Solution Manual For Managing a Global Workforce 4th Edition By Charles Vance, Yongsun Paik, Fabian

SOLUTION MANUAL FOR Managing a Global Workforce 4th Edition By Charles Vance, Yongsun Paik, Fabian Jintae Froese, Torben Andersen

Chapter 1-11 CHAPTER 1 INTRODUCTION AND OVERVIEW LECTURE NOTES This introductory chapter examines the many different external global and local contextual factors that may influence key internal company factors, which in turn determine global workforce management. Key perspectives that appear throughout the text for understanding effective global workforce management are also discussed.

LEARNING OBJECTIVES • Identify important factors in the external global market context that can influence global workforce conditions and company management practices; • Discuss important factors within the organization that can influence workforce conditions and company management practices; • Understand the value of a talent management perspective, inclusive of all who contribute to an organization’s success; • Discuss applications of career management and personal responsibility in global workforce management; • Understand the role of the Human Resource function in effective corporate governance and sustainability; • Describe potential benefits of globalization for all; • Understand the ongoing challenge of managing our global workforce within the changing forces of convergence versus divergence.

I. INTRODUCTION A.

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Today’s burgeoning growth of business on a global scale (both home and abroad) has significant challenges associated with the acquisition, deployment, and management of labor.

Critical to the success of all organizations, both profit and nonprofit, in our increasingly global marketplace is the ability to plan for, attract, develop, and retain capable and committed employees, whether those employees are at home or abroad.

Competence in workforce management should not be restricted to those individuals who specialize in human resources, but should be a top priority for every executive, manager, and business professional.

The challenge of effectively managing human resources to achieve organizational strategic objectives only increases in scope and complexity with the introduction of

multiple cultures, differing national practices and regulations, and physical distances involved with global commerce.

II. GLOBAL MARKET CONTEXT (EXTERNAL FACTORS) Company leaders endeavor to manage their organizations within a growing global market context, with rapidly changing social, political, economic, and technological forces. Key external factors influencing the effective management of human resources can differ dramatically from one local context to another.

A. Physical environment First and foremost, the Global COVID-19 pandemic has been the most prominent recent factor in our physical environment affecting each of us personally as well as overall workforce management policy and practice has been the global COVID-19 pandemic. The pandemic dramatically changed the nature and frequency of workforce interaction, encouraging more distant/remote and virtual working arrangements.

Second, the increased awareness of global warming and associated climate change under the broader managerial philosophy of sustainability is having a major impact on workforce management. Many organizations are encouraging the use of virtual meeting technologies such as Zoom and Microsoft Teams to reduce the cost and energy use in employees’ domestic and international travel, and the first experiments with virtual reality meetings. Remote working arrangements that have benefitted from online technological advancements are also being employed to ease physical commuting challenges in large metropolitan areas.

B. Economy As local, national, regional, and global economic strength can have a great influence on business activity, economic conditions can in turn greatly affect workforce decisions for carrying out business activity. Where an economy is perceived as weak, company growth plans may be put on hold, along with a freeze in hiring new regular employees and a greater emphasis on using temporary employees. Where regions may differ in their economic favorability, MNCs may shift their business activity focus to gain the greatest benefit for the company, thus placing differing workforce demands in different regions. Exchange rates across the financial markets of the global economy can affect human resource arrangements to a significant degree.

C. Social Preferences This factor is made up of the broad set of culture-based beliefs, values, norms, customs, attitudes, and expectations held by groups, communities, and societies. Social preferences are also greatly influenced by: • communications technologies, such as the Internet, that increase widespread awareness of new issues, opportunities, and social models (e.g., CSR, basic human rights, etc.), rapidly changing traditional norms and expectations.

• other external factors, such as government laws and regulations against workplace discrimination.

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growing global social expectation supporting nationalism, where national interests are placed ahead of those of other countries or multinational cooperative efforts.

D. Competition Global competition to increase market share and profitability by increasing the number of satisfied customers and at lower costs is a primary driver of globalization.

• With greater accessibility to cheaper labor markets, companies are motivated to move their operations, affecting workforce relations and employment in home country and host country environments.

• With the support of advancing information and communication technologies, companies are able to gain efficiencies by consolidating and moving, through offshore outsourcing, many operations to less expensive labor markets.

• A company’s human resources also represent a primary source of competitive advantage through such key contributions as workforce innovation and human capability.

• Companies compete for quality human resources, and are able to successfully attract and retain human talent through their workforce management practices.

E. Demographics General labor characteristics, such as age, gender, ethnicity, and skill base: • Can influence the nature of challenges and practices of workforce management.

• Can differ dramatically from one location to another.

• Labor skill base also is a critical area of demographics, which MNCs carefully consider when planning for opening operations in other countries.

F. Innovation Our world is changing, posing an ongoing challenge for organizations to monitor and anticipate changes, and to adjust appropriately to survive and successfully compete. Innovations often usher in major changes worldwide affecting workforce management. Two major forms are discussed below.

1. Technological Innovation The artificial intelligence (AI) and digital revolution is becoming integrated into and having an important impact on important HR administrative duties throughout the entire talent management lifecycle, from employee recruitment to training, to performance feedback and appraisal, to rewards management, to retirement. In addition, technological innovation continues to bring increased efficiencies to work processes, often reducing the number of workers needed to achieve the same level of productivity.

2. Best Practice in Management Throughout the world there are continually new developments and innovations in management practice that potentially affect people in the workplace (e.g., offshoring company back-office operations to foreign work sites; outsourcing: allows companies to focus on their core

competencies while partnering on site or on a distance basis with other firms that provide a service that they do best).

Organizations can pick up new ideas and innovations for improving workforce management practice in several ways, including attending professional conferences and meetings where information is disseminated formally and informally through networking.

G. Governments Governments individually and collectively have a central role in regulating economic activity and can exert tremendous influence on workforce management practices.

1. Individual Governments Governments are typically active forces trying to facilitate economic health leading to increased local employment opportunity—increasingly active in improving national infrastructures, investing in education and labor force skill development, and negotiating tax arrangements to successfully attract MNCs that provide new jobs through their foreign direct investment.

Governments also have a responsibility to make laws and monitor labor practices to protect the rights of workers, as well as those seeking employment, and to ensure safe working conditions.

2. Multilateral Agreements Two or more governments form agreements and treaties that serve to promote cross-border commerce and economic development for all governments involved.

• Often stipulate workforce standards and requirements that each country must uphold.

• Common criticism: they generally only specify that present labor laws of each country be upheld, and fail to require adherence to higher common standards.

• The most integrated multilateral agreement is the European Union (EU), with an extensive governing and regulatory structure affecting organizations in all EU current and prospective member countries, as well as companies doing business within this huge economic bloc.  The establishment of the EU and its labor mobility provisions has resulted in a major increase in labor migration across national borders, creating much greater challenges in managing diversity than experienced in the past, as well as bringing in to developed countries of the EU an increasing supply of highly motivated labor from less-developed economies and generating a downward pressure on local wages.  EU’s Charter of Fundamental Rights for EU citizens and all persons residing in the EU. Major points of EU Charter relevant to HRM:  No one shall be held in slavery or servitude.  No one shall be required to perform forced or compulsory labor.  Trafficking in human beings is prohibited.  Everyone has the right to education and to have access to vocational and continuing training.

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Nationals of third countries who are authorized to work in the territories of the Member States are entitled to working conditions equivalent to those of citizens of the Union.

Any discrimination based on any ground such as sex, race, color, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, nationality, disability, age, or sexual orientation shall be prohibited.

Equality between men and women must be ensured in all areas, including employment, work and pay.

The G-20, G77 Besides long-term agreements and treaties involving cross-border commerce, governments meet regularly to discuss common current pressing issues that can have major implications for global workforce management.

• The Group of Twenty (G-20) consists of Finance Ministers and Central Bank Governors.

Established in 1999 with the objective of bringing together industrialized and developing economies to discuss key issues in the global economy.

• There is also growing solidarity among countries represented on the other end of the economic spectrum, as evidenced by the regular meeting of the Group of 77—provides the means for the developing world to articulate and promote its collective economic interests.

H. Intergovernmental Organizations (IGOs) Ongoing transnational governmental and administrative activities and supportive structures are provided by the formation of intergovernmental organizations, comprised of the governments of member states that have joined together to cooperate on common goals. An IGO usually has a formal, permanent structure with various organs to accomplish its tasks.

1. United Nations (UN) Largest and most comprehensive intergovernmental organization with a multitude of agencies and initiatives to carry out global priorities of peace and security, economic and social development, human rights, humanitarian affairs, and international law. Besides the workings of its agency specifically dedicated to international labor issues (the International Labor Organization or ILO), the United Nations has a high-profile influence on global workforce management through its Global Compact, officially launched in 2000, listing 10 universal principles in the areas of human rights, labor, the environment, and anticorruption. The Global Compact • is completely voluntary • is not monitored or enforced • relies on a joint effort involving public accountability and transparency, companies with enlightened corporate social responsibility, labor representatives, and nonprofit citizen organizations (e.g., nongovernmental organizations or NGOs) to promote adoption of the Compact’s.

2. International Labor Organization (ILO) Specialized United Nation’s agency that seeks the promotion of social justice and internationally recognized human and labor rights.

• Founded in 1919 at the end of World War I through the tripartite participation of governments, employers, and labor unions during the initial planning of the ill-fated League of Nations. Later became the first specialized agency of the United Nations in 1946.

• Formulates and monitors international standards in basic labor rights across a broad spectrum for its 178 member countries.

• Maintains its unique tripartite structure with workers and employers participating as equal partners with governments.

• Provides training and advisory services to all parties in such areas as vocational training and rehabilitation, employment policy, labor and industrial relations, management development, social security, labor statistics, and occupational safety and health.

• In 1998 adopted the Declaration on Fundamental Principles and Rights at Work covering four major areas: 1.

Freedom of association and the right to collective bargaining; 2.

The elimination of forced and compulsory labor; 3.

The abolition of child labor; 4.

The elimination of discrimination in the workplace.

3. Organization for Economic Cooperation and Development (OECD) Based in Paris, was created as an economic counterpart to NATO, and grew out of efforts in 1947, supported by the United States and Canada, to coordinate the reconstruction of Europe after World War II. • • • • • •

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Helps governments in member countries achieve sustainable economic growth and employment and rising standards of living.

Is a primary proponent of economic globalization, and is an active overseer of associated economic, social, environmental, and governance challenges.

Its 38 member countries are committed to a market economy and a pluralistic democracy Shares expertise and views on topics of mutual concern with more than 100 countries worldwide, from Brazil, China, and Russia to least developed countries in Africa.

Has been one of the world’s largest and most reliable sources of comparable statistical, economic, and social data.

In 1976 the OECD set forth its Guidelines for Multinational Enterprises, covering a wide range of corporate responsibility issues, including employment and industrial relations, environment, information disclosure, competition, financing, taxation, and science and technology.

OECD guidelines represent a multilaterally endorsed and comprehensive code of conduct recommended by governments to MNCs. They are not legally binding, but many government OECD members refer to them when drafting national legislation on corporate behavior, and often require company compliance.

4. World Trade Organization (WTO) Only global intergovernmental organization dealing with the rules of trade between nations, involving tariff and trade barrier reductions and the resolution of international trade disputes. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments.

• 164 members, accounting for over 98 percent of world trade.

• Decisions are made by the entire membership, typically by consensus. The WTO’s goal is to regulate and help facilitate a smooth, fair, and predictable conduct of global business among producers of goods and services, exporters, and importers.

• Ongoing debate about whether the WTO should use sanctions and regulations to ensure the protection of core labor rights among trading partners, such as those advocated by the ILO. • Unions in developed countries, motivated to preserve local jobs by restricting work operation relocation and foreign direct investment in developing countries, are particularly vocal in support of the WTO requiring developing countries to adhere to high labor standards.

• Governments of developing countries generally are against a WTO immediate requirement of higher labor standards, which they believe serve as a cost barrier to increased FDI, a significant source of new tax revenue and jobs.

5. Financial IGOs The two major global institutions that focus on financial issues attendant to challenges and needs of globalization are the World Bank and International Monetary Fund (IMF). Both are dedicated to reducing world poverty and raising the economic health and stability of developing countries. (a) The IMF. The International Monetary Fund, supported by its 190 country members, has a narrower financial focus, working to promote international monetary cooperation, exchange stability, and orderly exchange arrangements.

• Provides advice and technical services for developing countries to restructure debt and revise fiscal and economic regulatory policy toward greater national investment in infrastructure, education, and other internal factors leading to economic growth and employment.

• Frequently criticized by labor and other employee interest groups when its fiscal policy advice and debt restructure prescriptions conflict with local labor practices, such as in IMF recommendations to loosen restrictive labor laws that are believed to impede new business development and FDI. (b) The World Bank. The World Bank, another agency of the United Nations, has a much broader scope than the IMF, working directly and in partnerships with member governments, agencies, and nonprofit organizations such as World Vision and CARE to support programs and projects to counter illiteracy, disease, child and family abuse, corruption and fraud, and other maladies in developing countries associated with poverty.

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Provides loans, policy advice, technical assistance, and knowledge sharing services to low and middle-income countries to reduce poverty and improve living standards.

Promotes growth to create jobs and to empower poor people to take advantage of economic growth opportunities.

Composed of five sub-agencies, all owned by its 184 member countries, and whose activities include providing interest-free loans and credit for project and program support, private sector investment, and investment risk insurance and dispute resolution assistance.

Works closely with the IMF and requires joint membership.

6. IGO Impact Much criticism of the voluntary nature of IGOs’ various declarations, guidelines, conventions, measures with their general lack of enforcement ability (e.g., China bans independent labor unions, violating ILO’s Declaration supporting freedom of association and recognition of the right to collective bargaining. But there is evidence that the encouragement of voluntary norms and codes of conduct can bring about a significant shift in corporate behavior to maintain a positive corporate image and reputation, and to encourage the formation of self-managing internal company values and ethical codes for doing business. In addition, there likely will continue to be greater diligence in fully adopting and enforcing these rights and principles and other conventions and recommendations that are placed in high profile when they are reinforced by other global entities, and especially when made contingent to funding, loan, and trade approvals by the World Bank, IMF, and the WTO. I. Employee Interest Organizations Many nonprofit organizations dedicated to protecting and promoting the interests of workers and improving workforce management practice. These organizations of diverse purposes and sizes are found at local, national, regional, and global levels, and continue to interact with governments, intergovernmental organizations (e.g., UN, World Bank) and companies, and help shape public opinion and social preferences to exert powerful influence on how people are managed in the world marketplace.

1. Labor Unions Labor or trade union is a group of workers who act collectively to address common concerns or issues associated with the employment arrangement.

• Typically structured as a separate organization external to a firm that legally represents employees, and who often collectively comprise its membership across many organizations.

• Can vary dramatically in purpose and structure from one country to another, with some being organized by industry (e.g., the UK’s National Union of Rail, Maritime and Transport Workers), and others by profession, trade, or functional area (e.g., Australia’s Queensland Nurses Union), and others emphasizing broader social and political issues.

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Although unions generally have a primary influence on workforce issues at the local and national level, they are beginning to make advancements toward global solidarity, yet still far behind the global reach of MNCs.

2. Employer and Professional Associations (a) Employer Associations. The primary focus of employer association is on the interests of companies that comprise membership, yet activities also indirectly involve the interests of employees.

• Can vary greatly in size and may be structured by industry or functional specialization.

• Traditionally, the principal role of an employer association has been to represent its members at multi-employer collective bargaining with recognized trade unions, although now place much greater emphasis on providing advisory services and training in several aspects of workforce management.

• They are particularly active in lobbying to influence government and world body laws and measures in ways that are favorable to or at least minimally restrictive for employer firm members. (b) Professional Associations. Professional associations, ranging from local to global membership, address the practical knowledge and career needs of working professionals who likely would not be organized in a union.

• Range from very general functional focus, such as the Society for Human Resource Management, to much more specific, such as the International Association for Human Resource Information Management.

• Very active in disseminating innovations and knowledge, including related to global workforce management, through such means as conferences, workshops, publications, and online discussion groups, for improving workplace performance.

3. Non-Governmental Organizations (NGOs) One of the strongest forces today to moderate the great global influence of MNCs is the combined impact of NGOs, which have exploded upon the national and global scene in everincreasing numbers over the past thirty years. This dramatic new NGO presence has been facilitated by global changes in prosperity, education levels, freedoms, mobility, increased transparency of markets, and advances in information and communications technologies; coupled with a growing awareness of governments’ inability or unwillingness to safeguard against negative developments incident to globalization. NGO influence in various forms is responsible for major changes in corporate behavior and policy, as well as greatly increased government scrutiny and reform activity.

• Literally millions of NGOs worldwide—independent entities to much larger organizations, such as Human Rights Watch, Amnesty International, World Vision, and CARE. • Sometimes referred to as social entrepreneurship or citizen groups, NGOs can be religious-based or nonsectarian, and their missions, generally related to social humanitarian and environmental concerns, differ greatly.

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May have a global focus with a central headquarters and offices in many countries, or they may have a local community or national focus.

May be characterized as more vocal and high-profile advocacy groups, applying through the mass media intense public pressure on governments and corporations, or more operational in nature, assisting in implementation projects and activities in line with their mission through partnerships with governments, corporations, and other NGOs. Many NGOs sponsor both advocacy and operational activities.

Growing trend for entrepreneurial NGOs is to serve to ―fill in the cracks‖ or exploit niche opportunities in social and environmental protection services that are not addressed by governments and MNCs. Many of the largest NGOs have working relationships and even official associative status with IGOs such as the United Nations or the World Bank.

NGOs are increasingly active partners with MNCs, governments, and intergovernmental organizations in monitoring, diagnosing, and serving these needs.

MNCs often see major advantages that NGOs provide in assisting with the implementation of corporate commitments to social responsibility, including the following: a.

Local knowledge base, since NGOs tend to work closely with grassroots movements; b.

Local network and community connections; c.

Credibility, given the NGO altruistic mission and purpose; d.

Past and existing partnerships with governments.

In some cases, MNCs may use the operational expertise of NGOs in carrying out the MNC’s own plans, such as with independent, impartial safety inspections at companyowned and outsourced manufacturing facilities around the world.

Or NGO’s themselves may approach MNCs and gain corporate financial and other resource commitment and sponsorship to support the NGO goals, which again may enhance MNC reputation in social responsibility.

Operational NGOs may also provide direct assistance with company workforce management needs.

III. INTERNAL COMPANY FACTORS INFLUENCING HRM Important factors within a company can also have a major influence on workforce management.

The combination of these internal factors often has a greater influence on company operations in general and workforce management in particular than the important external factors that we have examined.

A. Company Culture Overall prevailing set of assumptions, attitudes, beliefs, norms, priorities, and values within the organization.

• Greatly determined by founding leaders and the collective common history of its members.

• Communicated explicitly (e.g., through employee handbooks, written messages, executive speeches) and implicitly (e.g., through behavior modeled by leaders, informal

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communications such as the ―grapevine,‖ reward/punishment contingencies) to indicate which behaviors are desired and which are unacceptable.

Can have a powerful influence on behavior expressed by organizational members, and tends to very naturally orient and educate new organizational members.

Because of its pervasive and often unconscious nature, organizational culture is very difficult to change, typically requiring considerable time and comprehensive planning for altering company behavior and practice, especially focusing on a thorough redesign of company rewards (both formal and informal).

Some organization cultures, like national cultures, can be very ―tight‖ or homogeneous, with little variation in styles and preference of acceptable behavior; while other cultures, such as with MNCs with operations that are extremely decentralized and share only a common name, and perhaps not even that, can be very ―loose,‖ or have several subcultures.

Organizational culture has a major impact on managerial thinking patterns and philosophy, and is expressed behaviorally through general management style, strategy, company policy and behavioral prescriptions, and actual practices.

Some researchers and practitioners argue that corporate culture can have a greater influence and more unifying effect on MNC behavior and performance than national culture.

B. Company Climate Refers to the overall present level of satisfaction of a workforce.

• Can change very quickly, such as with an announcement of necessary downsizing of employees and no pay increases for the coming year.

• Key contributors to favorable workforce climate include workforce empowerment, effective communications and feedback merit-based pay and promotion, and job meaningfulness and enrichment.

• Can have a major impact on employee retention, as well as such key company performance measures as productivity, profitability, and customer satisfaction.

• Since workforce preferences can differ dramatically from country to country, management should not assume that the same workforce practices and rewards will yield a high level of worker satisfaction across all operations.

C. Strategy and Structure 1. Strategy A company’s strategy is the overall approach it takes to help it compete and succeed. Effective workforce management is key to successful company strategy implementation. Strategic management may involve an identification of core company values, followed by an alignment of company policies, activities, and programs that are consistent with those values.

2. Structure

An organization’s structure is characterized by how it is organized, both physically and administratively. It greatly determines how employees perform their work. Smaller firms tend to have less formal structures, where people regularly interact in a way attend to problems and resolve them in a timely fashion. However, in larger organizations where such interactions are less predictable due to distance or sheer number of employees, a more formal structure with regular meetings and reporting procedures may be more productive. Companies with very centralized structures exert significant controls from central headquarters, decreasing the level of autonomy and decision-making responsibility at foreign operations. Very decentralized structures, on the other hand, often yield significant decision-making responsibility to local managers in foreign operations.

IV. KEY PERSPECTIVES IN GLOBAL WORKFORCE MANAGEMENT The purpose of the class text is to help current and future managers and human resource professionals of all organizations—large and small, profit and nonprofit—recognize and understand the critical human talent management issues underlying the broad global challenges that they face. This book also is intended to help managers and HR professionals enhance their competence in making effective HR-related decisions to better cope with competitive global business challenges and opportunities. Areas of emphasis in the text are: A. Global Talent Management Perspective We generally consider ―global‖ to involve managing the firm with a broad perspective, combining both international and domestic dimensions—management of a firm’s human resources wherever they may be located in the world—both in locations abroad and in the home country of company headquarters. When we use the term ―international‖ we generally refer to issues abroad and away from headquarters, whereas the term ―global‖ generally considers both contexts in managing the entire enterprise. Although what we cover in this course certainly is pertinent to nonprofit organizations and other forms of enterprise management and ownership, we generally take a corporate business enterprise perspective and refer to the multinational corporation or ―MNC.‖ Also, although the term ―multinational‖ often refers to an enterprise with 50 percent or more of its business conducted or derived away from the home country domestic market, we use the term broadly and ―MNC‖ will have relevance to firms with operations in only one or a few other countries.

B. Inclusive View of Global Talent We hold a much more inclusive view of talent, and consider the talent of an organization as all employees, despite their wide variations in levels of ability and knowledge, that can be utilized by the organization. We further believe that an organization’s employees at all levels represent potential present and future sources of worthy contribution as well as vital knowledge and information that can lead to innovation and MNC performance success. The focus of the text is on managing the entire workforce representing an organization’s global human talent, wherever the employees are temporarily or permanently located in the world. Unfortunately, past and even much of the current literature has comparatively little emphasis upon the organization’s employees who do not have citizenship in the home country of company headquarters, or who

are contingent workers (e.g., temporary or part-time) and not technically employed within the organization on a regular basis. Leading global firms today increasingly demonstrate competitive advantage through the effective deployment and management of a truly global workforce, integrating the talents of PCNs, HCNs, and TCNs. C. Career Management Emphasis and Personal Responsibility Companies are increasingly attending to and supporting employee career development and ongoing career management for attracting and retaining competent and highly committed employees. Due to the uncertainties of today’s global marketplace, individuals increasingly realize that they can no longer depend upon organizations to provide a predictable desired career path, and that they must assertively take charge in seeking and obtaining opportunities to advance their career. With growing awareness of the importance of international work experience for personal and professional career development, many individuals are asserting their personal control as ―self-initiated expatriates‖ (SIEs) by moving abroad on their own and obtaining employment or finding new venture opportunities as so-called ―expat-preneurs.‖ Recognizing this growing self-management trend, many organizations are changing from their traditional command and control role in employee career enactment to one of collaboration in balancing company goals with individual employee expressed interests and aptitudes.

D. HR and Global Corporate Governance: CSR, Sustainability, and Business Ethics Corporate governance involves both external and internal efforts and controls to guide the activities of organizations for the benefit and protection of both organizational and societal stakeholders. Corporate social responsibility (CSR) is aimed at monitoring and addressing internal employee needs as well as those of external communities (local, national, and global) and the physical environment. Sustainability involves a balanced focus on the three pillars of economic viability, social equity, and environmental protection, often referred to as the triple bottom line.

The human resource function is increasingly placed in the role of the ―conscience‖ of the organization, and has an important responsibility of creating and monitoring an organizational culture and overall internal environment that supports and encourages ethical behavior. This role extends from the corporate boardroom in establishing guidelines for corporate governance, especially affecting the behavior and compensation of managers and executives, to all levels of the organization with the development of comprehensive policies and practices that encourage productive and ethical behavior and discourage and decisively correct unacceptable and unethical behavior. This significant role of human resources in global business ethics is particularly challenging with its increased scope across national borders with vastly different legal systems and regulations, cultures, and social expectations.

E. The Potential Benefits of Globalization for All Worldwide sharing of ideas through open global trade and other forms of cooperative interaction leads to greater advancement in innovation in all areas of human endeavor, which ultimately can benefit the quality of life for humanity. Cross-border work experience encouraged by the forces

of globalization can provide very enlightening, meaningful, and satisfying interactions leading to personal growth and development, and increased cross-cultural understanding and respect. Unrestricted and open markets, with transparent and equitable market transactions and distribution, ultimately lead to prosperity for poorer and richer countries involved in free trade.

To address significant problems associated with free market driven globalization, however, national governments, IGOs, NGOs, and MNCs should work closely and on an ongoing basis to secure and protect fundamental human and labor rights, provide appropriate labor standards, and support those displaced with necessary social assistance and, where possible, retraining for new job placement. Also, it is in the long-term economic interest of MNCs, individually and collectively, to invest in the ongoing care and development of the labor force of the countries where operations are located. Those in the local labor force represent future consumers of MNC products and services as well as potential entrants into the MNCs local workforce.

F. Ongoing Challenge of “Convergence” vs. “Divergence” We are witnessing a significant amount of convergence in economic, technological, political, and social practices around the world, from instant communications facilitated by the Internet and global cell phones to cigarette-free workplaces, restaurants, and even entire countries. More specifically in international management and human resources we are seeing an increased sharing and adoption worldwide of recognized ―best practices‖ that contribute to global competitive advantage. However, we should be aware of limitations of ―universal‖ perspectives in management and of the persistent, pervasive impact of cultural differences, particularly involving the implementation of company plans and objectives, which require local customization and adjustment from a divergence perspective.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: TRADING PLACES IN GLOBAL TRADE 1. As depicted in this chapter’s opening scenario, what are the developing trends that are changing old patterns of global trade and foreign direct investment between developed and developing countries?

In the past, companies in developed countries outsourced their products and parts and components from developing countries. The original idea behind offshoring was that Western firms with high labor costs would realize huge savings by sending work to countries where wages were much lower. However, as wages and total production costs keep increasing in many developing countries like China, companies from emerging economies are now recognizing opportunities to outsource to developed countries like the U.S. In doing so they also gain greater access to their intended markets. The global labor arbitrage that many MNCs in developed countries used to take advantage of in developing countries is quickly disappearing. To the great surprise of many people, it costs less to spin a kilogram of yarn in the U.S. than it costs in China.

Although economists still debate on whether FDI substitutes or complements trade, it is obvious that increasing barriers to trade in developed countries will only increase incentives for firms in developing countries to undertake FDIs to circumvent trade barriers, both tariffs and non-tariffs.

2. What are important implications of these changes in global business for employment in both developing and developed countries? What cross-border HR-related challenges do these changes present?

If this trend continues, it will certainly create more employment in the U.S. and other developed countries at the expense of jobs in developing countries. The continued outsourcing of companies from developing countries may help revitalize American industries once considered to be driven out due to comparative disadvantage vis-a-vis developing countries. Companies from developing countries now want to be in, or closer to each of their biggest markets such as the U.S. and the EU, making customized products and responding quickly to changing local demand. Under this logic, America and Europe, with their big domestic markets, should be able to attract plenty of new investment as companies look for a bigger local presence in developed economies around the world. To assure successful investments in the developed countries, these companies from developing countries must overcome cross-border HR-related challenges surrounding how to work with developed country workers whose values and norms are different.

They also need to come up with appropriate compensation and benefits schemes that reflect the cultural values and norms of the new host country employees.

3. Based on this opening scenario, what are important ways in which national and local governments, as well as cross-national trade agreements and treaties, can influence the developments of new employment opportunities?

Local government should provide many different types of incentives, such as tax credit and holidays, to attract FDI from companies in developed countries. National governments also can be deliberate and proactive in attracting FDI, thus creating more jobs for their own people by decreasing trade and investment barriers to their neighboring countries. This is why bilateral or regional free trade agreements have been booming while the Doha Round, multilateral trade negotiations, have made very little progress so far. In this particular case, the so-called local content requirement under the provision of free trade agreements such as the USMCA have encouraged Chinese manufacturers to produce yarn and other raw materials inside the trading bloc in order to gain duty-free privileges. As such, regional trade agreements may expand employment opportunities for member countries through the implementation of protectionist measures.

CASE 1.1: THE UNITED NATIONS OF BANANAS 1. What message does this case send to those who categorically deny any value from globalization?

Although there certainly can be serious problems associated with globalization, this case illustrates how people from different nationalities, religions, and ethnic groups can work together productively with a common purpose for the benefit of all parties involved, including those in developing host countries. This case is very important for pointing the way to increased world peace and reduced cross-border and cross-cultural conflict.

2. How do the principle of superordinate goals and self-perception theory as mentioned in this chapter apply in this case?

In this case the actors from different countries are working together effectively and value the talents and contributions of one another despite differences in cultures and backgrounds.

According to the principle of superordinate goals, by working together toward common goals and building interdependence, cooperation is increased and conflict reduced. According to SelfPerception Theory, as people see themselves cooperating and having positive experiences with productive outcomes for all, traditional negative attitudes and stereotypes are discarded. As we see in this case, trust is developed, along with appreciation for one another despite significant cultural differences.

3. What social and human aspects surrounding Datu Paglas have changed with globalization (for example, movement toward global cultural convergence), and what aspects remain very much the same (for example, persistence of a cultural divergence effect)?

Mr. Paglas has become more aware of other cultural groups, and has recognized common needs and values that build a form of social convergence. He recognizes that all have common desires for prosperity, and many possess a common willingness to cooperate to yield benefits for all involved. He is also becoming more aware of increasing modern resources and equipment found throughout the world that can bring success to his operation. Nevertheless, he is retaining his deep-seated cultural preference for physical violence in dealing with those who would try, especially through their own violent means, to interfere with the security and dispute resolutions associated with his operation.

CASE 1.2: Social Expat-Preneurs: Key Agents for Building a Better World 1. Do social expat-preneurs represent a viable career model that, collectively, can have a positive impact in addressing our global sustainability challenges? What are major obstacles to overcome?

Yes, absolutely. Social expat-preneurs represent a viable career that could make a significant influence on meeting our global sustainability challenges. They are already imbued with the mindsets to support local or global economy by creating new ventures and providing employment opportunities. Their previous work experiences typically inspired them to pursue a career that prioritize the needs of the society over the individual prosperity. In pursuing a career as social expat-preneurs, they may have to overcome lack of resources and fight against corruption still prevailing in many developing countries as part of their efforts to build more sustainable global villages.

2. What are possible initiatives that governments and non-government organizations could individually and collectively develop to support potential heritage social expat-preneurs (e.g., the large number in the United States with Mexican heritage) in establishing viable new private-sector ventures in the country of their family heritage that would provide more local jobs and strengthen the local economy?

Governments and NGOs can provide resources to help social expat-preneurs grow their businesses through the provision of various incentives such as tax credit, infrastructure, and grants. For example, a number of immigrants from Mexico, China, and Korea exist in the state of California. A majority of them are already engaged in entrepreneurial activities. They still maintain close contacts with their family members in their parents’ home countries and can work together to share their business acumen and financial resources to create new jobs and develop the local economy.

3. What are some international experiences that you might consider for gaining experience abroad and identifying possible future opportunities as a social expat-preneur?

College students can participate in a study abroad program or an overseas mission trip to serve communities in developing countries to better understand their economic situation and identify opportunities to contribute to eradicating poverty and improving their standard of living. This will be an eye-opening experience that may persuade them to pursue a more meaningful career as a social expat-preneur who can tackle the issues associated with the U.N. sustainable development goals (SDGs).

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Impact of COVID-19 Pandemic: In small groups, ask students to discuss (a) how their past schooling activities, work, and overall lives were affected by the recent COVID-19 pandemic, (b) what changes were made to allow them to successfully adapt to this crisis, and (c) what changes in our lives, especially related to school and work, now persist beyond the pandemic that are worth retaining, representing important learning from this crisis. Following small group discussion, ask individual groups to share their insights with the rest of the class, and facilitate total class discussion of important insights identified.

2. Planning a Social Expat-Preneur Venture: As a team assignment for eventual class presentation, ask student teams to review the United Nation’s 17 Sustainable Development Goals (https://sdgs.un.org/goals), and identify a foreign country where a specific sustainability need (i.e., social, environmental, economic) could be addressed through the students’ proposed new venture in social entrepreneurship, where the students themselves could act as ―social expat-preneurs‖ in effectively addressing the sustainability need.

3. Impact of AI Upon the Global Workforce: In preparing an individual or team report (NOT simply provided through a ChatGPT command!), have students analyze research and popular literature (i.e., newspaper articles) that examine current and future applications of artificial intelligence (AI) in the workplace, both at home and abroad.

CHAPTER 2 THE GLOBAL LABOR MARKET: CHALLENGES AND PROSPECTS LECTURE NOTES It is in this broad context that this chapter will examine major changing trends, often complex and interrelated, in the global labor market along with their implications for governments and multinational firms. The important implications for human resource managers will also be addressed.

LEARNING OBJECTIVES • Describe the impact of the COVID-19 pandemic on demographics related to global workforce management; • Discuss important overall demographic changes affecting global workforce management; • Understand the various social tensions that exist regarding crossborder migration, both documented (legal) and undocumented (illegal); • Understand the emergence and importance of the growing contingent workforce in our global economy; • Describe emerging trends offshore and onshore source with their relative advantages and disadvantages in global workforce management.

I. INTRODUCTION The competition for attracting talent will intensify as the nature of work has been transforming, particularly during the COVID-19 pandemic. The pandemic underscores the need for ―fluidity‖ in talent and a seamless flow of knowledge and innovative ideas to enable capability, capacity, and agility. As companies redefine how and where different tasks are carried out, they require new skills and new employer–employee relationships. Changes in global labor force demographics and the influence of migration is adding increasing diversity to our global workforces. Contingent workers have emerged as a significant component of the labor force. The impact of COVID-19 pandemic on offshore sourcing will be also analyzed. All these trends have implications for HR professionals.

II. THE DEMOGRAPHIC IMPACT OF THE COVID-19 PANDEMIC The COVID-19 pandemic has caused an unparalleled disruption worldwide through its devastating impact on public health, employment, and livelihoods. In 2020, an estimated 8.8 percent of total working hours were lost—the equivalent of the hours worked in one year by 255 million full-time workers. The pandemic has affected fertility, mortality, and immigration. An aging population results from decreasing fertility rates combined with rising mortality rates that surpass migration rates.

III. CHANGES IN LABOR FORCE DEMOGRAPHICS AND MIGRATION The past few decades have noted significant changes in worldwide external labor market and internal workforce demographics. Many of these changes toward greater diversity have been due to changes in migration patterns with increased transportation opportunities and more open national borders to support world trade and replace decreases in local populations. International migration has substantially increased since the year 2000. In 2020, 281 million people were living outside of their countries of origin compared to 173 million people in the year 2000.

Currently, international migrants make up 3.5 percent of the global population. Borders have not been closed to immigrants, but admission criteria have been tightened. At the same time, however, many countries, maybe with an exception of the U.S., have made entry easier for scarce highly-skilled workers and for entrepreneurs. There also are continuing changes in domestic migration patterns that are important for MNCs to understand as they plan for an adequate supply of qualified employees to staff their host country operations.

A. General Changes in World Demographics As of July 2022, the world’s population was estimated by the UN Census Bureau to be 7.9 billion, with 5.3 billion (or 80 percent of the world’s total population) living in less developed regions. Current UN population projects estimate that the world’s population will increase to nearly 9.7 billion by 2050.

As the populations of industrialized nations age, the transfer to elderly dependence from child dependence will be more pronounced. This trend means that the smaller younger generation will need to support a large number of elders, placing significant pressure on such areas as health care and retirement social services.

B. International Migration The contribution of migrant workers became increasingly visible and essential during the COVID-19 pandemic. Often undervalued and exploited before the pandemic, migrant workers are now recognized as essential workers, keeping their adoptive countries fed during the global economic shutdown. The pandemic may have slowed the growth in the stock of international migrants by around 2 million by mid-2020, 27 percent less than projected. Whatever happened during the pandemic, a solution to the dramatic demographic change of decreasing national population in developed countries is to allow more migration between developed and developing countries—just as the United States has done, along with Canada, Germany, Italy and the United Kingdom.

1. Opportunities Globalization, with its increased information and communications access, has made people aware of conditions and opportunities abroad. As people see opportunities in other parts of the

world they envision and actively plan how follow those opportunities, including through physical migration to other countries where the opportunities are found.

2. Changing Cultural Foundations Such migration is changing the cultural foundation of most developed nations. Because culture is the foundation of any polity, political consensus will increasingly fragment as more people from different cultural backgrounds live within the same political jurisdiction.

3. Changing Immigration Laws Challenges facing global HR planning do not have to be directed at foreign countries. In the interest of helping its domestic business sector access an adequate supply of qualified labor to meet work demand, several countries have changed their immigration laws.

C. Arguments for Immigrant Workers Asia, home to 60 percent of the world’s population, is a major source of immigrants for North America and Europe. Asians represent about a third of the total immigrants to the United States, and more than half come from Latin America. The growth of the U.S. high-tech industry has been fueled by a steady flow of highly educated immigrants and foreign students.

1. Benefits Immigrants can bring many benefits to their newly adopted countries.

(1) For low skilled jobs, immigrant workers are usually cheaper to employ than native workers in developed countries and employers often prefer to hire them to remain cost competitive.

(2) Immigrants are willing to do jobs that natives spurn.

(3) Immigrants are also increasing the tax income base for the government to help cover the staggering financial claims of the growing number of retired people in developed countries.

(4) A vibrant immigrant economy may help revive a stagnant local economy. Immigrants often have the same personal characteristics as entrepreneurs. They are by nature risk takers and are more likely to be self-employed than natives. These immigrant entrepreneurs are making a significant contribution to economic growth and innovation, keeping firms and national economies globally competitive.

2. Immigrants Needed for High-End Jobs In addition, it is no longer only in lower-end jobs where immigrants replace natives. In Japan, the United States, and Canada large numbers of immigrants are filling such disciplines as engineering, mathematics, medicine and virtually all aspects of computer-systems work. Also, the needs of an aging population will create an enormous opportunity for caregiver careers such as licensed practical nurses, physicians’ assistants, and physical therapists. Thus, these developments support the view that countries must maintain a reasonably open and minimally

restrictive immigration policy to provide an adequate supply of qualified labor to meet job demands and support entrepreneurial strength for economic health and vitality. Governments would do well to follow this less-restrictive perspective to avoid the loss of potential new jobs and business growth due to excessively restrictive immigration policies, as happened when Microsoft decided to move new software development operations to Canada in the face of ongoing U.S. quota challenges for obtaining visas.

D. Arguments Against Immigrant Workers Not all people view immigration as a solution to the current economic and social problems in developed countries. Immigrants may not be welcome if large parts of the native population of a nation feel threatened by immigration not only because they take away jobs from local people but also because they become a source of social unrest and ethnic strife.

1. Sentiment (a) In the United States, despite the benefits immigrants bring to the economy, they are increasingly seen as liabilities, not assets. Security rather than economic issues is forming an anti-immigrant national consciousness. (b) European. Anti-immigration sentiment is even more conspicuous in Europe particularly among middle and lower socioeconomic levels. Many residents in Europe link immigration to rising crime rates, deteriorating discipline in schools, and white flight from the cities. And immigrants have much higher unemployment rates than native-born workers. In contrast to the United States, Europe’s immigrants come in large groups from a few countries. This trend makes it difficult to assimilate with the other naturalized Europeans, as the immigrant communities are large enough for newcomers to remain segregated within their own groups. European countries admit large groups of immigrants from other cultures whose customs are difficult to assimilate and who cannot speak the language of their new home.

2. High Costs Opponents to immigration argue that while the economic benefits are marginal, the costs are great: immigration leads to massive overcrowding, traffic congestion, and overstretched public services; exacerbates the housing crisis; imports poverty, crime, and public health problems such as HIV and TB; increases social tension; and creates enclave communities. More importantly, dependence on immigrants discourages companies from adopting family-friendly practices, training the unskilled, and retaining older workers. Prejudice against immigrants from the EU was a ―major‖ deciding factor in the Brexit referendum. Such restrictive immigration policies in Europe could be costly in competing for a skillful labor force in the global market.

3. Brain Drain vs. Brain Circulation Negative impacts of immigration are not limited to the receiving countries. Immigration is also often disastrous for sending countries. The more that developed countries attract skilled migrants, the more they are stripping developing countries of the people they need most to

achieve economic development, a condition often referred to as ―brain drain.‖ Despite its considerable anti-immigration rhetoric, research funded by the EU found no direct cause-andeffect link between crime, unemployment, and immigration, dealing a huge blow to ultranationalist and racist parties throughout Europe. On a brighter note, it is increasingly argued that brain ―circulation‖ replaces the traditional dynamic of ―brain drain versus brain gain‖ because of the growing mobility of human talent across borders. This increasing phenomenon involves people who move back and forth between their country of origin and the adopted country to take advantage of career and new venture opportunities in both countries, resulting in an overall increase in benefits for both countries.

E. Immigration Policy Implications for Government Officials It is critical for a government to set up an immigration policy that can maximize the net gain of immigration through imported skilled human resources, and thereby enhance its global competitiveness. MNCs can have significant influence on the development of socially responsible immigration policy that also achieves this net gain.

1. Access to the Job Market Immigration experts argue that the success of integrating foreigners into a society is based on access to the job market. Societies that are more integrated seem to offer more opportunities to immigrants.

2. Negative Effects of Segregation Segregation among different races and ethnic groups has disproportionate and adverse effects on schools and home ownership rates. Residential segregation has grave consequences for minority employment and minority business ownership rates.

3. Bring Immigrants into the Labor Market The first priority of a government should be to bring immigrants into the labor market. Language barriers, discrimination, lack of skills, and poor educational levels contribute to the many reasons why immigrants are disproportionately jobless in Europe.

F. Domestic Migration People move not only across borders but also within a country, greatly affecting local labor conditions and characteristics that MNCs consider for their global business planning.

1. Concentration in a Few States The U.S. Census data shows immigration is bolstering population growth for a wide range of areas, from booming Southern states to slow-growing or shrinking states in the Midwest.

Immigration is increasingly important to the growth of the US workforce. Immigrant populations are concentrated mainly in three states: California, Texas, and New York. Together, these areas

account for 45 percent or nearly half of the immigrant population in the country. While Florida experienced the biggest number of domestic in-movers, California had the most significant number of domestic out-movers.

2. Rural to Urban Another important continuing trend is migration from rural areas to urban cities. According to UN estimates, by 2025 the urban population is expected to exceed the rural population by 1.3 billion people. For example, in Mexico the younger generation continues to leave rural areas for cities along the US-Mexico border, looking for jobs and a higher standard of living.

V. EMERGENCE OF THE CONTINGENT WORKFORCE Another important trend in the global labor market is the continued increase in the contingent workforce—the workers whose jobs are dependent or contingent upon present work demand (more specific HR utilization issues will be examined later in the chapter on global HR planning). Companies have become sophisticated about who they need and when they need them. Between one-fifth and one-third of American workers are now freelancers, contractors, or temporary workers. Permanent workers typically have full-time, long-term jobs and also enjoy benefits such as pensions, health insurance, and vacations. However, these benefits are usually not available to temporary workers. Managing employees and contract workers across the Internet, companies now have the ability to make labor more of a variable cost, rather than a fixed one, by engaging workers on an as-needed basis. The dramatic increase in the demand for temporary professional and technical workers has led to the formation of specialized temporary employment companies, many of which are integrated globally.

A. Interdependence of the Global Economy and Flexibility As we have witnessed throughout the recent COVID-19 pandemic, our global economy has significant interdependence of national economies across borders. Businesses need to be vigilant and be ready to respond quickly to sudden, unexpected, or unforeseen changes. The use of a contingent workforce provides employers with flexibility to meet abrupt fluctuation in demand arising in the global marketplace.

B. Growth and Competitiveness New industries are developing rapidly in this information age. To keep up with ever-changing technologies, firms need to employ highly trained and skilled workers who are versatile. Firms need to improve productivity to remain competitive at least partly by cutting variable and fixed labor costs. Using a contingent workforce better serves these goals than maintaining a large pool of permanent workers. Although the temporary workforce as a whole has grown significantly, the most rapid growth in recent years has been in professional, technical, and managerial workers.

C. Virtual Companies

Small companies may not be willing, or may be unable to handle functions such as recruiting and selecting workers, benefits and payroll, workers’ compensation and unemployment insurance claims. They may also be reluctant to employ a permanent workforce to handle these activities, and will outsource these functions to temporary staffing firms that provide their service for a fee.

Such an arrangement benefits firms not only from saving the fixed costs of a permanent workforce but also from reduced expenses derived from economies of scale accrued to an outsourced firm which provides the same service to multiple firms.

D. Changing Relationship Between Employers and Employees The longstanding implicit social contract between employers and employees seems to have come to an end in recent years.

1. Decreased Loyalty Continued downsizing to remain competitive makes it difficult for employers to make long-term commitments to employees while employees in turn are not expected to show their loyalty to the employers. Many governments are relaxing or eliminating strong job-protection rules, which make it extremely difficult and costly for employers to lay off full-time workers during a business slowdown.

2. Flexible Working Arrangements In addition to changes in the social contract between employers and employees, far-reaching changes in employee needs, expectations, and lifestyles have come to change relations in the workplace. Increases in the number of working mothers and the rise of dual-career families have led to demands for flexible working arrangements, striking a balance between family responsibilities and jobs. Population aging and the COVID-19 pandemic has also contributed to an increased number of contingent workers because they need more flexibility to care for their elders as well as their children.

VI. OFFSHORE SOURCING VS. ONSHORING Although immigrant workers represent one solution to the declining number in the workforce in developed countries, offshore sourcing is another option that can achieve the same objective by utilizing the overseas workforce without physical transfer of the labor force.

A. Lower Costs The phenomenon of offshore sourcing of MNC work, whether to company-owned and managed foreign subsidiaries or to other contracted (i.e., outsourced) operations, has become increasingly popular among MNCs since it allows them to produce goods at lower costs in developing countries. However, just as an influx of immigrant workers can pose an economic threat to the home country labor force, so can offshore sourcing present a threatening picture with the

movement of work abroad that would otherwise support local employment. However, the substantial decline in global labor cost arbitrage has recently made companies reduce offshoring.

Overall, a recent study discovered that immigration and offshoring complement each other.

B. Effect of the COVID-19 Pandemic on Offshoring The COVID-19 pandemic has made an increasing number of companies revisit global supply chains to improve resilience through reshoring the production of goods and components.

However, not all the countries experienced the same consequences from the pandemic. US companies have continued to lay off employees and send their work abroad even through the pandemic. Similarly, over the past three years, the number of Korean companies that ventured abroad increased more than 10 percent.

C. Benefits Offshore outsourcing certainly presents some benefits. It increases MNCs strategic flexibility by either contracting out their manufacturing process outside the home country or by forming joint ventures. The development of such a dynamic organizational network through contracting and joint ventures enables firms to maximize the specialized competence of individual operations and to use human resources more effectively that would otherwise have to be accumulated, allocated, and maintained by a single organization. This development means a company’s global competitiveness will increase due to its ability to perform a certain value creation activity in a country where it can be produced most efficiently.

D. Drawbacks However, offshore sourcing also has drawbacks. It increases dependence on independent operators for assurance of quality of components and finished products. Given the increasing recognition of the value of strategic factors such as durability and quality rather than simple cost savings, offshore sourcing may not be a viable option in the long run. Increasing dependence on independent suppliers in turn tends to lose sight of emerging technologies and thereby design and manufacturing abilities. Furthermore, not all value-added functions are amenable to offshore sourcing. Not only can corporate cultural differences between the client organization and the vendor influence the performance of offshore outsourcing, but also differences in national cultures may affect every area of business relationships, systems, processes, and work interactions.

VII. GLOBAL WORKFORCE MANAGEMENT CHALLENGES The global economy requires firms to transform themselves into global companies that are able to compete with anybody, anywhere, anytime. This imperative means that companies must excel in a number of dimensions that create a new level of competitive advantages. The war for global talent forces countries to compete with each other for a scarce and valuable human resource in much the same way they have previously competed for gold or oil. The decreasing number of people in developed countries between the ages of thirty-five and forty-five will not only create

greater competition for viable workers, but will also increase the difficulty of succession planning.

A. Personnel Data Managers need to develop the ability to gather and process relevant information about the talent pool of people around the world to effectively use an offshore sourcing strategy or to import temporary workers from abroad. Given that offshore labor markets hold the human factors so critical to delivering products, information, and services in today’s global economy, MNCs should consider developing a portfolio of strategic offshore options as potential sources of sustainable competitive advantage. Although it may seem appealing to source jobs in established offshore locations today, apparent cost advantages may continue to dissipate over time as today’s offshore locations become economically and demographically more similar to current ―home‖ countries. Unfortunately, many countries have extended their privacy laws to prevent cross-border personnel data flows. This legal obstruction creates tremendous problems for global HR planning and control, which might hamper or completely stall a company’s important operations.

B. Diversity, Equity and Inclusion Faced with an increasingly aging global population and contingent workforce, companies that handle the upcoming demographic change skillfully will be able to reward workers more generously and still earn a higher shareholder return. The effective management of a global workforce composed of both continuing and contingent employees requires special attention to issues of diversity, equity and inclusion. Companies should be able to manage and leverage the differences and similarities in the diversity of national and business cultures, and managers should learn how to collaborate with foreign partners to minimize culture clash. This requirement means that managers and HR professionals need to devise appropriate recruiting, career development, compensation, and performance schemes for their global workforce based on individual merits, regardless of racial, ethnic, and other personal backgrounds.

C. Government Immigration Policies Managers should closely follow government immigration policies and influence the shaping of these policies as deemed necessary. MNCs’ active and socially responsible involvement in their home country’s immigration and other labor policy formation is important, ultimately because government policies either reinforce or hinder the competitiveness of a country’s firms and economy. For effective strategic planning, managers also need to be familiar with some domains in developing countries where either foreign direct investments or outsourcing is prohibited.

D. Creation of Ethical Climate Finally, although it may not be directly related to global labor issues, the creation of an ethical climate within organizations requires continuous and comprehensive education of managers, along with communicating and enforcing relevant policies and procedures. Controlling corruption is one of the most important and challenging HR-related issues to tackle as what is considered ethical or not varies across countries. Corruption is likely to lead to a higher cost of

conducting business, exerting negative effects upon business, and creating uncertainty, which can act as a pseudo-tax by increasing costs and reducing incentives to compete.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: FINLAND’S EFFORTS TO ATTRACT GLOBAL TALENT 1. Why did the Helsinki Business Hub create the 90-day Finn program?

Since the pool of talented human resources are limited in Finland, the country has struggled to build a national labor force that is able to keep up with its growing demand. Finland has a strong schooling system that can educate and provide many engineers and software coders, but the local Finnish business demand is still greater than the supply. In order to fill this gap, Helsinki Business Hub created this innovative program and hope that it will help promote Helsinki and Finland as a job placement destination for many high-tech global workers.

2. Why do you think so many people are attracted to this program? Who are they?

Many of the candidates are attracted to Finland’s Nordic social welfare system, with its universal health care and generous parental leave provisions. This is a major selling point to convince workers from even the warmer and sunny climes of California. In fact, the program was especially designed to attract tech workers from the US West Coast. A majority of the candidates can be called digital nomads, i.e., remote workers, who do not mind working anywhere around the world as long as they are satisfied with the job. Some are entrepreneurs looking for new venture opportunities or directly seeking for jobs with companies in Helsinki.

3. What would be the benefits and costs of this program for the candidates? Are you interested in this type of program and why?

They can gain first-hand experience living and working in Helsinki for three months and decide whether they want to continue living there. It is almost a risk-free opportunity for the candidates as a free 90-day relocation package and possible job placement in Finland are offered. However, student answers will vary depending on their interest in pursuing a career in international business.

CASE 2.1. THE CHINESE ARE MOVING TO AFRICA TO MAKE SHOES 1. Why are Chinese shoemakers moving their manufacturing factories to Africa?

They are moving their factories to Africa because the production costs, including labor costs, keep rising in China. Three decades ago, China had a significant advantage over Africa in its cheap labor costs. China is losing that advantage as its economy grows and prosperity spreads.

In addition, the Chinese shoemakers can enjoy other incentives such as location-specific advantages and preferential treatment of exports from African countries to the EU and the US markets. The labor cost is very competitive in Africa and also the electricity cost is actually only half of the cost compared with China. A secure procurement of raw materials is another incentive

for Chinese shoemakers as there is a great supply of sheep and goat skin in a country like Ethiopia.

2. What are some examples of the rising tensions between China and African countries as Chinese investments into Africa continue to rise along with its cheap imports?

As China’s appetite for African resources has boomed, some people describe the current relationship between Africa and China as neo-colonial. There also is growing concern among African officials that the flood of cheap imports from China is contributing to its deindustrialization. China imports primary goods from Africa and exports manufactured goods to Africa just as the British went to Africa and India to secure raw materials and markets in the past. For example, Nigeria, a country with a large domestic market of more than 160 million people, spends huge resources importing consumer goods from China that should be produced locally, such as textiles, fabric, leather goods, furniture, electronics, building materials and plastic goods. The Chinese, on the other hand, buy Nigeria’s crude oil. In much of Africa, they have set up huge mining operations and have also built infrastructure. But, with exceptions, they have done so using equipment and labor imported from home, without transferring skills to local communities. African countries want to protect their infant industries.

3. What practices and activities can Huajian Shoes HR managers engage in to overcome challenges in managing African workers?

Since the Chinese managers and African employees need to develop trust and good working relationships to increase productivity, they need to implement cross-cultural training programs designed to increase awareness of cultural differences. They also need to provide technical training for African workers to help them acquire more advanced skills and knowledge about making shoes. At the same time, managerial training is also necessary for middle-level managers to effectively manage supervisors and employees. To effectively implement these training and development programs, Huajian Shoes need to carefully select Chinese expatriates who are possessed with not only technical competence but also cross-cultural competence to make its investment successful.

CASE 2.2. INDIA IS SENDING JOBS ABROAD 1.

From this case, how would you describe this new wave of offshore outsourcing?

The new wave of offshore outsourcing is based around total efficiency that sees the world as a singular unit. No longer are international borders or language differences major barriers to finding a suitable workforce. Rather than a country’s economic clout determining where work is done, it is now determined by where the resources and workers are. In the case of the U.S. bank needing a Spanish language computer system, a collage of people completed the work across the globe. Infosys, the Indian firm, had the skills and reputation as a software developer. Infosys has Spanish-speaking employees based out of their office in Mexico. Therefore the bank chose Infosys to design its software. While it may seem redundant to have such a complicated chain of command across several countries, it is being utilized because it is the most efficient and costeffective way to get the job done.

2.

Why did Indian outsourcing companies have to change their strategy?

Indian outsourcing companies had to change their strategy because the market adapted to the success of their business model. When outsourcing to India first became popular, India was the only country providing the services, but this did not mean there were not economically similar countries out there. Other developing countries with an excess of workers began to emulate this outsourcing model. Therefore, India lost its competitive advantage in the market. The area in which they still had an advantage was that they had the most experience and expertise in the field since they were the pioneers of outsourcing. This allowed Indian companies to stay profitable because they took this competitive advantage and opened offices in the countries that were trying to compete with India. Now they continue to have low-cost labor combined with years of outsourcing experience that countries new to the market do not have.

3.

What kinds of challenges do you anticipate that Indian companies will face in implementing this new outsourcing strategy?

Indian companies will face challenges in any new country that they enter. As with all outsiders there will be hesitation on the part of the local workers to accept the new Indian companies. By entering new countries they will have a significant advantage over the native outsourcing start ups. This will likely lead to a heated debate on whether or not they should be allowed to operate there in the first place. Countries like Morocco will be trying to follow the Indian model, but this will prove difficult if Indian companies practicing this model are already there. Aside from the conflicts with the countries they will be entering there will also be hesitation on the part of their clients to work with the new complicated global model. While their new model may in fact be the most cost-effective, clients may shy away from such a global process to complete their projects.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Pros and Cons of Immigrants: Divide the class into two groups and have students debate pros and cons of immigrants. Choose two countries from developed countries and another two from developing countries, and compare and contrast the immigration policies of those countries, and suggest possible areas of improvement to attract more talent through immigration.

2. New Trends in Offshore Outsourcing: China and India have been among the most popular destinations for an offshore outsourcing for many MNCs. Have students discuss how the COVIDS-19 pandemic has changed offshore outsourcing and reshoring trends. Ask them to evaluate the pros and cons of the offshore outsourcing of HR functions.

3. Impact and Challenge of Increasingly Contingent Workforce: In small groups, ask students to consider different contingent working arrangements in which they have participated or been exposed to (i.e., campus food services, part-time employment, contracted work projects). Have them consider how these contingent work arrangements represent greater workforce flexibility for organizations, as well as pose significant challenges in managing contingent workers on a global basis.

CHAPTER 3 CULTURAL FOUNDATIONS OF INTERNATIONAL HRM LECTURE NOTES This chapter examines the role of culture in managing people across borders. It identifies the several important dimensions for gaining insights and understanding about the cultures of employees that staff organizations domestically and abroad. It also addresses the different views about how global and regional economic integration have affected and will affect the different dimensions of culture.

LEARNING OBJECTIVES • • • • • •

Understand the concept of culture, the numerous ways to define culture and the how culture influences global workforce management; Explain the different views about how global and regional economic integration have affected and will affect the different dimensions of culture, including convergence, divergence and crossvergence; Explain the four dimensions of Hofstede’s Cultural Model and their implications for managing a global workforce; Explain the seven dimensions of Trompenaars and Hampden-Turner’s Cultural Model and how it varies from Hofstede’s Cultural Model; Understand the nine dimensions of the extensive GLOBE Study and how they compare with previous models; Know how to plan for cultural challenges in various business contexts, such as, international mergers and acquisitions.

I. INTRODUCTION Culture is central to the effective management of a global workforce. Culture is often a source of conflict than of synergy. National and organizational culture can have a pervasive, powerful influence in organizations, and in various aspects of global workforce management. Without proper knowledge of different cultures, a merged company will not be able to achieve the expected synergy.

II. UNDERSTANDING CULTURE Culture is defined as the socially transmitted behavior patterns, norms, beliefs and values of a given community. While cultural values represent an individual’s views of how the society (or organization) should behave, cultural practice represents the individual’s perception of how

cultural norms are enacted in organizational and societal behaviors. Culture affects and governs all facets of life by influencing values, attitudes and behaviors of a society.

A. Three Different Pespectives of Culture First, the functionalist perspective focuses on cognitive components of culture and considers culture as a fixed entity firmly defined by the nation-state. Hofstede’s seminal work represents a great example of this perspective highlighting specific cultural dimensions that may vary across countries. Second, the constructive perspective considers culture as a dynamic and complex phenomenon that emerges in the interaction between individuals and rejects the assumption that cultural values and norms are always applied in the same way to all members of a particular nation-state. Third, the integrative perspective combines the functionalist and constructivist views, integrating cultural complexity and dynamics with the inertia of social and cultural structures as sustained in and by the nation-state.

B. Scope It should be noted that culture is not just a national phenomenon. Culture can also extend to ―communities‖ of age groups (e.g., retired persons), disabled persons (e.g., the legally blind), individuals holding similar religious beliefs, and work professions. The concept of culture can also extend to individual organizations, as communities, that through common experience over time develop their own distinct set of values, norms, priorities, and beliefs, e.g., ―the way we do things in our organization.‖ C. Cultural Patterns vs. Stereotypes Cultural patterns capture general cultural characteristics and differences between national cultures. We must remember that within national cultures there can be considerable variation, and we must not expect every individual to behave in a manner consistent with general cultural characteristics in every situation. Also, even though a general cultural characteristic may be accurate for individuals in most situations, they are also able to adapt their behaviors to the needs of a particular situation. Although there is value in learning about general cultural characteristics and tendencies to help guide our sense making of otherwise puzzling or even offensive behaviors we encounter, we also must be careful not to form rigid perceptions and fall into the mistake of simply relying on stereotypes. Stereotypes treats people in a specific country as if they were all alike. Ultimately, to be effective in managing human resources at home and abroad, we must get to know, manage, and assess employees on an individual level.

D. Cultural Distance and Cross-Cultural Adaptation One of the first reactions that we have in traveling abroad for the first time is the differences in signs, written and spoken language, rules and norms, and accepted practices including as reflected in official local laws and regulations. The collective degree of these differences or overall ―foreignness‖ that we notice refers to the cultural distance between our culture and that of the country we are visiting. Cultural distance dimensions capture national values and resulting behaviors that distinguish one country from another. The degree of cultural distance should be taken into consideration in international business planning, including for preparing and training individuals for international assignments. More careful planning and predeparture training to support foreign adjustment might be necessary where cultural distance is great. However, it

should be noted that this cultural distance or degree of adjustment challenge is often not symmetrical or experienced the same way in opposite directions. Also, it should not be assumed that little cross-cultural preparation is needed when perceived cultural distance is small. Many U.S. and UK business interactions have been seriously impeded due to neglect of cross-cultural sensitivities due to the perceived close cultural distance involved. Culture shock could be felt more severely when we come across unexpected differences between the two countries perceived to be culturally similar to each other.

E. COVID-19 Pandemic and Cultural Resilience Cultural resilience refers to the role that culture may play in the resilience of an individual or community. Resilience is defined as the capability of a system or process to absorb disturbance and adversity. Cultural resilience influenced the way different countries responded to the COVID-19 pandemic. Countries with cultural resilience have an ability to overcome adversities such as COVID-19 pandemic and natural disasters.

F. Tight versus Loose Culture Cultures may differ from one another not only in their physical and behavioral manifestations, but also in how persistent and pervasive they are. In some ―tight culture‖ societies there is virtually complete agreement in terms of what constitutes acceptable behavior for a given situation, whereas in ―loose cultures‖ there may be much greater expression of, and tolerance for, diversity. A tight culture, such as Thailand, tends to have greater uniformity and agreement due to greater ethnic and religious homogeneity than what is found in a looser culture, such as the United Kingdom. Tight cultures, such as Korea and Japan, also tend to resist the loss of original cultural identity, as well as resist the "close inner group" entrance of those from a different culture.

G. Globalization and Cultural Convergence Rapid innovations of technology and decreased trade and investment barriers as part of the increasing trend of globalization have made it possible for firms to launch and market their products simultaneously to many different countries. As a result, and especially due to powerful common telecommunications via the Internet, globalization has encouraged cultural homogeneity and convergence toward common tastes, interests, and values as different cultures experience frequent interactions. As the value systems of managers become increasingly similar, convergence in HR practices has also been noted.

H. Localization and Cultural Divergence Despite the global and regional integration of national economies and powerful converging influences, cultural differences still remain strong. Global integration may not always result in cultural conformity and convergence. Managers still recognize the need to adapt management practices to the local environment. Compatible with functionalist view, the divergence perspective advocates that the HRM model must be embedded with culture-specific elements.

I. Glocalization and Cultural Convergence Convergence and divergence perspectives represent polar extremes. Neither the convergence nor divergence approach can properly address the wide array of international talent management challenges that are so varied and global in nature. As most firms struggle to find the optimal trade-off between globalization and localization, sometimes called glocalization, perhaps the more realistic movement is toward a more balanced or middle-ground approach called crossvergence, or hybridization (i.e., the intermixing of cultural systems between different countries). Consistent with the integrative perspective of culture, crossvergence represents the synergistic interaction of convergence and divergence effects within a society that results in a unique value system. This crossvergence trend is particularly visible in economies that experience a rapid transformation of their society as the interface of Western and Eastern cultures intensifies.

III. MAJOR MODELS OF CULTURE Culture represents a system of values and norms that are shared among a group of people and that, taken together, constitute a design for living. Although values are abstract ideas and convictions about what people believe, norms are prescribed behaviors that are acceptable in a specific society. Both values and norms are influenced by many factors such as religion, language, social structures, education, etc. The following section will introduce two commonly used models of culture with their managerial implications.

A. Hofstede’s Cultural Dimensions and Managerial Implications Geert Hofstede defined national culture as the set of collective beliefs and values that distinguish people of one nationality from those of another. His original comprehensive study, which he conducted while working at IBM as a psychologist, involved more than 100,000 individuals from 50 countries and three regions, Hofstede identified four important dimensions in national culture in his original study and expanded to six dimensions later.

1. Uncertainty Avoidance This Hofstede dimension refers to the extent to which people feel comfortable when they are exposed to an ambiguous or uncertain situation. People in a low uncertainty avoidance society are more willing to take risks and appreciate flexibility and informality in the workplace. In contrast, people in a high uncertainty avoidance society tend to be risk averse, and favor rigid and formal decision-making processes in the workplace.

Implications. The perceived difference in tolerating uncertain situations has several important implications at both macro and micro levels.

• Innovation. First, at the macro level, the acceptance of uncertainty is essential for innovation because it requires a tolerance for risk and change.

• Flexibility. Second, at the micro or organizational level, in high uncertainty avoidance societies, numerous formal internal rules and regulations exist to control the work process

of employees. In low uncertainty avoidance societies, managers are allowed to exercise more latitude and discretion in their decision making rather than relying on rigid internal rules and regulations.

2. Power Distance Power distance refers to the extent that people have an equal distribution of power. In a large power distance culture, power is concentrated at the top in the hands of relatively few people while people at the bottom are subject to decisions and instructions given by superiors.

Conversely, in a small power distance culture power is rather equally distributed among the members of the society. (a) High Power Distance. Managers in high power distance societies tend to believe in giving subordinates detailed instructions with little room for interpretation. Subordinates are supposed to respect the authority and superiority of upper management. Thus, the ―mechanistic characteristics‖ of high power distance cultures, such as inequality among the members in the society, lack of free communication across different levels of the hierarchy, and centralized control can all stifle employee creativity and new ideas. (b) Low Power Distance. In contrast, ―organic characteristics,‖ such as lack of hierarchical authority and less centralization, tend to promote employee interaction, lateral communication, and less emphasis on the rules. Nondirective, hands-off monitoring systems have often been implemented to allow the creativity and exploration necessary for successful innovation.

3. Individualism vs. Collectivism (a) Individualism. Individualism means that people seek and protect their own interests over the common goal of the society and their role in the society. In an individualistic culture, people are comfortable with having the authority to make a decision based on what the individual thinks is best. In individualistic societies, people are provided with a great deal of personal freedom and autonomy. Thus, it was much more difficult to control the spread of COVID-19 in individualistic societies where people believe that facial mask-wearing and vaccination mandated by the governments is a violation of constitutional rights that protect individual freedom and choice. (b) Collectivism. In a collectivistic culture, people tend to belong to groups or collectives and look after each other in exchange for loyalty.

Although individual freedom or autonomy is not as much appreciated in collectivistic societies as in individualistic societies, collectivistic cultures have their own way of advancing innovation through an effective group collaboration as evidenced by the success of the Japanese and Korean companies such as Toyota and Samsung in the global automotive and consumer electronics industries. Group performance evaluation and a higher level of organizational loyalty are expected of a collectivistic culture. However, the overwhelming and unconscious pressure for conformity and uniformity in collective cultures may not cultivate an environment for diversity, and provides less room for people to deviate from established norms, thus impeding the innovation process.

4. Masculinity vs. Femininity (a) Masculinity. Hofstede believes that the masculine dimension is very closely related to the concept of achievement motivation. A masculine culture is basically a performance driven society where rewards and recognition for performance are the primary motivational factors for achievement. This type of culture tends to give the utmost respect and admiration to the successful achiever, who fulfills his ambition and demonstrates assertiveness and willingness to take risks in order to achieve goals. Top management positions are usually filled with men who tend to display characteristics of dominance and assertiveness—which tend to be discouraged among women by societal gender norms. (b) Femininity. On the other hand, in feminine cultures people tend to emphasize the quality of the ―whole‖ life rather than money, success, and social status, which are easier to quantify. They are willing to reach out to the underprivileged and share their wealth with them. Overall, organizations with a feminine culture are not as competitive as those with a masculine culture, since the former places higher priority on concern for others and little distinction is made between men and women in the same position.

5. Confucianism Dynamism Using a different survey instrument called the Chinese Value Survey (CVS), Hofstede and Bond identified a new cultural dimension, ―long-term versus short-term orientation,‖ that strongly reflects Confucianism, a cultural backbone of East Asian countries. Hofstede emphasized that this particular cultural dimension was missing in his original study and only relevant to countries in East Asia. Confucian dynamism may reflect a society’s search for virtue rather than truth, truth being driven by religious ethics in Western countries. (a) Long-term Orientation. Long-term orientation captures the following elements: adaptation of tradition to the modern context, high savings ratio driven by thrift, patience and perseverance towards slow results, and concern with respecting the demand of virtue. (b) Short-term Orientation. On the other hand, a short-term orientation contains the following aspects: respect for traditions, lower savings rate, quick results orientation.

6. Indulgence vs. Restraint This cultural dimension concerns the feelings of subjective happiness or unhappiness of people in a society. The notion of indulgence captures an extent to which a certain society allows people to enjoy their life. (a) Indulgence. People in an indulgence culture tend to live in the moment doing freely whatever they want and try to enjoy their life as much as possible. They believe that they are the master of their own destiny and thus can control their life. (b) Restraint. People tend to suppress immediate gratification of their basic desire and needs. They are more likely to believe in determinism that restricts the control over their own life.

7. Criticisms Hofstede’s research has received several criticisms. (a) Cultural Influence. First, the research may have been culturally bound since his research team, composed of Europeans and Americans, may have unintentionally influenced the analysis of the answers by their Western perspective. (b) Multiple Subcultures. Second, a one-to-one correspondence does not exist between culture and nation as many countries have more than one culture. For example, the US has multiple regional and local subcultures, as the country consists of various ethnic groups and regional traditions, which a strong emphasis on local autonomy and individual states rights. Therefore, it may be presumptuous to generalize a certain country’s culture. (c) Cultural Changes. Most importantly, his findings may have lost explanatory power over the years since culture is not static and changes over time, albeit slowly.

B. Trompenaar’s and Hampden-Turner’s Seven Cultural Dimensions Adopting Parsons’s five relational orientations as their starting point, Trompenaars and Hampden-Turner identified seven important cultural dimensions. They mainly viewed culture as the way in which a group of people solves problems and reconciles dilemmas.

1. Universalism vs. Particularism (a) Universalism. Universalism is a belief that there exists only one single management principle that should be applied to all situations.

People from universalistic cultures tend to believe that their way of doing business or managing people is the universal one and best way, and should be adopted by all other countries. Those from universalistic cultures also tend to believe in absolute justice and truth, and extend great resources to their protection. Those high in universalism take moral principles very seriously because they tend to adopt a unified approach to business across borders. (b) Particularism. Conversely, particularistic cultures highlight the peculiarity and distinctiveness of a country’s culture that is different from those of other countries. Both at a country and individual level, the emphasis is upon building long-term relationships and being sensitive and responsive to the unique circumstances surrounding that relationship. People in particularistic cultures tend to interpret justice or moral convictions in a more flexible manner, depending on the local and current circumstances.

2. Specific vs. Diffuse Cultures This cultural dimension concerns perceptions regarding private versus public space and how each is handled. In specific cultures, people clearly separate public space from private space.

(a) Diffuse. In diffuse cultures, the distinction between private and public space is rather unclear and blurry. Everything is related and business is just another form of social interaction. Business relationships are expected to be enduring and spill over into personal relationships and vice versa. Furthermore, for diffuse cultures the size of public space is almost equal to that of private space. Therefore, in diffuse cultures, people tend to reserve even their public space (e.g., professional workplaces) for those with whom they are familiar, since accepting the entry of unknown people could also mean the uncomfortable opening of their private space. (b) Specific. Specific cultures tend to compartmentalize public and private life into separate roles, where one role does not influence another. In addition, in specific cultures, the size of public space is larger relative to private or personal space as they are more willing to open their public space to other people with whom they do not have an acquaintance.

3. Achievement vs. Ascription Cultures (a) Achievement. Achievement cultures value personal competency and an outcome resulting from individual hard work. What matters most in an achievement culture is an objective track record of individual accomplishment and merit. (b) Ascription. Ascription cultures mean that people are conferred a certain status based on specific characteristics such as title or position, age, and profession. People in an ascription culture value personal connections and family background more than the individual’s qualifications. Appearance accorded by title and status is more important than substance driven by individual qualification.

4. Individualism vs. Communitarianism As Hofstede identified this term, individualism refers to the culture that emphasizes the interests of self or of his/her own immediate family. In contrast, communitarianism, a synonym for collectivism as used by Hofstede, emphasizes group (e.g., team of employees) interests before individual interests, and seeking group consensus in decision making.

5. Affective vs. Neutral Culture (a) Affective. People in affective cultures are not hesitant to reveal their innermost feelings. Thus, they may view the stoic behaviors of people from neutral cultures as insincere and deceiving. (b) Neutral. People in neutral cultures tend to control their emotions very carefully and maintain their composure. Thus, they may consider the behaviors of people from affective cultures immature. Such different perception may cause problems during cross-cultural negotiations between managers from affective and neutral cultures.

6. Time Orientation

People across cultures may deal with the concept of time in a different manner. Time orientation contains two different connotations. (a) Time Use: Monochronic vs. Polychronic. First, the time dimension is related to how people actually use time. A monochronic or sequential approach to time means that people use time in a linear way while a polychronic or a synchronous approach to time suggests that people use time in a circular way. People in a monochronic culture tend to think that time is money; it should be saved and spent in the most efficient manner possible. In contrast, people in polychronic cultures tend to have a more flexible view about time and can handle multiple agenda at a time. (b) Orientation. Another time-related difference concerns people’s orientation to past, present, and future. This orientation points to whether or not people are likely to see the future as an extension of the past.

7. Orientation to Nature This cultural dimension concerns how people in a society orient themselves to nature. First, people can think that human beings are supposed to dominate nature. This view usually corresponds to a culture where people believe they are the master of their own destiny. Second, some people believe that they need to live in harmony with nature. A third and final orientation toward nature is a sense of subjugation to nature. This view typically reflects the mindsets of people who believe in determinism.

C. The GLOBE (Global Leadership and Organizational Behavior Effectiveness) Study The GLOBE research project represents the most recent, comprehensive study on culture and its impact on leadership. Using middle level managers from 951 organizations in 62 countries, a team of 170 scholars from around the world worked together and identified nine cultural and six leadership dimensions. Six out of the nine cultural dimensions that the GLOBE study found useful in distinguishing one culture from another replicate Hofstede’s findings: uncertainty avoidance, power distance, societal collectivism, in-group collectivism, gender egalitarianism, and assertiveness orientation. Hostede’s concept of collectivism was separated into two categories: institutional collectivism and in-group collectivism. Whereas institutional collectivism (Collectivism I) measures how organizational and societal institutional practices encourage and reward the collective distribution of resources or collective actions (such as with the strong societal commitment to social services in the Scandinavian countries), in-group collectivism (Collectivism II) refers to how individuals express pride in and loyalty to family or organization, and value family bonding or organizational cohesiveness.

The other three cultural dimensions that the GLOBE study discovered are future orientation, performance orientation, and humane orientation. Future orientation refers to the degree to which individuals in organizations or societies engage in future-oriented behaviors such as planning or investing in the future. Future-oriented societies tend to take more time in making decisions and value deliberate and systematic planning. Performance orientation is defined as the extent to which individuals or societies encourage and reward group members for performance improvement and excellence. A high performance orientation culture stresses an

individual’s continuous improvement through training and development, a low performance orientation culture tends to emphasize family connections and social background rather than individual accomplishment. Finally, the humane orientation measures how individuals in organizations and societies encourage and reward individuals for being fair, altruistic, generous, and caring.

IV. FINAL CAVEATS ON CULTURAL AND GLOBAL WORKFORCE MANAGEMENT Whatever position one may take among the various cultural orientations previously discussed, it is hard to deny the fact that cultural differences still exist across borders. It is probably true that we often tend to overemphasize cultural differences, suggesting a distinctive approach to conducting businesses in each country. As many consultants and even academics commonly suggest a ready-made formula such as a ―dos and don’ts‖ list for correctly handling cultural differences, people are easily trapped in a pitfall hypersensitivity, in which they tend to overrate or exaggerate the influences of cultural differences.

A. Look for Mundane Explanations More often than not, we tend to search for an easy answer based on nationality whenever different behaviors are shown among people from different cultural backgrounds. However, as mentioned earlier, stereotypes regarding national culture may not always be accurate and should be exercised with great caution. Therefore, it is imperative that when you sense a cultural distinction, look first for a mundane, ordinary explanation before attributing the cause to deep cultural differences.

B. Individual Variance Individuals also differ in the internalizations of what their national culture means and do not always act in accordance with generalizations regarding their national culture. Although people from different cultures probably tend to demonstrate similar actions and behaviors under specific circumstances, it would be naive to assume that all people from a certain culture will follow the same pattern of behaviors.

C. Appreciate Commonalities The level of a country’s industrial development, its cultural values, and the level and nature of its cultural interactions may all play a part in the nature of its human resources management practices and their appropriateness to the economic and cultural context within which they operate. While we should be sensitive to cultural differences, we should appreciate the commonalities of our human family and be careful not to overestimate the impact of cultural differences. One must be aware of the possibility of cultural differences and what they might be, but one must also use this awareness cautiously and not overgeneralize and lose sight of the individual, which should be the primary focus for making accurate and fair human resource decisions.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: HOW MULTICULTURAL TEAMS SUCCEED 1. What are the benefits and challenges facing multicultural teams?

Multicultural teams can take advantage of different ideas and opinions of a diverse group of people, avoiding group thinking. They can stimulate intellectual discussion and optimize decision-making by bringing different perspectives together. However, it could be challenging for multicultural teams to build trust as miscommunication could occur due to differences in cultural values and norms. Variance in how team members from different cultures express opinions and ideas can create confusion and misunderstanding between them.

2. Consider Hofstede’s quote mentioned earlier: ―Culture is more often a source of conflict than of synergy. Cultural differences are a nuisance at best and often a disaster.‖ How can you make sure to take advantage of a diverse global workforce and avoid possible problems?

We often observe significant cultural differences between countries. This is particularly true between a country in the East and one in the West whose values and norms are substantially different. Apart from language barriers, for example, Easterners such as Chinese and Koreans are strongly influenced by Confucianism: they are typically known as more long-term oriented while Westerners are short-term oriented. Corporate or organizational culture could be contradictory to national culture and may play a more influential role than national culture when it comes to business decisions. Accordingly, multicultural teams need to figure out how to deal with both national and organizational cultural differences. To take advantage of team diversity, team members must recognize the value in difference by developing a corporate culture that embraces different way of thinking and practices.

3. Share your insights and experiences in dealing with people from other cultures. What are the things you have done well or perhaps poorly, and why?

You can lead the discussion by sharing your own experiences with the students. Cultural blunders or bloopers you made during your participation in study aboard program or at your workplace could spark intriguing discussion in your class.

CASE 3.1: CROSS-CULTURAL ASSESSMENT OVER A CUP OF COFFEE 1. Why do you think people tend to exaggerate cultural differences?

People generally have a need to understand and master the world around them. In situations involving international business, which typically are already filled with uncomfortable uncertainty, people are quick to grab a broad explanation that they can generalize and use in the future to build a better sense of coping with uncertainty. Broad general cultural trends are

stereotypes that provide an initial level of understanding yet tend to oversimplify and exaggerate cultural differences.

2. What are the most effective ways to deal with either real or imaginary cultural differences?

Important ways to deal with perceived cultural differences (real or imaginary) include not trying to find fault with another country’s cultural practices while asserting the superiority of one’s own, and to simply accept that the country’s culture has worked well for a lot of people and isn’t necessary bad. In addition, it is very important to hold back final judgments about individuals in a foreign culture, and observe their behavior to determine how much it conforms to the general cultural patterns or stereotypes that you have formed. Often just a little additional experience will prove initial impressions and cultural generalizations completely unfounded. Such additional experience and observations you have with an open mind will likely result in revised and refined understanding of cultural differences, as well as a greater appreciation for people as individuals who show a broad range of human differences within a particular culture.

3. Do you have any similar experiences that indicate we should be very cautious in interpreting and generalizing cross-cultural differences?

Note: In responding to this question you can facilitate class discussion based on students’ experiences abroad in forming initial stereotypes, and then revising them based on subsequent observations and meaningful cross-cultural interactions. In many cases students remark that eventually cultural differences seem to disappear as they learn to appreciate and accept one another as unique human beings with much more interests and characteristics in common than are different.

CASE 3.2: CULTURE CONFLICT SOUTH OF THE BORDER, DOWN MEXICO WAY 1. What dimension or dimensions of culture seem to be most central to the problems that Jim is experiencing?

A major cultural dimension that is related to Jim’s problems is power distance, where Jim is used to a much smaller power distance culture with associated behaviors than prevails in Mexico.

Another important dimension is high versus low context, where Jim seems oblivious to the importance of reading the broader context or situation of his work and relationships.

2. What are possible causes of Jim’s ineffectiveness in leading his sales team? What are sources of Jim’s deteriorating relationship with his boss, Carlos?

A primary cause of Jim’s ineffectiveness is his reliance on his past strengths and style to carry him to success in a new culture, where those strengths and style will not be successful unless adapted appropriately. His sales team is used to high power distance, where Jim is their boss and should make the important decisions. His relationship with Carlos likely suffers due to Jim’s failure in private and public to show what Carlo’s would perceive as respect for his higher position as Jim’s boss. He also fails to read the various situations of his work to determine when the most appropriate time is to give particular public communications.

3. In a coaching meeting with Jim, what insights would you share with him about cross-cultural differences that might be at the root of his problems? How should Jim behave differently to help resolve his present difficulties at work?

Jim should be coached on the need to develop a greater sensitivity to what is going on around him—to become more high-context in style—to be sure his communications are tactful and appropriate. In public meetings where Carlos is in charge, Jim should consider deferring to Carlos due to his higher position, and then giving suggestions to Carlos in private. To obtain input from his sales team, Jim should look for more culturally acceptable and indirect ways for them to come up with ideas for improvements that don’t conflict with their need to show respect for his higher position.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. National Culture and Coping with the COVID-19 Pandemic: Ask students in small groups to identify and discuss countries whose cultural values and norms have either facilitated or impeded handling global health crisis. Following the small group discussions, facilitate the sharing of group insights with the total class.

2. Influence of Three Different Perspectives on IHRM: Divide the class into three groups and have them discuss what aspects of international HRM are driven by Convergence, Divergence, or Cross-vergence, respectively. Ask them to present the areas that are most amenable to each of these three different perspectives.

3. Personal Cross-Cultural Insights: Facilitate a class discussion of student experiences in interacting with local immigrants or expatriates (including fellow international students), and how these interactions have resulted in new cross-cultural insights. Have students also consider how their previously-held attitudes about those from other cultures were adjusted or completely changed through those direct experience-based interactions.

CHAPTER 4 SUCCESSFUL MNC STRATEGY THROUGH INTERNATIONAL HRM LECTURE NOTES This chapter examines several forms of strategic influence on an organization’s ability to compete in the global marketplace. Particular strategies and structures that MNCs choose tend to have an impact on international human resource management practices. Using a contingency model, we can understand how different types of international human resource management practices may be selected to support the effective implementation of distinctive competitive strategies and organizational structures.

LEARNING OBJECTIVES

• • • • • •

Know the two major classes of knowledge and the importance of knowledge dissemination.

Explain the various ways to develop global leadership and development.

Understand how MNCs can maintain control over their international operations.

Know the four different major strategies that MNCs use to overcome expansion challenges and compete on an international and global scale.

Explain the various global strategies and their effect on MNCs. Know how to link human resource strategy to competitive and organizational strategy.

I. INTRODUCTION The COVID-19 pandemic has brought profound changes in the role of HRM particularly from a company’s strategic intent. As employees’ health and safety issues take on increased priority in the company, the strategic role of HRM has elevated with an increased

focus

on

the

well-

being of their employees and sustaining operations. Facing this reality, this chapter first discusses the links between HRM and three key strategic variables: strategic agility, knowledge management, and global leadership talent development. The strategic roles of human resource management on global organizational performance have impacted MNCs’ competitive strategy and organizational structure for international human resource management practice.

A. Strategic Agility The COVID-19 pandemic has driven firms to develop new ways that global work can be accomplished, encouraging them to rethink how to use global teams and virtual collaboration and international assignments. Strategic agility means a company’s capability to respond quickly and appropriately to environmental changes, while maintaining flexibility and focus to achieve the organizational goals during the crisis.

B. Knowledge Management 1. Vital Knowledge Transfer Top managers believe that the effectiveness of transferring human knowledge, best practices, expertise, and critical capabilities is the most important factor for optimizing an MNC’s performance. International assignments are increasingly considered a strategic mechanism for vital transfer of knowledge and capabilities needed for success.

2. Types of Knowledge

There are two major classes of knowledge: explicit and tacit.

(1) Explicit Explicit knowledge can be codified (i.e., expressed in words and numbers), and easily communicated and shared in the form of written communications in digital or hard copy formats.

(2) Tacit Contrary to explicit knowledge, tacit or implicit knowledge is not easily visible and expressible, making it difficult to share or communicate with others. More specifically, tacit knowledge consists of the ―know-how‖ or learned skills that result from personal experience, i.e., learning– by–doing. In other words, tacit knowledge has to do with an employee’s ―practical expertise‖ rather than information that can be derived from books or manuals.

3. Knowledge Dissemination Much of the knowledge and best practices transferred between the units of an MNC is not explicit but implicit. This tacit knowledge is embedded in the individual experience and skills of the organization’s members and is revealed only through its appropriate application. Given that tacit knowledge cannot be codified or explained in manuals, a company needs to rely on personnel transfer for knowledge dissemination.

Unique HRM practices of Japanese MNCs have been regarded as a main reason for their heavy reliance on expatriate managers. People-dependent and communication-intensive Japanese management processes cannot be easily transferred across borders without sending managers from headquarters who understand its HRM practices.

C. Global Leadership Talent Development 1. Communicate Another essential function of HRM concerns its contribution to development and management of global talent. To support global leadership development, global talent management should be fully integrated into all of the employee-related processes of the organization. To effectively transfer knowledge and critical capabilities across borders, MNC managers need to develop not only an in-depth knowledge in specific functional areas but also an ability to effectively communicate with people who have different cultural values and norms.

2. Accept Cultural Diversity Managers with a global mindset understand intuitively that different cultural norms have value and meaning to those who practice them. Differences in behavioral patterns and social norms that create cultural distance may impede and complicate not only interpersonal relations between managers from different cultural backgrounds but also the contexts of decision making as established within the MNC.

3. Develop a Global Mindset To develop and manage a global organization implies developing and managing people who can think, lead, and act from a global perspective, and who must possess a global mind as well as global skills. Developing a global mindset in the manager’s way of thinking is the most critical factor in creating a truly global organization. Managers with a cosmopolitan mindset intuitively understand that different cultural norms have value and meaning to those who practice them.

4. Beware of Cultural Distance Differences in behavioral patterns and social norms which create cultural distance may impede and complicate not only interpersonal relations between managers from different cultural backgrounds but also the contexts of decision making as established within the MNC. This is because people with different cultural backgrounds have different ―frames of reference.‖ 5. Influence Actions and Beliefs Difficulties in understanding behavioral characteristics and in properly interpreting various verbal and nonverbal signals pose great challenges to managers as they are exposed to a new and different environment. Global leaders are the ones who overcome these challenges by understanding ways to influence the actions and beliefs of others.

6. Encourage Work Abroad An executive cannot develop a global perspective on business or become comfortable with foreign cultures by staying at headquarters or taking short business trips abroad. Indeed, the most effective way to fundamentally change how people think about doing business globally is by having them work abroad.

II. COMPETITIVE STRATEGIES OF MULTINATIONAL CORPORATIONS When faced with many challenges in expanding and conducting business abroad, MNCs may adopt different broad options of business strategy and structure to build distinct organizational capability. In general, MNCs adopt one of four competitive strategies to overcome these challenges and compete on an international and global scale: global cost leadership, multi-domestic, transnational, and regional. The fundamental challenge to MNCs is to establish a system that will effectively accommodate the two conflicting needs of globalization and localization. MNCs should not only be cost competitive but also be capable of delivering products that satisfy the needs and preferences of local customers, which often differ from one country or region to another. However, the relative emphasis on these two imperatives varies according to the industry’s characteristics.

A. Global Cost-Leadership Strategy 1. Need for Global Strategy

The fast-changing global environment, such as the globalization of markets and the acceleration of products and technology life cycles, necessitates that MNCs develop a global strategy.

(1) A global strategy is noted when a firm’s competitive position in one country is significantly influenced by its position in other countries.

(2) A firm integrates its activities worldwide to capture and benefit from linkages and synergies among countries, thereby gaining a competitive advantage.

(3) In firms that pursue a global strategy, the higher levels of coordination and interdependence required between foreign affiliates and parent company operations lead to the need for the company to be globally integrated.

(4) MNCs attempt to realize cost-saving efficiencies and economies of scale and scope by integrating and coordinating operations around the world and by developing highly standardized products and marketing approaches.

B. Multidomestic Strategy 1. Cross-National Diversity Cross-national diversity likely impedes organizational effectiveness for firms employing a global strategy. With different national and regional laws and cultures, attempts to use a standard promotional message or product can be very problematic.

2. Differentiated Products To a great extent, consumers continue to demand locally differentiated products reflecting substantial divergence in standards, tastes, and perceived needs, even across countries within a regional bloc like the European Union that purports to be integrated and one large market.

Consequently, attempts to implement standardized policies and operational procedures worldwide across all international operating units may completely disregard the special needs of individual subsidiaries, including differing national regulations where they are located.

As a result, with declining local market interest, as well as local regulatory obstructions and even fines, the overall performance of the organization may decrease.

3. Local Responsiveness To effectively deal with these differences, MNCs need to emphasize local responsiveness.

(1) Local Market Needs. When local differences are substantial, it is often necessary that the firm’s strategies be adapted to meet the particular conditions of each local market.

(2) Autonomy to Adapt. The extent and direction of the adaptation may differ significantly from one local market to another. Thus, under such conditions, regional and/or country managers in each area are provided with substantial autonomy to adapt the strategies of the home country product divisions to fit the specificity of the local situations.

C. Transnational Strategy

1. Global Integration and Local Responsiveness Recent changes in the global marketplace suggest that MNCs can sacrifice neither global integration nor local responsiveness. Competitive pressures in an increasing number of industries indicate that firms pursue globalization and localization at the same time.

2. Technological Developments (1) Increased Global Integration Recent developments in information and communication technology have enhanced the global integration of economic activities as large MNCs attempt to increase economic efficiencies by utilizing the most cost-effective inputs, and by marketing their outputs from and to various places around the globe.

(2) Intensified Competition Concurrently, the same technological development has also served to intensify competition in each local market. Countries are vastly different from one another in terms of political, legal, economic, and sociocultural environments. Consumer tastes and preferences of one country differ significantly from others, and many countries are also highly diverse in terms of religion, ethnic groups, language, and income levels. This distinctiveness creates mounting pressure on MNCs to provide locally appropriate products and services. Firms adopt a transnational strategy to meet these seemingly conflicting challenges, i.e., high pressures for cost reductions and high pressures for local responsiveness.

3. Global Learning Transnational strategy emphasizes global learningthat the flow of skills and product offerings should flow not only from headquarters to the foreign subsidiary but also from the foreign subsidiary to headquarters. The transnational strategy seeks to conduct a network of activities with multiple headquarters spread across borders, and with these multiple key decision centers optimizes both global efficiency and local responsiveness.

D. Regional Strategy Although a transnational strategy typically is considered the most ideal, in reality it is not always easy to achieve the optimal balance between global integration and local responsiveness. As an alternative to balancing the trade-off between global strategy and multidomestic strategy, many MNCs have employed a so-called regional strategy. Furthermore, the rise of regional trading blocs, such as the European Union and the USMCA, has led them to reassess the anticipated rise of globalization and has facilitated the utilization of a regional strategy. Focusing on the idiosyncrasy of each separate economic region, regional strategy represents a compromise between multidomestic strategy and global strategy.

III. STRUCTURING FOR OPTIMAL GLOBAL PERFORMANCE Another strategic organizational capability to maximize an MNC’s performance concerns how to design an appropriate organizational structure. Introducing the right type of organizational structure in accordance with competitive strategy is critical in securing MNC competitiveness.

A. Global Product Division Structure When benefits from global integration are significant and local differences are minor, firms establish a global product division structure. Under this structure all functional activities tend to be controlled by a product group. Because product managers at headquarters make product decisions for the global market, input from overseas local subsidiaries is often discouraged.

Accordingly, local autonomy is very limited, and the local subsidiaries are treated as cost centers as opposed to profit centers. Existing studies generally indicate that firms in global industries will adopt a global product division structure.

B. Global Area Division Structure A global area division structure is adopted when local adaptation of the firm’s products and services is critical to its business success. When local differences are substantial, it is often necessary that the firm’s strategies be adapted to meet the particular conditions of each local market. Thus, under such conditions, firms establish a global area division structure; regional and/or country managers in each area are provided with substantial autonomy to adapt the strategies of the home country product divisions to fit the specificity of the local situations. Firms in multi-domestic industries are usually expected to establish a global area division structure.

C. Global Transnational Division Structure 1. Transnational Structure To meet this growing challenge for both global integration and local responsiveness, a transnational organizational structure has been suggested. Four critical elements of the transnational structure include: (1) (2) (3) (4)

Both local managers overseas and headquarters managers at home share a global perspective; The relationship between the two is balanced without one dominating the other; There exists a frequent and extensive two-way flow of ideas, information, resources, and personnel between the two locations; and Significant linkages are established across the various operating units, and with headquarters.

2. Networks of Horizontal Decision Making The idealized form of a transnational structure seems to share the important characteristics of a matrix organizational structure in which local subsidiaries report to both area and product

managers. As such, some researchers indicate that MNCs should be viewed as networks of horizontal decision making, where local subsidiaries and headquarters are to be positioned at horizontal rather than hierarchical level. As a result, it is possible that the transnational structure may also be exposed to potential problems of conflict and confusion frequently associated with the matrix structure,

D. Regional Headquarters Structure As an alternative to the matrix structure, MNCs have adopted a regional headquarters (RHQs) structure. This design represents an organizational form intended to overcome the potential tension between headquarters’ pull for global efficiency and local operating units’ push for national effectiveness.

1. Regional Strategy Logically, a regional strategy goes hand-in-hand with RHQs. Under this structure, an RHQ is established in major geographical areas. Typically, MNCs have created three regional headquarters in response to the emergence of the Triad Phenomenon of the global economy: North America, Europe, and Asia.

2. Advantages The advantages of the RHQ structure could include economies of scale in regional strategic planning, effective utilization of globally trained human resources, efficient exchange of information, management of interdependence between and among headquarters and local units, and improved control and coordination of business activities. Capitalizing on these advantages, the RHQs may serve as a critical balance between headquarters at home and local operating units, and thereby help an MNC to attain the ultimate transnational goal of concurrent globalization and localization.

IV. CONGRUENCE BETWEEN HUMAN RESOURCES MANAGEMENT PRACTICES, COMPETITIVE STRATEGY, AND ORGANIZATIONAL STRUCTURE The following contingency model suggests the fit between each strategy and structure and corresponding human resource approach or orientation: A. Ethnocentric Orientation Organizations with a global strategy along with a global product division structure are usually required to maintain a higher level of control at headquarters so that they ensure the effective coordination and integration among different overseas units. Under a global strategy, MNC headquarters wants foreign affiliates to act as if they were the headquarters’ agents. To achieve this goal, they follow an ethnocentric orientation by placing the authority and major decisionmaking functions in the hands of corporate headquarters (or their expatriate extensions abroad), rather than in the hands of the foreign subsidiaries.

1. Home Country Is Superior Under ethnocentrism, related to a sense of cultural universalism, it is believed that the headquarters home country way of doing business is superior or at least preferable to any approach followed outside the home country.

2. Home Country Expatriate Assignments To ensure that the headquarters’ way of conducting business is followed, the ethnocentric orientation typically relies heavily on assigning expatriates or parent country nationals (PCNs) to foreign operations. PCNs sent from headquarters, in general, enhance an MNC’s control of overseas subsidiaries and reduce the MNC’s reliance on the rigid, distant, bureaucratic control mechanisms that have become less suitable to meet the local diversity and complexity of the global operations of MNCs. The use of PCNs not only prevents the leaking of important information, thereby protecting technological know-how, but also facilitates the transfer of a company’s core competencies to overseas subsidiaries through local workforce interactions.

B. Polycentric Orientation 1. Host Country Management Polycentric orientation, consistent multidomestic strategy, may be utilized that requires people from the host country to manage the foreign organization.

(1) Cultural Particularism. This type of HR management practice is based on cultural particularism, as discussed in Chapter 3, which involves sensitivity to the distinctiveness and idiosyncrasies of different countries. HCNs are familiar with the intricacies of the local culture and possess a network of established contacts in the area.

In contrast to PCNs, HCNs possess a high degree of local environmental competence but typically a low degree of internal company functional competence. A polycentric orientation, through the employment of HCNs, eliminates language barriers and avoids adjustment problems faced by expatriate managers and their families.

2. Strict Adherence to Corporate Standards In order for a polycentric orientation to be successful, companies need to require a strict adherence to certain corporate standards. A polycentric approach also prevents subsidiary managers from gaining experience outside their respective countries. Isolation can also grow due to language barriers, national loyalties, and cultural differences, particularly when considering the relationship between the various levels of management within the subsidiary and corporate headquarters.

C. Regiocentric Orientation A regiocentric orientation expands the candidate pool by seeking people from within a specific region.

1. Benefits (a) Promotes Interaction. The regiocentric approach is appealing because it allows and promotes the interaction between executives transferred to RHQs from subsidiaries in the region and home country nationals posted to the RHQs. (b) Fills Shortages. This approach may also be beneficial to the MNCs that continue to experience shortages in well-trained global managers. By assigning them to the RHQs, the MNCs may expect to capture more concentrated and effective utilization of scarce human resources than by separately assigning them to local units in a smaller number. (c) Facilitates Networking. Upon completion of their overseas assignments, managers return to the product divisions for which they used to work. As a result of this job rotation, it is often true that the managers at different locations and levels, e.g., RHQs, product divisions, or local units, become members of informal information networks based upon these established relationships.

Such information networks form a critical basis on which a significant extent of control and coordination may be achieved. By complementing formal communication channels with informal ones, MNCs can attain the concurrent goals of globalization and localization.

D. Geocentric Orientation A geocentric orientation is aimed at solving the problems associated with an ethnocentric as well as a polycentric orientation.

1. Staffing Approach Unlike the previous two approaches, this orientation relies on the assumption that the most qualified and well-trained candidates are sought to occupy important management positions within both corporate headquarters and foreign subsidiaries, regardless of nationality Thus, a geocentric orientation attempts to utilize PCNs, HCNs, or third country nationals (TCNs), who do not belong to either home or host country for international assignments. Such a staffing approach for an MNC is attractive in companies with an interdependent organizational structure, thus relying heavily on cross-border collaboration between headquarters and overseas subsidiaries as well as among overseas subsidiaries themselves. It eliminates a hierarchy of influence and facilitates the creation of a truly international company that identifies with the interests of both the parent and host countries by allowing the development of the best people, for the best positions, regardless of location. Therefore, firms following a transnational strategy and matrix division structure are likely to adopt the geocentric orientation.

2. Strong Corporate Cultures A geocentric orientation leads to a strong unified corporate culture and an informal management network because people no longer feel bound by cultural ties and national loyalties. The transfer of core competence is facilitated because an increased number of people are taught the techniques that make the company successful, further contributing to global success.

V. Increased Role of HRM in Cross-border Strategic Alliances and Mergers and Acquisitions Cross-border strategic alliances and mergers and acquisitions (M&As) are becoming more prevalent strategies and structural choices as MNCs face increasing competition in the global marketplace. Strategic alliances are interfirm cooperative agreements aimed at achieving strategic objectives and competitive advantage for the alliance partners. The simplest form of strategic alliance is a contractual arrangement, such as agreement over licensing, marketing, promotion and distribution, development and service.

Strategic alliances can be particularly advantageous in dealing with high environmental uncertainty and rapidly changing technological innovation, allowing companies to focus on their core competencies while sharing the total risk of a new venture with another party. However, the practical day-to-day operations of the alliance must be in alignment with its common goals and agreed-upon objectives from the alliance formation. The role of HR management is critical to successfully plan and manage alliances with people who are equipped with appropriate skills and competencies, including cross-cultural knowledge.

A cross-border M&A is the preferred entry mode for MNCs into new markets because it provides them with a high level of control while eliminating many of the performance and relational risks traditionally associated with strategic alliances. MNCs often fail to adapt their strategies to the host country environment, including national cultural differences, resulting in unprofitable acquisitions. Furthermore, difficulties experienced by an acquiring firm in managing its acquired firm may be directly related to fundamental differences in the priorities and values held by their organizational cultures. Typically, MNCs have overlooked the role of HR management in creating a successful integration. HR policies and practices are key to a successful M&A, and the lack of attention to HR management, particularly in the early stages, can be disastrous.

To ensure a successful integration, early planning of a seamless integration is very important.

Investors are generally skeptical about mergers where the cultures, reflected in the styles of the top management teams, are perceived to be incompatible, while they are supportive of mergers where the cultures appear to be compatible. Nothing is more important than top management leadership for achieving successful organizational culture change in cross-border mergers.

VI. PARADIGM SHIFT OF INTERNATIONAL HRM FROM CONTINGENCY MODEL TO GLOBAL TALENT MANAGEMENT PROCESS DEVELOPMENT MODEL The strategic role of human resource management needs to be proactive in influencing the optimal competitive strategy and designing an appropriate structure. A shift has taken place in the international management literature from a ―fit‖ between strategy and structure to an emphasis on active value-adding processes that optimize environmental responsiveness and competitive advantage, such as implementing global talent management, developing global leadership competencies and supporting the transfer of knowledge and best practices.

A. Harnessing the Global Talent Pool Aligned with Strategic Orientation

The single most significant contribution of HR professionals and MNC leaders to improving the performance of their companies depends upon how effectively they can help implement global talent utilization and management strategy. The strategic orientation of MNCs, namely, ethnocentric, polycentric, and geocentric, determines how MNCs develop appropriate human capital architecture. In other words, a company’s distinctive strategic orientation requires different configurations of the talent portfolio to compete in the global market.

1. Global Strategy Companies can take advantage of more comprehensive firm-specific knowledge that has a value applicable across multiple countries, transcending any one single location. Headquarters determine key HR decisions and practices.

2. Multinational Strategy Companies utilize location-specific knowledge, i.e., external knowledge rather than internal corporate level knowledge. Subsidiaries have a primary responsibility to develop independent talent management and HR practices are customized to meet local imperatives.

3. Transnational Strategy Companies are required to achieve integration through close lateral coordination and a knowledge exchange that drives organizational learning among subsidiaries. This means that HR practices should support knowledge flows, both internal and external that allow for local adaptation and global integration at the same time 4. Barriers to Talent Management First, a foreign subsidiary may not always pursue the same goals as headquarters, and thus not act completely according to the overall corporate interests. Second, the limited knowledge and decision-making capability (known as ―bounded rationality‖) of managers at the headquarters leads them to rely more on company talent that is readily available and geographically proximate instead of searching for more pertinent and accurate information encompassing all the subsidiaries. Companies should rethink their approaches to managing talent and align them with the strategic objectives of their organization MNC leaders and HR professionals may help overcome these two barriers to global talent management B. Developing Global Mindset and Competencies A global mindset captures the ability to take a global rather than country-specific view of business and people, and to apply this perspective to a specific country, taking its culture into account. One of the critical roles of talent management is to help develop managers with effective leadership competencies for working with people and optimizing engagement across countries and cultures. Successful global leaders need to develop and cultivate a global mindset to work with people from different countries. A global mindset consists of three key dimensions: intellectual capital, psychological capital, and social capital.

1. Intellectual Capital It represents the cognitive aspect of a global mindset. Global leaders are required to demonstrate a solid understanding about global business environments and possess adequate knowledge and

expertise about their business imperatives to help the company succeed in the global market. In other words, business acumen is required to have a comprehensive understanding of the overall business and an excellent foundation in the professional knowledge and skills required to do the job.

2. Psychological Capital It captures the desire and affection of leaders who are willing to develop emotional attachment and open-mindedness, accepting different perspectives and behaviors of people from different cultures. Global leaders should have the desire and passion to experience the unfamiliar world around them with curiosity. Global mindset help develop managers who possess a higher level of acculturation ability and effective international management.

3. Social Capital It reflects the manager’s ability to act in a way that helps build trustful relationships with people from other parts of the world. Understanding and developing informal networks in host countries will help managers develop social capital and access critical information. Global leaders should be able to cultivate quality relationships to take advantage of the diversity of managers from different cultural backgrounds. A clear understanding of the expectations of host country workers allows MNCs to provide appropriate incentives and rewards that more effectively fulfill their needs.

The World Economic Forum identified the top 10 skills for the twenty-first century in its recent report. These are: complex problem-solving, critical thinking, creativity, people management, coordinating with others, emotional intelligence, judgment and decision-making, service orientation, negotiation, and cognitive flexibility. While hard core skills such as data analysis and problem-solving skills are important, soft skills and personal traits such as adaptability and openmindedness are key to thriving in the digital workplace to stay connected with a remote workforce.

C. Encouraging the Effective Transfer of Knowledge and Best Practices 1. Address Explicit Contributions MNCs need to shift managers from one location to another to transfer best practices. Otherwise they will lose out on a vital knowledge resource within the organization—the individual and tacit ―know-how‖ of its employees. MNCs need a top-down initiative to establish and legitimize the role of transferring core competencies within the organization. To share important knowledge among different units of the MNC, it is critical to establish an organizational structure and corporate culture that facilitates the active exchange of best practices. The easiest way to counter this problem is to start by addressing the explicit contributions.

2. Establish Better Reward Systems MNCs should establish appropriate rewards to encourage knowledge acquisition and transfer. If knowledge sharing is a missing or minor part of employee performance evaluations, it will provide little incentive to make contributions. Employees need to receive some kind of direct

compensation for their efforts. More targeted compensation and performance evaluation methods will motivate employees to take knowledge sharing seriously and encourage better and more thorough contributions to the transfer of best practices. It is the responsibility of human resource management to establish such compensation and reward systems that produce a global learning environment conducive to knowledge sharing across borders.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: HOW DO MNCS COMPETE IN EMERGING MARKETS? 1.

How would you describe IBM’s new global competitive strategy?

IBM’s new global competitive strategy is consistent with the current trends of globalization, outsourcing, and worker migration. They have torn down the old barriers that tied a company to its home country, and developed into a free-flowing entity. They attempt to find the most efficient combination of labor, skills, and business environment to complete their goals regardless of these elements’ global location. IBM has learned to adapt to each unique environment they enter so that they can provide customized products and services to meet the needs of each emerging market.

2.

How can IBM effectively modify its international HR management strategy as the company moves away from its traditional international model to become a ―globally integrated enterprise?‖

If IBM hopes to be successful using the globally integrated transitional model, they must apply these same principles to all aspects of the company, including their HR management strategy.

IBM’s international model reflects a geocentric strategy. They want to find the best fit for a managerial position regardless of nationality. This will help perpetuate the culture of IBM being a truly international company. This diversity in management will help to break down cultural barriers that might hinder two globally different divisions of the company from working together smoothly. This will also help to spread tacit information and skills throughout the entire company. These personal experiences will not be seen as unique to one region, but rather to everyone involved across the globe. Using the geocentric strategy does not mean that local business cultures should be ignored. This knowledge is vital in successfully launching an operation in an emerging market, but as IBM grows in a new country the employees should be learning from the experiences of all international IBM employees in order to create a unified company culture.

3.

How is effective recruitment, selection, training, development, and retention critical to IBM’s strategy for success in emerging markets? How is IBM’s business strategy in emerging markets different from those of other markets, and what are the main challenges from a global talent management perspective in achieving business success there?

In order for IBM to succeed in emerging markets they must be able to acquire the best and brightest talent from each specific location. Not only must they bring in talent from the emerging

market, but they also must train them to work alongside IBM’s current employees from the United States and other countries. Success in an emerging market requires the enthusiasm and support of the locals, but these employees should also feel that they are not isolated. These employees must feel that they are part of a larger entity where the mission and goals are shared by all employees regardless of their geographic location. This mindset will lead to the free flow of knowledge and experience. If an employee in an emerging market is learning from the company as a global entity, they are more likely to feel like part of the global IBM population, and are more likely to stay with the company rather than leave for a local or multinational competitor. IBM headquarters should allow its subsidiaries to groom the local talent rather than transferring them to the parent company.

CASE 4.1. ROADBLOCKS TO INDIA’S APOLLO TIRES’ ACQUISITION OF THE US’s COOPER TIRE 1. What international HR issues presented major challenges to the successful acquisitions of Cooper Tire by Apollo Tires?

Apollo Tires needs to convince the Chinese workers that the proposed acquisition will not adversely affect the financial performance of the JV company in China. The Chinese partner is not only concerned about the impact of this merger on the profitability of the IJV, but also management policies and practices due to the change in the ownership and the nationality of the parent company from the U.S. to India. The political and legal environment in which a crossborder M&A agreement takes place may influence the way the transaction is structured and how the employees are treated. HR managers should be well aware of the role of unions and different employment relations policy approaches in different countries to devise appropriate labor practices and compensation strategies.

2. Why was the Chinese joint venture partner of Cooper Tire opposed to the acquisition of its US partner’s parent company by India’s Apollo Tires?

First, this acquisition will bring uncertainty and anxiety about the future of CCT. Second, the Chinese managers and workers do not like the fact that they now have to work with Indian bosses since India is still considered a developing country whose per capita GDP is lower than China’s. Communication is a critical vehicle through which employee motivation and engagement about the acquisition is kept alive and the acquiring company extracts the maximum potential of the targeted employees. Chinese employees need to be convinced that this acquisition will help CCT continue to grow and directly benefit the employees. Communication helps reduce the targeted employees’ anxiety and uncertainty about the acquisition and generates trust, and thereby builds support for the intended project.

3. What recommendations do you have for MNCs considering cross-border M&As to avoid such problems identified in this case and successfully complete pending deals?

For a successful M&A, HR should be involved from the very beginning in the acquisition strategy, target examination, preparation of pre-deal contracts, due diligence, integration planning, and employee communication. The significance of blending corporate cultures or

retaining key employees is not visible on financial statements. Therefore, many analysts who have not conducted thorough due diligence by interacting with management and understanding the ―soft‖ qualities of the companies will not significantly use HR strategies as key instruments in successfully completing M&A deals. As this case illustrates, cross-cultural misunderstandings were at the heart of the takeover’s severe complications. Such miscommunication is a growing problem as increased numbers of M&As occur across national boundaries.

CASE 4.2. IS ACCENTURE’S GLOBAL FACE REALLY A FAÇADE? 1.

What are the key characteristics of Accenture’s knowledge management strategy?

Accenture’s knowledge management strategy is ethnocentric in nature, focusing on the world as a single market where standardization and centralization of processes is the key. Accenture also follows a codification strategy. Its KX system is based on the idea that Accenture consultants throughout the globe should enter their experience-based knowledge and insights into the system, and which then will be instantly accessible for retrieval and application by other consultants facing similar problems and tasks.

2.

Why does Accenture’s knowledge management strategy fail to utilize potentially valuable knowledge generated in East Asia?

Cultures in East Asia tend to be more high-context in nature, doing business based more on established personal relationships than through impersonal and even mechanical interactions, as is the case with the KX system. Thus, Accenture employees in East Asia generally would be reluctant to enter their insights and knowledge-based experiences into the impersonal KX system, and would likely be averse to accessing this impersonal source of information. In addition, the nature of their knowledge exchanged through personal relationships would be more tacit and less explicit, which is not readily codified for recording on the KX system.

3.

What are the key roles that managers could play to improve the current global knowledge management strategy at Accenture?

The KX system of Accenture could be more successful if there were a stronger effort to transpose and convert the information between tacit and explicit forms, and make the knowledge source more acceptable to potential East Asian users. For example, managers who are more comfortable with the explicit nature of the data recorded on the KX system, yet have established strong personal working relationships with East Asian consultants, could monitor their colleagues’ information needs, and retrieve information from the KX system and share it as needed on a more informal, personal basis with the East Asian consultants. In a reverse flow, these managers working closely and interacting frequently with the East Asian consultants could monitor their experience-based insights and client case solutions. They could then transfer this knowledge into a more explicit format for recording onto the KX system, thus increasing the level of East Asian input into the system.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT

1. Strategic Significance of HRM: The HRM function has taken an increasingly important role in shaping and implementing an MNC’s strategy. As an extended team assignment, ask student teams to identify and discuss companies that have effectively demonstrated each of the following components contributing to competitive advantage: strategic agility, knowledge management, and global leadership talent development.

2. Self-Assessment of Global Mindset: A global mindset consists of three key dimensions: intellectual capital, psychological capital, and social capital. Have students (a) evaluate how well they have developed each of these three dimensions, (b) identify areas that need most improvement, and (c) discuss ideas for how they can plan to make improvements that will lead to an enhanced global mindset.

3. Staffing Implications for 4 MNC Strategic Orientations: Divide the class into 3 to 4person groups, forming four or more groups. Assign to each group one of the four major strategic HR orientations or approaches discussed in this chapter: Ethnocentric, Polycentric, Regiocentric, Geocentric. Ask each group to discuss and report to the class the staffing decision implications (i.e., who to hire) appropriate for each strategic HR orientation.

CHAPTER 5 GLOBAL HUMAN RESOURCE PLANNING LECTURE NOTES This chapter examines the important role of human resource planning in carrying out MNC strategic plans, both on an immediate basis in organizing and staffing work, as well as on a longrange basis to build internal capability to compete now and in the future. Important considerations for the global HR planning function include external environment scanning, work organization and job design, and analysis of important kinds and sources of labor supply. In addition, this chapter examines long-term HR planning issues including forecasting labor supply trends and opportunities, building global capability, and succession planning.

LEARNING OBJECTIVES • • • • • • •

Explain the role of HR planning in carrying out MNC strategy, both for the short-term and the long-term.

Understand the purpose of environmental scanning and what valuable information can be gained to benefit HR planning.

Describe the purpose of job analysis and factors that can influence work design.

Describe various major forms of international work arrangements.

Describe different classes of standard or regular employees in the global workforce.

Discuss the purpose and major forms of contingent or nonstandard employees.

Explain major issues and practices of long term HR planning, including country labor forecasting, global capability, and global succession planning.

I. INTRODUCTION

Human resource planning provides the essential link between MNC strategy and people—those who make strategy work—including outsourced workers. For success in the global business arena, human resource planning should be part of the strategic management process, both in terms of strategy formulation and strategy implementation.

(1) Global HR planning should be responsive to both short-term and long-term needs and plans of the organization.

(2) Global HR planning should link with company strategic planning to develop policies, plans, programs, and activities that provide the human talent to help carry out and achieve those strategic plans.

(3) Before staffing and other detailed action plans are made, there should be thoughtful consideration in HR planning about the nature of the present and future work demand and potentially viable sources of labor supply—wherever they may be, both in the short-term and long-term—that serve to achieve the strategic objectives of the firm.

(4) Based on company strategic objectives, HR planning helps to identify and organize work demand, as well as identify and secure appropriate ways to meet and supply this work demand.

(5) HR planning also assists the organization for the long term in changing and developing desired competencies.

II. ENVIRONMENT SCANNING Major HR planning decisions should be based on a careful scanning and assessment of the external environment and maintain awareness of changing and developing challenges— represented by threats and opportunities—to successfully carrying out business plans in our global marketplace.

A. Labor Market Conditions and Characteristics Human resource planning should include a careful and ongoing scanning of various national labor markets to identify particular opportunities or potential problems related to the supply of labor to support ongoing MNC strategic objectives. Scanning of global labor markets might consider current levels of adult literacy and technical skills, as well as labor flexibility and mobility.

B. Governments and Other Labor Interest Organizations A company can feel strong social pressure in terms of patriotism and national solidarity to not move jobs (work demand) to other countries that results in the immediate loss of jobs and increase in national unemployment. Governments and influential trade unions may also impede or completely prohibit certain kinds of work, such as those related to key industries and national security, from being sourced to other countries. Governments can also  seek to limit the number of foreign workers at all levels that can be employed by the MNC in the host country • require MNCs to staff their local operations with targeted levels of host country supervisors and managers (with appropriate training provided),

• •

enforce costly and restrictive labor laws, require significant company payments to address the social costs of employee job displacement when the MNC determines to close.

C. Global Competition Organizations compete for the human talent that drives competitive advantage. Essential to an organization’s ability to succeed in the increasingly competitive global arena—whether or not an organization even ventures abroad—is its ability to compete with other firms to attract and deploy a motivated, innovative, team-oriented, cooperative, responsive, flexible, and competent workforce at all levels—and then retain this talent without losing it to other firms.

D. Cross-National Cooperation and Conflict There are several different regional and multinational trade treaties and agreements among various countries that have important HR planning implications related to business conducted with and within participating countries. Such treaties include the Organization for Economic Cooperation and Development (OECD—most of the countries of Western Europe plus North America, South Korea, Japan, and Australia), the European Union, and the US-Mexico-Canada Agreement (USMCA). Important HR planning implications of these agreements include: • joint venture formation and appropriate staffing to promote treaty country partnerships, • standardization and harmonization of acceptable HR practices, • formation and staffing of regional headquarters and HR function corresponding to treaty member geographic arrangements, • movement of workforce operations across participating national borders to take advantage of operational efficiencies .

• Serious forms of conflict within and between countries can have important implications for the human side of business that should be attended to as part of HR planning. These include • ongoing trade wars, • more serious cross-country conflicts involving physical violence and terrorism, • political instability.

III. JOB DESIGN FOR MEETING GLOBAL STRATEGY WORK DEMAND Once work demand has been identified that directly addresses the implementation of company strategy and business objectives, decisions are needed regarding work organization and design, involving breaking down larger business performance plans and goals into specific coordinated and integrated tasks, responsibilities, and jobs for people to perform. The work responsibilities and tasks, as well as the qualifications or requirements necessary to perform them (e.g., knowledge, skills, abilities), are considered in detail through a process called job analysis.

The job analysis process forms the basis upon which key employment decisions related to recruitment, selection, training, performance appraisal, and compensation are made. Job analysis typically results in the development of a document known as a job description, listing the duties and responsibilities, working conditions, supervision or reporting arrangements, and required

knowledge and skills to perform the job effectively. This document should be regularly reviewed and discussed with employees and revised if necessary to ensure that work performance expectations are clearly understood. Major methods used in job analysis include: • current employee observation, • interviews, • questionnaires, • keeping a diary or log, • expert input by experienced managers or other professionals.

A. Primary Factors Influencing Global Work Design Given an identified work demand in some foreign environment, there are several potentially critical factors that should be taken into consideration in the design of work that meets that work demand.

1. Cultural Adaptation Considerations in Work Design Although general tasks and responsibilities for similar jobs can be identified from central corporate headquarters, their specific working conditions and arrangements in their foreign location should be carefully examined to ensure a good fit with local cultural norms and expectations.

2. Government Regulatory Influence on Work Design Different governments may have specific restrictions about how work is organized and carried out, e.g., how work is organized, how many hours per day a store can remain open, how many hours a week employee can work, conditions related to overtime work.

3. Labor Market Skill Levels Depending upon the levels of skills and knowledge available in the labor force, jobs may be designed with more or less technical complexity, or having more or less careful supervision (also part of the work design).

4. Available Technology and Infrastructure Work design must also consider such factors as the availability and development of technology in the local area of business operations, as well as the surrounding infrastructure supporting business. Where technology is unavailable, work must be designed in a more simplified form, which often results in the need for many more employees to handle many more simplified tasks.

The field of sociotechnical systems seeks to optimize this interaction in work design between new technologies and the human dimension leading to improved productivity and workforce satisfaction. Along with the productivity boon associated with these technological innovations, current challenges with the introduction of new technologies into the design of work include potential threats to proprietary information security, managing an increasingly virtual workforce

that is able to work remotely, and dealing with serious amounts of wasted time and distractions during work hours due to personal use of the Internet, texting, and various popular social networking media programs.

Significant work redesign also becomes needed around previous human-driven tasks that are now automated, and requiring higher employee skills for managing automated operations. In many cases complete jobs are being automated or even eliminated entirely through technological innovation and work process redesign. Although some consider economic downturns as the primary reason for layoffs and unemployment, over the long term the greatest cause for job loss worldwide, especially in the manufacturing sector, is increased efficiency and automation from technological innovation.

5. Personal Accommodation Needs In addition to the need to accommodate the design of jobs to fit the cultural and skill level requirements of employees, individual employees may have unique circumstances that influence the design of their work. For example, where long commutes are required, longer but fewer work days may be arranged, or work may be designed on a ―telework‖ basis (i.e., performed at home with regular communications to the office via telephone, fax, or the Internet B. Major Forms of International Work Arrangements Besides traditional full workday arrangements at the company work site, various alternate forms of other working arrangements may be made to fit the global work demand needs of the organization and its employees.

1. Traditional Expatriate Assignments MNCs increasingly are sending professionals located in their foreign subsidiaries on extended (e.g., three to five years) international assignments to other foreign operations as well as to headquarters, they traditionally have sent expatriates from the headquarters home country locations, particularly in earlier stages of their business expansion abroad. The demand for these traditional expatriates’ services has been based primarily on the need to provide strategic control and to fill a critical skills gap by transferring operating knowledge and techniques and general managerial skills from headquarters to the distant subsidiary. This transfer, thereby allows more MNC control.

Two additional major purposes for sending expatriates abroad include (a) supporting individual learning and competency development for future leadership positions, and (2) organization development of the host operation and MNC as a whole. Particular purposes of organization development include: • global workforce socialization to common values and priorities, • widespread global orientation and core competency development, • development of informal company-wide networks.

•

organizational learning and effective global knowledge management, where returning expatriates potentially serve as important sources of knowledge and learning for the organization about foreign markets.

There are significant disadvantages of PCN expatriate assignments that should be carefully considered before structuring work to be fulfilled through expatriate job designs: • Expatriate assignments can be very expensive—ranging from three to ten times the cost of domestic employees with similar responsibilities.

• Over-reliance on the use of expatriates for management and leadership responsibilities in foreign operations can lead to limited development of other members of the MNC workforce not coming from MNC headquarters, contributing to an overall underutilized and underdeveloped global talent pool.

• Exclusive use of expatriates for managing foreign operations can significantly diminish the breadth of experience-based perspectives about foreign markets that can be returned back to MNC headquarters, limiting the MNC’s ability to innovate and compete due to its narrow, ethnocentric frame of reference.

4. Inpatriate Assignments Inpatriation: A work assignment featuring the transfer of foreign managers and other professionals from their host country to global or regional headquarters is known as inpatriation.

Major purposes: • Increase the foreign inpatriate manager’s understanding of company strategy, culture, and critical operations and practices, which can be used to MNC benefit upon eventual return in a leadership role to the host country.

• Serve as a knowledge transfer agent back to the host country.

• Serve to infuse knowledge of the corresponding host country market to leaders at headquarters and throughout the global organization • Enrich the MNC management team by adding a multicultural perspective to global decision making and strategy development.

2. Short-Term Foreign Assignments Whereas traditional expatriate assignments among MNCs based in both developed and emerging economies remain important, increasing priorities for cost savings are leading to greater growth in short-term foreign work assignments, ranging from a few days, weeks or months to a year.

Where sufficient work is developed in a foreign location, employees might be sent there temporarily, such as on a two-month assignment, or for multiple work periods at the foreign location over an extended length of time.

5. Virtual Expatriate Assignments Due to disadvantages associated with expatriate assignments, companies are increasingly using assignments that combine short travel trips with virtual interaction through computer mediated technology. These arrangements expose the employee to valuable developmental global management issues, while still permitting closer touch with the home office. Despite their

growing use in MNCs, virtual expatriate assignments will not completely replace expatriate assignments since the latter work arrangement still potentially holds a huge face-to-face advantage in solving problems in a timely fashion as they arise, and especially in building trusting and open communication relationships necessary for effective team performance 6. Global Virtual Teams The globalization of business and the growing trend of using the best organizational talent available in the MNC (no matter where that talent is located), and combined with new information and communications technologies, have led to the formation and continued growth of complete or partial working arrangements known as global virtual teams. Global virtual teams range from occasional to total reliance on communication technologies as the medium for team interaction. Most are knowledge-based teams formed to improve organizational processes, develop new products, or satisfy complex customer problems. Their work has three common design components: (1) responsible for formulating and/or implementing decisions that are important to their organization’s global strategy, (2) use a substantial amount of communications technology to support group member interactions, (3) are comprised of members working and living in different countries.

Major Advantages of Global Virtual Teams • Ability to perform work asynchronously, helping global organizations effectively bridge different time zones and enabling teams to be productive over more than one work period.

• Dispersed members’ proximity to different customers, markets, practices, perspectives, and resources in their local contexts can enhance flexibility and innovation capability— thus increasing the ability of the team to balance local awareness with a broader, strategic perspective of the united global MNC team.

Major Disadvantages of Global Virtual Teams • Increased potential for cross-cultural conflict, • In lean, asynchronous communication typically found in multinational virtual teams, especially those stretching across Asian, European, and American time zones, the conveyance of cues is hindered, feedback is delayed, and interruptions or long pauses in communication often occur.

IV. SOURCES OF GLOBAL LABOR SUPPLY FOR MEETING WORK DEMAND Once global work demand has been identified and human jobs (as opposed to automated or robot-delivered work) have been designed into specific tasks and responsibilities, various sources of labor may be considered to fill this work demand.

A. Regular or Standard Employees

Regular or standard employees (better but less accurately known in the past as ―full time‖ or ―permanent‖ employees) typically are considered full members of the organization, and generally are recipients of full benefits provided by the organization. These employees often are considered to be at the core of the organization’s employment picture, where other ―noncore‖ employees serve as layers beyond the core that provide work as needed and as afforded by the organization. The noncore employees can serve as a protective buffer for their core employee counterparts, and these nonstandard employees tend to be the first ones to lose their jobs, or to have their working hours diminished in tight financial times. Five general categories of employees that MNCs may consider in their HR planning as sources of labor for filling work demand at various levels in their foreign operations 1. Parent Country Nationals (PCNs) Traditionally selected to fill MNC leadership assignments abroad for optimal MNC strategic control, PCNs are citizens, or at least legal residents, of the ―parent home country‖ of the parent company, or the home country where the primary company headquarters is located. Although in most uses of the term PCNs are presently employed by the MNC, they also could come from outside the company as members of the larger national labor force in the home country where the MNC is headquartered. (a) PCN Advantages.

• awareness of company culture, priorities, strategy. In addition, the experienced PCN is likely well networked within the MNC and has a good understanding of the key decision makers and power brokers within the organization.

• likely share the same language and national cultural characteristics that influence company business behavior and decision making.

• optimal MNC strategic control. (b) PCN Disadvantages.

• lack of familiarity with and difficulty in adjusting to foreign business location of the MNC. • inability to adjust headquarter policies and practices to fit local host country.

• very costly.

2. Host Country Nationals (HCNs) HCNs are citizens or residents of a country that ―hosts‖ or provides local property and facilities for MNC operations abroad. HCNs can come from the ranks of existing local MNC employees, such as in the case of an employee from within the local foreign operation being promoted to a management position or given an inpatriate assignment, or from outside the firm and from within the surrounding host country labor force. HCN strengths include familiarity with the local culture, common business practices, and economic conditions. An obvious advantage of HCNs as a source of labor is typically their ready availability in the local environment.

Due to this local familiarity, HCN managers may actually provide a greater degree of strategic control in business formulation and implementation than PCNs. This greater knowledge

possessed by HCN managers for controlling local operations, along with their generally lower costs and degree of assignment risk involved, help explain why we see increasing trends by MNCs in selecting HCN top leadership for their foreign operations.

Potential Problems. May lack a clear understanding of the organizational and predominant national and organizational culture of MNC headquarters; or its business priorities, accepted and expected business practices, and strategic mindset. HCNs might also not share a common language with PCNs, thus potentially posing a serious communication challenge.

3. Third Country Nationals (TCNs) When an MNC considers filling the leadership and technical talent work demand for a particular foreign operation in a host country, a viable source of this talent could be citizens of a different third country, apart from the MNC’s home or host country.68 TCNs can represent a useful and economical alternative labor source for filling work demand. This staffing approach often follows an overall regiocentric strategy to minimize costs and take advantage of possible regional commonalities, including common language and cultural familiarity, where em-ployees are assigned as TCNs to nearby host country operations.

(a) TCN Strengths.

• useful source for alternative labor, especially where focus is on obtaining the most costeffective labor, regardless of what country the employee comes from; • usually less expensive when comes from nearby regional location; • when there is regional proximity, TCN may already have knowledge of host country and may require less adjustment. (b) TCN Potential Disadvantages.

• depending upon where the TCN is from, there might be language and cultural problems with HCNs, • difficulties with local public sentiment and governmental obstruction where TCNs are perceived as taking jobs away from local HCNs, • TCNs, like HCNs, may have language difficulty in communicating effectively with PCNs and MNC headquarters, and they may not have a clear understanding of MNC strategic priorities, accepted business practices, and organizational culture.

4. Self-Initiated Expatriates (SIEs) ―Self-initiated expatriates‖ (SIEs), unlike migrants who leave their home country primarily motivated by economic and sociopolitical necessity, SIEs go abroad more due to the perceived value of international work experience for their long-term personal and professional development. (a) SIEs Strengths



uninhibited by organizational and occupational constraints, and are motivated to take charge of their careers rather than wait for their organization to arrange for an appropriate career progression  already be adjusted to the local host country environment and are motivated to remain employed there  much cheaper to hire and place in a host country position than PCNs (b) SIEs Potential Disadvantages  Due to their lack of experience with MNC headquarters  not an appropriate alternative to traditional PCN expatriates for purposes of strategic control, transfer of company knowledge, and company-customized management development 5. Foreign Executives in Local Organizations (FELOs) FELOs are hired with the expectation that their familiarity and experience with international business will help the local firms learn new approaches and practices to enable their rapidly catching up to and even surpassing their international competitors in the local domestic market, and in some instances compete in the global context as well. (a) FELOs Strengths  local firms are greatly benefitting from the immediate injection of valuable technical knowledge and experience related to global business through the newlyhired FELOs (b) FELOs Potential Disadvantages  question the level of local company loyalty and commitment of these foreign executive  the neglect of softer skills related to building trusting working relationships, cross-cultural understanding, and a more flexible global mind-set may impede local company growth and success over the long term  difficult to overcome critical adjustment challenges often due to the great cultural distance involved with this international work B. Contingent or Nonstandard Workforce Work on a flexible basis as needed or contingent to an organization’s work demand, and have neither an explicit nor implicit contract for continuing employment. Countries can differ in the extent of contingent employee use, with Spain at the highest level of nearly 60 percent, favoring part-time job-sharing arrangements to decrease unemployment. An international study estimated an average of approximately 25 percent of the world labor force in ―casual‖ nonstandard or contingent employment—and the use is growing.

1. Reasons for the Contingent Labor Sector Worldwide (a) Increased Workforce Flexibility. Used on an economical ―as needed‖ basis, allowing the company to relatively easily adjust up or down the number of workers employed and their working hours based on the existing work demand, and thus not having to pay for excess labor supply when work demand slackens.

(b) Supply Factors. In some cultures, a large sector of the labor may be available to work only on a part-time basis, such as where women are expected to attend to childcare and other household management responsibilities. In several countries we also have noted that senior citizens, with increased health and longevity, may return from complete retirement to the workplace on a parttime basis to generate extra income and provide additional variety in their lives. (c) Screening Function. Temporary employees and their part-time employee counterparts who are working a smaller number of hours allow for management to sample their work performance before making a long-term employment commitment—thus improving employee selection decisions. (d) Technological Change. Significant changes in technology often lead to (a) outsourcing or reassigning work outside of the company to those specializing in new technology expertise, (b) automation of work and robotics that typically reduce the number of needed employees as well as change the nature of their work, and (c) rapid changes that demand flexibility and diminish the value of long-term employment commitments. (e) Employment Legislation and Deregulation. Generous legislated benefits for regular employees may create an economic motive for companies to increase their use of part-time and other nonstandard employees. Also, through deregulation companies may become freer to utilize more flexibility in their staffing practices. (f) Worldwide Growth in Numbers of Small Businesses. Many forces have contributed to the global increase in the number of small businesses, including the increase in corporate outsourcing of functions, corporate downsizing, and the lure of being one’s own boss. Many small businesses outsource specialized business functions for a fee to consultants, contractors, and special service vendors. In this way the small employer is not weighted down by the fixed costs of regular employees. (g) Changes in Employer-Employee Relationships and Expectations. The longstanding psychological contract between employers and employees of lifelong employment and job security is greatly diminishing worldwide. Employees increasingly see themselves as being their own free agents and not committed on a long-term basis to a single employer. (h) Changes in Employee Personal Life Needs and Lifestyle Preferences. In addition to changes in the psychological contract between employers and employees, major changes in employee needs, expectations, and lifestyles have come to alter work arrangements in the workplace. The dramatic increase, especially in developed countries, in the number of working mothers and the rise of the two-career family have led to the demands for flexible working arrangements provided by contingent employment. Temporary work also increasingly is being seen as a way of life for some professional, technical, managerial, and executive employees.

C. MNC Concerns Regarding Contingent/Nonstandard Employees •

Reduced job satisfaction

• • • •

Loss of direct control over quality Decreased employee commitment/loyalty Negative perceptions toward outsourcing and offshoring Loss of sense of responsibility toward employee

V. HR PLANNING FOR THE LONGER TERM. Besides regularly scanning the environment for the short term, HR planning should also study external trends and conditions pertinent to the firm’s longer-term survival and competitiveness.

In addition, MNCs should look internally to consider the MNC’s organizational culture and core competencies that it desires to build across its global workforce in the coming years, as well as plan for future leadership talent—regardless of gender and national passport—that will successfully direct the MNC and its individual units.

A. Country Labor Forecasting: Considering such longer-range factors as • • • •

national birthrate statistics, health conditions and mortality, the nature and quality of educational systems within a country, changing labor demographic trends.

B. HR Planning for Global Organizational Talent Capability HR planning should keep in mind what the MNC wants to become in the long run related to global talent capability, and plan and manage its HR activities and policies accordingly. An important source of talent capability contributing to an MNC’s competitive strength is shared organization cultural values, priorities, and practices, leading to the formation of valuable workforce alignment and common mind-set. Global organizational talent capability also is dependent upon an organization’s capacity to identify and build leadership talent for its worldwide operations, as well as develop a reliable process to enable timely and effective senior leadership succession.

C. Workforce Alignment and Common Mind-Set This increased alignment and coordination in turn can contribute to faster and consistent, high quality responsiveness to customer needs around the globe. Companies that have as a major strategic objective to develop greater company-wide global leadership capability have been encouraged to increase, through global HR planning, their number of young managers involved in extended foreign assignment experiences (including inpatriation).

International firms large and small should carefully plan their selection, training, performance management, remuneration, and overall diversity management practices to support the acquisition of human talent with common core priorities and key competencies that collectively promote alignment and coordination across national boundaries.109 The development of an MNC common culture characterized by shared values, beliefs, priorities, and personal identification

with the company also creates a deep and enduring internal structural mechanism to informally teach, influence, and reinforce desirable behavior throughout the MNC. D. Global Leadership Succession Planning Global leadership succession planning concerns the careful selection of talented employees for calculated grooming and eventual replacement of MNC senior managers.

Effective succession planning aims for minimal disruption and confusion arising from such leadership changes, with a view to implementing company strategy and achieving organizational goals in a smooth and continuous manner. These succession plans include detailed developmental strategies and activities for their managers to make the plans work. The most effective global companies are able to regularly and inclusively consider across the multinational organization—regardless of such personal characteristics as gender, national culture, ethnic background, religion, etc.—and identify and groom a continuing supply of leadership talent for timely placement.

E. Global MNC Culture Supporting Diversity, Equity, and Inclusion (DEI) MNC success in building company-wide alignment and optimal leadership talent at all levels is greatly dependent upon its capability in developing a corporate culture that is supportive of and encourages diversity, equity, and inclusion. Through effective HR planning, organizations can build their capability in effectively managing DEI and develop a more supportive company-wide culture. Goals may be set for increasing the representation of particular minority or under-represented groups in various positions and locations of the MNC. Local worker councils or employee resource groups (ERGs) committed to DEI initiatives appropriate for their locations can be formed to enhance employee commitment and engagement. DEI goals and initiatives, as with other MNC strategic plans, must be implemented in a fashion that is sensitive to local cultural expectations and regulations across the various operations of the MNC. NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: WHO ARE OUR EMPLOYEES, ANYWAY?

1.

What changes in global work supply have taken place that contributed to the situation of Gap and its global workforce?

Major forces of globalization, including improved technologies, communications, transportation, and especially more opened borders of developing countries that invite foreign business have resulted in a tremendously increased array of labor worldwide. Local manufacturing firms have rapidly sprung up worldwide to organize and offer on a contracted basis local labor to MNCs that continually search for acceptable sources of low-cost labor to help them keep their prices competitive. Local employees seek work opportunities in these very low-cost contracted services arrangements simply due to the more dire alternatives to not accepting the work.

2.

What are possible forces that might contribute to an MNC’s lack of a sense of responsibility toward workers in different parts of the world who produce its products or deliver its services? In fact, what external forces can even interfere with this sense of responsibility?

Governments of developing countries are becoming increasingly active in trying to attract foreign direct investment, emphasizing to MNCs the low cost, low risk, and minimal restrictions involved in moving business to contracted manufacturing services within their borders. MNCs often see these opportunities, including opportunities to obtain cost-savings advantage over competitors who are seeking similar opportunities. There are also company shareholders, interested in optimal MNC profitability and stock price, who believe that it is not within the MNC’s responsibility to impose more costly moral perspectives related to worker rights and responsibilities upon developing countries—these rights and responsibilities should be within the sole purview of the contracted service companies and the local governments. And many customers in industrialized counties seem happy to support these MNCs’ cost-savings strategies, when lower costs are passed on to the customer. Finally, local parties in developing countries, including employers and employer organizations, may be very vocal in supporting these less than favorable contracted work operations, stating that the people would be in much more dire economic circumstances without them.

3.

Is this opening scenario dealing only with a global phenomenon? Can you think of local work outsourcing arrangements where there is a clear gap between an organization and the outsourced or contracted workers who supply labor to meet the work demand?

Many organizations in Western industrialized countries increasingly try to reduce their operating expenses by outsourcing noncore functions to other firms providing contracted services, often even upon the same premises of the outsourcing organization (such as hospital, hotel, airport, university). These outsourcing firms often ―shop‖ for outsourced contracted services for the lowest price, typically at the expense of employees (often immigrant) of the outsourced firms, who now receive substandard wages and benefits. Thus, the original outsourcing organization loses a sense of responsibility for the employees of the outsourced firms, even though those employees still contribute to their overall business success, in a similar fashion as the outsourced contracted service employees working in sweatshops abroad.

CASE 5.1. GENDER DISCRIMINATION IN JAPAN: GROWING CHALLENGES AND OPPORTUNITIES 1. What HR talent acquisition opportunities are presented by this case for an MNC desiring to develop operations in Japan?

Japan has long been considered as a masculine culture society where one expects a clear-cut distinction between the roles of men and women. Men work to support their family while women stay home to take care of the children and domestic affairs. However, expectations for such traditionally separated and distinct gender roles are quickly changing as increasing employment opportunities are presented to Japanese women to meet the growing demand for corporate talent.

MNCs are encouraged to learn that Japanese women prefer to work for foreign companies rather than local Japanese companies since they believe that the former offer a more friendly work environment for women and support their career development.

2. How does the predominant discriminatory nature of the Japanese culture toward women, particularly in managerial and professional roles, ultimately serve as a significant obstacle for Japanese firms? What HR planning is needed for these firms to change in order to enhance their own competitiveness?

Given the serious shortage of talented people, the global or local talent strategy of any firm should include all human resources available. Excluding Japanese female talent will definitely put Japanese companies at a disadvantage when they compete for capable and competent mangers in the global as well as local market. They should introduce new HR planning designed to attract more females and retain talented incumbents. They should provide new HR policies to accommodate the needs of female managers so that they can balance their professional career with family issues. It is encouraging that the current Abe administration considers offering financial incentives for Japanese companies to promote women, and to provide expanded maternity leave and increased day-care funding.

3. What are important economic and demographic reasons behind the Japanese government’s efforts to reduce discrimination against women in the workplace?

Japanese society is quickly aging, probably at the fastest pace among all the developed countries.

In order to effectively respond to an aging workforce and a sluggish economy, increasing numbers of available and skilled women should participate in the active workforce. The Japanese economy has been caught up in prolonged economic doldrums for the past two decades. Since Mr. Abe Shinzo became prime minister of Japan in 2012, the so-called Abenomics characterized by expansionary monetary and fiscal policy helped boost the Japanese economy. However, the domestic economic revival seems to have been short-lived due to the increase in consumption tax from 5 percent to 8 percent in April 2014. A more active participation of a talented female workforce in entrepreneurship as as well large conglomerates is desperately needed.

CASE 5.2. HR PLANNING FOR DEXTERITY CAPABILITY IN THE FACE OF UNCERTAINTY AND RAPID CHANGE

1. What do you think about Elaine’s advice for building greater organizational capability in dealing with change and uncertainty, which tends to become even more of a challenge in the global marketplace? Which recommendation do you believe is most beneficial? What specific action plan recommendations do you have for Karl and his leadership team?

Elaine addressed some common recommendations, e.g. flexibility, agility, trust. These are some general, meaningful recommendations. More specifically related to HR planning, it would be important to consider flexible staffing options, e.g. contingent workers, partnerships with other companies, in such uncertain times. That would allow him to more quickly grow and downsize, if necessary. Thus, he should carefully scan different markets/partners and prioritize markets/partners and consider growth potential as well as flexibility.

2 Why do traditional organizations face impediments in dealing with change and uncertainty?

What are examples of organizational confusion and paralysis that you have seen in response to the COVID-19 pandemic.

Traditional organizations in highly regulated markets cannot easily change their strategies and HR headcount. Decision-making can be slow and inflexible. COVID-19 has demonstrated how governments and organizations reacted to external shocks. While some governments imposed severe restrictions, e.g. home office mandates in Germany, others were more lenient, e.g.

Sweden. Organizations were forced to comply with suddenly imposed restrictions.

3 What organizational responses did you observe that assisted organizations in successfully adapting to the pandemic crisis? What organizational capability or capabilities did they possess before the pandemic that enabled them to more effectively adapt to this crisis than other organizations?

Flexibility and agility are particularly important in responding to external shocks. It is important to be able to responding to changing market environments. Such crises may also present new opportunities. For instance, Sartorius, a German medical equipment supplier, greatly expanded its business to provide supplies for the production of vaccines.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Hiring for Global Market Expansion: Select a real (or fictitious) organization and ask students to identify a country for outsourcing work, e.g. textile production, IT workers.

Students should carefully select and evaluate various potential target markets. Students will draw from various web resources considering various factors (see textbook Figure 5.2) to develop an informed decision.

2. Pros and Cons of Contingent Work: Select a real (or fictitious) organization with operations in multiple countries, and have students discuss whether/where that organization should extend its contingent workforce. Assign students into two groups. One group will develop arguments for an increase in contingent work and the other group will develop arguments against it. Following group preparation, one group representative will be selected to debate with the other group representative using the group arguments. This exercise will

help students understand the various advantages, disadvantages, and consequences of contingent work within our global marketplace.

3. Self-Initiated Expatriate (SIE) Early Career Planning: Ask each student to (a) identify a foreign country of genuine interest for having future living and working experience soon after graduation, and (b) develop a realistic, flexible early career plan for moving to that country and gaining valuable global competence development experience as an SIE. To assist in considering SIE planning options and ideas, students are recommended to read the following: 

Vance, C.M., and McNulty, Y. (2014) Why and How Women and Men Acquire Expatriate Career Development Experience: A Study of American Expatriates in Europe. International Studies of Management and Organization, 44(2), 34-54.



Vance, C.M. (2005) The Personal Quest for Building Global Competence: A Taxonomy of Self-Initiating Career Path Strategies for Gaining Business Experience Abroad. Journal of World Business, 40(4), 374-385.

CHAPTER 6 GLOBAL STAFFING LECTURE NOTES This chapter focuses on global staffing for filling immediate work demand through the processes of recruitment and selection. Staffing implications to support major strategic approaches and perspectives are examined. Important general factors and approaches are examined that influence global staffing in MNCs. Then more specific approaches, tools, and important considerations for recruiting and for selecting viable candidates are considered, with a particular emphasis on expatriate staffing.

LEARNING OBJECTIVES 

   

Describe general factors affecting global staffing decisions, including MNC strategic approach and perspectives, stage of international development, foreign market experience, influence of host government, sociocultural considerations, and plans for individual and organizational development.

Understand general issues and practices underlying effective global recruitment efforts.

Discuss general issues and practices contributing to effective selection decisions.

Describe critical staffing challenges and practices involving women expatriates.

Explain important selection considerations and practices for international assignments.

I. GENERAL CONCEPTS ON STAFFING

Involves many activities related to moving employees into, throughout, and out of an organization in the pursuit of satisfying work demand and meeting organizational objectives (e.g., recruitment, selection, transfers, promotions, layoffs, firing, and retirement). Staffing also considers how to best retain desirable employees—to prevent them from moving out of the organization prematurely. However, this chapter focuses on recruitment and selection.

II. FACTORS AFFECTING GLOBAL STAFFING A. MNC Business Strategy •

•

The primary focus of a firm’s human resources agenda throughout all of its processes and activities, including staffing, should be upon optimal support and reinforcement of company strategy—both strategy formulation and implementation (i.e., attracting key leaders who have a primary influence in formulating MNC strategy, and attraction and placement of middle managers throughout the MNC who have a vital role in carrying out the strategic direction of the firm).

The staffing function should seek to fit and reinforce the priorities and strategic approach of the MNC.

1. Ethnocentric Approach Typically characterized by all or most key positions at a foreign operation being filled by PCNs, especially in the early stage of internationalization. Some MNCs, as is often the case with Japanese firms, persist with PCNs predominating in foreign operation management ranks well beyond the early stages of country industrialization or internationalization. There is an overarching lack of comfort or confidence in extending authority beyond corporate headquarters, with a desire to maximize control over local operations and maintain tight coordination with MNC headquarters. Disadvantages may include high costs of using PCNs, inefficiencies involved in PCN international adjustment, potential conflict and adjustment time for HCNs relative to new PCN, problems associated with limited promotional and developmental opportunities of HCNs (e.g., dissatisfaction, lower productivity, increased turnover).

2. Polycentric Approach Similar to what is often described as a multidomestic strategy involving customizing company products, services, and practices to meet the differing local market circumstances. Each major overseas subsidiary usually somewhat independent, and managed by a local HCN familiar with the competitive demands of local market.

Major Advantages. Familiarity of operation management with local social norms and customs, local language fluency, typically less costly than an expatriate assignment, no foreign adjustment problems, can gain support of local government and people who see operation as beneficial.

Major Disadvantages. Potential lack of effective flow of information and productive interaction between MNC headquarters and the foreign subsidiary due to language and cultural differences,

lack of international professional skill enhancement and career development opportunities for HCNs who remain in host country operations, restricted international management opportunities in foreign subsidiary operations.

3. Regiocentric Approach Firm’s operations or particular functions (e.g., sales) are structured by multiple country areas or major economic regions, such as a Western European or Latin American division. Predominance of HCN staffing at the local subsidiary, however, with an increased movement of senior HCN managers to head up operations in other countries (now becoming TCNs) of the economic region, such as a French national to a Spanish operation of IBM in Madrid. Increased crosscultural interactions may contribute to building useful international competencies, representing a helpful transition to an eventual global strategy with geocentric approach.

Disadvantage. May contribute to regional ―kingdoms‖ with minimal exchange of knowledge and resources.

4. Geocentric Approach MNC staffing policy driven by a geocentric strategic orientation recruits and selects the best talent for important jobs from throughout the world operations and external environments of the MNC, regardless of nationality. This staffing policy works well especially within industries whose products or services involve minimal cultural differentiation such as in the high-tech electronics or automotive industry. Works well within industries whose products or services involve minimal cultural differentiation (e.g., electronics or automotive industry).

Advantages.

Increased global leadership development opportunities for HCNs, increased opportunity for cross-cultural learning and knowledge sharing throughout the firm, greater opportunity for developing common MNC identity and set of key global competencies throughout the MNC leading to a distinct competitive advantage in human capital.

Disadvantages: Implementation of a geocentric staffing approach is challenging all the more because bounded rationality makes it difficult for MNCs to locate a qualified candidate for an opening job across borders, and this is why they are increasingly relying on professional recruiting firms to help them find global talent, particularly for top management positions. A geocentric staffing policy may also prove prohibitively expensive to implement fully due to compensation adjustment needs and relocation expenses.

B. Stage of Company Internationalization Beginning with export activity and progressing through the development of foreign sales offices, licensing agreements and foreign direct investment with manufacturing facilities, international division formation, multinational status, and finally integrated global enterprise. Firms of all sizes differ in pace toward increased internationalization—some bypass stages through

acquisitions and joint ventures—and some ―born global‖ new ventures begin with a primary focus on the global marketplace.

Staffing decisions at each stage of internationalization may differ due to the unique work demands of each stage (e.g., in new operation there might be subcontracted staffing and management services. At the more advanced level of the multinational enterprise, firms are often greatly interested in transferring company knowledge and technical expertise to foreign wholly owned subsidiaries, as well as coordinating with headquarters and controlling foreign operations to ensure consistency with parent company policies and procedures—all frequently done through expatriate PCNs assigned to these operations.

Finally, at the stage of integrated global enterprise the firm has a large assortment of internal talent to consider for its staffing of both domestic and global operations, and follows a geocentric approach. External and nonstandard or contingent sources of employees are also frequently considered at this level depending upon the nature of the particular work demand and the comparative advantage of these sources.

C. Specific Foreign Market Experience Multinational firms that have little experience with a specific foreign market are likely to staff these new foreign operations to a significant degree with local management that is very familiar with the specific market.

These initial hires may be local HCN managers who have been instrumental in the planning for this new market entry, or TCNs (third country nationals), perhaps from a neighboring country, who have considerable experience and expertise with the local market.

D. Government Restrictions and Incentives Governments often require MNCs to demonstrate that HCNs are not available to fill certain managerial or technical professional positions before they grant entry visas and work permits to PCNs and TCNs. Governments may also restrict and reduce the number of foreign asylum seekers and immigrants who are perceived as low-wage threats to their existing national employment opportunities. Many governments have begun to change their laws or quota restrictions related to employment related immigration to better meet their local economic development demands, especially for higher skill jobs, thus facilitating international transfers and cross-border staffing.

Governments and NGOs (Non-Government Organizations) also may place demands or lobby for staffing requirements (including future HCN managerial staffing requirements) for MNCs that are making foreign direct investment, especially in developing countries. Governments may also provide significant tax, tariff, local labor force training, and other incentives to encourage MNCs’ foreign direct investments (FDI) leading to significant HCN staffing.

E. Sociocultural Considerations

There are important social and cultural considerations and shifting trends affecting staffing decisions.

Two of these considerations affecting staffing are general social norms and, more specifically, women as talent for international staffing.

1. General Social Norms Although the consideration of such factors of potential candidates for staffing as gender, age, family ties, or previous friendships might seem irrelevant and even unethical in some cultures where the primary focus is on a candidate’s technical ability to perform a job, such factors might be very expedient and necessary in other cultures. For example Selmer and colleagues recently found that the age of expatriates assigned to operations in Greater China had a positive association with expatriate managerial performance, providing support to the presumption that the age of business expatriates matters in a Chinese cultural context.

2. Women and International Staffing Despite national laws and policies prohibiting discrimination against women in the workplace, cultural norms and expectations widely held in several countries might need to be considered when making women staffing assignment decisions in those countries, especially involving work and supervisory interactions with men.

Nevertheless, women have been relatively untapped as a source of human talent in the international business arena, and key to international business success will be the ability to mobilize and utilize all available human resource talent to the fullest extent. There is a persistent unfounded bias against the selection of women as expatriates. In some cases (e.g., memorability, skills in relationship building), women might even have a natural advantage in international business as expatriates.

To effectively recruit and increase the number of women in expatriate positions, companies should consider the following field-tested ideas: • Provide awareness training countering the bias to relevant managers involved in possible expatriate selection, emphasizing that many women actually would welcome an international assignment, and that the dual management career challenges are similar to what would be faced with male expatriates.

• Create a system for identifying and keeping track of employees willing to take foreign assignments, with a concerted effort to include potential female candidates in this database.

• Use successful female expatriates to recruit other women, providing seminars and less formal interactions to talk about the pros and cons of foreign assignments.

• Be flexible about timing, providing a reasonable deadline for deciding whether to accept an assignment and being flexible about the starting date to accommodate possible childcare responsibilities that tend to fall more frequently upon the mother.

• Provide employment assistance where possible for an accompanying male spouse, who might be feeling greater stress as a ―trailing spouse.‖ F. Plans for Individual and Organization Development

Immediate staffing decisions can also be influenced by longer range goals and objectives of the firm related to individual employee development, or the development of the organization’s capability as a whole. The selection of HCNs for inpatriate assignments has been recommended as a reverse knowledge transfer strategy for building greater capability at company headquarters in considering diverse perspectives and meeting the demands of global diversity.

G. Situational Factors Influencing Staffing Decisions • • • •

Nature and duration of task.

MNC financial resources available for staffing.

Availability of qualified and willing candidates.

Economic trends and conditions.

III. GLOBAL RECRUITMENT OF HUMAN RESOURCES A. Geographic Scope of Recruitment Geographic scope may be worldwide when the company is following a geocentric approach, searching for top talent regardless of national pedigree. Broad scope may be followed when particular professional or technical skills are highly sought after but are in short supply.

Although low costs of web-based recruiting have allowed the geographic area for recruitment to increase dramatically, other costs and restrictions related to the overall staffing effort (e.g., candidate travel for interviews and dealing with difficult country visa and immigration policies) may lead to minimizing the geographic recruitment area as long as it is likely to produce a reasonable supply of qualified candidates.

B. Internal vs. External Candidates Many MNCs encourage an internal recruitment ―promotion from within‖ policy where possible, in home country and abroad, in hiring for job openings at all levels beyond entry level.

Internal recruitment advantages include: 1.

Where effective human resource information systems (HRIS) are in use, qualified candidates are easier to identify and contact, representing significant savings; 2.

With an effective HRIS, the work performance background and developmental progress of potential candidates are readily available to inform selection decision; 3.

Promotion from within may have a significant boost on employee morale and motivation, increasing retention and productivity; 4.

Reduction in training and socialization time and costs; 5.

For expatriate assignments, internal candidates tend to have a proven track record, and already possess much company knowledge that can be useful in foreign assignment.

Advantages of recruiting external candidates: 1.

Bring fresh new ideas and viewpoints into the organization; 2.

Reduce training costs where technically trained employees are recruited;

3.

4.

Provide additional greatly needed human resources, especially in times of growth, without overusing and overburdening existing internal staff; Provide greater objectivity and flexibility in making critical decisions, without a history of past commitments, relationships, and expectations that can impede needed change.

C. Global Recruitment Methods—Internal 1. Job Posting Company newsletters, bulletins, and computerized ―intranet‖ in-house communication systems may carry announcements and details of job openings for a foreign assignment, or may be used in a foreign operation to support a local ―promotion-from-within‖ policy.

2. Skills Inventories Many organizations have developed useful skills inventories on both local and global levels that facilitate an internal search for employees with interest and requisite skills to fill an international assignment.

3. Internal Network Referrals Organizations typically use informal communications as a means to ―spread the word‖ and identify possible internal candidates for promotion or transfer assignment. Through their contacts throughout the organization, managers often are able to learn of qualified individuals who have previously expressed an interest in the type of job opening available, and then can contact these individuals directly.

D. Global Recruitment Methods—External 1. Advertising Direct advertising to the external public can reach a large number of potential applicants, and may happen in a number of ways. Regardless of the method or medium, it should fit the local culture and regulatory conditions. Too broad of an advertisement approach may attract unqualified candidates and create an extra load on the selection process, while too narrow of an approach might miss qualified candidates that could bring great value to the organization.

2. Employee Referrals Many companies have found the employee referral approach to be very useful in attracting in a timely manner competent and committed employees. Under an employee referral approach employees typically receive a financial reward and/or gift for referring a candidate to the company who is eventually hired. Current employees tend to have a clear idea of the required skill sets and requirements for success with the company. However, possible problems of this approach include excluding other strong candidates who aren’t family members or friends, and even potential legal liability where members of protected groups do not have equal opportunity.

3. Field Recruiting Many companies actively send professional internal recruiters out into the external environment in field recruiting activities, such as to domestic or international college career centers, company or government-sponsored outplacement service centers, school or local government-sponsored career fairs, or meetings of professional associations—all places where potential candidates might seek employment opportunities.

4. Internships Companies are increasingly working closely with domestic and international university programs to develop internship arrangements where students may work on a part-time basis during a school year or full-time during a summer prior to graduation. As a recruitment tool, appealing internships can be successful in attracting very capable students who managers can assess further for organizational fit and potential before making hiring decisions. Especially for potential future international assignments, international internships also serve as a valuable trial test of an individual’s ability to adapt and adjust to a foreign work environment.

5. Professional Recruitment Firms There is a rapidly growing worldwide industry for firms that perform various forms of assistance in ―sourcing‖ or providing labor to fit company employment needs. A fairly new and developing segment of the professional recruitment services industry is often called ―temp-to-hire,‖ which provides employees from entry to middle management levels initially on a temporary basis, but afterwards hired by the company on a regular employment basis when future work demand and employee fit warrant such a decision.

6. The Internet and Related Software as Tools for External Recruitment There has been tremendous growth in the use of the Internet as an external recruitment tool. With increasing widespread availability and usefulness of the Internet and e-mail for resume and applicant data collection, as well as availability of integrated software tools for automated applicant data scanning and analysis for screening purposes, companies are finding that the use of these new technologies is significantly reducing both the cost and time needed to fill many positions. The Internet is also able to improve on traditional advertising by targeting specialized websites and electronic newsletters and bulletin boards to more effectively reach particular groups of interest (e.g., expatriate newsletters and relocation services). But despite its strengths, the use of e-recruitment has potential drawbacks, including: • Too many applicants to process effectively and in a timely manner, creating an excessive workload and possibly hurting company image; • Challenge when the recruiting company is not well known in new foreign markets; • Questionable data received, and quality is highly variable; lack of quality control in getting a response from truly interested targeted groups.

IV. GLOBAL SELECTION OF HUMAN RESOURCES

A. General Principles and Practices of Employee Selection 1. Triangulation Multiple different kinds of selection measures provide a field of data, and the areas of agreement of the data from these separate measures tend to provide accuracy in predicting the future success of a candidate—more than merely data provided by a single measure or assessment.

2. Focus on Job Relevance The actual requirements of a job should guide all selection activities and decisions, and the results of the various assessments and measures of a job candidate should be judged against those relevant job requirements. Local mores may prescribe particular characteristics such as related to age and gender, and in these cases a fit with local cultural expectations may represent an important job qualification.

3. Investment in Interviewing Skills Development The employment interview is generally the most frequently used method for employee selection, yet in the hands of untrained managers and supervisors it often has one of the lowest validity rates in predicting the future company success of a job candidate. Therefore, to increase the accuracy of this widely used and potentially valuable selection method, organizations should invest in training on interviewing skills for their managers and supervisors and other employees involved in the selection process. An important focus of this training should be on the behavioral interview technique, which (when focused on job-related behaviors) has high predictive validity, and requires the candidate to describe specific behaviors used in the past or to be used in a hypothetical situation.

4. Influence of Culture on Selection Measures In carrying out employee selection on a global scale a careful consideration should be made regarding the possible influence of cultural differences in affecting the results and conclusions of selection tests and other methods and measures for assessing candidate fit and qualifications.

Assessment centers are generally seen as one of the most robust and valid selection techniques.

But their often culture-bound assumptions about ―appropriate‖ candidate behavior in one country may not effectively translate elsewhere. Differential effects of culture are particularly problematic in the use of personality tests, where subtle interaction between language and culture make it hard to discern if test results are due to national cultural differences or individual candidate characteristics.

B. Selecting Employees for Foreign Assignments 1. Selection criteria

The most important selection criteria depend upon the nature of the international assignment.

Traditionally the primary criterion for selecting employees for a foreign assignment has been ―past demonstrated technical competence.‖ But this past technical competence likely took place in a domestic work environment without the significant number of uncertainties, unfamiliar conditions, and differing cultural variables contained in the intended new foreign work environment. Selection criteria are now gradually changing to a wider range of skills and personality characteristics—such as interpersonal skills, personal intent and motivation for obtaining international work experience, cross-cultural sensitivity, adaptability, tolerance for ambiguity, and overall inquisitiveness. And since the ability to adjust to the foreign environment—both on the part of the expatriate and any accompanying family members— appears to have as great or even greater determination in foreign assignment success than the expatriate’s technical competence, the measure of this adjustment ability for expatriate and family members should likely be given significant weight in the overall selection decision.

2. Methods for Selecting Employees for a Foreign Assignment (a) Psychometric Approach. This general approach using personality tests argues that there are identifiable competencies associated with foreign assignment success, and that the accurate measurement of these competencies can be used to identify and predict effective performers in international assignments. Many MNCs develop their own customized competency measures. (b) Experiential Approach. There are three major forms of this approach that emphasizes the expatriate candidate’s direct experience with many of the realities of the future assignment. i. Assessment center technique (including in-basket exercises, relevant job assignments, and work simulation), places the candidate in various relevant situations and with common and critical tasks that they likely would face in the foreign assignment. ii. Foreign site preview visit or familiarization trip. The candidate and her/his spouse and even children may be invited to visit the actual area of the proposed foreign assignment to experience it firsthand. It is of great importance that this brief visit be planned and made as realistic as possible to provide an accurate and realistic preview, rather than merely an enticing touristoriented experience in a foreign and exotic location. This foreign site familiarization trip can be very effective in providing a realistic picture to ensure that the candidate makes an informed decision, as well as to help prepare the expatriate—intellectually and emotionally—for the foreign assignment, fostering enhanced adjustment. iii. Developing an internal international cadre or talent pool. This method requires significant HR planning and a much longer time perspective than the other experiential methods, and relies upon the MNC’s long-range investment in developing within its managerial ranks international competencies through foreign work experience. Where a significant number of managers are involved in international developmental assignments of relatively short duration in their early careers, the MNC is able to build up a talent pool of experienced potential candidates for longerrange expatriate assignments. The quality of their performance during this early experience can be used as a sound basis for predicting their likelihood of future success in the extended expatriate assignment.

(c) Clinical Risk Assessment Approach. This approach investigates candidate competencies and ability to adjust to the demands of the foreign assignment, but also other factors affecting success beyond the expatriate, including adaptability of accompanying partner, dual-career difficulties, nature of supporting structure in the foreign assignment, cultural distance and technical difficulty of the assignment, and accountabilities and responsibilities. Through this comprehensive assessment, candidates who present an overall picture of greatest potential with minimal risk may be the best choice for a foreign assignment.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: GLOBAL STAFFING AT SHELL 1. Based on what you have learned from this chapter, how would you critique the Shell People Services staffing function? Particular strengths? Any weaknesses or potential limitations?

Particular strengths include (1) using SAP, a comprehensive IS system that integrates well across other organizational functions; (2) using one common system throughout the organization (more economical); (3) using the company website as a global job posting board for internal job opportunities around the world; (4) having the ability to tap into a supply of applicants—external and internal—around the world; and (5) being sensitive to local cultural differences in candidate assessments and interview. Weaknesses or potential limitations include (1) potentially excluding those with high promise but weak English skills or who are high context/relationship-oriented from being accurately represented within this system; (2) with a global scope, there is a chance of attracting too many applicants to be able to effectively deal with in an efficient and timely manner.

2. What are various methods used by Shell People Services to maximize its ability to have a global reach for talent yet fit local workplace conditions?

Shell People Services (SPS) actively provides training for expatriate managers to increase their awareness of local legal requirements and practices to avoid legal problems associated with recruitment and selection. In addition, SPS works to ensure that its assessment center methodology for selecting job candidates is based on culturally valid behavioral criteria for each location that reflect desirable job competencies, and that those conducting the assessment are trained to recognize those competencies within the culturally specific context. SPS also provides general information to potential candidates around the world, such as job descriptions, whether particular positions require extensive travel, the initial location of positions, and how each position fits within the Shell organization.

3. How is the Shell Group using its global staffing function to contribute to overall competitive advantage?

SPS helps build company alignment through its standardized approach, including both the standardized SAP system and the use of the common language of English. The global assessment center with commonly trained assessors also builds common alignment for the company. This standardized global approach also greatly reduces overall staffing costs, and extends the reach of

the staffing function worldwide. This approach also provides greater objectivity and flexibility in making critical staffing decisions, without too great of a dependence upon personal relationships and minimal internal politics that can impede objective and efficient decision making in attracting and selecting talent for the firm.

CASE 6.1. BRAZIL'S ECONOMIC BOOM NEEDS MORE TALENT 1. How are MNCs coping with a talent shortage driven by the economic boom in Brazil?

To cope with a talent shortage, many MNCs are increasing internship programs, spending more on training and salaries, and transferring workers from flat or declining markets. Local colleges and universities cannot produce graduates fast enough who are equipped with adequate skills and knowledge for filling jobs required by MNCs. A company’s success increasingly depends on identifying, recruiting, managing, and retaining high performers or talented individuals to meet the present and future demands of the organization.

2. Do MNCs rely more on internal or external staffing, and why? What are particular advantages of using internal versus external sources of staffing?

They rely more on internal than external staffing for the following reasons. First, it has become virtually impossible to recruit all the managers and employees in demand from other companies or competitors. They realize that it would be better to groom a cadre of managers who understand a company’s strategy and values and norms instead of risking hiring managers whose values and norms are not compatible. Second, although poaching is an issue, one would expect that managers who received internal training tend to show higher loyalty to a company compared to the ones recruited through external staffing.

3. What are the main concerns and practices of MNCs in retaining talented employees?

MNCs are very concerned about poaching of their employee talent. As the case mentioned, it is very common that competitors try to steal the people who are already well-trained and capable of showing high performance. In order to retain these people, it is critical that companies make their managers and employees more engaged with the company by providing financial and nonfinancial incentives. In addition, firms may use employer branding to attract new employees and assure that current employees are engaged in the culture and the strategy of the firm.

Employer branding is a targeted, long-term strategy of a particular company to manage the awareness and perceptions of employees, potential employees, and related stakeholders to create and promote a reputation that the company is a great place to work.

CASE 6.2. MNC STAFFING PRACTICES AND LOCAL ANTIDISCRIMINATION LAWS 1. What message does this case have for MNCs as they plan and carry out staffing and other workforce management activities in their foreign host operations?

A major message is that MNCs must be familiar with prevailing labor law in the locations where their operations are located. They can’t assume that the legal practices in their headquarter (home) country will necessarily apply in their locations abroad.

2. What evidence does this case provide that local management was guilty of unfair discrimination according to U.S. labor laws?

One form of evidence of the firm’s guilt is its pattern of employment at upper levels of management, showing a clear preference for Asian males in selection and promotion decisions.

More damaging is personal testimony and even e-mail message data that indicate a clear discrimination against anyone besides Asian males. Included in the e-mail evidence are messages containing disparaging comments against white males, and even ethnic/racial slurs against minority groups.

3. Do you believe that the behavior of local Marubeni managers would be acceptable in other counties where it is not specifically prohibited by local labor laws?

This patently discriminatory behavior might be allowed in other countries without antidiscrimination legal protection, but in the long run the firm will not be able to build good will within the local workforce, as well as the external local business environment and labor force. In addition, the firm will not be successful in building a loyal internal workforce with diverse strengths and perspectives, and that is optimally sensitive to local market conditions.

4. Besides avoiding legal costs, can you think of any other reasons to avoid discriminatory behavior when making staffing decisions in global workforce management?

Besides lack of success in building a local, committed internal workforce that possesses and brings to senior levels of decision-making diverse strengths and perspectives that are relevant for the local marketplace, such discriminatory behavior will not build goodwill in the surrounding community, making the company’s ability to attract strong talent more difficult, as well as possibly directly hurting reputation and success among potential consumers.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Gender Equality Around the World: Each student will select one country and search the internet for relevant information about gender equality (mostly work related, e.g., gender pay gap, proportions of women in top management) in that country. If possible, students will interview at least one person from that country to obtain further insights and personal stories.

Students will present their findings in class or through submitted written reports.

2. International Recruitment/Talent Acquisition: Assign student teams to fictitious firms that plan to expand operations in another country. Tell students to search the Internet and select a major international recruitment or talent acquisition firm that they would like to use in helping to staff the new foreign operation with appropriate leadership and professional employees. From their careful study of the selected firm’s website, teams will identify

important issues, challenges, and practices involved in effectively working with the firm to achieve successful staffing objectives.

3. Expatriate Selection: Development of a mini-case study: The instructor selects a real (or fictitious) company and will develop three profiles of three different potential expatriate candidates for one specific expatriate position, e.g. CFO for South Korea. The instructor may design profiles with whom some students could identify themselves. This would make the discussion more interesting for students. It would be sufficient to give some basic information about each potential expatriate candidate, e.g. fictitious name, age, nationality, family status, work experience (same/different company), study background, language skills.

Students will discuss which candidate to select and why. Optional: instructor appoints one student who will make the final decision and other students will provide recommendations.

CHAPTER 7 GLOBAL LEARNING AND DEVELOPMENT LECTURE NOTES To provide a greater understanding and appreciation of the role of learning and development for successfully competing in today’s global marketplace, this chapter first examines the strategic role and key contributions of learning and development, and then considers fundamental concepts and principles for guiding important global learning and development activities. In addition, critical imperatives are examined, including building global competencies and workforce alignment, particular considerations for HCN and expatriate training, and learning priorities particularly for women expatriates.

LEARNING OBJECTIVES • • • • •

Understand the strategic role and importance of training and development activities in the global marketplace.

Understand fundamental concepts and principles for guiding global training and development activities.

Discuss approaches and areas of emphasis for building global competencies and workforce alignment.

Describe special considerations for the training of expatriates, and women expatriates in particular.

Understand important considerations for HCN training leading to enhanced productivity of the host country operation as well as the entire MNC.

I. STRATEGIC ROLE OF LEARNING AND DEVELOPMENT Training plays a central role in the effective implementation of organizational strategy, and merits thoughtful planning and investment of company resources, whether in good economic times or bad. We will examine five particular ways in which training can assist organizations in gaining a competitive advantage in our global marketplace.

A. Quality and Customer Satisfaction

Various studies have identified ―reliability‖ as a primary if not the most important standard that customers use in evaluating the quality of a product or service. Effective training increases work performance reliability contributing to a product or service by decreasing the variation of work performance away from the desired standard.

B. Decreasing Costs Through effective training there is a reduction in ―rejects‖ and unacceptable performance yielding undesirable results. Since these rejects represent undesirable costs to the organization, their reduction and even elimination through effective training represent important cost savings.

An additional means of lowering costs is the reduction of wasted time that could be put to more productive use—sometimes referred to as ―shortening the learning curve.‖ The inability to rapidly adapt and change also means the potential costly loss of business to competition that can more quickly adapt and meet changing customer demand.

C. Organizational Learning and Knowledge Management Collective individual learning and knowledge acquisition resulting from training and various formal and informal forms of experience sharing are followed by organizational learning, or changes in MNC culture, policies, and commonly accepted practices.

D. Global Alignment Various training activities and related efforts can be used to help build internal employee alignment, or a common mindset or way of thinking throughout the MNC that brings control and consistency to offset the unavoidable uncertainty and rapid change within the environments of global business. Beyond this common mindset, training can also build a common identity, commitment, and sense of values to guide decisions—shared attitudes that provide additional stability and support for unity of action.

E. Building Global Talent An increasing priority for MNCs is the development of high potential employees, from wherever they are found in the global organization, into effective managers and leaders who are able to think and compete effectively on a global scale. Training can serve as a vital function for helping global professionals and leaders reliably and effectively develop general international competencies that are crucial for their present and future success.

II. KEY CONCEPTS FOR GUIDING GLOBAL LEARNING AND DEVELOPMENT There are several basic concepts and principles that can help guide decisions regarding employee training and development at home and abroad.

A. Domains of Learning

As might be expected, most training is aimed at increasing knowledge, awareness, and understanding—all relating to the cognitive domain of learning and involving intellectual and rational thinking processes.

The affective domain deals with emotions, feelings, values, beliefs, attitudes, expectations—all often combined into the general category of motivation. The changing of attitudes, commitment, or desire to perform effectively pertains to learning in the affective domain, and tends to require much more active participant interaction and involvement and sharing of feelings in the learning process than is typically the case for learning in the cognitive domain. Examples in the affective domain include predeparture training efforts directed at helping expatriates and family members to overcome concerns about a new foreign assignment, or to reduce and eliminate prejudice against a host country workforce with whom the expatriates will be working.

The psychomotor domain often relates to the acquisition of new physical skills, such as typing or correct new language pronunciation. This domain also pertains to the learning of information in the cognitive domain, but at a very deep, virtually automatic level. Many tasks require an individual to perform in the midst of significant distractions and stressful conditions where, although a conscious focus may be lacking, the person is still able to perform flawlessly due to the unconscious or automatic nature of this deep level of learning.

B. Sensitivity to Cross-Cultural Differences As with all other practices of international human resource management, general training concepts and principles should be implemented with sensitivity to possible effects of cultural differences. In particular, the tendency to avoid asserting personal control in the learning process will likely be high in cultures with high power distance, where the trainer’s leadership status and role of authority should not be questioned or challenged.

C. Conduct Careful Learning Needs Assessment This first phase is extremely important for determining whether a training need actually exists.

Rather than a lack of knowledge and skills, suboptimal employee performance is often due to poor communication, poor job design and work procedures, or a reward system with disincentives to performance and inadequate incentives (both financial and nonfinancial), or a combination of these. A thorough training needs assessment examines training needs at the organizational level, the job or work operations level, and the individual level.

Examined at the organizational level are such factors as organizational performance objectives, available resources, and possible needful supportive changes from the organizational culture and reward system.

At the work operations level the nature of the particular performance to be mastered is carefully examined, and the training content for supplying new knowledge or skills to enable this desired performance is considered. In cases of an existing performance problem or desire to improve performance, this analysis might also examine the causes of the performance problem, including particular behaviors contributing to the problem that should be avoided. In addition, the prevailing conditions in which the work is to be performed (e.g., job design, supervision and

other potential sources of support and reinforcement, possible obstacles impeding performance) are studied. This work operations level examination should include input from as many different sources as possible, including those directly performing the work, previous holders of the job, supervisors, customers, and subordinates.

At the individual level the particular needs or characteristics of the trainee or trainees are carefully considered. Particularly relevant to global business at this level are such personal factors as trainee language skills, technical and basic skills, and cultural influences.

D: Identify Specific Learning Objectives

Based on the preceding needs assessment, detailed learning objectives should be developed that identify what specific behaviors the intended learners are supposed to be able to perform as a result of the training as well as the expected conditions in which each behavior is to be performed.

E: Learning Method Selection

The most significant amount of employee learning takes place informally as part of the work experience. In fact, the ―70–20–10‖ model that is growing in acceptance globally contends that 70 percent of employee learning within organizations occurs through direct working experience, 20 percent happens through informal interactions with other people at work, and 10 percent happens through formal learning programs. Because of its power and relevance, and especially due to its low cost, on-the-job training is the most commonly used method for employee learning.

To enhance learning control and predictability, other experiential methods providing high learner engagement and realism are often employed as part of classroom instruction, such as with simulations, games, and role plays. In

some cases, a simple checklist or brief instruction emailed to each employee will suffice. Therefore, a cardinal rule guiding the selection of employee learning and development methods is the following: the most cost-effective

method or combination of methods to use depends upon the learning objectives. Ultimately, the particular needs of the employee performance situation, reflected in the learning objectives, should dictate the method or methods used to effectively achieve those learning objectives at the lowest necessary cost.

F. Promoting Learning Transfer to the Workplace A successful HRD effort should result in individual performance improvement leading to enhanced individual and organizational productivity. Effective learning and mastery of new skills, attitudes, and knowledge are futile unless there is effective transfer of this learning back into the workplace. To encourage effective transfer of the learning there are several things that managers can do before, during, and after the training effort takes place.

1. Before Training The leaders and managers of the organization typically have a powerful influence on what behavior is perceived as appropriate and valued and what behavior should be avoided in the organization. These leaders and managers should clearly demonstrate their approval and acceptance of the training—and they can do this through adequate budget allocation for the training, supportive public statements, and even participating in the training themselves. In some cases there will need to be a preceding or at least concurrent effort to change the organizational culture (e.g., priorities, values) to effectively support the desired new skills and behaviors that are targeted in the training. A careful review and possible revision of pertinent company policies, procedures, and workplace conditions should also take place beforehand to be sure that any obstruction that might be posed to the utilization of the new skills is removed.

2. During Training Practice is essential during training to ensure positive transfer, and in as close a simulation as possible of the real working situation in which the targeted skills would be used. Since on-thejob training takes place in the actual workplace, this approach when conducted with effective coaching and supervision tends to have optimal positive learning transfer. Away from the workplace, experiential exercises and role plays can be particularly effective methods for combining practice with realism to enhance positive transfer.

3. After Training

Following training there should be an effort made by supervisors of those trained to encourage the use of the new skills to ensure their retention. Thus, managers and supervisors should be very much aware of and involved in the employee’s new skill acquisition process and plan work accordingly.

III. TRAINING IMPERATIVES FOR THE GLOBAL WORKFORCE Key imperatives for global training include building global competencies for international professionals, building global alignment, predeparture and on-site expatriate training, special training considerations for female expatriate assignment success, and HCN training.

A. Building Global Competencies for International Professionals 1. What Are They?

To effectively compete in our global marketplace, managers, executives, and other professionals need to develop and hone particular global competencies beyond those that used to suffice in the domestic arena. These skills that collectively contribute to what is often called a global perspective or global mindset include the following general forms: • Business Acumen: The working understanding of effective principles and practices of functional disciplines as well as broader strategic management knowledge for conducting business in international settings; often involving both external business environment savvy and internal MNC organizational savvy.

• Paradox Management: An appreciation and ability to make effective decisions within the uncertainties and complexities of global business, often involving paradoxes and contradictions, such as smaller business entities being able to wield more power than larger entities, or managing the ongoing tensions of thinking on a global scale yet being responsive to local concerns and demands.

• Self-Management: The ability to monitor, care for, adapt, and renew oneself to maintain strength and vitality amidst the ongoing demands of rapid change, uncertainty, complexity, and otherwise stressful working conditions of international business; often involving planning for achieving balance in intellectual, physical, spiritual, and social realms of life.

• Cultural Acumen: An appreciation and interest in other cultures, as well as sensitivity to and flexibility in dealing with cross-cultural differences in various settings, including working in and managing multicultural teams in international business.

2. How Can They Be Developed?

To develop these global competencies, MNCs are using various approaches, including the following categories labeled the ―Four Ts.‖ Transfer. Many researchers support the ongoing practice of MNCs in using extended international work-assignment transfers as rich experiential training grounds for their future leaders—regardless of nationality and location—in developing global competencies and a vital global mind-set to help

the MNC meet its global competitive demands of the future. Many researchers and practitioners consider the extended international assignment as the single most powerful approach for developing these global competencies.

Training. This strategy of training refers to more controlled, structured learning activities with fairly limited topics and specific learning objectives. Of the ―Four T‖ strategies examined here, training is by far the most formal and with the greatest focus on sharing explicit knowledge.

Examples of these more structured training efforts could be a program on global strategy, change management, managing virtual work teams, or international negotiations and conflict management skills, involving middle managers of various nationalities from the MNC’s subsidiaries around the world. Besides the development of valuable global competencies, incidental learning benefits of these kinds of training activities.

Travel. As part of brief business assignments abroad, travel in itself can provide a rich source of exposure and experience-based knowledge about foreign cultures and different behavioral norms, diverse economic and political environments, and different and often insightful business practices. To gain added exposure from travel experiences, companies often encourage their employees to engage in nonwork activities involving mixing with local cultures, such as shopping in local markets, visiting schools and homes of host country employees, participating in humanitarian service projects, and engaging in other meaningful activities beyond the typically superficial agenda for tourists.

Teams. The global workplace features several different forms of team assignments in multinational and multicultural work teams, including cross-functional task forces or more enduring teams at middle or senior levels, or fairly autonomous and self-managing virtual teams involving quarterly meetings in person. These experiences involving meaningful interactions with team members of other national and cultural backgrounds can provide a rich exchange of tacit knowledge and capability of many forms, including those related to global leadership competencies. To ensure that these experiences lead to learning that is as productive as possible, they should be preceded or at least supplemented by targeted training in cross-cultural awareness and multicultural group dynamics.

B. Building Global Alignment 1. What Is It? The systematic acquisition of key global competencies and thinking skills among MNC managers and professionals, whether PCNs, HCNs, or TCNs, leading to a common mindset, as well as the transfer throughout the MNC’s global workforce of industry-specific critical capabilities linked with success, can contribute to a very productive internal cognitive alignment.

This common mindset and shared knowledge represent a unifying language that provides alignment in thought and action, facilitating effective interactions and collaborative synergies across the MNC much as more formal rules and other control mechanisms. Additional alignment comes from the development of an MNC culture of common values, identity, beliefs, and priorities that also serves to informally teach, influence, and reinforce desirable behavior within

the MNC. There is strong evidence that the influence of organizational culture can be much more influential and override national culture.

2. How Can Alignment Be Developed?

The development of the important mechanism of alignment of both ―mind and heart‖ takes place naturally through informal learning channels as various parts and members of an MNC develop a history together and gain common work experience. It also can be facilitated by purposeful training and communication activities throughout the MNC, as illustrated by Johnson & Johnson’s systematic worldwide effort to continually examine, challenge, and embrace its credo, mission statement, or set of fundamental philosophical guidelines that direct company decision making and behavior.

C. Learning Considerations for Assigned Expatriates 1. Need for Predeparture Training There is strong evidence that various forms of predeparture training for expatriates can serve as a valuable investment leading to effective performance in international assignments. Training can enhance the speed and effectiveness of expatriate adjustment and performance in the assignment, and minimize costly expatriate assignment failure. Despite this evidence, most expatriates are sent abroad without any training, often with the rationale that there is inadequate time for the training (which can be true due to poor HR planning), the needs for training are unclear, or that the existing technical skills of the expatriate are adequate to lead to a successful assignment.

2. Predeparture Training Considerations Of particular importance is to: • provide useful, realistic information and a sense of personal control in addressing possible challenges; • reduce concerns or fears by providing positive but very realistic expectations regarding the likelihood of success with the foreign experience, including a clear picture of the ―good, bad, and ugly‖ that the expatriate will likely encounter.

• provide cross-cultural awareness training for expatriate any accompanying family members, especially where significant cultural distance is involved in the assignment.

• customize the actual content and form of the predeparture training according to the unique conditions of the international assignment, depending upon various factors such as these: (a) Job Toughness. The degree to which the work in the new foreign assignment is similar to past work in which the expatriate has been engaged (e.g., does the new job require different working conditions, equipment, legal or union restrictions?). (b) Cultural Toughness. Also referred to as cultural distance, this factor relates to the degree to which the values, norms, and attitudes of the foreign culture matches the expatriate’s home culture. However, cross-cultural awareness training should not be neglected where there is

apparently little cultural toughness—often significant culture clashes can occur where they are least expected, and neglected due to assumed cultural similarity. (c) Communication Toughness. This third toughness factor relates to the difficulty and amount or frequency of communication involved with HCNs and in the foreign environment. Different conditions related to this factor include differences in norms and rules for written, oral, and interpersonal communication; frequency of foreign communication required; difficulty in learning the predominant foreign language, length of the foreign assignment, and modes of communication used (e.g., e-mail, telephone, face-to-face).

In general, where one or more of the above factors involve significant toughness, more time and intensity is needed for effective predeparture training (e.g., significant practice and highinvolvement, application-oriented experiential exercises or assignments in realistic settings).

Where the overall toughness is minimal or moderate, appropriate training might be delivered in the form of lectures, cases, role plays, or assigned readings.

D. Special Learning Considerations for Female Expatriates Special recruitment and selection efforts alone are not enough to help improve the present gender imbalance in expatriate representation. Additional actions in predeparture training and preparation as well as ongoing support during the assignment are warranted to overcome potential obstacles to the success of female expatriates.

1. Local Norms and Values Regarding Women In providing realistic job expectations as part of predeparture training for women expatriates, information should be provided on local norms, values, and perceptions about expected female role behavior, as well as attitudes toward women managers. With this accurate information women can begin to develop effective strategies for coping with possible negative attitudes and perceptions.

2. Attitudes and Norms Regarding Expatriate Women vs. HCN Women Successful women expatriates have commented that they are often not held to the same gender role expectations as are women from the local culture. Therefore, a clear picture of the differences in perceptions between local women and women expatriates could be useful in providing a more accurate picture of the intended work environment.

3. Behaviors to Avoid To avoid unnecessary HCN offense with or misinterpretation of their behaviors, women expatriates should receive training on what particular behaviors that should clearly not be used.

In some cases, to avoid the local gender-based restrictions and possible offense in violating cultural expectations for local women, women expatriates should consider avoiding particular behaviors that would place them in the same expectation category as local women.

4. Networking with Successful Female Expatriates Arranging for connections and contacts with female managers who have successfully completed expatriate assignments can provide very helpful networking channels, both before and during an assignment, through which valuable advice and information may flow for effectively dealing with unique challenges facing women expatriates.

E. HCN Learning Considerations There are particularly important training needs of HCNs at different organizational levels that, when filled, can lead to enhanced productivity of foreign operations.

1. Operative/Lower Level Four major categories of potentially beneficial forms of training for HCN at this level include new employee orientation, entry job skills, parent company predominant language (i.e., what language is most commonly spoken at MNC headquarters, and cross-cultural awareness training about the parent company’s home country culture. In addition to basic information as typically offered in new employee orientation, two messages noted as particularly important by several of the companies are (a) presenting the ―big picture‖ of where the employee fits in and contributes to the global efforts of the MNC, and (b) helping the employee develop positive expectations and confidence about how successful performance on the job can contribute to the fulfillment of employee immediate and long-term needs, including career advancement within the MNC. 2. Supervisory and Middle Management Level Forms of training activities at this level include supervision and technical operations management, home country cross-cultural awareness, expatriate coaching, and skills related to the often informal liaison role between parent company expatriates and lower level HCNs. These forms of HCN learning involve close interaction with and support of expatriates in ensuring smooth operations within the foreign subsidiary. Those in middle management also typically receive technical training, particularly for planning and management of technical system operations. This technical training may be provided primarily on an internal or ―inhouse‖ basis through on-the-job training and coaching, and occasionally at parent company regional or central headquarters for generally a one to three-week period.

3. Upper Management Level Forms of beneficial HCN learning from training efforts directed at the upper management level include advanced technical system operations, business level strategy, parent company strategy, and parent company corporate culture. At this level, HCN executives occasionally may receive advanced technical systems operations management and business level strategy training at parent regional or central company headquarters from periods of one or two weeks to six months.

Increasingly HCN managers from foreign subsidiary operations are assigned to parent company central headquarters to work for over two years prior to returning to host country upper-level management responsibility. This ―inpatriate‖ form of longer-term management development

experience in the MNC’s home country can potentially provide for the HCN manager a helpful exposure to MNC headquarters corporate culture, and to the particular style and process of parent company strategic management. When the HCN manager returns to a senior-level assignment within a foreign operation, working closely with or even replacing expatriate management, this manager should now be able to work more effectively within the context of the strategic direction, goals, and culture of the parent company.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: WELL-INTENTIONED BUT MISGUIDED EXPATRIATE PREPARATION AND TRAINING 1. Training involves both content and process (how the learning experience is organized and information delivered). Aside from the actual content of the training and information that Daniel received, how would you evaluate the appropriateness of the various parts of Daniel’s predeparture training and preparation process?

The process for preparing and training Daniel for the international assignment had strong components, including input and top support from the president, directors and top management team, and from an experienced expatriate in Latin America who served as a personal coach. This preparation and training also preceded his departure by several months. However, there was an inadequate process of comprehensive training needs assessment to ensure that the direction and training provided Daniel was customized for the specific assignment and country.

2. What evidence is there from this case that the training Daniel received was inappropriate for his international assignment? What contributed to this ineffective and inappropriate training and preparation?

Although his general Spanish language training was appropriate, the cross-cultural awareness training did not fit the fairly unique characteristics of Costa Rica, especially compared with Mexico. In addition, Daniel’s personal coach, Anders, was sharing considerable Mexico-specific information that didn’t apply well with Costa Rica. Finally, ABEND top management was involved in significant strategic planning for guiding Daniel while lacking the relevant and unique business environment experience that would ensure that Daniel received relevant performance objectives.

3. What should have been done to ensure that the preparatory information and training that Daniel received from all sources, including the president of ABEND, would be valid and customized to the specific and unique requirements of his upcoming assignment?

Through an effective training needs assessment, ABEND should have gathered customized information from Costa Rica and the specific work assignment involved, including information about local culture and employee needs and expectations. ABEND should have found another coach for Daniel who had experience working in Costa Rica. In addition, a business professional such as Carlos Arenal should have been consulted at the beginning to provide more accurate

local business environment information to be sure that Daniel arrived at his assignment with accurate marching orders.

CASE 7.1: SAFETY TRAINING INSIGHTS FOR WOMEN EXPATS IN INDIA 1. How does this case illustrate the importance of customized preparation and training for expatriates before departure?

Training on health and safety needs to happen before there is any chance that any harm can take place. This predeparture training is particularly critical for women expatriates assigned to India, especially in the area of Delhi.

2. What are the implications of this case for the effective predeparture training of both men and women assigned as expatriates to India?

Expatriate training should be designed to be customized to meet the unique needs of a particular assignment and the particular expatriates involved. In this case, particular safety issues related to avoiding rape would not be as important in predeparture training for male expatriates as for female expatriates. Particularly important predeparture training unique to men for expatriate assignment work in India might involve acceptable behavior in interactions with female Indian employees, and what behaviors to avoid.

3. Why is customized training and preparation, as highlighted in this case, an important investment for MNCs to make besides just to ensure the health and safety of their workforce? What are other possible benefits of such special preparation and training?

Customized training and preparation provide an important contribution to the expat’s perceived organizational support, demonstrating that the organization cares enough to go beyond providing quick generic training to ensure that due diligence has been done to ensure appropriate predeparture preparation. This perception of organizational support can also spread informally to enhance the overall sense of satisfaction among other employees as well, and can increase interest of future expatriates in accepting foreign assignments with the organization.

CASE 7.2: HCN SUPERVISORY TRAINING NEEDS 1. Even though Annette demonstrated a strong commitment to host country workforce training, is there any evidence that Aran was inadequately prepared for his new management position?

Annette was strongly committed to host country workforce training, however, there were a few issues and challenges that made Aran inadequately prepared for his new position. Aran failed to understand cultural differences and perpetuated cultural misunderstanding throughout the organization. Aran did not quite understand why French expatriates criticize employees, something that is generally acceptable in France. He also failed to explain to his Thai employees why the French expatriates were acting in a particular way and failed to explain to the French expatriates why the Thai employees were upset. When different cultures are interacting in an organization, it is crucial to keep the channels of communication open in order to foster understanding and increase workers’ efficiency. Aran had a critical liaison role between the

French expatriates and local employees to foster this open communication and understanding, but he was not prepared for this liaison role.

2. What kind of preparatory training could have been helpful for Aran to avoid the difficulties he experienced? What kind of training could have been helpful for the general Thai workforce at ATZ? What are some possible ways in which this training for Aran and the other HCN workers could be provided effectively?

There are various training methods that would have been useful for this company. As mentioned above, cross-cultural training could have been very beneficial to allow this situation to come out differently. Cross-cultural training would have benefited the Thai workforce in particular because they would understand why the French expatriates were acting in a particular way. By becoming more culturally sensitive, the Thai employees could brush off the French actions as part of their culture. Besides classroom training, Aran and other HCN workers might benefit from working abroad in some sort of expatriate experience where they can get to know a wide variety of cultural influence in a workplace. Aran in particular could greatly benefit from training to support his important liaison role between French expatriates and Malaysian employees.

3. What recommendations do you have for Annette as she plans for her meeting with Aran?

The first recommendation I have for Annette is to make sure that she tries to understand Aran’s cultural perceptions. She should help Aran see that he has his own cultural perspectives and should have played the role of a mediator of cultures as a manager at the company. She should also be ready to give specific explanations and examples of how Aran could have handled the situation better. However, she should publicly take the blame herself and not put the blame on Aran since she was responsible for not providing adequate training. She may even try to convince him to stay with the company but to undergo some more extensive cross-cultural awareness training.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Expatriate Preparation and Training: In developing a mini-case study for class discussion, the instructor selects a real (or fictitious) company and a real person, e.g. MBA student, (or fictitious character), who was selected by his/her company to go on an expatriate assignment, e.g. CFO, for five years to a foreign country, e.g. Saudi Arabia. Ideally, the instructor selects a scenario that students can relate to. The instructor will provide some basic information about the company, job, person, and family (including a partner and children would make the discussion more interesting). Students will discuss the questions such as the following: What kind of training would you offer? How would you determine the appropriate content of this training? How much time should you allocate for this predeparture preparation and training?

Who should conduct the training? Who should receive training? When should what kind of training take place?

2. Learning about International Business Etiquette: Students will select or be assigned different foreign countries, and will search the Internet and/or ask knowledgeable colleagues

or fellow students, friends, or family members about accepted business etiquette in their assigned foreign country. Students will discuss and compare their findings in groups/class.

3. Video Case Analysis on Documentary, “American Factory”: If time permits, show in class (in one sitting or in segments) or assign for out-of-class viewing this 2019 fascinating documentary (110 minutes) of the Chinese windshield manufacturing firm Fuyao that bought and established operations in a shuttered U.S. automobile (General Motors) manufacturing plant in Ohio. After students have viewed this documentary, in small group and total class discussion have them examine the culturally-based and other sources of conflict between the Chinese owner and expatriates and the American workers (as host country nationals) that threatened the success of this new operation. Also consider important forms of preparatory training that was provided to the Chinese and the Americans, and how this training could have been improved for both sides to help support a more smooth start-up. To enhance perceived relevance, provide current information about the status of Fuyao’s operations in the U.S.

CHAPTER 8 MANAGING INTERNATIONAL ASSIGNMENTS LECTURE NOTES This chapter examines important issues and practices associated with successfully managing company-assigned expatriate assignments, including predeparture planning and preparation, onsite management for effective adjustment and ongoing support, and repatriation. Additional issues and recommendations are examined that may be unique to women and third country nationals in their expatriate assignments, as well as HCN inpatriates who are assigned to work at MNC headquarters. Finally, important practices to support the work of global virtual teams are discussed.

LEARNING OBJECTIVES    

Understand the costs associated with poor management of international assignments.

Explain how a company can support their expatriates for effective and successful predeparture preparation, international assignment, and repatriation.

Explain different practices that an MNC can follow effectively support women, third country nationals, and inpatriates in their expatriate assignments.

Understand challenges faced by members of global virtual teams in performing their international assignments, and describe effective practices that encourage team success.

I. INTRODUCTION Expatriates assume important functions abroad such as enabling knowledge transfer between countries, managing and coordinating foreign operations of MNCs. International work experience can present opportunities to learn new skills and competencies and boost careers of

expatriates. However, these foreign assignments can present significant individual and organizational challenges.

II. THE EXPATRIATE CYCLE Expatriate assignments are costly and always come with the risk of assignment failure prompting a premature return. Also, a completed assignment duration featuring underperformance or failure to achieve anticipated goals can also be very expensive. Even with a successful foreign assignment, there can be significant underutilization and turnover costs when the completion of the expatriate’s assignment and transition to the home country are handled poorly. Following the thoughtful selection of an expatriate for an extended foreign assignment, a company must carefully implement the expatriation cycle (the predeparture preparation, foreign work experience, and repatriation phases) to optimize the company’s return on the expatriate assignment investment.

A. Predeparture Preparation Phase Effective predeparture training for expatriates and accompanying family members should provide a clear set of expectations about conditions—both positive and negative—that await them in the foreign country.

1. Predeparture Preview These accurate, realistic expectations provided by a thorough predeparture preview process contribute a form of ―anticipatory adjustment‖ that can greatly facilitate actual adjustment upon arrival by reducing uncertainties and increasing predictability in the new setting. Pertinent information on other matters unrelated to understanding the upcoming international assignment itself, such as personal details involved in relocation, should be provided prior to the international assignment to help increase confidence and minimize the natural apprehensions and stress involved.

2. Adequate Time Where possible, adequate time should be allowed between the expatriate decision for accepting the foreign assignment and the actual departure to enable the expatriate and family members to attend to personal arrangements. In addition, this adequate time allows for a more effective appraisal of potential stressors awaiting in the foreign location and, where possible, the building of helpful cross-cultural skills.

3. Clear and Honest Expectations In addition to a realistic preview and clarification of expectations about the foreign assignment, there should be clear and honest expectations set about the length of the assignment, as well as the uncertainties involved that make sincere long-term intentions about future promotions and activities beyond the foreign assignment difficult to fulfill.

4. Informal Conversations Besides formal and specific predeparture training (e.g., cross-cultural awareness, host country language), more general predeparture preparation may involve informal conversations and exchanges of helpful tips and advice through gatherings and other encouraged interactions between predeparting employees and their families, and any available inpatriates and other PCNs having recent experience working and living in the host country.

5. Mentor/Coach Finally, in this predeparture preparation a mentor or coach from the home workplace could be assigned to keep in regular contact during the assignment via telephone and e-mail, helping the expatriate navigate through the inevitable adjustment and ongoing challenges, as well as keeping him or her apprised of company developments back in the home country.

B. Foreign Work Experience Phase Notwithstanding the importance of careful expatriate predeparture selection, preparation, and training, many believe that it is after arrival in the intended foreign location that the most important work can be done to secure the success of the expatriate assignment.

1. Initial Cross-Cultural Adjustment Despite the extent of their past international work experience, those beginning a foreign assignment in a new host country inevitably experience a need to make significant adjustments— including cognitive, behavioral, physical, social, and emotional—to achieve a sense of efficacy and psychological comfort with living and working in the new environment.

International adjustment can be characterized as a five-stage process or cycle that begins with excitement and euphoria with predeparture anticipation and extends through arrival at the international assignment.

Stage 1: Tourist/Honeymoon. Initially almost everything about this new adventure appears positive, and individual performance is augmented by energy and enthusiasm toward the new international experience. However, after a few months or only a few weeks in some cases, the euphoria of the first stage wears off and the collective disruption of routine and familiarity in the new environment begins to take its toll, often plummeting the individual into a second stage of psychological crisis and notable performance debilitation known as culture shock.

Stage 2: Culture Shock. At this point dissatisfaction and homesickness set in, and the individual may experience increasing feelings of irritability and hostility upon regular encounters with unfamiliar and frustrating aspects of everyday realities in the new foreign experience.

During this culture shock stage and accompanying drop in performance the individual is struggling with four major adjustment dimensions in the host country: 1.

Adjustment to work; 2.

General adjustment (including local environment);

3.

4.

Interaction adjustment (i.e., with local workforce—may be most difficult form of adjustment depending on degree of cultural distance involved; Psychological adjustment (overall subjective assessment of wellbeing).

Dual Career Couples. Particular attention should be made in the increasing number of dual career couple situations, where the international assignment may represent a significant loss of family income and professional challenge and opportunity for the accompanying spouse. Perceived organizational support can be greatly increased by assisting spouses and partners in obtaining appropriate employment opportunities consistent with their qualifications and career goals.

Stage 3: Adjustment. Both the extent of performance debilitation and length of time required for effective adjustment can differ from one person to another and from one international assignment to another, often depending on the degree of cultural distance involved in the new assignment as well as local conditions and workforce receptivity and rapport.

Stage 4. Performance Improvement. With effective adjustment, the individual develops and strengthens new skills and perceptions to cope with the new environment, experiencing continued performance improvement in both work and personal life. Unfortunately, many simply plateau in this fourth stage, forming personal rules and practices for merely coping and surviving for the duration of the international experience and forming rigid, judgmental stereotypes of the local predominant culture. They also try to associate and gain social support during nonworking hours only with others from the same or similar culture, and minimize meaningful interaction with individuals from the local culture, whom they disdain and try to hold at a distance. They are frequently heard to derogate and put down the local host culture. Thus, due to their lack of desire to learn about the cultural underpinnings that influence the activities and behavior they see around them, these expatriates and family members limit their personal and professional growth and understanding. Another less common plateau may develop when individuals ―go native‖ by developing overly positive stereotypes of the local culture and international assignment, assessing everything in the local environment as better than home.

Stage 5. International Mastery. The individual’s performance stabilizes and a higher level of personal and professional development in global competence emerges that includes greater ability to appreciate differences and live with and enjoy membership in more than one culture.

Through this bi-cultural development, the individual now represents a more valuable asset and resource for the firm.

2. Ongoing Support Just as perceptions of organizational support in the expatriate assignment are critical for effective adjustment, they also can affect ongoing commitment to assignment success. As with immediate postarrival assistance, both local and headquarter-based ongoing support efforts signal to the expatriate the degree to which the organization cares for his or her well being, as well as values the expatriate’s present and longer-term contributions to the organization.

Mentors. Beyond initial adjustment assistance, qualified on-site mentors and coaches—from the ranks of both HCNs and other expatriates—can be assigned or sought out by the expatriate to provide valuable continued task-related guidance and psychosocial support. This mentoring activity during the expatriate assignment, especially coming from the parent company, can also be helpful in terms of future career planning, and particularly in alleviating a sense of isolation and future repatriation anxiety due to a loss of visibility at the home office.

C. Repatriation Phase The repatriation or return home of the expatriate is often the most overlooked phase of the international assignment, yet is often the most crucial to the expatriate and the MNC. There is evidence that repatriate perceptions of perceived company career support are positively linked with increased productivity and retention. To benefit from their investments on overseas assignments, MNCs should establish practices that facilitate effective professional and social repatriation.

• Mentoring. As part of predeparture preparation, it is helpful to secure a mentor back home prior to departure to provide ongoing support during the expatriate assignment and assist the expatriate in keeping linked to home country announcements and developments.

• Periodic Performance Appraisal. Besides sharing ongoing information between the expatriate and company headquarters, the expatriate’s periodic performance appraisal information that considers future career planning should also make its way back to HR planning efforts at MNC headquarters.

• Postassignment Position. At least six months before repatriation an internal search should be initiated for a position that suits the expatriate’s qualifications following the foreign assignment • Training. Re-entry training for expatriates and their families can also be very beneficial for enhancing adjustment upon return from the international assignment.

III. CONSIDERATIONS FOR DIFFERENT TYPES OF EXPATRIATES A. Women Expatriates 1. Predeparture Preparation As part of predeparture preparation, women should receive training to develop realistic expectations about the work and surrounding cultural context of their international assignment.

Depending upon where the assignment is made, the local norms, values, and traditions possessed

by HCN employees and the surrounding society may underlie and foster negative stereotypes and biases against women in business leadership positions. Knowledge of potentially negative stereotypes and ideas for effectively responding and coping with them can do much to start the foreign assignment on a solid footing.

2. Foreign On-Site Training

As with male expatriates and their families upon arrival, foreign on-site training and advisement should continue to be provided to promote effective international adjustment. On-site training focusing on productive attitudes and building trust may also be profitably provided for HCN employees with whom the woman expatriate will have significant work interaction.

3. Networking Women in international assignments tend to be more isolated than their male counterparts, often lacking formal and informal forms of support—such as mentors and professional networks— from their organizations. Since women expatriates may have difficulties finding suitable local mentors, companies may find it useful to provide mentoring programs and encourage the woman expatriate’s involvement in local women professional and global online support networks.

B. Inpatriates Inpatriates or ―inpats‖ are host country or third country nationals who are invited to MNC headquarters typically for an extended period of time (and permanently in the case of immigrants) to gain valuable exposure and understanding of company strategy, culture, core competencies, and priorities. Many of the ideas for enhancing the adjustment and ongoing success of the PCN’s expatriate assignment also generally apply to the inpatriate assignment. However, there are several unique issues and conditions that should be thoughtfully addressed to ensure the inpatriate’s effective initial adjustment, ongoing support, and repatriation to a host country operation management responsibility or transition into a new third country assignment.

1. Adjustment The PCN expatriate must adjust to the local host country culture and working arrangements, but often is shielded to a great degree by the existing MNC home country culture, policies, and support structures at the host country operation. Whereas the inpatriate must adjust to the external surrounding culture of the MNC home country, as well as the much more established unique organizational culture, written and unwritten rules, and priorities in play at MNC headquarters than are evident in distant host country operations.

2. Needs Assessment To ensure that the actual efforts to enhance inpatriate adjustment and ongoing success, a careful needs assessment should be conducted to consider such factors as cultural distance between the inpat’s home culture and that of the new location, whether there will be accompanying family members and what are their particular personal needs (e.g., schooling, language instruction, medical care, banking), and degree of familiarity with MNC culture and operations (e.g., some inpats may have previously had significant exposure to the MNC culture and headquarter operations through long experience with the company and previous short visits to headquarters).

3. Realistic Relocation Preview

Based on the needs assessment, a realistic relocation preview should be planned and conducted before departure with the inpatriate and family members involved in the relocation. As with PCN expats, this preview should be realistic and feature the positives and negatives that can be expected in the future experience. This preview and associated predeparture training also should focus on both accurate expectations and means for successful coping related to both the external cultural environment and the internal organizational culture environment.

4. Training Methods Methods for conducting predeparture training should fit the experience, background, capabilities, and learning style needs of the inpatriate. In addition, the extensiveness of the training time, experiential exercises, and supportive learning materials should depend upon the degree of the learning and adjustment (both internal corporate and external environments) required with the inpatriate assignment.

5. Social Support Structures Besides providing training and clear expectations for managers at MNC headquarters to provide ongoing guidance and support for the newly arrived inpatriate, other MNC employees who the inpatriate may encounter on a regular basis should be encouraged to provide informal social support and guidance. This encouragement should be provided by clear communications of this expectation to the MNC employees, and where possible even some information about the inpatriate and his or her culture to promote cross-cultural awareness and understanding at the inpatriate’s work site.

6. Career Planning and Compensation Considerations As with PCN expats, ongoing activities related to career development and planning can be helpful in facilitating inpatriate adjustment and maintaining continued commitment to assignment success. Ongoing training efforts should be consistent and supportive of these future repatriation career plans.

C. Third Country Nationals TCNs can be assigned to a host country operation from anywhere besides the MNC’s home country, and face immediate and ongoing support needs as with the traditional expatriate assignment. However, in cases where the TCN is new to the MNC, or has had experience working for the MNC elsewhere with little interaction with and influence by MNC headquarters, beneficial training prior to departure and after arrival could also focus on overall company strategy and priorities to ensure the alignment and coordination of the TCN’s new international assignment with MNC objectives.

Besides concern for third country nationals’ initial adjustment and ongoing assignment success, consideration should be given to support measures that would encourage talented TCN retention by enhancing the effectiveness of their eventual repatriation or even transition into a new country assignment.

C. Self-Initiated Expatriates The majority of expatriates nowadays find their employment on their own, so-called selfinitiated expatriates (SIEs). Unlike immigrants, SIEs intend to work and live in a foreign country only a for a limited time and then return home or relocate to a different country. As SIEs do not receive any or only limited expatriate benefits, SIEs face similar work and living conditions as HCNs. Due to this lack of training and support, they often need to put more efforts to adjust to the life in a foreign country compared to corporate expatriates.

To ensure the success of SIEs, organizations should pay particular attention to selection, compensation, and career development. As SIEs often have a strong desire to work in a certain country to gain work experience, they might be willing to make compromises to accept a job offer and switch jobs easily once a better job opportunity arises. To increase loyalty of SIEs, organizations should look for a good fit during the selection process. While SIEs initially appreciate their job contract, they might become dissatisfied over time as they gain experience and complete similar tasks as corporate expatriates but do not receive any expatriate benefits.

Thus, organizations might consider extending some expatriate benefits such as children education subsidies and housing allowance to highly performing SIEs. IV. FLEXIBLE AND VIRTUAL TYPES OF INTERNATIONAL ASSIGNMENTS As MNCs try to avoid exorbitant costs and challenges associated with international assignments involving the long-term (e.g., three-five years or more) relocation of PCNs, HCNs, and TCNs, and as individual employees consider ways to avoid personal hardships often attendant to international relocation (e.g., spouse career and family disruption), we have seen the emergence of several new and flexible short-term international assignment arrangements that avoid costly relocation but still enable organizations to achieve their international competitive business goals.

Features commonly encountered in these new flexible forms of international assignments are significant work in managing and participating within global teams, and frequent travel.

A. International Assignments Involving Global Teams 1. Virtual Expatriate Assignments A critical success factor for the management of a group or team of employees on a distance basis across national boundaries, with occasional visits for direct interactions, requires the development of mutual trust.

Adequate Training. A major source of building this trust is the manager’s ability—whether on a virtual basis or in person—to provide adequate training for the employees, clearly communicate what is expected, and then empower the employees (with clear individual responsibilities and group roles) to carry out their work. In establishing clear ground rules, expectations, and mutual trust, it is recommended that longer and frequent contact be made in person in the beginning, with a gradual increase of team management on a distance basis.

2. Success with Global Virtual Teams Perhaps a greater challenge than managing a foreign work group and operation largely on a distance basis is the management of a global virtual team, where the manager (if this is not a self-managing group) and team members are from different cultures and countries. As with the typically identified most important contribution of PCNs in traditional expatriate assignments, the most important work of leaders of multinational teams has been identified as knowledge management and transfer. In addition, ideally leaders of these teams are cross-culturally competent and multilingual to effectively motivate team members to fully explore, identify, and transfer valuable knowledge within the team and to other MNC locations.

A distinct advantage of global virtual teams, particularly where team members are spread longitudinally across various international work sites, is the ability to perform work asynchronously, helping global organizations effectively bridge different time zones and enabling teams to be productive over more than one work period. In addition, dispersed members’ nearness to different customers, markets, practices, perspectives, and resources in their local contexts can enhance flexibility and innovation capability—thus increasing the ability to balance local awareness with the broader and strategic perspective of the global team.

3. Frequent International Travel Regular and frequent travel across international borders is a common feature of the growing number of flexible international work assignments. This characteristic of frequent travel has important implications for the personal health and safety of those involved with these new flexible international assignments, which should not be overlooked or treated lightly.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: EXPATRIATE INNOCENCE ABROAD 1.

How typical would you say are the adjustment experiences of Carol Williams, Clarence Mitchell, and Clarence’s family, including repatriation? Critique the effectiveness of Carol Williams’s firm in managing its expatriates’ overall international assignment.

The international adjustment experiences in this opening case are very typical for all involved.

Carol Williams had very little preparation for her international assignment, and after her initial ―tourist‖ or ―honeymoon‖ stage she was really falling in personal and professional effectiveness due to the effects of culture shock. She even was beginning to withdraw from her surroundings, which only perpetuates difficulty and doesn’t promote adjustment. Clarence Mitchell and family were having great difficulty, and the pressure on Clarence caused by his family, severely suffering the effects of culture shock, made the situation unbearable. This situation with Clarence is consistent with expatriate family member inability to adjust as a major cause of expatriate difficulty and failure. This case also illustrates how problematic repatriation is for organizations, with the firm losing Clarence to a competitor a fairly short time after he and his family returned to UK headquarters. The company clearly does not manage international assignments very well, from the predeparture stage through the foreign assignment and finally with repatriation. There

appears to be very little long-term planning for the company and for the careers of its managers.

The company could have at least made sure that Carol was in frequent contact with Clarence to help pass on to her possible learning that he had gained during his brief time in Japan.

2.

What are particular costs of poor management of international assignments as exemplified by the opening scenario? What changes could be made to improve this company’s performance in supporting its expatriates to optimize their international assignment success, including repatriation?

There are two significant costs evident in this case: suboptimal performance during international adjustment and suboptimal performance and utilization of talent upon repatriation, with the ultimate cost of losing talented managers through poor repatriation. Although some kind of adjustment seems to be always necessary in an international assignment, predeparture preparation and training can provide an advanced psychological adjustment effect that can facilitate actual adjustment in the field. Ongoing local training and assistance from the company can also facilitate effective adjustment, including providing the important perception of organizational support that builds employee satisfaction and commitment that supports retention.

Besides planning for repatriation well before the return home, the firm’s efforts in providing support for repatriates in the form of ongoing career development opportunities, responsibility for sharing new knowledge gained from the international assignment, and giving assignments to coach and mentor current and future managers in international assignments can also assist with successful repatriation.

3.

What are particular steps that the company could do before and during the assignment to better support Carol as a woman in her international assignment?

Women often encounter different challenges than their male counterparts that should be addressed in the predeparture preparation, foreign experience, and repatriation phases of the international assignment to increase the likelihood of international assignment success. As part of predeparture preparation, women should receive training to develop realistic expectations about the work and surrounding cultural context of their international assignment. Depending on where the assignment is made, the local norms, values, and traditions possessed by HCN employees and the surrounding society may underlie and foster negative stereotypes and biases against women in business leadership positions. As with male expatriates and their families upon arrival, foreign on-site training and advisement should continue to be provided to promote effective international adjustment. Women face significantly different conditions in their personal and professional lives that should be acknowledged and addressed for providing additional support where possible. Although mentoring can be important for women in securing and effectively carrying out an international assignment, it appears to be especially critical for successful repatriation.

CASE 8.1: WORKING IN A SHELTERED ENCLAVE IN KUALA LUMPUR, MALAYSIA 1.

Discuss the potential reasons why the company needs to send its own expatriates instead of using a local Malaysian manager or a third-country national.

There are various reasons why a company may need to send its own expatriates instead of using local managers or third-country nationals. First and foremost, the company prefers to send expatriates to transfer knowledge and develop global leadership for their young promising managers. Second, the company may experience the difficulty in finding a manager who is technically competent in performing the assigned task. Third, it is much easier to work with an expatriate particularly when it attempts to export its organizational culture and philosophy to Malaysia. By sending the expatriate, they can teach the employees at the host country various knowledge and organizational processes that a local manager may not be aware of or extensively trained in. Finally, local laws and regulations may limit HCNs from conducting business or managing the way that the company wants. Thus, by sending expatriates, they are not restrained by many of the barriers of the host country.

2.

Can you identify the main family issues facing David’s family?

David’s family faces the issue of having to live in a foreign country and be exposed to a new culture. They will have to adjust to Malaysian norms and customs as they venture out in the society. They will have to learn enough Malaysian to get around and also become accustomed to local food. Also, David’s family may have loneliness as they will be away from their family and friends and missing their familiar and fond aspects of life in America. For David’s wife, it is critical that she find some kind of meaningful work to do, if not a comparable job to the one she used to have in the Untied States. His child also needs to adjust to a new school environment.

3.

Do you see any longer-range pitfalls in the approach used by David’s company to carry out its HR policy to attract the most qualified expatriates?

A long-range pitfall with the approach of creating a mini-American community is that expatriates are not exposed to local culture as much as they should be. The company should want its expatriate managers to have to assimilate somewhat and be exposed daily to local culture to understand the new market they are operating in. Also, the families will gain more from their experience abroad if they interact with the locals and make new friendships. This will increase the likelihood that they will stay in the country. David’s as well as his family members’ crosscultural learning experience will be very limited if they just remain in an expatriate community, which is not much different from their home country surroundings.

CASE 8.2: RE-ENTRY SHOCK: A FAMILY AFFAIR 1.

What was different about the expatriate assignment to Colombia, compared to the company’s previous expatriation experiences, that might have contributed to a more challenging re-entry experience for Pekka and his family?

The expatriate assignment to Colombia was a five-year term instead of a shorter term the company previously used for assignments. The longer period abroad made it more difficult for them to readjust when they returned. This is because the family learned more about the country the longer they stayed and made more and more friends who facilitated their assimilation. In

situations like this, it is necessary to provide strong repatriate training upon return to the home country.

2.

What could Nordic Oils do more effectively before initial departure to Colombia, during the foreign assignment, and after return to improve the family’s repatriation adjustment?

The company should have provided extensive predeparture training such as teaching the family the various cultural differences between Finnish and Colombian culture. During the foreign assignment, the company should have provided the family with support and help them understand the various cultural differences they are acquiring in their new country. Upon repatriation, they should have received extensive counseling on how to readjust to their home cultures as well as on Pekka’s own career planning.

3.

What could a family like the Nieminens do for themselves to increase the likelihood of a smoother repatriation experience?

It is critical that repatriates and their family members should have a realistic view and expectation about their home country. A so-called ―reverse culture shock‖ should not be underestimated. A family like the Nieminens should consider the differences between their Finish cultures and Colombian cultures, and realize that what is accepted in Colombia may not be accepted in their home country. They should carefully discuss the different ways that these differences will impact their repatriation experience. They should provide support for each other and try to be as culturally sensitive as possible when they arrive back at home.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. Personal International Experience: Instructor asks students whether they had any experience living abroad (e.g., as children, study/work abroad, extensive travel abroad). If a sufficient number of students had some significant international experience, students would form small groups and discuss with one or more internationally-experienced classmates assigned to each group such questions as the following: How did you feel when living abroad? What did you like when living abroad? What did you NOT like when living abroad?

What made you feel better adjusted/satisfied when living abroad? Afterwards, instructor and students can discuss individual group discussion insights with the entire class. This activity serves as a good introduction into the challenges of expatriation.

2. Field Interviews of Expatriates about Their International Adjustment Experience. As an assigned small team or individual field research presentation or written report, have students identify a foreign country where they would like possibly live and work some day as a valuable international experience. Ask them to join that country’s or major city’s online Internations group or Facebook page (e.g., expatriates in Rome). Make 3-5 expatriate contacts through these online social network sites who have been there at least a year, and conduct brief individual interviews (i.e., via Zoom or email) examining the expatriates’ stories of how they got to the country, what they are doing there, how long they have lived there, the nature of their international adjustment experience, and how this international adjustment could be improved if they were to start over as new expatriates in the country.

3. Host Country National (HCN) Support for Expatriate Adjustment: Assign local students (not international students) into teams of 3-4 students to interview outside of class 3-5 fellow international students (if needed, contacts could be made through the school’s international students office) about the nature of their arrival and early experiences as student expatriates, examining particular adjustment challenges that these student expatriates faced. Consider in the interviews how the new host country entry and adjustment could have been improved, and especially how the local students and others, as HCNs, could have provided better support for addressing the adjustment challenges. Later in class, have the individual teams present their findings.

4. Brief Videos on Culture Shock and Reverse (Repatriation) Culture Shock: There are several effective brief videos available on YouTube that can easily be shown in class or assigned for outside-of-class viewing related to such topics as international adjustment and culture shock, and reverse (repatriation) culture shock. These videos can provide a compelling presentation of relevant chapter information to spark useful class discussion, or can be assigned for individual student presentations or written reports.

CHAPTER 9 GLOBAL WORKFORCE PERFORMANCE MANAGEMENT LECTURE NOTES This chapter examines performance management as an ongoing process, beginning with a careful design of work and clear sharing of performance expectations followed by regular feedback. We explore how effective performance management on a global scale involves linking individual employee performance to company priorities and strategies as well as being sensitive to crosscultural differences and local conditions.

LEARNING OBJECTIVES • • • •

Understand how to modify the practice of performance appraisal and ongoing performance management to take account of cross-cultural differences.

Explain how to improve the overall performance management process for a company that is developing globally.

Explain each of the five phases of the performance management process, and the essential criteria for effective performance management on a global business scale.

Explain the various principles and practices of performance appraisal for expatriates, as well as brief considerations for ensuring the effective appraisal of inpatriates and TCNs.

I. INTRODUCTION The role of managers and supervisors in working closely with individual employees and teams on a regular basis is critical for helping them keep on course and optimizing their contribution to achieving organizational goals. An important approach for managers to take is to become familiar with current research on best practices in human resources and employee performance

management, yet maintain a keen sensitivity to local conditions and cultural differences for the actual customized implementation of those practices.

II. PERFORMANCE MANAGEMENT PROCESS A. Job Design Performance management is integrated with the larger HR function as well as aligned with company strategy at the first phase, where a specific job or work assignment is carefully designed or redesigned (given the tendency of jobs to soon become obsolete in a rapidly changing global business environment) to meet current organization objectives. The design of the job should not be in the abstract, but should include specific tasks, performance expectations, work interactions and reporting relationships, and job qualifications that fit the specific job situation.

B. Agree upon Clear Job-Performance Goals In this second phase of the performance management process the manager and employee jointly examine the specific tasks, requirements, and expectations of the job within a larger picture of the goals of the organization, and obtain clear understanding and agreement regarding specific job performance goals and objectives, including special work assignments. The clear understanding and agreement upon the job expectations at this phase are critical for effective performance management to proceed.

C. Provide Direction, Immediate Performance Feedback and Coaching The third phase involves the initial work performance of the employee, and in many respects with ongoing direction and frequent feedback resembles on-the-job training (OJT), the most common form of training in organizations. Coaching here consists of the ongoing close one-onone assistance, especially at the early stage of the new job, to provide continued direction, mutual goal setting, feedback, correction, and encouragement as the employee progresses toward optimal performance. It is important for the employee, whether in the home country or abroad, to begin the job on a positive note with positive expectations for success and self-efficacy.

D. Monitor Job Progress In this fourth phase of the performance management process, as the employee over several months becomes more confident and competent in performing work according to expectations, the manager becomes gradually less involved in close advisement and coaching. Nevertheless, the manager remains in close contact to provide performance feedback, correction, and coaching as needed to maintain desired performance.

E. Conduct Performance Appraisal At the appropriate time (e.g., after six months or a year of work—most formal performance appraisals are conducted annually) and following appropriate preparation, a formal appraisal is

conducted concerning the employee’s performance for the purpose of enhancing job performance in the future.

III. IMPORTANT GLOBAL PERFORMANCE MANAGEMENT CONSIDERATIONS A. Upstream 1. Strategic Integration and Coordination The expectations for individual and group performance that are established, communicated, and facilitated through the performance management process should be in sync with the strategic objectives of the business unit and company as a whole. In addition, where particular functional or geographic business units of an MNC become increasingly interdependent and require greater standardization of processes and performance, a careful coordination of the various relevant performance expectations across these business units should be made.

2. Workforce Alignment In addition to an integration of work expectations with business strategy and goals, and coordination of policies, procedures, and structures related to work expectations across business units, another major strategic or upstream consideration for performance management is workforce alignment. This strategic alignment, shared vision, or common direction of performance effected in the minds and hearts of the global workforce at various levels throughout the MNC can have a powerful contribution to the competitive advantage of the MNC in such areas as worldwide customer responsiveness and service consistency, agility, flexibility, managing innovation and change management, and effective knowledge management and internal sharing of best practices. A common shared language appears to be essential in enabling strategic alignment. Besides facilitating conceptual understanding in supporting knowledge transfer, the common symbols and meaning of a shared language also can provide a sense of emotional solidarity and cohesion in support of alignment.

An important step in achieving alignment is the development using human resource processes of global leaders throughout the MNC who share common core values, priorities, capabilities, and performance-based expectations; and then implement these congruent performance expectations—with appropriate local adaptation—within their business units.

3. Organizational Learning and Knowledge Management A third important upstream consideration in performance management is valuable company-wide organization development and change—often discussed in terms of organizational learning or purposeful changes in company know-how and practices as part of company-wide knowledge management. These changes can eventually take place when those being managed in the performance management process are given the opportunity and are effectively encouraged to provide feedback on performance management systems and input into managerial decision making.

B. Downstream 1. Responsiveness to Local Conditions An ongoing dual and often seemingly irreconcilable challenge of the global corporation is the effective global integration and coordination of business units and processes in carrying out MNC strategy, and at the same time the implementation of business practices with appropriate awareness of and accommodation to local needs and circumstances. These conditions that can greatly influence individual and organizational performance, and should therefore be considered for effective accommodation and implementation of performance management at the local level, are both external and internal to the firm. (a) External Conditions. External conditions affecting local performance include such factors as local economic circumstances, competition, demographics, supporting infrastructure, unions, and national/local culture. (b) Internal Conditions. Internal conditions that can affect employee performance and thus should be considered in the performance management process include such factors as organization size and resources, organization structure, organizational culture, and management.

Larger organizations tend to have more specialized resources and human resource management policies and guidelines that can more effectively support the global performance management agenda. (c) Organizational Culture. Organizational culture consists of the set of values, beliefs, priorities, and assumptions of an organization that guide individual and, collectively, organizational behavior. Organizational culture develops naturally through collective experience of organizational members, and also can be shaped and changed through comprehensive, systematic interventions by organizational leadership. Organizational culture is also increasingly considered as potentially able to have greater unifying influence on employee behavior and work performance than our more and more pluralistic national cultures. (d) MNC Management. MNC management, from top management down through the ranks of line management, can have a powerful effect upon global performance management activities; they are essentially the ones who plan and implement performance management practices. The collective backgrounds and experience of top management can certainly influence the range of performance management practices that might be used within an MNC. 2. Sensitivity to Cross-Cultural Differences One of the biggest areas of concern in this duality challenge is the effective implementation of MNC strategy and goals, yet with appropriate sensitivity to national and especially local cultural differences. The influence of a society’s culture can be noted particularly within the context of the performance management process, deeply influencing the various communications inherent in performance management, including even the basic perception of what kind of performance really matters. Cross-cultural differences pertinent to performance management and appraisal can

come to play even within what might initially seem as homogeneous regional markets and ethnic cultures. (a) Power Distance. As described by Hofstede, the cultural dimension of power distance relates to perceptions that people in a society have about the distribution of power in their organizations and their society as a whole. In high power distance countries, efforts should be made in the workplace to maintain a respectful distance between manager and subordinate. And where upward feedback is needed, efforts could be made to encourage the indirect passing of input or corrective feedback to the manager—such as through a third party or by focusing on a concept in the abstract rather than in the context of contradicting or criticizing the superior. (b) Masculinity-Femininity. In high masculinity countries such as the United States we often see a strong preference for assessing bottom-line performance, and in holding individuals accountable for achieving their specific performance objectives. Especially in professional and managerial positions we often see versions of a management by objectives (MBO) approach, where employee performance is evaluated against specific goals related to organization objectives. Recognition and bonus rewards, which are often competitive, are clearly tied to desired measurable performance. In contrast, in countries high on the femininity scale we see more qualitative evaluations of individual performance in contributing to the whole job, including quality of interpersonal interaction, supportive and cooperative work relationships, and work climate. In high feminine cultures there also is an emphasis in the appraisal process upon supporting career development and professional progression. (c) Communication Context. In some cultures, such as U.S. and German, information conveyed in communication is very much limited to the meaning of the written or spoken words used, with little concern for the surrounding context. Besides inflection, in some cultures the meaning of a given word depends upon the nature of the surrounding context in which it is used. Therefore, due to the strong influence of context sensitivity in communications, it should be carefully considered when planning and implementing performance management practices across cultures.

To anticipate possible problems due to cross-cultural differences in sensitivity to context in communications as part of the performance management process, organizations should consider obtaining culturally experienced input to help guide the effective implementation of performance management. (d) Collectivism-Individualism. This dimension describes how people within a particular culture prefer to relate to one another, from a high level of interdependence on one end of the cultural dimension to significant autonomy. Those in collectivistic societies prefer to be a part of a group or team and to encourage harmony and benefit for all. In the workplace, these individuals prefer to work on team projects and in-group arrangements, and to not be singled out for individual accomplishment. (e) Domination and Control. Another important dimension of culture involves the degree to which individuals believe that as human beings they dominate or are in control of or can influence their external environment. On one extreme individuals may believe that they are in total control of their destiny—their future is what they make of it. On the other extreme individuals may regard themselves as dependent upon supernatural forces within the universe,

and any outcomes that affect them are generally out of their control and are due to predetermined fate or luck.

C. Establishment of Performance Management Relationship Key in the effective implementation of performance management is the establishment of a viable working relationship with the employee that is based on mutual trust and respect—regardless of differences in nationality, cultural background, age, gender, and other personal characteristics.

This trust is developed through clearly setting role and work performance expectations on the part of both employee and supervisor, and then following through with those expectations. The role of the supervisor is primarily one of resource provider, supporter, and facilitator of employee performance.

D. Comprehensive Training Training for both manager and employee is essential for the performance management process to function effectively. All involved in the process need information about the purpose and importance of the various performance management activities. Effective skills on assessing employee needs and giving effective feedback, active listening, coaching, correction, conducting performance appraisal interviews, and other forms of communications—and often through a diverse cultural lens that can cause misunderstanding and lead to conflict—are not naturally in a manager’s repertoire, and they require development and refinement. Employees themselves, as active participants and potentially valuable contributors in the process, could also benefit by developing skills in effective feedback solicitation and providing upward feedback, within a context of cultural fit and increased cross-cultural awareness, to minimize confusion and conflict and enhance the overall performance management process.

IV. PLANNING AND IMPLEMENTING GLOBAL PERFORMANCE APPRAISALS A. Sources of Performance Appraisal Input Although most performance appraisals use primarily input from the immediate supervisor for evaluating an employee’s work performance, there is strong agreement that generally additional sources of input with their different perspectives can improve the reliability and accuracy of the overall picture of employee performance, especially for developmental purposes. An extreme version of the utilization of additional sources of input is 360-degree feedback in which there continues to be an interest among large MNCs for use globally. With 360-degree feedback, those individuals who have relevant interaction with and opportunity to observe the employee in action may provide input on the quality of his or her performance, including the direct supervisor, subordinates (also called direct reports), fellow workplace peers, internal and external customers, and even the employee him or herself.

1. Supervisor The direct supervisor to whom the employee reports typically has significant information with which to evaluate the employee’s performance. The supervisor is also responsible for the

employee’s performance, and should therefore have a central role in the overall performance management process, including appraisal. In some cases, such as with an expatriate working under a host country manager or an inpatriate working under a manager at company headquarters, and where the employee has a supervisor or mentor back at his or her home country who is monitoring the person’s performance, that home country supervisor can beneficially provide input that takes into consideration and corrects for possible inaccuracies in direct supervisor judgments due to cultural differences.

2. Workplace Peers Companies globally are increasingly using largely self-managing, cross-functional, and virtual team working arrangements where individuals spend much of their work performance outside of the view of a direct supervisor. Therefore, input on the quality of employee performance can be very helpful to compensate for the lack of supervisor information.

3. Customers Both within and beyond our expanding global services sector, organizations increasingly compete for customers through enhanced effectiveness in customer satisfaction and responsiveness. Since this area of performance is being increasingly viewed as essential, many organizations are increasingly utilizing inputs from external customers, clients, suppliers, and others to evaluate the quality of the performance of employees who interact with them— especially when the service-providing employee is relatively removed from the supervisor or other employees.

4. Subordinates Several organizations have found the upward performance feedback from employees to be useful in evaluating a supervisor’s performance, particularly for developmental purposes. Employees hold a unique firsthand perspective on the impact of the supervisor’s behavior on their overall interest and ability to perform their job, and their input could be very valuable to a supervisor who is interested in enhancing that impact A common criticism of performance appraisal is the focus on individual performance at the neglect of attention to more integrated work systems and organizational processes. Upward feedback from subordinates also represents a critical opportunity for the manager to consider other factors above the individual employee level and beyond employee control that can influence performance, such as work design processes or group dynamics.

To ensure the quality of upward feedback, measures should be taken to increase employee perceptions that negative upward feedback will be held confidential and safe from retaliatory consequences, and that constructive ideas really can result in managerial and organizational improvements that benefit employees and the organization. In addition, as discussed previously, in high power-distance cultures where employees are not accustomed to and feel uncomfortable with giving upward feedback regarding supervisor performance, less direct and informal means should be utilized to obtain this very important information.

5. Self There is strong evidence that employee satisfaction with and perceived value of the performance appraisal experience is optimal when the employee participates in the process by completing a self-appraisal that is considered and used by the supervisor as relevant input. Primarily useful for developmental purposes, this source of input can also be very helpful as a discussion-fostering tool and opening up communication between employee and supervisor to avoid misunderstanding.

B. Frequency of Performance Appraisal Although traditionally performed once a year, research suggests that more frequent performance appraisals tend to lead to enhanced performance, and an increasing number of global companies are conducting formal appraisals at least twice a year, and on an informal basis much more frequently. In addition to increased accuracy and timeliness of feedback for improving performance, frequent informal performance feedback sessions have been found to be a significant source of employee satisfaction in several different countries.

C. Customization of Performance Appraisal Employee satisfaction and perceptions of fairness tend to be highest when procedures and forms used for performance appraisal are customized to the individuals and work situations involved.

There is some evidence that customization often happens naturally as originally standard performance appraisal methods are implemented locally, and this sensitivity and flexibility in meeting local needs appears to be an important factor in performance appraisal success. A general rule to keep in mind is the more different a host country’s environment is from that of the home country, the greater degree of modification is needed in appraisal procedures and tools for host country application.

1. Performance Appraisal for Company-Assigned Expatriates As a special international employee, the expatriate often plays a pivotal and unique role in the success of the MNC’s global operations. This unique role is often multifaceted and there are distinctive challenges and complexities involved in this work that merit special considerations when planning and implementing fair and accurate performance appraisals for expatriates. A neglect of these considerations can lead to significant dissatisfaction and perceptions of unfairness, possibly contributing to dissatisfaction, diminished productivity, and even eventual turnover.

2. Awareness and Accuracy of Expatriate Assignment Purposes and Objectives The expatriate assignment might have multiple purposes, including filling an international assignment that enhances MNC profitability, controlling foreign operations consistent with MNC objectives, developing local host country talent and expertise, contributing to MNC knowledge about foreign markets and global business issues and conditions, as well as promoting the valuable development of the expatriate him/herself. Therefore, where multiple roles and

purposes of the expatriate are in play, the performance appraisal should also be designed to assess performance in those roles and purposes, and not simply measure one convenient, easily measurable aspect such as foreign operation profitability under the expatriate’s management.

And especially in newer foreign operations where the MNC has not had much history and experience, the performance objectives for that operation should be fairly tentative and flexible until a clear and accurate picture of reasonable performance expectations are obtained.

3. Rater Selection Those who provide input for evaluating the performance of an expatriate should have a clear picture of how the expatriate has performed and the unique conditions involved. A selfassessment by the expatriate is strongly encouraged to provide a useful firsthand perspective and optimal involvement for a productive performance appraisal process. Those working closely with the expatriate, such as subordinates, peers, and local supervisors, can also provide a valuable direct perspective on the expatriate’s performance.

4. Balanced Use of Quantitative and Qualitative Criteria Quantitative, or ―hard,‖ data related to expatriate performance (such as foreign subsidiary measures of goal achievement on productivity and profitability) are frequently used, often to the neglect of other important ―soft‖ qualitative criteria and approaches (e.g., coaching and mentoring). Major problems with the overreliance on hard financial data is a possible masking effect of rates of exchange and other extraneous influences that may lead to distorted performance interpretations. Other subjective and less readily measurable areas of expatriate performance, such as quality of relationship with host country subordinates and overall local workforce satisfaction, may represent important qualitative criteria to also consider and try to measure as part of an accurate overall appraisal effort.

5. Sensitivity to Multiple Extraneous Environmental Variables There are many possible external environmental variables beyond the control of an expatriate who is heading up a foreign operation, and these should be taken into consideration when preparing and conducting a fair and accurate appraisal of the expatriate’s performance, including when the appraisal involves comparing one expatriate manager’s performance with that of another in another foreign operation. Another important variable external to the expatriate assignment and beyond the expatriate’s control might actually be brought about by the MNC in the determination of the expatriate assignment. In some cases the MNC might want to penetrate a particular market that faces strong traditional competition, or provide a significant threat to a foreign competitor that would tie up its resources and distract its focus from other potentially more fruitful markets that the MNC would like to pursue unfettered by heavy competition. In both of these situations, especially in the short term, the profitability of the expatriate’s foreign operation may be unusually low compared to other MNC expatriates, and even negative.

6. Local Conditions

Often referred to as ―contextual criteria,‖ local conditions typically involve factors in the local working environment of the expatriate assignment that can influence expatriate performance and measures thereof. Such contextual factors include local workforce demographics, worker satisfaction, amount and quality of local MNC resources and support for the expatriate, and cultural distance between expatriate and host country employees. In addition, the local context of the expatriate assignment, such as illustrated above with changing exchange rates in or different national policies regarding repatriation of earnings, can significantly influence measures of profitability.

7. Timing and Distance Considerations An important timing issue for new expatriates is when the performance appraisal takes place in the course of a fairly predictable international adjustment period where the expatriate is typically less productive while working on ―culture shock‖ or adjustment to the new foreign environment and culture. Every new job or assignment, whether at home or abroad, has a ―learning curve,‖ where performance improves over time and experience on the job. And this learning curve should be taken into consideration when evaluating performance in the first six months or even first year of an expatriate assignment, especially in an assignment involving significant cultural distance or personal change and upheaval with a likely longer adjustment period.

D. Performance Appraisal for Inpatriates and Third Country Nationals There is a notable lack of research that examines particular needs and considerations for longterm assigned inpatriates and TCNs in planning and conducting effective performance appraisals.

As with expatriates, TCNs and inpatriates experience displacement into a new foreign workplace and culture for a significant period of time. And as with expatriates, there should be input in the overall performance appraisal process for TCNs and inpatriates by individuals who are aware of cross-cultural differences that might interfere with performance, as well as influence in a negative way the performance evaluations of individuals from the predominant workplace culture.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: PUZZLING PERFORMANCE APPRAISAL 1.

What are some possible cross-cultural challenges associated with the nature of work communications in this scenario?

In this scenario, Yusoff and Karl had a cross-cultural barrier. They were only communicating through e-mails and it was thus hard for Karl to maintain helpful communication signals such as body language. Karl thought that Yusoff was happy with the progress because he would respond to the e-mails, and Karl assumed that a lack of a contrary response was an acceptance. It is quite possible that Yusoff was not really happy with the program-development project, but in his culture it wasn’t appropriate to be vocal about issues. Also, Yusoff probably didn’t respond well to the criticisms and especially the low-context medium in which they were given to him. Karl

should have done his research and tried to assess Yusoff’s true feelings in a high-context society like Malaysia.

2.

From your reading in this chapter, what are possible explanations for Yusoff’s decision to request a transfer?

Yusoff could have been frustrated with Karl’s impersonal work style of solely e-mailing him and not calling him on the phone or scheduling to meet with him in person. He could have also been upset with the way Karl criticized him or that he didn’t praise him through the correct cultural personal communication approaches. Also, there may have been a wide variety of cultural norms that Karl was not abiding by, which frustrated Yusoff. Karl should have looked into whether there are cultural considerations to take into account when supervising and working closely with someone from Malaysia.

3.

What recommendations do you have for modifying the practice of performance appraisal and ongoing performance management to take account of cross-cultural differences?

What other suggestions do you have for improving the overall performance management process for this company that is developing globally?

The first strategy the company should take is to assess the various cultures involved. The company should find out the formal and informal ways of communicating performance appraisals and also cultural influence on ongoing performance management. Once the company gains knowledge about the various cultures then they should implement a customized strategy based upon which culture is involved. The company should continue to gain feedback on how their performance appraisal and ongoing management is working in different countries. They should concentrate on obtaining feedback directly from their employees about their feelings and concerns.

CASE 9.1. OVERCOMING GENDER STEREOTYPING IN PERFORMANCE MANAGEMENT 1.

How are these unfounded gender stereotypes detrimental to an organization’s ongoing competitive performance?

Unfounded stereotypes are detrimental to an organization’s competitive performance because they classify individuals as having specific characteristics without ever having to learn if these qualities are true. These stereotypes, when negative, can label employees with certain traits, which automatically makes them ineligible for a promotion to a new position. For example, a female employee may be excellent at delegating work but might be automatically thought of, due to a possible gender-based stereotype, as not possessing this skill. Therefore she would not be considered for a management position even when she actually may be the best person for the position. This stereotyping is hurting the firm in question because they are artificially lowering the amount of people in their applicant pool. They will not be able to make the best decision for the most competitive candidate because they are not including people who may be well qualified in their initial search. A firm that stays away from these stereotypes will be able to look at all potential applicants, regardless of gender, and choose the best qualified person for the job.

2.

How can gender stereotypes influence a manager’s various performance management activities and decisions?

Gender stereotyping can negatively influence a manager’s evaluation of employees by placing predetermined labels on employees that do not reflect their true nature. This can lead to the manager drawing conclusions about an individual before they are given a fair chance to be evaluated. If employees’ performance is evaluated incorrectly due to stereotypes, they may be placed in positions that do not optimally utilize their individual skills and traits. Not only is this inefficient, but it is unfair to employees who are not being employed to their full career potential.

There are also ethical and legally difficulties that are associated with such unfair employment practices.

3.

The context of the research examined here is within large Western organizations. What possible additional culturally based challenges might exist for countering such gender stereotypes in developing countries?

In Western societies there has been a long-standing movement to eliminate gender stereotypes, so actions taken to counter these practices are accepted as normal. In many developing countries the cultural roles of men and women are drastically different. Oftentimes these developing countries are not as socially progressive as the Western home countries that these firms.

Therefore, one can anticipate that there may be strong resistance to a company culture that tries to dispel these stereotypes. Each country is unique, so a developing country’s culture must be taken into account to find a constructive way to address these issues while still supporting a unified corporate culture.

CASE 9.2: CUSTOMIZING HCN PERFORMANCE APPRAISAL DESIGN 1.

Based on the information that Kukka was considering, what are some general performance management practices that likely would fit well with Costa Rican HCNs?

It is important to note that Costa Rica is a collectivistic culture, low on individualism. This means that performance management practices that incorporate collectivism would work best in this country. For example, employees should be placed in situations where the entire group contributes to a task. The key to performance management is to create job functions that require employees to work together. A task that involves an employee’s completing work in private or individually may not work well in this type of culture. Also, individual feedback should not be used exclusively in this type of culture. Managers should focus on evaluating the group as a whole and giving suggestions and criticisms in a matter that is directed to the group as a whole and not particular individuals.

2.

What particular plans for Costa Rican performance appraisal likely would work well (for example, how appraisal is conducted, who provides performance feedback, team versus individual performance focus, emphasis on development versus achievement, and so on)?

In Costa Rica appraisals would likely benefit from a team rather than strictly an individual focus as it is a collectivistic culture. Costa Ricans are used to working together on a task, rather than individually. Accordingly, the feedback should be given to the group as whole and not only to individuals. Since Costa Rica is low on power distance, lower-level employees are encouraged to give their own input to their performance appraisal. Since the country is high on uncertainty avoidance, employees are expected to receive direct, formal feedback on a regular basis. Finally, a feminine culture would suggest that the primary focus of performance appraisal should be placed on development rather than achievement.

3.

What are possible forms of future cross-cultural conflict in the performance management process between Costa Rican HCNs and their Mexican supervisors and managers? What plans should be considered to help minimize this potential for cross-cultural conflict?

Since Mexican culture tends to be more masculine, Mexican supervisors are likely to focus more on employee achievement than development in evaluating the performance of Costa Rican workers. Coming from a large power distance culture, Mexican supervisors will tend to exercise a top-down approach in the performance management process without seeking any input from the Costa Rican employees, which will cause cross-cultural conflict. Mexican supervisors should be given the cross-cultural training to avoid potential conflict with Costa Rican employees.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 1. International Performance Management Best Practices: As an in-class small team exercise or out-of-class team assignment for subsequent presentation and discussion with the total class, ask students to search the Internet for tips and effective practices related to international performance management and performance appraisal, focusing on actual applications and examples. There are several company websites that provide this helpful information, and global consulting firms in particular.

2. Building MNC Alignment for Enhanced Global Performance Management: As a team or individual assignment for subsequent presentation in class or submission of an individual report, ask students to search the Internet for recent information about what is company alignment or corporate mindset (i.e., common vision, purpose), and to identify specific examples of how such alignment and shared mindset can contribute to effective global performance management, despite significant national cultural differences. Students should also examine best practices for developing this alignment and common mindset.

3. Performance Management Comparative Analysis: Form student teams of 3-5 students, with each team representing a consulting firm that has been engaged to work with an MNC client to provide recommendations on how to customize performance management practices appropriate for the MNC’s new foreign operation (each team selects or is assigned a different country hosting the MNC’s new foreign operation). Outside of class, the student teams will search the Internet for ―Performance Management in (the assigned country, e.g., China, India, Mexico, Nigeria, South Korea, Romania, etc.)‖ to identify country-appropriate performance management practices. In class, the teams then present their findings and examine similarities and differences in recommended performance management practices

across the various countries involved, and consider what local conditions (e.g., differing cultural values and expectations) lead to these differences.

CHAPTER 10 MANAGING COMPENSATION AND REWARDS FOR A GLOBAL WORKFORCE LECTURE NOTES Compensation, including the overall system of rewards—formal and informal—provides the driving force for effectively attracting, retaining, and encouraging human talent at home and abroad. This chapter examines the important and fundamental practices for managing compensation on a global scale include managing global compensation strategically, considering performance-based pay where appropriate, anticipating the influence of local culture, using a total rewards system perspective, and addressing the duality challenge of global integration and localization. Careful consideration should be made to effectively address the unique needs, goals, and circumstances of major employee categories within the global workforce, including PCN expatriates, HCNs, and TCNs. LEARNING OBJECTIVES    

Understand important and fundamental practices for managing compensation on a global scale, including managing compensation and rewards strategically and using a total rewards system perspective; Explain possible influences of culture in adapting compensation practices to local conditions; Explain areas of convergence in global compensation and reward practices; Describe compensation and reward needs, goals, and circumstances of major employee categories within the global workforce, including PCN expatriates, HCNs, and TCNs.

I. INTRODUCTION Compensation is at the very heart of every organization’s performance potential. There are several important and fundamental practices for managing compensation on a global scale. There are key compensation considerations for major employee categories within the global workforce, including expatriates, host country nationals, and third-country nationals.

II. KEY PRACTICES FOR MANAGING INTERNATIONAL COMPENSATION A. Managing Global Compensation Strategically As companies begin to develop business activities involving the transfer to or local staffing of employees in their foreign operations they typically make ad hoc decisions about compensation arrangements. But as international business activity expands, such an ad hoc, fragmented approach inevitably will lead to costly inefficiencies and missed opportunities without a coordinated, strategic approach to managing global compensation. This approach should be

addressed at two primary levels: the link with company strategy and the strategic management of the compensation function itself.

1. At the general company level, compensation should control compliance with and reinforce corporate objectives and mandates.

2. On an organizational level, the reward system can ensure the progress of an MNC toward enhanced global perspectives among its current managers and future leadership.

3. On the functional level, effective overall compensation strategy and more specific policies for managing a global workforce should ideally meet the following six objectives: • Attract and retain employees who are qualified for foreign assignments.

• Facilitate transfers between foreign operations and between home-country and foreign locations.

• Establish and maintain reasonable equity in the compensation of employees of all affiliate operations, both home and abroad.

• Be competitive in relation to the practices of leading competitors (external equity).

• Take cost-saving advantage of economies of scale, and deliver intended rewards in the most cost-efficient manner (including tax consequences).

• Ensure transparency and clear understanding of compensation plans.

B. Paying for Performance There is an increasing concern about avoiding the wasteful practice of rewarding employees who only marginally contribute or completely fail to achieve critical performance objectives, but instead better utilizing rewards to attract and retain strong human talent who actually contribute to organizational effectiveness.

1. Individual vs. Group Individual performance pay approaches tend to emphasize the importance of individual accountability and responsibility, while group-based approaches tend to reinforce the essential role of cooperation and helpfulness within work units leading to enhanced unit and organizational productivity.

2. Organization-Based Approaches Organization-based approaches, such as profit sharing or gain sharing, tend to emphasize the importance of long-run commitment to the organization, cooperation and sharing of information across organizational units and national borders, and the development of common identification with the organization.

• Profit Sharing. Profit sharing generally takes place annually and is based on an overall predetermined measure of an organization’s profitability.

• Gain sharing. Gain sharing, on the other hand, tends to be rewarded on a regular, more frequent basis according to an established performance measure, such as monthly levels of work unit productivity or cost savings.

•

•

Accumulating. Under an accumulating scheme such as merit pay, performance-based payments earned in one evaluation period are added to an employee’s base pay, which becomes the new base pay that is used for calculating subsequent pay-related benefits and performance payments.

Nonaccumulating. Under a nonaccumulating scheme (e.g., piece rates, commissions, onetime lump sum bonuses) the employee is required to re-earn these payments in the future.

With an increasing focus in many countries on holding individuals responsible for their performance through reward allocations, there needs to be a vigilant eye on possible negative outcomes where work is increasingly designed for individuals when the tasks or the people involved are more appropriate in team arrangements, or where effective workplace cooperation and communication are hindered by compensation practices that focus primarily on rewarding individual performance.

C. Anticipating the Influence of Culture 1. National Culture National culture and associated rules and social expectations of a society can have a significant impact on compensation practices. On an individual level, culture is central to the formation of employee perceptions, preferences, and emotional reactions, including those associated with employee compensation and rewards. An awareness of the local culture and its influence is just as critical as awareness of local laws and regulations in designing effective compensation packages and practices. The concept of equity or fairness in comparing compensation from one individual to another can also differ across countries.

Adding greater complexity to the picture, the varying influences of subcultures can also be noted frequently within countries due to significant internal demographic differences. In general, there is strong evidence that management practices that reinforce national cultural values are likely to result in greater self-efficacy and higher performance.

2. High vs. Low Power Distance In countries and subcultures measuring relatively high in power distance (e.g., India, Mexico, Panama, Indonesia, Middle Eastern countries) appropriate compensation practices might employ pay and rewards that reinforce status distinctions with little or no employee participation and involvement in reward determination and distribution decisions, while those measuring relatively low in power distance (e.g., Austria, Sweden, Denmark, Republic of Ireland, New Zealand) might feature compensation approaches that minimize status differential and promote egalitarianism.

3. High vs. Low Individualism In countries and subcultures that are relatively high in individualism (e.g., Sweden, United States, United Kingdom, Canada, Netherlands, France, Italy) effective practices might emphasize rewards based on individual performance, including individual praise and recognition, whereas

those relatively low in individualism (high in collectivism—e.g., Ecuador, Colombia, China, Honk Kong, South Korea, Taiwan) might use practices emphasizing group-based contingent rewards, as well as nondirect financial rewards that satisfy recognition needs with minimal individual distinction.

4. High vs. Low Uncertainty Avoidance Work settings in countries and subcultures that measure high in uncertainty avoidance (e.g., Japan, Germany, Spain, Portugal, Turkey, Belgium, South Korea) may favor a limited, conservative use of performance-based or variable pay to maintain a desired consistency and predictability, while employees in countries low in uncertainty avoidance (e.g., United States, Singapore, Malaysia, UK, India, Denmark) may be more comfortable with and actually prefer a higher level of variable performance-based and external market-based pay, and flexible pay structural arrangements such as broadbanding that involves few pay grades.

5. High vs. Low Masculinity Finally, compensation practices in countries and subcultures registering high in masculinity (e.g., Italy, Switzerland, United States, UK, Mexico, Germany, Austria, Japan) may emphasize individual and group competition in pay, promotion, and recognition, with a clear emphasis on performance-based pay; while for those low in the masculinity dimension (high in femininity— e.g., Denmark, Chile, Finland, Norway, Sweden, Netherlands, Thailand) there might be a strong preference in the total compensation package for emphasis on social benefits, quality of work life and work life balance, and job security, with a clear partiality for sharing over competing for rewards.

D. Using a Total Reward System Perspective Managers and their organizational compensation policies may err in focusing only on the financial forms of rewards and overlooking important nonfinancial, intrinsic reward considerations. As organizations competing globally are feeling more and more pressure to contain costs, they should be aware that some of the most valued rewards by a large percentage of critical skill employees (technical, professional, managerial) include career development, flexible schedules, and opportunities for advancement—posing very little direct financial cost to the organization.

A total reward system perspective also takes into consideration potential negative factors and disincentives: • Anxiety, based on underlying fear or distrust, about what the change will bring, and • The effort and sometimes discomfort involved in breaking up an established pattern and pulling oneself out of a comfort zone of familiarity and mastery.

When planning compensation, managers should consider within a total reward system the entire spectrum of rewards, incentives, and disincentives—financial and nonfinancial, formal and informal—available to and facing the employee. In addition to the formal compensation package,

managers should ask themselves the following questions with regard to the total reward structure facing their employees.

• Are there any disincentives perceived by employees that would discourage the desired performance?

• Are employees actually being punished for the desired performance?

• Are there clear and strong enough disincentives for neglecting or not meeting desired performance?

• Are there competing rewards, where employees are rewarded for doing something other than the desired performance?

• Is the overall set of rewards (formal and informal, extrinsic and intrinsic) adequate to sustain desired performance on an ongoing basis?

E. Global Compensation Management vs. Local Responsiveness A major ongoing challenge faced by multinational organizations is the need to manage the enterprise globally while at the same time remain responsive to local conditions. Compensation for a global workforce is particularly faced with the dynamic tension of this duality challenge.

Whereas in the past multinational organizations could succeed by fitting compensation policy to its fragmented, multidomestic strategy with a primary focus on local responsiveness, global competition pressures have driven today’s organizations to integrate and globalize compensation and benefits programs.

1. Reasons for Global Reward System There is an increasingly strong push to manage reward systems globally for at least three major reasons: achieving economies of scale, gaining alignment, and building unique firm capability. (a) Economies of Scale. First, a potential benefit for large multinational organizations is due to the principle of economies of scale or standardization, where compensation policies and practices that are applied in a fairly standard fashion throughout the world represent cost savings in not having to go to the added expense of managing significantly different compensation arrangements at each international work operation. (b) Gaining Alignment. Second, especially where international business success calls for significant integration, coordination, and cooperation in internal knowledge sharing, harmonizing manufacturing and distribution, and presenting a consistent company message to customers across international operations and national boundaries, a more centrally managed reward system is needed to encourage workforce alignment. (c) Building Unique Firm Capability. Finally, related to the above global integration objective of compensation management, MNCs are increasingly showing interest in developing an international workforce possessing unique global capability serving as a distinct competitive advantage, featuring reliable key competencies as well as a common MNC mindset that can provide consistency and synergy throughout and across the international business units. This building of unique firm capability through common global competencies and mindset, as well as

common commitment through shared identification with the MNC, can be greatly facilitated through reward structures that support similar international learning experiences.

2. Sensitivity to Local Culture With particular regard to sensitivity to local culture, there is increasing evidence that concern about national cultural differences in guiding human resource practices has been exaggerated due to a typically high level of diversity of preference within a given national population—even those in which we presume low heterogeneity—and that organizations would be much better off identifying and clarifying their core priorities and values (part of their unique organizational culture), attracting a global workforce that fits these priorities and values, and then clearly communicating and reinforcing these same core priorities and values through the reward system 3. Strategic Flexibility Model To help address this need for flexibility in meeting the constantly changing demands of managing duality in global compensation, Milkovich and Bloom have presented a very helpful three-level model of strategic flexibility. In this model an employee’s total compensation is structured into three major sets: core, crafted, and choice. (a) Core Set of Rewards. The core set of rewards provides clear encouragement for a common company mindset and in support of identified priorities for success (e.g., strong flexibility and cooperation for global customer responsiveness), which underlie and reinforce a common MNC global culture. (b) Crafted Compensation Components. A second set of crafted compensation components within the total compensation structure of this strategic flexibility model includes both legally mandated and socially preferred rewards that fit local conditions as well as support and reinforce corporate culture and priorities. (c) Choice Set. Finally, whereas the previous reward sets are primarily determined by managers as they consider supporting both corporate objectives and demands of the local business environment, the choice set of compensation components switches to the selection by employees themselves of elements of compensation that they perceive of greatest value to their individual situations. Here the individual employee is in charge of customization.

III. KEY COMPENSATION CONSIDERATIONS FOR EXPATRIATES, HCNS, AND TCNS A. Expatriate Compensation An expatriate’s overall perception of organizational support represented by a compensation package’s ability to maintain one’s standard of living is linked to expatriate adjustment and commitment in the international assignment. Nonfinancial rewards such as learning opportunities and expectations of future career gains are important motivators.

Due to the degree of variation across countries in compensation practices and the many complexities involved, MNCs often devote considerable time with internal staff and retain the services of international accounting firms to design and administer the most cost-effective and appropriate rewards for their global workforce. We now will examine seven basic approaches to expatriate compensation used by MNCs. 1. Headquarters-Based Model Expatriates, regardless of nationality, are paid according to the headquarters compensation structure. This approach is relatively easy to administer and has few problems with nationality pay discrimination. This approach is effective in attracting expatriates to the host operation from lower-salary countries (TCNs), but tends to incur high compensation costs with many other nationality expatriates’ pay based on the often higher headquarters reference point.

2. Home-Based Balance Sheet Model This is by far the most common PCN compensation model used by European and U.S. MNCs and typically is implemented through some version of what is known as the balance sheet approach. The purpose of the balance sheet approach is to help the expatriate avoid personal sacrifice in standard of living or financial loss due to the expatriate assignment as well as provide an attractive incentive or inducement for accepting the assignment. Essentially, the MNC and the prospective expatriate need to determine and agree on what it would take to ―balance‖ and even outweigh the apparent disincentives and challenges involved in accepting the foreign assignment, ensuring that the expatriate is left with a feeling of overall equity with the new expatriate experience.

3. Host Country/Local Market Model In this approach that provides simplicity and avoids equity problems, expatriates are paid on the same lave as local nationals in the country of the foreign assignment. However, as with the headquarters-based model, higher local pay and benefits in such a host country assignment can render successful repatriation to a lower-salary home country difficult. Often referred to as ―localization,‖ this approach works well when transferring a fairly new employee with little international experience primarily for the purpose of international competency development. It also is used when expatriates decide to remain in the foreign location on an indefinite or permanent basis. , where the expatriate’s original home based balance sheet compensation package is ―localized,‖ stripped of the previous costly incentives, premiums, and allowances, and the base salary becomes more in line with that of local managers.

4. Local-Plus Model A growing trend in hot employment markets is for MNCs to hire according to local salary structures available self-initiated expatriates (SIEs) in the local labor market, which is a much less costly option than for traditional PCNs. However, to sweeten the attractiveness of the compensation package for these talented and highly mobile professionals and to recognize their valued broader international perspective and experience beyond that of locals, besides the local

salary rate these SIEs increasingly also are provided additional extra PCN-type benefits such as some form of housing assistance and possibly a partial children’s education allowance. Employers determine much of what they offer in this local-plus or ―expatriate light‖ approach on a case-bycase basis, and the practice differs in various country locations depending on the local market demands and other factors.

5. Better of Home or Host Model Here expatriates are paid at a level at least the same or higher than in their home country, depending upon the pay structure in the host country. This approach is often used for transfers within regions, most notably within the European Union and Latin America.

6. International Citizen Model In this recent alternative to the commonly used Modified Home-Country Model an international ―basket of goods‖ (covering expenses for food, clothing, housing, etc.) is used for all expatriates regardless of country of origin. This approach offers pay adjustments allowing expatriates to purchase comparable local products—but not the same products as in the home country, greatly reducing the costs when following the balance sheet approach. This approach may also be appropriate for international executives who, as international citizens or career diplomats, plan to move from country to country in international assignments.

7. Lump-Sum Model For short-term assignments, such as one to three years, it may be easiest to provide expatriates with simple lump-sum payments to cover additional expenses incurred with the foreign assignment, allowing them to manage their personal finances on their own. This very flexible approach avoids unnecessary incentives and inducements, as well as intrusion into expatriates’ more personal financial matters such as taxes and retirement pensions.

8. Negotiation Model This flexible approach is especially appropriate for special or fairly unique assignment situations, or with organizations having few and infrequent expatriate assignments. And as an overall rule, despite recent developments in more standardized models of expatriate compensation, it is recommended that company’s maintain flexibility in considering each expatriate’s unique needs and situations, and fine tune the actual compensation arrangement through open discussion and negotiation.

B. Host Country National Compensation Since HCNs potentially can have a very valuable direct influence on both foreign operation performance as well as future leadership and strategic direction of the MNC, it is imperative that careful attention be given to the design and administration of compensation plans to ensure success in the attraction and retention of talented and committed HCNs in all foreign operations.

1. HCN Compensation in Host Country To help build a thorough compensation framework for HCNs staffed in a particular host country, Stephen Perkins recommends that several interrelated factors be carefully considered, including local expectations and regulations regarding compensation package content and administration, local economic and labor market conditions, expectations of management (both local and at global/regional headquarters) and investing partners (i.e., joint ventures), nature and degree of variable rewards (i.e., pay for performance), and strategic choices. (a) Local Conditions. Important strategic choices typically involve the degree to which compensation should reflect primarily local conditions, or also include components promoting common corporate identity worldwide. (b) Investment. Another strategic concern relates to possible long-term plans for investment in local employees as human capital for staffing future local, regional, and MNC leadership, where perhaps above average compensation packages may be offered to those HCNs deemed worth the investment. (c) Purchasing Power Parity. To assist in HNC compensation planning, some MNCs now use the concept of purchasing power parity (PPP) to compare relative purchasing power between countries. (d) Reward Inequity. A potential problem with HCN compensation may arise when other nationalities, especially PCNs, are located at the host site operation and work closely together with HCNs, and perform similar work yet have a more attractive total remuneration package.

To help prevent or minimize this potential conflict and drain on productivity due to perceived reward inequity, some organizations look for ways to negotiate with selected expatriates to forego certain benefits and forms of remuneration during the course of the assignment, and to be rewarded financially and in other ways on termination of the assignment.

Many organizations avoid the problem by using primarily a localization compensation approach described earlier, and reducing the number of experienced expatriates dramatically, employing them in primarily short-term visits.

2. Inpatriate Compensation Specific remuneration programs for inpatriate employees tend to be less well defined than for expatriates, most likely as a result of the much less MNC experience with inpatriates beyond short-term training rotations. Unique practices and conditions in the inpatriate’s home country should be considered, including differing tax, retirement, and social security regulations; as well as social programs and national care health plans. In addition, other factors should be examined such as the duration of the inpatriate assignment, the inpatriate’s position and rank in the firm, and the prevailing practices in the particular industry.

Another consideration that may be appropriate when planning inpatriate compensation relates to perceptions of inequity, where, for example, a talented inpatriate from a less-developed country now works side-by-side with PCNs on the same or similar projects with requiring similar skills and duties, yet is paid much less because the expatriate is on a home-based remuneration model.

Due to a relatively high risk of inpatriates from developing countries failing to return to their home country after their foreign assignment in a developed country, overall rewards and incentives related to the inpatriate assignment should also consider what is needed to guarantee effective repatriation and ensure a return on the developmental investment of the inpatriate assignment.

C. Third-Country National Compensation Compensation issues and decisions for third-country nationals lie on at least two primary levels: executive and low-level employee.

1. Executive Level A frequent consideration for TCNs is at the executive level, where they comprise a growing contingent of global executives or international cadre who move from extended assignment to extended assignment away from their home country, and are paid on a global scale following the international citizen expatriate compensation model.

Aside from similar compensation considerations that TCNs at this higher-level share with their PCN expatriate counterparts, particular challenges for dealing with these TCNs, due to their long-term cumulative absence from home country, include providing health, death, and retirement benefits.

2. Lower Level TCNs at lower levels who immigrate into a host country represent a growing source of employees for staffing foreign operations, such as Eastern Europeans flowing (legally or illegally) into European Union Countries or Mexicans and Central Americans into the United States. A direct impact that this growing global migration phenomenon has on compensation is holding down or even lowering the prevailing pay scale for lower-level workers, which is causing considerable displeasure and conflict with existing HCNs and their unions who feel increased pressure of competition for lower pay. MNCs that save labor costs by staffing their host operations heavily with these TCN workers—even when they can prove legal documentation—at the neglect of HCNs may be severely criticized and suffer a damaged reputation in the host country.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES OPENING SCENARIO: CHALLENGES IN INTERNATIONAL PAY EQUITY 1. From this scenario and your reading, what are some of the biggest challenges faced by MNCs in their global compensation practices?

Besides perceptions based on relative comparison—because an individual’s cultural background can greatly influence perception—the significant cultural differences involved in managing a global workforce greatly augment the challenge facing effective compensation. A challenge for management is achieving satisfaction and overall positive perceptions regarding total compensation and rewards among the global workforce. Managers must research and understand historical and sociopolitical factors that can influence compensation and reward perceptions. The concept of equity or fairness in comparing compensation from one individual to another can also differ across countries.

2. What are perceived compensation and reward needs to support expatriate attraction that are contributing to the perceived inequity in this case?

For some locations, it is difficult to attract expatriates. Without any additional benefits, UK physicists might be reluctant to relocate to Spain. Thus, the multinational energy company would need to offer some expatriate benefits to attract foreign experts. Relocation and housing support are standard components of expatriate compensation packages.

3. What recommendations do you have for improving this situation that would lead to a more harmonious, cooperative and productive working environment?

As employees would find out about expatriate benefits eventually, it would be important to provide transparent information. It would be important to clarify the important role and function of the expatriates. Furthermore, it would be important to clarify the limited time horizons of the expatriate assignments. The expatriate benefits appear overly generous. The multinational energy company may reduce some of the expatriate benefits, e.g. reduced housing benefits. Meanwhile, successful Spanish employees might also have the opportunity to work abroad as expatriates and enjoy similar expatriate benefits.

CASE 10.1: REWARD PACKAGE CHANGE NEEDED TO ATTRACT EXPATRIATES TO CHINA 1. How does this case illustrate the importance of continually monitoring host country conditions and the effectiveness of expatriate compensation packages for accepting international assignments?

The living and working conditions for expatriates may change over time as this case illustrates.

China has lost its attractiveness among expatriates. It has become more difficult to attract expatriates, particularly those with families. To attract expatriates, organizations may need to provide additional compensation and expatriate benefits.

2. From this case, what are possible changing conditions that can affect expatriate assignment attractiveness?

Several changes related to the COVID pandemic have made China less attractive. Increased hassle to enter and exit a foreign country. Less schooling options prevents Western expatriates with families from relocating to China.

3. What are some creative ideas for changing the overall compensation and rewards package to increase attractiveness of otherwise unattractive foreign postings?

Higher pay would be one major factor to attract expatriates. Other options would be to shorten expatriates assignments and offer more flexible expatriation options and benefits.

4. What are other staffing options besides traditional PCN expatriates for filling local leadership demand with the significant departure of PCNs? MNCs could fill local leadership positions with HCNs. They could promote HCNs staff to higher positions. That would also motivate the incumbent staff. If not sufficient available talent resides within existing operations, they may recruit HCNs from competitors. In addition, they may try to attract expatriates as TCNs from other countries.

CASE 10.2: KEY EMPLOYEE BENEFITS FOR THE POST-PANDEMIC WORLD 1. Why are organizations increasingly required to re-examine their previous working arrangements, including employee time at the work site? How have the pandemic and increasing utilization of new technologies combined to change these requirements?

The business environment is constantly changing. Working from home has become the norm during the pandemic. Organizations/people have set up corresponding technology to enable remote work. People got used to it and want to continue this working arrangement.

2. Why is it in the organization’s interest to consider adding to the employee’s total reward package new benefits associated with protecting and improving employee physical and mental health?

Total reward packages consist of financial and non-financial rewards, including benefits related to physical and mental health. The latter have become increasingly important since the pandemic to attract and retain employees.

3. How do the developments described in this case demonstrate the need for company leaders to regularly assess the total picture of employee rewards—not just direct financial compensation— to optimize an organization’s ability to attract, motivate, and retain employee talent?

Employees have additional needs, interests, and perceived rewards beyond financial compensation, particularly among highly skilled employees in highly developed countries. The pandemic has increased the awareness of health issues and demand for remote work.

Organizations need to respond to changing demands to attract, motivate, and retain talented employees.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT

1. Comparing Pay Around the Globe: Students will be assigned to conduct research to compile a list of pay of top talent across different industries and across selected countries.

For instance, students should find out the pay of top soccer players in Germany, UK, USA, members of parliament in the European Union, CEOs, entry-level jobs in finance. Then, students can discuss whether and why global mobility of such talent might be limited.

2. Employee Benefits Comparative Analysis: Form student teams of 3-5 students, with each team representing an HR consulting firm that has been engaged to work with an MNC client to provide recommendations on how to customize employee benefits plans appropriate for the MNC’s new foreign operation (each team selects or is assigned a different country hosting the MNC’s new foreign operation). Outside of class, the student teams will search the Internet for ―Employee Benefits in (the assigned country, e.g., China, Indonesia, India, Mexico, South Africa, Japan, Turkey, etc.)‖ to identify country-appropriate employee benefits practices. In class, the teams then present their findings and examine similarities and differences in recommended employee benefits practices across the various countries involved, and consider what local conditions (e.g., government regulations on mandatory benefits, and differing cultural values and expectations) contribute to these differences.

3. Inpatriate Compensation Planning to Support Successful Repatriation. As was discussed in the textbook, a relatively high risk has been observed of inpatriates from developing countries failing to return to their home country and simply disappearing after completing their foreign assignment working at MNC headquarters in a developed country.

Such an outcome represents a substantial loss for the MNC in investment in the development of future host country leadership talent for the MNC. Select a prominent developed country to serve as MNC headquarters, as well as a developing country from which a host country national has been given an inpatriate assignment at MNC headquarters. Then assign students to 3 to 5-person teams with this selected MNC headquarter developed country and developing host country to discuss and plan possible overall compensation and reward strategy (considering a total rewards perspective, including direct financial, benefits and incentives, work and future career-related rewarding components, etc.), to increase the likelihood of successful inpatriate return to the host country to ensure a positive return on the developmental investment of the inpatriate assignment.

CHAPTER 11 OPTIMIZING THE EMPLOYMENT RELATIONSHIP LECTURE NOTES Strategic importance is recognized in managing a global workforce in creating positive relationships between organizations and their employees, and in building a safe and positive working environment that leads to increased employee engagement, satisfaction, and productivity. This chapter explores the primary focus of employee relations in global workforce

management in which employees’ personal interests and needs are protected and served by MNCs. We also explore external factors that affect employees’ interests such as, unions and governments entities.

LEARNING OBJECTIVES • Describe major human rights and ER challenges in the global marketplace, including forced labor, child labor, workplace discrimination, health and safety, and job insecurity and displacement; • Understand important MNC ethical and responsible practices that create effective global ER, involving employee health and safety, participation and engagement, open communications, valuing and managing diversity, employee correction and discipline, and employee displacement and job termination; • Explain the role and status of labor unions in global ER. I. INTRODUCTION Employee relations is the area of human resources that deals with the nature and quality of the relationship between organizations and their employees. This relationship is characterized by the way employees are treated regarding their physical, psychological, and economic well-being.

This treatment is also influenced by several external factors, such as unions, governments, and prevailing economic and working conditions like those that resulted from the 2008 global economic crisis and the more recent global COVID-19 pandemic. Thus, the primary focus of employee relations in global workforce management is on the nature in which employees’ personal interests and needs are protected and served by MNCs as well as influenced by other external factors.

External parties (besides multinational corporations) such as unions, NGOs and governments are also involved in ER, and globally competent firms should be aware of these external parties and influences in managing a productive employment relationship.

II. CURRENT ER ISSUES Powerful forces of global economic competition are driving a relentless search by MNCs for the lowest production and operational costs. Given this background of global competitive pressure and opportunities for achieving lower labor costs, much of the global labor force is vulnerable to workplace abuse by some short-sighted, unethical organizations—those that seek to maximize their benefits at the expense of workers and their communities. Governments can become more attractive to MNC investment by playing into these tendencies. The system keeps itself in check however, since efficiency sometimes requires better quality and greater expense. In order to avoid inadvertently contributing to workplace abuse, managers must be aware of current global worker protection issues, including the following: A. Forced Labor

This is labor in which the worker is engaged involuntarily or under duress; arises most commonly as bonded servitude in which one is essentially enslaved until a debt is paid. A recent global estimate indicates that approximately 50 million people were living in a condition of modern slavery in 2021, with more than 27 million of these in forced labor and 22 million in a forced marriage. Of the approximately 27 million in forced labor, over 17 million are exploited by the private sector, over 6 million are involved in forced commercial sexual exploitation, and nearly 4 million are in forced labor conditions imposed by national governments or armed forces.

Most prevalent in Asia, Latin America, the Caribbean, Africa, and the Middle East, mostly due to government involvement. Twenty percent is due to human trafficking for exploitation in more developed countries. Unsuspecting organizations, in the interest of securing cheap labor contracts in their own domestic context, often overlook their due diligence responsibilities regarding the documentation details and working conditions of their contracted workers.

B. Child Labor This is pervasive throughout the world where work is necessary to support family, leading to the neglect of education and personal development. Approximately 160 million children worldwide between the ages of 5 and 17 are involved in child labor (nearly half of these under hazardous conditions) that deprives them of their joyful childhood, interferes with their formal education, and threatens their physical, mental, and social development, leading to a lifetime of poverty and misery. The recent COVID- 19 pandemic, resulting in significant job loss for parents in many developing countries, has contributed to an increase in child labor to help provide additional family earnings for survival. Child labor is recognized as a cause of the vicious cycle of poverty, and is perpetuated by lack of national policies against its use. Several developing countries, including Brazil and Mexico, have launched innovative schemes aimed at providing financial support to poor families so that their children need not leave school to beg or seek work.

But not all children stay in school, and for them employment in an MNC’s manufacturing plant might be better than the next-best legal alternatives: working in domestic industries or begging.

Therefore, ethical decision-making leading to long-term positive outcomes also must consider the prevailing relative level of economic development and the potential unintended impact of well-intentioned decisions.

C. Workplace Discrimination This has a harmful effect on the well-being of several demographic groups within the global labor force and should be avoided to protect human rights and to ensure valid business decisions and longevity through fair competition. Laws and fines to protect against discrimination are increasing in prevalence and may cause an additional burden on firms’ ability to compete.

Companies also are finding that they face an ―extraterritorial effect,‖ where their legal liability for unfair discrimination can cross national borders to protect their expatriates assigned to other countries where antidiscrimination laws may be weak or nonexistent. Such laws may have a ―long-arm‖ effect, transcending national borders; multinationals should be aware of the risks.

Also risky is the threat of reputation damage due to discrimination. As we have seen with the recent #MeToo movement against sexual abuse and harassment that has swept across Northern Europe and the United States in particular, besides decreased performance capability and increased legal liability due to workplace discrimination, companies can suffer significant damage in image and reputation among consumers and potential employees.

D. Health and Safety Hazards The COVID-19 pandemic made companies to focus more on employee physical health and mental well-being. Nevertheless, the right to a safe and healthful workplace is increasingly under threat around the world as the competitive global economy puts tremendous pressure on reducing and minimizing costs associated with occupational health and safety regulations. Many workplace accidents, such as gas leaks and oil spills, also endanger local surrounding communities and physical environments.

Developed countries are not exempt from this risk, due to lack of updated standards and regulations to address newly recognized hazards. Company costs due to health and safety neglect can be considerable; companies should avoid these costs by maintaining an ethical commitment while maintaining competitive, simultaneously raising morale and performance among workers.

Firms should understand that liability for health and safety neglect in foreign operations may be decided by their home country’s unsympathetic and more globally responsible courts, such as US MNCs have found under the Alien Torts Claims Act. E. Job Insecurity and Displacement The pressures of globalization and technological advances continue to lead to job loss and worker displacement in developing countries. Companies should remain socially responsible while focusing on profitability to minimize negative impact of their business decisions on the well-being of the host countries and communities where their operations are located. They also should contribute in the long run to greater skill development within the local labor force, as well as to overall increased socioeconomic stability. It is critical to understand that the company and employees build the primary employment relationship underlying an organization’s ER, both individually and collectively.

III. ROLE OF MNCS IN GLOBAL EMPLOYEE RELATIONS

Employee relations differ in practice worldwide; external factors, as well as internal factors like company culture are very influential in determining ER practices despite regulation and union presence. MNCs should expect to follow local regulations, including those regarding the treatment of employees. But do MNCs have an ethical responsibility to respect and adhere to the same home-country ER practices in their host-country operations, even though the host country might not have any such standards or regulations, or if they have them, ignore them through virtually nonexistent enforcement?

A. Moral Dilemmas

Differing ER standards between home countries and host countries can create moral dilemmas for MNCs entering new countries, and stakeholder scrutiny increasingly demands social responsibility. As MNC operations come under greater scrutiny around the world, consumers, shareholders, communities, and other stakeholders increasingly demand that corporations play a positive role in promoting and upholding high corporate social responsibility. Long-term sustainability of a company depends upon the adoption of high ER standards.

B. Intent Is Irrelevant Regardless of intent, companies whose actions provide sufficient evidence of disparate impact against a protected group can be sued; such legal doctrines help to surface unfair practices regardless of motive. Companies should actively examine employment practices on an ongoing basis to ensure that standards are followed and ethical practices upheld.

IV. IMPORTANT MNC PRACTICES FOR EFFECTIVE GLOBAL ER 1. Employee Health and Safety Organizations should be committed to protecting employee health and safety regardless of employment location. Protections not only reduce long run operating costs, but also provide opportunities for work process improvement innovation. (a) Management Support. An effective health and safety effort requires significant input from management, both in active enforcement and in setting examples. Managers should be held accountable for their contribution. (b) Ongoing Risk Assessment. Sources of worker harm and injury vary greatly, changing with modified work processes and the surrounding environment as was so powerfully noted with the recent COVID-19 pandemic. Analysis by management on an ongoing basis is necessary to identify and protect against potential risks. Supervisory attention is necessary for younger employees, since increased experience is directly related to a decrease in accidents. (c) Regular Audits and Inspections Based on World-Class Standards. Similarly, planned and unannounced audits should be conducted on an ongoing basis, even where labor is subcontracted. Impartial third-party audits may carry greater credibility, enhancing valuable company reputations and raising overall global standards and expectations in the global business environment. Stockholders may insist on such additional external validation. (d) Ongoing Communication and Training. Communication and training are critical—early on as well as on an ongoing basis—to counter the risk of accidents. Any incident should serve as a lesson to prevent future problems, and can be shared through best-practices newsletters, workshops, etc. Targeting areas such as stress management, work/life balance, first aid, crisis management, alcohol/drug abuse, workplace aggression/violence, and general health/wellness can prove important in lowering health-related costs and minimizing loss during emergency.

Continuing safety education is necessary for supervisors to create a safer and healthier work environment. (e) Employee Participation. All employees should uphold and contribute to company health and safety. Lower-level employees have the best vantage point for identifying problem areas, and should be encouraged to provide suggestions for improvement both informally and through participation in committees. Any concerns should be seriously considered, and no employee should feel forced into working under unsafe conditions. (f) Employee Feedback and Incentives. Feedback is necessary, both on safety behaviors and outcomes, to provide a safe environment. Regular Feedback. A basic step in employee involvement is simply providing employees with regular feedback on their performance—both safety behaviors and outcomes—in promoting a safe and accident-free working environment.

Such regular feedback sends a clear message of the importance of safety and that all employees play a crucial role.

Rewards/recognition. Financial reward and recognition for best practices can be effective as well, both internally and through external programs, and can help the company’s reputation. This practice should not be allowed to prevent the honest reporting of accidents, however. (g) Employee Assistance Program Support. The EAP provides professional help to employees with psychological difficulty, including drug abuse, marital/family difficulties, stress, financial problems, depression, and grief. Often, such EAP services are outsourced, providing confidentiality that may be lacking in an internal counseling environment.

Acknowledgment. The presence of such a program acknowledges that any company with a large employee base is likely to have a percentage of employees affected by these types of difficulties, and that the company acts ethically and responsibly to assist employees with emotional as well as physical issues.

Expatriation. EAPs are increasingly used in the global workforce to assist with the myriad issues involved with expatriation.

Increasing productivity/morale. EAPs may also be employed in educating leaders within group settings to deal with critical conflicts and incidents, and it has been shown that their presence is effective in increasing productivity and morale.

2. Employee Participation and Engagement It is important that ER helps to bring personal satisfaction and meaning to employees’ lives in addition to financial gain, and this can be accomplished through employee input. The active involvement of employees in providing input and making decisions related to their work has been found to lead to increased levels of motivation and job satisfaction and is associated with heightened worker productivity and retention and lowered absenteeism and tardiness.

Decentralization. To achieve this, often organizations are decentralized and flattened, allowing employees to make decisions without consulting supervisors. It also benefits the company as a whole, since the ―lower the position, the better the idea,‖ and it allows employees to understand company direction. The active involvement of employees frequently calls on their utilization of higher-level skills in problem-solving and decision- making. This, in turn contributes to their job satisfaction, job advancement within the organization, and career security and marketability outside of the organization.

Group work, task forces, and committees strengthen this practice, and since higher-level skills are involved, employee development increases and so does job satisfaction and promotion.

3. Open Communications and Grievance Process Employees need to be kept informed of honest feedback, and also allowed to provide their own input without fear. (a) Groups/Task Forces. Groups or taskforces facilitate this two-way process especially during times of change, which can lead to more productivity, profitability, customer satisfaction, and retention. (b) Indirect/Third-Party Approaches. Due to different cultural views on respect and loyalty, some employees may still fear criticizing their superiors, even constructively; in these cases, indirect/third-party approaches can be used.

Whistleblower hot lines are important to allow employees to report problems with superiors without fear, but supervisors should know how to listen and resolve problems closely and informally. (c) Safeguards/Grievance Procedures. Safeguards and formal grievance procedures, like those used by many union workplaces need be in place in all organizations in case the direct supervisor is the cause of the concern. Grievance and dispute resolution procedures may include an internal ombudsperson, an open-door policy, peer review panels, and arbitration as a last step.

Such procedures have the advantage of providing fair and quick handling of issues, explicit recognition of employee rights, clear processes and specific remedies, consistency in procedural justice across large organizations, documentation of grievance records, and the meeting of legal obligations.

4. Valuing Diversity, Equity, and Inclusion (DEI) To optimize employee engagement and psychological health and safety, MNCs should create environments of respect and support for diversity, fairness, and inclusion throughout their locations, including within their cross-cultural virtual teams. The effective management of DEI also requires patience and sensitivity to local cultural norms, values, and expectations.

MNC’s DEI imperative can be implemented through the following practices:

• Establish working definitions of diversity, equity, and inclusion that are both culturally specific and global in scope for your organization; • Expand company-wide language around identity and representation to incorporate regionally specific and meaningful demographic groups; • Review policies and procedures for (systemic) bias and inequality.

For example, with global teams, what geographies drive the thinking on timing for important calls and meetings. Are US time zones prioritized? Or are meetings clustered in Europe?

• Examine DEI challenges at all levels of the organization; • Incorporate a global lens on employee resource groups (ERGs) and allow for subgroups. For example, a Black ERG at an international organization may serve different purposes for African Americans and those based in the Middle East/ North Africa region; • Consider that legal parameters around diversity compliance may differ by country; • Adopt a global mindset and track significant political developments around the globe on an ongoing basis, particularly in regions where the organization is most active and has an employee base.

5. Employee Correction and Discipline Mistakes are natural in organizations, and ER practices should be based on this perspective, emphasizing improvement over blame. The most important purpose of employee correction and discipline is performance improvement.

• Correction. In order to avoid discipline, correction involves providing feedback, additional direction, and joint, cross-level problem solving.

• Avoiding Discipline. Most employees desire to improve performance when they are aware that it is unacceptable, and most often proper performance management can avoid the need for uncomfortable disciplinary action until absolutely necessary. (a) Develop, Update, and Communicate. Disciplinary systems must be sensitive and adapted to unique needs, regulations, culture, and local expectations. Unacceptable behaviors and their consequences need to be clearly identified. Discipline should be based on pertinent behaviors and past critical incidents, and should be reviewed and updated regularly. Such regular and reasonable efforts may limit the company from liability in the event of a lawsuit. (b) Progressive Discipline. Discipline needs to be commensurate with the magnitude and frequency of the infraction. It is generally less costly to discipline, correct, and coach an existing employee’s behavior than to replace and train, and the sparing use of excessive measures protects morale and productivity. (c) Hot stove analogy.

• Warning. One should clearly warn employees about potential problem behaviors before their occurrence, just as one would point out a hot stove.

• Sufficiently Hot. Consequences should be strong enough to ―cook,‖ but not strong enough to ―burn.‖ Discipline requires balance.

• • •

Immediate. Instant feedback with clear explanations help to tie the consequence to the negative behavior. Delays decrease this correlation for the employee and make discipline less effective.

Consistent. The same negative behavior should lead to the same consequences.

Impersonal. Discipline need be impartial to treat each employee the same and produce the best organization-wide effect.

(d) Documentation. Documentation maintains a professional and orderly manner in discipline, effectively communicating clear evidence to the employee and to third parties for review; especially helpful in case of litigation. Software can facilitate the dissemination of documentation. Documentation should detail the infraction’s entire context, its proper remedy and deadline for remediation, and the current and potential future consequences. (e) Ongoing Fairness and Support. Confidentiality and openness in accepting employee clarification minimizes the perceived adversarial nature of discipline. Thorough and impartial investigation should precede disciplinary actions, with the right of appeal. Genuine support and desire to overcome the problems should be communicated to employees by supervisors.

6. Employee Contract Termination When misconduct, inability to perform effectively, or even the need to restructure or downsize leads to the ultimate conclusion that employee termination is necessary, established procedures and local/national regulations should be carefully followed to avoid costly consequences. In some areas, it is extremely difficult to terminate an employee, and may require significant advance notice and government consultation. (a) Mandatory Payments. Severance payments commensurate with age and experience are mandatory in many countries regardless of cause. When terminating for redundancy in certain countries, a minimum of 30 to 90 days of consultation is required before dismissals may take effect, and may cover the reasons for proposed redundancies, amount of employees involved, proposed methods for determining redundancy, proposed methods and timelines of dismissal, payments to be made beyond those required by law, ways in which negative effects can be mitigated through counseling and job search assistance, and means through which the terminations may be reduced or avoided. (b) Alternatives. Alternatives may include natural wastage/attrition, voluntary early retirement, transferred redundancy or ―bumping,‖ redeployment to another area while maintaining equal compensation, retraining, work-sharing/evenly distributed hour reduction, voluntary part-time, coordinated leave or furloughs, and job sharing. Humiliation should be carefully avoided and the process should be as supportive as possible. Attention should also be given to layoff ―survivors‖ for their additional stress and anxiety regarding uncertainty, increased workload, resentment, and guilt. Effective ER practices may be less costly in the long run by benefiting morale, reputation, and minimizing litigation.

V. ROLE OF LABOR UNIONS IN GLOBAL ER

The presence and influence of labor unions are carefully considered during selection of MNC facility locations, due to possible costs and consequences for investment. Union structures and practices can differ dramatically around the world, and can be organized based on different criteria. Union presence is required in countries such as Germany, but in countries like China, independent organizational movements that may distract from the communist regime are not allowed.

1. Union Control Union span of control also varies between protecting wages and working conditions to being deeply involved in social/political activism. Unions can help to forge employee/management relations and may reduce company costs through effective communication. Unions can produce higher wages, better training and working conditions, benefits, greater health and safety, and longer tenure. They also hold considerable political power due to the electorate power of their constituency.

2. Union Strengths and Vulnerabilities They may restrict MNC operations by influencing local governments to make labor costs noncompetitive, restricting a company’s ability to change employment levels, limiting companysponsored group activities, and forcing MNCs to develop redundant workforces in different countries. However, organized labor’s power is diminishing as production is globalized and the collectivist trend shrinks. The increase of well-educated, highly skilled employees makes such individuals consistently employable and competitive, acting as ―free agents‖ with lower tenure, but more mobility. The development of work-friendly environments that encourage personal growth and profit-sharing mechanisms help employees to identify with the company’s success, limiting the need for labor unions.

3. Potential Challenge of Union Global Solidarity (a) Regulatory Restrictions. National labor laws typically restrict exercising extraterritorial jurisdiction, and national laws regulating unionization vary from country to country. (b) Reluctance Yield Autonomy. National union leadership is typically very reluctant to yield power and usually prefers autonomy. (c) Conflicting National Union and Labor Interests. These vary around the world based on local context and national economy and are concerned with the protection of different interests.

Unionization. As interest in international relations increases, a greater emphasis on global, decentralized unionization is instrumental in establishing international peace and harmony. The merger of the World Confederation of Labour and the International Confederation of Free Trade Unions represents 180 million workers in 233 organizations in over 154 areas worldwide, helping to secure basic rights and labor standards worldwide.

NOTES FOR OPENING SCENARIO AND END-OF-CHAPTER CASES

OPENING SCENARIO: WORKPLACE DEMORALIZATION OR ENGAGEMENT 1. How does the situation at Foxconn in China demonstrate that considerations for employee health and safety should go far beyond mere physical concerns? What are important implications of this case for the design of healthy working conditions in developing countries?

While physical concerns are often the most visible element of employee health, there can often be less visible but equally or more serious threats to an employee’s health. The tragic suicides at Foxconn show that the work was taking an unseen mental toll on the young employees. Everyone has had moments at their job where they are mentally frustrated or worn out. This effect of work can only be compounded by the monotonous factory labor at Foxconn and long shift hours, along with poor treatment from supervisors. Employees must not only be physically safe on the factory floor, but they also must be mentally stimulated by their job and given a forum to express concerns with their daily labor. Without a positive mental state of mind, the workers will begin to struggle with their physical work, and this leads to a domino effect that rubs off on the other employees as well.

2. What are important lessons from this tragic case in China for organizations, both MNCs like Apple and their contracted work suppliers? What costs will they inevitably bear if they ignore these lessons?

MNCs must remember that contracted workers abroad are their people, too. Just because they are on the other side of the globe does not mean that they can be viewed as “out of sight, out of mind.” The contracted work suppliers must also factor in employee wellbeing when making decisions to fulfill orders of their clients. In order to succeed in developing countries, MNCs need to show the local workforce that they are a positive company to work for. This can be greatly facilitated by regularly conducting satisfaction surveys, interviews, and other forms of formal and informal communications to gain a sense of employee needs and recommendations for improvement in working conditions, including making the work more meaningful and instrumental in the employees’ future career development. Creating a physically and mentally healthy work environment is key to winning over the workforce in a developing country. Otherwise, the workers will look elsewhere for jobs and the MNC will lose out in competing for the low-cost workforce. This is illustrated in the Foxconn case as thousands of dissatisfied workers quit or never applied to Foxconn in the first place. Ignoring these lessons will alienate the population of developing countries and lead to a serious labor shortage. Back in their home countries, MNCs also will receive bad press and the public will view them in a negative light, causing serious damage workforce morale and to worldwide reputation. This will lead to customers leaving to use competitors, as well as the MNC potentially facing serious legal battles.

3. What are possible positive and negative outcomes of a laissez-faire approach to global HR and employee relations that Foxconn exemplifies at its various country operations?

While a laissez-faire approach gives a lot of autonomy or discretion to MNCs’ contractors or local subsidiaries in operating and managing their overseas manufacturing facilities, it risks neglecting or avoiding their responsibility to comply with local laws and regulations and uphold universal moral values. This could lead to the violation of human rights and endanger employee relations, resulting in demoralization and lower productivity of local employees, as well as potentially damaged company reputation in the surrounding community.

4. How can governments and other external entities help prevent future demoralization and tragic consequences such as has occurred at Foxconn operations in China?

Governments can take action to prevent tragic instances like the one at Foxconn without greatly hindering business performance and international trade. Governments can follow the steps of many Western nations by creating and enforcing basic guidelines for physically and psychologically healthy working conditions. A government agency should be established to enforce these guidelines so that employees like Ma do not end up working 112 hours of overtime, three times the legal limit. A government can also create and enforce channels of communication for employees to report worker abuses or just to voice concerns and recommendations for improvement. Therefore, if workers begin to be overworked and are feeling mental stress, they have somewhere to address the problem rather than having it boil over into a tragic event before it is noticed.

CASE 11.1: PLANNING FOR AN IMPENDING PANDEMIC 1. What are the important priorities that should guide the formation of Pedro’s afternoon meeting agenda of the ad hoc steering committee?

The top priority in guiding the upcoming meeting agenda is to plan ongoing global operations in a way that will minimize health and security risk to Prodiel’s employees and family members. Especially at this time of great uncertainty, confusion, and chaos in the face of the verified and growing public health threat of the coronavirus pandemic, an additional important priority includes decisive but flexible action in providing direction both in Spain and in the foreign units to guide employee behavior. It is also especially important that Prodiel behave in a way that is responsive to employees and maintains employee confidence and perceptions of ongoing strong organizational support.

2. What kind of employee involvement and participation should be considered from all levels to provide informed input for the plan and flexibility to meet the potentially differing country needs in coping with the pandemic? Why is this involvement consistent with company values, and how will it likely help to optimize employee commitment?

Respected individuals (preferably local HCN supervisors) in the various host country units of Prodiel should quickly be identified and given the responsibility to communicate company directives to the local workforce, and especially to gain their input and feedback related to how to continue operations while minimizing employee health and safety risk. Prodiel clearly respects employee participation and upward communications/feedback, and values flexibility in meeting differing local conditions and needs. When employees at all levels and in all Prodiel units truly believe that their participation and input are important, their commitment and engagement likely will be optimal.

3. How was Prodiel already well prepared, compared to other companies, to meet the impending demands of the COVID-19 pandemic?

Prodiel’s core values of ―work-life balance and integration of modern technologies‖ provide a great advantage over other companies due to their quick flexibility and ability to integrate technology into their work in the face of growing remote work government requirements.

Their value of work-life balance also denotes a clear priority in supporting employee health, both physical and emotional. In addition, the fact that Pedro has a clear high-level organizational communications responsibility provides a recognized and credible operation to manage the flow of communications at this critical time.

4. Based on your experience with the COVID-19 pandemic, what additional measures or actions would you recommend for Pedro and Prodiel’s General Manager in addressing future similar crises?

Students should consider their own pandemic experience with organizations with which they were involved, including university and work organizations. Some might suggest that it would be helpful if Pedro and the General Manager afterward consult its various units at home and abroad to consider lessons learned from this pandemic experience, including what worked well and what didn’t. Or they might suggest that lower-level organizational representatives should be organized and rapidly tasked with providing upward feedback on organizational decisions related to the crisis and providing input for improvement.

CASE 11.2: PROVIDING EXPATRIATE EAP AND OTHER PERSONAL CARE SERVICES 1. Why do you suppose MNCs would be interested in providing EAP and other health and wellness services through GeoBlue? How do such offerings potentially enhance potential and current expatriate perceptions of organizational support?

As was presented in the chapter on managing international assignments, there is clear evidence that expatriates’ perceived support of their organizations has a very positive influence on their overall performance and assignment success, as well as successful repatriation. When MNCs provide effective EAP and other health and wellness services to expatriates and their

accompanying family members, this practice can greatly add to perceptions of support and caring, whether or not those services are fully utilized.

2. How does the external structure for the provision of these personal care services enhance employee confidence in confidentiality?

When the EAP services are offered off-site from the organization and by an external trusted, professional source, there tends to be a greater perception of confidentiality for expatriates and family members, where minimal personal information of expatriates can become internal knowledge within the organization.

3. Would you say the arrangement of these outsourced employee care services make internal ER professionals’ work easier or more complicated? Explain.

Although an external arrangement for the provision of these EAP and health-related services provides an additional layer of complexity for management, the professional specialization of these outsourced services allows MNC managers to focus only upon ER and performance-related issues of expatriates and other employees, thus simplifying the MNC managers’ work while providing better personal and health-related services.

ASSIGNMENTS AND ACTIVITIES FOR FACILITATING STUDENT ENGAGEMENT 5. Brief Videos on Current Employee Relations Issues and Challenges: For class discussion on current international ER issues and challenges (e.g., modern slavery, forced labor, child labor, workplace discrimination, health and safety in foreign manufacturing operations), consider using effective brief videos available on YouTube that can easily be shown in class or assigned for outside-of-class review. These videos can provide a compelling topic introduction and presentation of relevant chapter information to spark useful class discussion, or can be assigned for individual student presentations or written reports.

6. Team Presentation on International ER Best Practices: As a team assignment for eventual presentation and discussion in class, students select a major MNC (after checking MNC websites that describe their corporate social responsibility/sustainability activities related to the ER of their global workforce) and examine the MNC’s effective practices in global ER. Besides studying information on the selected MNC’s website, students also should do a thorough Internet search of the MNC related to their international ER practices to confirm or possibly differ from the claims on the website. Following the team presentations, the instructor should lead a discussion summarizing best practices in international HR based on insights gained from this analysis of multiple MNCs. 7. Working Toward Effective Management of Diversity, Equity, and Inclusion (DEI) Across the Global Workforce: As discussed in the textbook, the effective management of DEI across an organization’s global operations requires patience, awareness, and sensitivity to local cultural norms, values, expectations, and regulations. For example, overt company LGBTQ+ policies and practices of inclusion may be a cause of significant discontent and conflict, or even legal action in some MNC developing country operations. As an in-class or

outside team assignment, ask student teams to pick some DEI issue, such as surrounding gender inequality, religious or racial/ethnic differences, or sexual orientation (e.g., when an expatriate is joined on a foreign assignment with a same-sex spouse/partner), and review literature on a specific developing country to identify and present to the class insights about necessary adjustment, at least in the short-term, of MNC DEI policy to fit the requirements of the selected local country environment. Ask the students to also note findings that actually are different than what they were expecting, such as more favorable laws and expectations for women in Saudi Arabia (e.g., they can now drive a car), and for women expatriates in particular.