalization ...
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CONCEPT OF GLOBALIZATION

Economic

Global relationship of economy,

politics, culture and technology.

Political

Process in which national

cultures, national economies and
national borders are dissolving.

Cultural

Integration of national economies

into international economy
through trade, FDI, capital flow,
migration, knowledge &
technology sharing.

Technological

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TAPESTRY OF GLOBALIZATION

Stone Age /
Prehistoric people

2.5 million
years ago

Hunters /
Gatherers

Early
Civilization

Rise of Empires

14,000 B.C.

900,000 B.C.

5,000 B.C.

Islamic
Golden Age

ProtoGlobalization

Modern
Globalization

500 A.D.

1200 A.D.

1900

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REASONS OF GLOBALIZATION

Ea
rl

ag
t
cS

i
r
o
st
i
H

yS
tag

Food, shelter,
security

Curiosity, trade

Globalization
Power, knowledge,
economic growth,
lifestyle, crime, etc.

Discovery, trade,
conquer

Mo
de r
nS
tag
e

ge
a
t
le S

d
d
i
M

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THEORY OF GLOBALIZATION
Human Capital

Global Communication
Global Production

Technology
Business

Globalization

Global People
Global Market

Migration

Global Politics
Politics
Global Finance
Economy
Occupation

Global Ecology
Internationalization

Environment

Global Organization
Global Consciousness

Causes

Effects
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MEASURING GLOBALIZATION
Goods & Services
Export & import as a proportion of national
income or per capita of population
Labour / People
Net migration / immigration rates,
weighted by population
Capital / Money
Inward / outward direct investment as a
proportion of national income / per head of
population
Technology
Proportion of population using particular
invention and technology (mobile, internet,
motorcar, etc.)

Globalization

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GLOBALIZATION & INTERNATIONAL MANAGEMENT

Global
Effect
Regional
Effect

National
Effect

Globalization

Organizational
Effect

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GLOBALIZATION & INTERCHANGEABLE CONCEPTS

Liberalization
Modernization

Globalization

Westernization

Internationalization
Universalization

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EFFECTS OF GLOBALIZATION

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BENEFITS OF GLOBALIZATION

Increased free trade between nations.

Increased FDI in developing nations by

developed countries.

Greater corporate flexibility in cross

border operations.

Global mass media, speed of

transportation, technology, knowledge
sharing, tie the countries and their
people together.

Spread of democratic ideals, standards

from superior nations to
underdeveloped and developing
nations.
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BENEFITS OF GLOBALIZATION

Greater interdependency among the

countries.

Reduction of likelihood of economic

turmoil, war, international crime, threats.

Increased in environmental protection.

Organizational development, expansion

and sustainability.

Employment growth, labor movement,

international management.

Economic stability.

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BENEFITS OF GLOBALIZATION
Globalization has made it possible to make leaders around the world sit together
to discuss economic, political, environmental, demographical, security issues.

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CRITICISM OF GLOBALIZATION

Confusing concept.

Exaggerated or not unprecedented.

Its nonsense to talk about a world of 6.5

billion people becoming a monoculture.

Rising inequality between rich and poor is

the inevitable result of market forces.

Market forces give the rich power to add

further to their wealth.

MNCs invest in poor countries to exploit and

access their cheap labor, natural resources
to ensure greater profit.
Protest against G-8 meeting in
Germany, 2010
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CRITICISM OF GLOBALIZATION

Antiglobalization movement against IMF and EU, Greece, 2010

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CRITICISM OF GLOBALIZATION

Antiglobalization movement against G-20 Toronto Summit, Canada, 2010

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CRITICISM OF GLOBALIZATION

Controversial role of IMF, WB, ILO, UN,

WTO and other institutional bodies.

Situation did not change in the last 100

years; rich became richer, poor became
poorer.

Transnational companies place

environmentally degrading industries in
poor countries which do not have
environmental control.

Resource industries (forestry, mining,

fisheries) exploit the resources of poor
countries and destroying biodiversity by
depriving subsistence farmers of their
livelihood.
Protest against G-20 London Summit,
U.K., 2009
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GLOBALIZATION OR AMERICANIZATION

McDonalds in Israel

Starbucks in Seoul, Korea

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2. INTERNATIONALIZATION OF FIRMS
... how big is an MNC ...
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MNC & INTERNATIONALIZATION

The growth of MNCs is without doubt one of the driving forces of the process of
internationalization
MNC
A firm in which the coordination of production without using market
exchange takes the firm across national boundaries through FDI

HSBC headquarter in London

Internationalization
Adopting business practice for non-native environment, specially in other
nations and cultures.
The process of doing business in more than one geographic reasons for
economic gain.
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GROWTH OF MNC

Oil, Gas, Energy

Mineral & Mining

Legal ownership
of operations in
at least two
countries

MNC

Sectors

FMCG
Automotive
Electronics
Finance, Banks
Telecommunications
Media
Medical
Education
Real Estate
Consultancy

Control of
productive
operations in at
least two
countries

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GROWTH OF MNC
Stage 2
The firm extends its market
internationally but retains its
production in home country

Stage 1
The firms market is
exclusively domestic

Stage 5
The most advanced stage of
internationalization where
firms become transnational
corporations.

Stage 4
The firm become full-fledged
MNC with assembly &
production facilities in
several countries

Stage 3
The firm physically moves
some of its operations to
another country

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GROWTH OF MNC

37 of the worlds largest economic

entities are MNCs.

Very big MNCs have budgets that

exceed some countrys GDP.

MNCs account for around twothird of total international trade.

MNCs can have powerful influence

and control in local and
international economies, relations,
cultures, environment and
lifestyles.

MNCs have a considerable

influence on political issues and
governments policies.
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MOTIVATIONS FOR INTERNATIONALIZATION

Revenue: USD 19 billion

Turnover: Euro 2 billion

Asset: USD 14.4 billion

Revenue: Euro 2,053 million

Employees: 34,400

Employees: 9,469

Origin: USA

Origin: Italy

How does Nike generate USD 19 billion by employing only 34,400 employees?
How does Benetton control 6000 stores in 120 countries without owning any of the
stores?
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MOTIVATIONS FOR INTERNATIONALIZATION

Lure of cheap
labor

Organization

Search for raw

materials

Internationalization

Profit
Growth
Sustainability

Competitive
advantages

Product life
cycle model
(Vernons PLC)

Easy
legislations &
regulations

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FIRMS GOING GLOBAL

FDI

Acquisition
Merger
Joint Venture

Firm

Strategic
Alliance
Wholly Owned
Subsidiary

Outsource
License
Franchise
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MNC - INEVITABLE ISSUES

The concept of MNCs is unfounded and

untenable.

Reasons of expansions
(internationalization) - exploitation or
utilization?

MNCs are not liable in law for

environmental damage arising from the
operations of subcontractors.

MNCs are not responsible for cases of

discrimination in employment that occur
in their subcontractors.

In 2005 Canadian gas company Nikos

negligence caused huge environmental
damage in Magurchhara Gas Field,
Tengratila, Sylhet

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MNC - INEVITABLE ISSUES

Majority of the worlds disastrous accidents

are caused by MNCs

2010 Deepwater Horizon Oil Spill caused by BP left thousands of

wildlife killed with great environmental damage

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MNC - INEVITABLE ISSUES

Many MNCs have become so

internationalized that they have
detached themselves from their
home business system.

A countrys competitive position is

not primarily determined by
national firms but rather by global
ones.

Competitive advantage concept.

MNCs shift to whichever part of the
world promises the highest return.

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3. INTERNATIONALIZATION OF CULTURES
... a collective programming of mind ...

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ANALYTICAL CATEGORIES OF CULTURAL ANALYSIS

Cultural
Perspective

Organization

Institutional
Perspective

Low context theories which

are considered as
appropriate in cultural
context.

Management and business

have different institutional
foundations across
countries.

These theories are:

economic utilities, personal
motivation, information
exchange, etc.

These institutions are: state,

the legal system, the
financial system, etc.

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DEFINITION OF CULTURE

Culture is the full range of

learned human behavior
patterns.

Culture is the collective

programming of the mind.

Culture is the learned and

shared ways of thinking and
doing, found among members
of a society. It is measured
through commonality of values
and practices. E.g. eating,
dressing, greetings, teaching,
etc.

Culture is the habit of being pleased with

the best and knowing why.

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CULTURAL ICEBERG
e

l
b
i
Vis

Inv

l
b
i
is

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VISIBLE DIMENSIONS OF CULTURE

Language - 6,000 languages in the world.

Some countries have one official
language: KSA. Some countries have
more than one official language: Canada.
Some countries have no official
language: USA.

Japan - money
Russia - zero

Time Orientation -

Monochronic - Doing one task at a

time. Precise time table is maintained.
Punctuality is very important. Even
milliseconds count. Time is money.
Example: USA.

Brazil - insult
UK, USA - ok

Polychronic - Doing several tasks at a

time. Culture is more focused on
relationship, rather than watching the
clock. Multiple tasks are schedules on
same time. Example: Bangladesh.
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Japan - money

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VISIBLE DIMENSIONS OF CULTURE

Space - Personal space, proximity,

distance and individual comfortable zone.

Middle Easterners / South Americans are

more comfortable in close proximity than
Americans, British and Australians.
Normal distance to Americans is close
proximity to Chinese.

Religion - Impacts on culture, beliefs,

rituals, vacations, eating habits, ethics,
morality, behavior, etc.

Islamic banking system.

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INVISIBLE DIMENSIONS OF CULTURE

Hofstedes Cultural Dimensions Theory

Power Distance (PDI)

Uncertainty Avoidance (UAI)
Individualism & Collectivism (IDV)
Masculinity & Femininity (MAS)
Long Time Orientations (LTO)

Geert Hofstede is Professor Emeritus, University

Maastricht, Netherlands
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HOFSTEDES CULTURAL DIMENSIONS THEORY

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INVISIBLE DIMENSIONS OF CULTURE

GLOBE Cultural Dimensions Theory by
Javidan & Dastmalchian 2009

1. Performance Orientation - refers to the extent to which an organization or

society encourages and rewards group members for performance improvement
and excellence.

2. Assertiveness Orientation - the degree to which individuals in organizations or

societies are assertive, confrontational and aggressive in social relationship.

3. Future Orientation - the degree to which individuals in organizations or

societies engage in future-oriented behaviors like planning, investing, delaying
gratification.

4. Humane Orientation - the degree to which individuals in organizations or

societies encourage and reward individuals for being fair, altruistic, friendly,
generous, caring and kind to others.

5. Collectivism (institutional) - reflects the degree to which organizational and

societal institutional practices encourage and reward collective distribution of
resources and collective actions.
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INVISIBLE DIMENSIONS OF CULTURE

GLOBE Cultural Dimensions Theory by

Javidan & Dastmalchian 2009

6. Collectivism (cultural) - reflects the degree to which individuals express pride,

loyalty, cohesiveness in their organizations or families.

7. Gender Egalitarianism - the extent to which people minimize gender role

differences and gender discrimination.

8. Power Distance - the degree to which people expect and agree that power
should be equally shared.

9. Uncertainty Avoidance - the extent to which people strive to avoid uncertainty

by reliance on social norms, rituals, bureaucratic practices to alleviate the
unpredictability of future events.

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GLOBE CULTURAL DIMENSION THEORY

Criteria

High

Low

Performance
Orientation

Singapore, Hong Kong, New Zealand (emphasise

training & development)

Russia, Argentina, Greece

(family connections, backgrounds)

Assertiveness
Orientation

Austria, Spain, Greece (can do attitude, more

competitive in business)

New Zealand, Sweden, Japan (more sympathy for weak,

more emphasise on harmony, loyalty)

Future
Orientation

Singapore, Switzerland, Canada (loner timehorizon in decision making & more systematic
planning)

Russia, Argentina, Poland (less systematic planning,

more preference for opportunistic behaviours & actions)

Humane
Orientation

Malaysia, Philippines, Indonesia (society /

organisation reward people who are fair, altruistic,
friendly, generous, kind)

Germany, Spain, Singapore (emphasise more on power,

material possessions, self enhancement, independence)

Collectivism
(Institutional)

Singapore, South Korea, Japan (emphasise group

harmony, cooperation and reward)

Greece, Hungary, Argentina (emphasise autonomy,

individual freedom, self-interest & reward)

Collectivism
(Cultural)

Iran, India, China (being loyal towards the family

and expressing pride of it)

Denmark, Sweden, New Zealand (people do not feel

obliged towards their family members, friends)

Gender
Egalitarianism

Hungary, Denmark, Sweden (minimizes gender

role difference)

South Korea, China, Egypt (higher status for men and

relatively fewer women empowerment)

Power Distance

Russia, Thailand, Spain (distinguish between

those with power & status and those without)

Denmark, Netherlands (less differentiation between

those in power & status and those without)

Uncertainty
Avoidance

Switzerland, Sweden, Denmark (value rules,

orderliness, consistency, structured lifestyle)

Russia, Hungary, Bolivia (strong tolerance for ambiguity,

uncertainty, less structured lives & rules)

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ORGANIZATIONAL CULTURE

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ORGANIZATIONAL CULTURE

Differences in national cultures are

important in terms of IHRM because
of their potential impact on
organizational culture.

There is no best practice of

managing multi-national
organizational culture.

Large number of cultural and

institutional elements shape and
determine IHRM practices.

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4. INTERNATIONALIZATION OF MANAGEMENT SYSTEMS

... management transition because of organizational transition ...

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INTERNATIONALIZATION OF FIRMS

1920 - 1950 (multinational form)

Collection of subsidiaries that manage
their local business with minimal direction
from HQ.

Little influence on corporate rules, policy,

procedure.

Mainly financial flows (capital out,

dividend back).

Decentralization and polycentric.

Location
A

Location
F

Location
E

Location
B

HQ

Location
C

Location
D

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INTERNATIONALIZATION OF FIRMS

1950 - 1980 (global form)

Tight operational infrastructure with

strategic decisions.

Location
A

Location
B

Direct supervision and control.

Tight financial control (capital out,

dividends back).

Less trade barriers and economic

development.

Knowledge, resource sharing.

Centralized and ethnocentric.

Location
F

Location
E

HQ

Location
C

Location
D

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INTERNATIONALIZATION OF FIRMS

1980 - onwards (transnational form)

Medium operational supervision and

control.

Skill, knowledge sharing and learning

culture at global level.

Location
A

Location
F

Integrated network of subsidiaries, each

of which possesses a distinct role.

Localization and decentralization.

Geocentric and regiocentric.

Location
E

Location
B

HQ

Location
C

Location
D

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TYPES OF INTERNATIONAL BUSINESS

International Business

Export & Import

Licensing

Joint Venture

FDI

Franchising

Merger

Acquisition

Strategic Alliance
Wholly Owned Subsidiary

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TOP TEN MERGER & ACQUISITIONS

No.

Year

Purchaser

Purchased

USD

2008

Bank of America

Merrill Lynch

50 billion

2008

Tata Motors

Jaguar & Land Rover

2.3 billion

2006

AT&T

BellSouth

72 billion

2004

Sanofi Synthelabo SA

Aventis SA

60 billion

2004

JP Morgan Chase

Bank One Corp.

58 billion

2004

Royal Dutch Petroleum

Shell Transport & Trading

75 billion

2003

Pfizer

Pharmacia Corporation

55 billion

2001

Comcast

AT&T Internet

72 billion

2000

Glaxo Wellcome Plc

SmithKline Beecham

76 billion

10

2000

AOL

Time Warner

164 billion

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TYPES OF EMPLOYEES

Locals

Expatriates

Home /Parent
Country
National
(PCN)

Employee
Third Country
National
(TCN)

Host Country
National
(HCN)

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INTERNATIONAL STAFFING POLICY

Ethnocentrism
(home)

Polycentrism
(host)

Geocentrism
(global)

Regiocentrism
(particular continent)

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GLOBAL PRODUCT DIVISION

CEO

Marketing

Structure where
separate division are
each responsible for
a line of products
sold around the
world

Finance

Production

HR

Product A

Product B

Product C

Asia

Europe

Africa

Germany

Marketing

HR

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GLOBAL GEOGRAPHIC DIVISION

CEO

Marketing

Finance

Asia

Production

Europe

Structure where
separate division are
each responsible for
all operations in
specific locations

HR

Africa

Germany

Marketing

Product A

HR

Product B

Product C

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MATRIX DIVISION
CEO

Marketing

Structure where
complex operations
require a hybrid
structure with
elements of both
product and
geographic divisions

Finance

Asia

Production

HR

Africa

Europe

Product B

Germany

Product A
Product B
Libya

Marketing

HR

Product C

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IHRM ISSUES

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IHRM ISSUES

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IHRM ISSUES

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5. INTERNATIONAL HUMAN RESOURCE MANAGEMENT

... growing issues and increased complexities ...
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CONCEPT OF IHRM

IHRM is when HRM is practiced by

MNCs.

Management of people in multicountry context.

It is the process of procuring,

allocating and effectively utilizing
HR in an MNC.

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CONCEPT OF IHRM

The field of IHRM is characterized by three broad approaches

Cross-cultural Management Approach - examination of human behavior within

organizations from an international perspective.

Comparative IR & HR - describe, compare, contrast and analyze HRM and IR

systems in various countries.

HRM in MNCs - explore the HR implication that the process of internationalization

has for the HR policies and activities.
Why do we need IHRM?

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COMPARISON & CONTRAST OF HRM & IHRM

When compared and contrasted with HRM, IHRM

Encompasses more functions

Has more heterogenous functions

Involves constantly changing perspectives

Requires more involvement in employees

personal lives and families

Is influenced by more external sources

Involves a greater level of risk than typical

HRM

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CHALLENGES OF IHRM

Getting rid of
troublesome employee

Career blockage

Culture shock

Why
foreign
assignments
fail

Lack of pre-departure
cross-cultural training

Family problems

Overemphasis on
technical qualifications

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ADDITIONAL ACTIVITIES OF IHRM

Acquisition - strategic recruitment & selection of international and local

candidates.

Career Management - relocation, repatriation, promotion, termination, etc.

Development - cross-cultural, language, diversity, ethics, technical, psychological,

behavioral, communication, labor or technology intensive, training.

Maintenance - personnel management, accommodation, transport, food & health,

medical, education, family, leisure, entertainment, religion, security, etc.

Remuneration - equity balance, payment structure & type, market rate, economy
societal issues, etc.

Others - currency rate & fluctuations, foreign HR & IR policies, practices, labor law,
etc.

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MYTHS OF IHRM

There is a universal approach to management.

People can acquire multicultural behaviors without outside help.

A good local manager is also a good international manager.

There are common characteristics shared by all successful international managers.

There are no impediments to mobility.

Employees always dream to become an expatriate.

Previous foreign exposure is the most important factor for future foreign posting.

There are little or no differences between HRM and IHRM.

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THINGS TO REMEMBER FOR IHRM

Previous international experience is

not necessarily an indicator of
future performance capabilities.

Some skills and experiences cannot

be taught formally.

Business environment changes

over time, so does people and their
capacity and mentality.

Formal methods of managing IHRM,

instead of being more reliable than
informal methods, are not entirely
problem free.

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6. GLOBAL EMPLOYEE ACQUISITION

... right person in the right place ...
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STRATEGIC ACQUISITION

Recruitment is an extremely significant issue in

IHRM.

A failed expatriate assignment can be a

catastrophic waste of money and time.

Most companies tend to use informal / generic

recruitment & selection program.

Researches suggest that, total cost of moving

an US expatriate to the UK for two years is
around USD 1 million!

Cost of selecting a third country national is

even higher.

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STRATEGIC ACQUISITION

Acquiring a wrong person for a foreign assignment can cause numerous problems

Given parent company a bad image.

Causes friction with host country

employees.

Reduce profits and incurs huge

financial and non-financial loss.

Gives a new business venture a bad

start.

Employee dissatisfaction.

Other problems.

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INFORMAL ACQUISITION PROCESS

Most companies tend to use informal / generic recruitment & selection program

Personal reference / contacts.

Selecting candidates based on

managers judgement.

Seniority, commitment, efficiency etc.

become the main consideration.

Peers feeling about a candidates

suitability.

Previous foreign mission experience.

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STRATEGIC ACQUISITION PROCESS

Formal methods of hiring expatriates, instead of being more reliable than informal
methods, are not entirely problem free

Tests and examinations

International staffing policy

Formal recruitment and selection

criteria

Ethical and legal requirements

Other challenges

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STRATEGIC ACQUISITION PROCESS

Tests and Examinations

Interviews

Background check

Reference check

Selection tests

Assessment centers - adaptability

screening

International Staffing Policy

Ethnocentric & Polycentric

Geocentric & Regiocentric

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STRATEGIC ACQUISITION PROCESS

Formal Recruitment and Selection Criteria

Manpower planning & forecasting

Competency based acquisition

Technical ability (skill matrix)

Job fit and organization fit

Know the company

Know the person and family

Know the assignment

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STRATEGIC ACQUISITION PROCESS

Ethical & Legal Requirement

Diversity Management

Cross-cultural suitability

Minority and disadvantaged group

EEO, AA, Anti-discrimination

Other local and international legal

issues, immigration, migration,
cost of labor, etc.

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STRATEGIC ACQUISITION PROCESS

Other Challenges

Elite Race - mentality possessed by

top executives to prefer PCNs in
subsidiary. British males in British
firms all over the world.

Discrimination - despite advances in

EEO, AA, women and ethnic
minorities are still discriminated
against international management.

Misconception about females unambitious / overambitious, split

loyalties, societal acceptance,
vulnerability, unavailability for
pregnancy, have trouble fitting in,
etc.

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REPATRIATION

The activity of bringing the expatriate back to the

home country.

When an expatriate returns to the home country

after completing the foreign assignment.

Re-entry into the home country presents new

challenges as the repatriate copes with what has
been termed re-entry shock or reverse cultural
shock.

Repatriation can be fantastic or traumatic.

20 to 40 percent repatriates leave the organization shortly after returning home.

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CHALLENGES OF REPATRIATION

Change in
status & pay

Societal
factors

Change in
culture & self
attributes

Repatriation
Poor
organizational
planning on
repatriation

Problem of
adjusting with
people &
culture
Self &
partners
career anxiety

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REPATRIATION PROGRAM

Preparation, physical relocation and transition information (what the company will
help with).

Financial and tax assistance (including benefit and tax changes, loss of overseas
allowances).

Reentry position and career path assistance.

Reverse culture shock (including family disorientation).

Childrens education, healthcare.

Workplace changes (corporate culture, structure, etc.)

Stress management, Employee Assistance Program (EAP)

Help in establishing networking and forming new social contacts.

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Choose your career wisely

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7. GLOBAL PERFORMANCE MANAGEMENT

... troubleshooting performance problems ...
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BASIC UNDERSTANDING

Managing performance is one of the most

challenging aspects of an MNC.

Increased complexities, more risks,

geographical distance, different products
and operation modes, diverse workforce
are the contributors of the challenging
international performance management.

MNCs have specific expectations for each

of its foreign affiliates in terms of market
performance and contribution to total
profits and competitiveness.

Performance Management System (PMS) is a tool used by organizations to

guide performance behavior in alignment to the organizational strategy.

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COMPONENTS OF INTERNATIONAL PMS

MNCs Internationalization
Strategies & Goals

Subsidiary Goals

Job Analysis

Job Goals &

Standards

Performance
Appraisal

Individuals (PCN, HCN, TCN)

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PERFORMANCE MANAGEMENT CONSTRAINTS

Whole versus Part

Betterment of the whole company is more important than one subsidiary parts
short-term profit.

Example: Banglalink by Orascom Telecom Ltd. in Bangladesh.

Orascom enters into a Bangladesh market through establishment of

Banglalink (BL) where its main global competitor GrameenPhone(GP) has
dominant position.

The objective of entering is to challenge GPs cash flow, customer database,

etc. with aggressive pricing policies, promotion campaign, although BL
might face continuous loss initially.

Through this strategy, BL remains in loss for 6 years, but ultimately, by tying
up the GPs resources, it makes higher return in another market or in the
parent company Orascom.
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PERFORMANCE MANAGEMENT CONSTRAINTS

Non-comparable Data

The data obtained from subsidiaries may be neither interpretable nor reliable.

Example: Nippon Garments Bangladesh Ltd.

Reebok outsourced its clothing to Nippon Garments for cheap and skilled
labor, less regulations and other competitive benefits.

Local labor dispute and strike unexpectedly delays shipment of Reebok

products on time, causing Reebok losing customer trustworthiness.

As a result, Reebok cancels all its work orders for Nippon Garments, even
withdraws its whole outsourcing interest from Bangladesh.

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PERFORMANCE MANAGEMENT CONSTRAINTS

Volatility of International Environment

The turbulence of the international environment required that long-term goals

be flexible in order to respond to potential market contingencies.

Problems arise when subsidiary managers perceive unrealistic and inflexible

goals and deadlines set by distant headquarters, failing to take into account
local conditions that change as a result of a volatile environment.

Example: FDI and Bangladesh Politics

Large number of renowned MNCs have shown their lack of interest in

continuing their business in our economy due to our destructive political
situation, mentality of degrading natural environment, lack of international
focus, etc.

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PERFORMANCE MANAGEMENT CONSTRAINTS

Separation by Time and Distance

Judgements concerning the congruence between the MNC and local subsidiary
activities are further complicated by several issues:

Example:

Physical distance and time zone differences among countries

Isolated locations

Infrequency of contact between head office and subsidiary

Cost of reporting system

Lack of face-to-face conversation

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PERFORMANCE MANAGEMENT CONSTRAINTS

Variable Levels of Maturity

Without adequate support of the parent company, market development in

foreign subsidiary is generally slower and more difficult to achieve than at
home country where established brand image can support products, and other
factors may support the business.

Example: Selling of BlackBerry by RIM in Canada and in Bangladesh.

There are variations in customs and work practices among home country and
host or third country.

Example: A high performing Bangladeshis productivity may become average in

comparing with the Europeans.

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CHALLENGES OF PERFORMANCE MEASUREMENT

Unclear Standards
Who is the
Appraiser?

Performance
Feedback

Halo Effect
360 degree

Performance
Measurement
Mistakes

Central Tendency
MBO
Leniency
Process Evaluation
Strictness

How to set KPI

and benchmark?

Outcome Evaluation
Biased View
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PERFORMANCE APPRAISAL CONSIDERATIONS

When attempting performance appraisal, it is important to consider the impact of
the following variables and their relationship

The remuneration package

The assignment

Duties & responsibilities

Support from the head office

Job context

Cultural adjustment

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94
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8. GLOBAL EMPLOYEE DEVELOPMENT

... no one is born as a skilled manager ...
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DEVELOPING INTERNATIONAL MANAGERIAL ROLE

Home-based Manager - who has a central focus on different markets and

players.

Multicultural Team Member - who work on a series of international projects.

Internationally Mobile Managers - who undertake frequent but short visits to

numerous overseas locations while remaining loyal to the parent culture.

Specialist Non-management - roles that involve international activity or transfer

of knowledge through trainings.

Expatriates - who carry the parent organizational culture and undertake lengthy
assignments representing the parent in host countries.

Transnational Managers - who move across borders on behalf of the

organization, but who are relatively detached from any organizational
headquarters.
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TRAINING & DEVELOPMENT DESIGN

Corporate Objectives & Goal

Acquisition
Short Term
Training

KPI
Benchmark

T & D Need
Analysis

PMS
Long Term
Development

T&D
Outcome

T&D
Review

Connection
of thought &
action
Career

Linking T & D with HR deliverables

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EMPLOYEE TRAINING PROCESS

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GLOBAL TRAINING APPROACHES

Information-giving Approach - less than a week and merely provides

indispensable briefings and a little language training.

Affective Approach - one to four weeks focuses on psychological and

managerial skills development

Impression Approach - one to two months, preparing for long assignments with
greater authority and responsibilities through field experiences, extended
language training, etc.

Decompression Approach - training programs for repatriates to help them cope

with reverse culture shock.

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GLOBAL TRAINING TYPES

Cross-cultural training

Job related technical training

Developing attitude, managing power,

negotiation skill

Factual knowledge about the country,

field experience

Language, adjustment, adaptation,

sensitivity

Leadership competency

Preliminary visit to host country

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TRAINING METHODS

Common Training Techniques -

On-the-job

Job instruction

Lecture series, seminars

Coaching and mentoring

Case study, role-play

Management games

Virtual tours, E-learning

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EMPLOYEE DEVELOPMENT PROGRAM

Common Development Programs -

Action learning

Group leadership development

Job rotation

Succession planning

University programs, courses

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FINAL CONSIDERATIONS

Understanding the organizational context within which the international

manager operates.

Rapid changes in company fortunes as a consequence of globalization leads

towards shorter, uncertain, multi-country career with higher risks and
challenges.

Expatriate training and development sensitize candidates for international

assignments, thus, before embarking on such a program, organization must
find:

Is training & development the solution to the problem / challenge?

Are the goals of training clear and realistic?

Are T & D a good investment?

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104
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9. EXPATRIATE REMUNERATION MANAGEMENT

... its not always about the money, or is it ...
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BASIC UNDERSTANDING

Total Package of
Compensation / Remuneration / Reward

Basic Pay

Incentives

Benefits

standard base
salary or wage

any reward
for good
performance

legal entitlement

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INTERNATIONAL PAY COMPLEXITIES

Expatriate Remuneration

Currency

Currency
Rate

Performance
Pay

Taxation

Membership
Pay

Centralized
Pay

Pay
Determinants

Benefits,
Incentives

Decentralized
Pay

Open /
Secret Pay

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Highest Paid CEOs

According to UNDP report, the assets of the worlds 358 billionaires

exceeded the combined incomes of 45% of the worlds population.
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Highest Paid CEOs

BBC & The Wall Street Journal Survey of CEO Compensation 2011 (top 5)

Tim Cook
Apple Inc.

US $ 378 million

Gregory B. Maffei
Liberty Media Corp.

US $ 87.1 million

Larry Ellison
Oracle

US $ 68.6 million

Ray R. Irani
Occidental Petroleum Corp.

US $ 52.2 million

Carol Bartz
Yahoo Inc.

US $ 44.6 million

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PAY INEQUALITY

Fall of socialism.

Resurgence of the USA as

a super power.

Less female participation

in foreign assignments.

Explosion of MNCs.
Male dominance in early
MNC development.

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FACTORS DETERMINING PAY EQUITY

Market rates of pay

Suggestions by HRM
Consultants

Business network

Job evaluation

Research and published

surveys

General market
monitoring and
intelligence

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EXPATRIATE REMUNERATION COMPONENTS

Allowances /
Foreign Service
Premiums

Base Salary

COLA

Housing

Going Rate

Mobility

Medical /
Health

Education

Balance
Sheet

Home
Leave

Spouse
Assistance

Relocation

Hardship
Allowance

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BASE SALARY DETERMINATION

Going Rate Approach (Market Rate Approach)

When the base salary of the expatriate is linked to the host country salary
industry / market practice.

Salary is determined based on selected survey comparisons with:

Local
Nationals

Expatriates
of all
Nationality

Expatriates
of same
Nationality

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BASE SALARY DETERMINATION

Balance Sheet Approach (Build Up Approach)

Most common approach used by MNCs.

Providing expatriates same standard of living in host country, which they would
have had in home country.

Formulates expatriate pay to equalize purchasing power across home and host
countries.

Goods & Services

Housing

Income Tax

Discretionary Expenses

Four expenses are given focus to find the differences between home and host
country. Employer pays the difference.
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EXPATRIATE TAXATION

Tax Equalization - ensures that the expatriate does not suffer a loss or windfall
gain because of differences between home and host country tax obligations.

Example: expatriate is taxed at the home country tax rate irrespective of the
host country tax rate.

Tax Protection - ensures that the expatriate does not suffer a loss in spendable
income because of higher host country tax.

Example: reimbursing the expatriate if the actual host country tax exceeds the
hypothetical home country tax obligation.

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STRUCTURING GLOBAL REMUNERATION

Strategic Considerations

Global Philosophy Framework - understanding how each pay component helps

achieving organizational goal.

Gap Analysis - identifying if existing pay system supports strategic aims or not.

Adapt Pay Policy - review global pay policy, analyze local pay practice, then fine
tuning firms global pay policies so they make sense for each location.

Review - periodical assessment of the implemented pay system.

Systematize Pay System - standardization of job descriptions, job requirements,

performance expectations for similar jobs worldwide.

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STRUCTURING GLOBAL REMUNERATION

General Considerations

Equity theory
Cost of living index
Organizations principles
Explicit add-on incentives
Effort - reward maximization
Manpower supply - demand scenario
Centralized / decentralized pay system
International and local laws and regulations
Communicate remuneration policy to employee and spouse

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118
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10. INTERNATIONAL INDUSTRIAL RELATION

... does HRM replace the need of ER ...
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INDUSTRIAL RELATIONS

Human Resource Management

HRM

The arrangements and

agreements between
employer and employees
about overall work
conditions and situations
Employment Relation
ER

Industrial Relations
IR

The study of ER. The

interaction of employee unions,
employer associations and the
government to operate the
industries of a country.
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INDUSTRIAL RELATIONS COMPONENTS

Industrial
Relations

EmployersAssociations

Workers Unions

Government

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121

INTERNATIONAL INDUSTRIAL RELATIONS

Country

Peak Trade Union

Union
Membership

Founded

Peak Employers
Association

Association
Membership

Founded

United Kingdom

Trade Union Congress (TUC)

6.5 million

1868

Confederation of
British Industry (CBI)

200,000
companies

1965

U.S.A.

American Federation of LaborCongress of Industrial

Organizations (AFL-CIO)

11 million

1886

American Chamber
of Commerce
(AmCham)

1912

Australia

Australian Council of Trade

Unions (ACTU)

46 member
unions

1927

Australian Chamber
of Commerce &
Industry (ACCI)

350,000
companies

1826

Sweden

1. LO (Swedish Trade Union

Confederation)
2. TCO (Swedish Trade Union of
Professional Employees)
3. SACO (Swedish
Confederations of Professional
Associations)

Confederation of
Swedish Enterprise

55,000
companies

2001

1. 1.8 million
2. 1.3 million
3. 0.5 million

1. 1898
2. 1931

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INDUSTRIAL RELATIONS BARGAINING

Individual Bargaining
Employers offer

Employees demand

Negotiation /
Conflict Resolution

Individual Agreement

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123

INDUSTRIAL RELATIONS BARGAINING

Individual Bargaining
Employer

Employees

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INDUSTRIAL RELATIONS BARGAINING

Enterprise Bargaining

Employers offer

Employers representative /
HR manager

All workers demand

Negotiation /
Conflict Resolution

Workers representative /
union leader

Third Party Involvement /

Negotiator / Arbitrator

Enterprise Agreement

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INDUSTRIAL RELATIONS BARGAINING

Enterprise Bargaining

Labor Unions

Anti Unions

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126

INDUSTRIAL RELATIONS BARGAINING

Collective Bargaining
Offer of the all employers of
an industry

Offer of the all workers of an

industry

Apex Employers
Association

Apex Trade Union

Negotiation /
Arbitration /
Conciliation

Government / Industrial
Tribunal / Labor Court

Collective Agreement

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127

INDUSTRIAL RELATIONS BARGAINING

Collective Bargaining

EmployersAssociation

Labor Union

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128

UNION MEMBERSHIP IN THE USA

129
129

UNION MEMBERSHIP IN THE UK

Percentage of union membership

Number of union members

130
130

UNION MEMBERSHIP IN AUSTRALIA

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131

UNION MEMBERSHIP IN JAPAN

132
132

UNION MEMBERSHIP IN THE WORLD

133
133

GLOBAL TRADE UNION MEMBERSHIP TREND

Why?

Declining

134
134

REASONS OF TRADE UNION DECLINATION

Female Participation

Immigration / Migration

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135

REASONS OF TRADE UNION DECLINATION

Industrial / Occupational Shift

Employment Change

136
136

REASONS OF TRADE UNION DECLINATION

Political / Managerial Prerogative

Corruption by Unions

137
137

HR or ER

Are trade unions necessary for employment benefit for

workers and employees?

138
138

HR or ER

Is HRM replacing the need of ER and trade unions?

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139

May Allah help us broaden our mind to acquire true knowledge

Thank you

Muhammad Faisol Chowdhury

faisol.chowdhury@me.com

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