Week 10

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Select one of the following case studies (located in your textbook):

  • Case 16-1: Sand by Saya: The Challenges of a Small Business Going Global.
  • Case 16-2: The Great Singapore Sale at Jurong Point: Finding and Retaining Bargain Employees.

Then complete the following:

  • Add your opinion about the choices and decisions being made—if this was your company, would you make this choice?
  • What would you do differently?

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Global Issues for Human Resource Managers

Chapter 16

Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

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Even if your company does not face direct competition from global competitors, businesses in the 21st century are still affected by global suppliers, partners, or customers for your company’s products and services.

Four types of capital flow between countries:

• Natural capital–Natural resources that are components of nature and can be linked with human welfare.

• Social capital–The social networks that support society such as social trust, norms and networks that create social cohesion.

• Manufactured capital–Human engineered and manufactured capital such as  tools and machines that are used to produce other assets.

• Human capital–The health and productive potential of people.

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Globalization of Business and HRM

Many businesses are affected by global suppliers, partners, or customers for their products and services.

Four types of capital flow between countries

Natural capital–natural resources linked with human welfare.

Social capital–social networks, like social trust, norms, and networks that create social cohesion.

Manufactured capital–human engineered and manufactured capital.

Human capital–health and productive potential of people.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Globalization may require you to interact effectively with people from many different cultural backgrounds: ‘as an employee’ with coworkers, suppliers, and customers; ‘as a customer’ in a local store; ‘as a student’ in college; and ‘as a consumer’ you use and buy products from other countries. Capital and goods flow easily between countries. Because of the ability to communicate instantly, services can generally be performed in the location where they have the lowest cost for the most efficient (not necessarily the best, but the most efficient!) service quality R.J. Reichard, S.A. Serrano, M. Condren, N. Wilder, M. Dollwet, and W. Wang, “Engaging in Cultural Trigger Events in the Development of Cultural Competence,” Academy of Management Learning & Education 14, no. 4 (2015): 461–481.

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Reasons for Business Globalization

Businesses must adapt and capitalize on technology that transcends distance and culture. Must also allow goods, people, and ideas to cross borders around the world.

Free flow of ideas, information, and knowledge has reshaped ways in which people view the world.

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Another reason businesses have reached beyond their own borders is the rise of the “global village,” with associated declining barriers to trade in goods, investment, travel, and communication.

Increase business. Let’s face it: Most large corporations want to continue to grow. If you are a major corporation like Coca-Cola, is there any place in America to expand? No, the market is saturated.

The global Village. The global village concept has become–in many ways–a reality. Essentially the entire world can see and interact with goods and services that were only available to others in “the village” a hundred years ago.

Declining trade barriers, GATT, and now the WTO. Another impetus for increasing globalization over the past 50 years was the changing disposition toward the use of tariffs and other trade barriers by country governments

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Declining Trade Barriers

The World Economy

Becoming mutually beneficial and essential for economic vitality to expand global trading partnerships.

During last 50 years, technology has dissolved barriers to world trade.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

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The Rise of Global Trading Relationships

Trade Blocs–groups of countries that form association to facilitate movement of goods across national borders.

Allow low cost (sometimes free) passage of goods between member nations.

Companies design facilities and component plants to overcome trade barriers.

If a domestic firm is competing against a global firm, economies of scale that favor the global firm will create a strategic advantage.

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Is HRM Different in Global Firms?

The more a business moves toward corporate globalization, the more complex its HRM needs.

Employees need to alter perceptions of HRM from local focus to broader concept of society as it relates to the following dimensions:

Staffing–home country, host country, or third-party employees require different sourcing, training, and compensation.

Training–orientation, culture and religion, language assimilation, management infrastructure need training modifications.

Employee and labor relations–differing country labor laws require HR to be aware of country labor laws.

Compensation–local wage trends and currency valuations require scrutiny standards of pay equity and fair distribution of benefits and pay incentives.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Examples of International Laws

China

Dispatch or “temporary” workers are limited to 10% of workforce.

Many employers require non-compete agreements.

Brazil

No at-will employment, so labor relations are regulated by national laws.

Overtime is required for more than eight hours per day or 44 hr a week.

Germany

Wages are often controlled through labor union negotiations.

Age discrimination is condoned in cases where employee is fully vested.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

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Are American Companies Bound by American Laws in Foreign Countries?

According to EEOC, employees working in U.S. or its territories are protected by EEO laws.

U.S. citizens who are employed outside U.S. by a U.S. employer or a foreign company controlled by a U.S. employer are protected by Title VII, ADEA, and ADA.

If an employee is U.S. citizen and employed by a foreign company in a country outside U.S., the laws of that country would apply and he/she would not be protected by U.S. EEO laws.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Corruption and Bribery in Foreign Countries

Many foreign countries accept corruption and bribery as common business practices.

To comply with U.S. business practices, the 1977 Foreign Corrupt Practices Act was instituted to bar U.S. based or U.S. listed companies from bribing foreign officials in exchange for business.

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International Ethics

Different cultures may have values and beliefs that result in various interpretations of ethical standards.

If a U.S. company ascribes to a code of ethics, employees should ethically apply those principles to any and all business situations.

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National Culture

Parochialism

Narrow-minded world view with an inability to recognize individual differences.

People who have lived in only one culture may not realize there are alternative options as it relates to values, beliefs, and culture.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Parochialism means having a narrow focus, or seeing things solely from one’s own perspective. Ethnocentrism is regarding one’s own ethnic group or culture as superior to that of others. Thus, a parochial view, which we will discuss again later, is part of ethnocentrism, which is a negative stereotype. Reichard, R. J, Serrano, S. A, Condren, M., Wilder, N., Dollwet, M., & Wang, W. (2015). Engaging in cultural trigger events in the development of cultural competence. Academy of Management Learning & Education, 14, 461–481.

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Hofstede’s Model of Culture

Geert Hofstede was an HR executive for IBM in the 1960s. As a trained psychologist, he developed a model of culture that addresses five primary dimensions widely used today:

Power distance–low versus high

Individualism versus collectivism

Masculinity versus femininity

Uncertainty avoidance–high versus low

Long-term orientation versus short-term orientation

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Hofstede’s model of national culture. Geert Hofstede is a trained psychologist who was hired in the 1960s by IBM (at the time, one of the few really global companies in the world with about 100,000 employees in more than 70 countries) to help them identify cultural differences within countries where they operated. His data allowed him to develop a model of national culture that is still widely used today. He originally identified five dimensions–each of which allows a country culture to be plotted along a continuum http://geert-hofstede.com/national-culture.html (retrieved August 1, 2017).

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Skills and Traits for Global Managers

International assignments require deeper analysis of how skills and traits can be adapted to a worldwide environment.

Companies may require previous international experience for employees taking international postings. Having such experience will help alleviate any “culture” shock.

Developing cultural awareness and sense of language will enable international employees to cultivate cultural currency.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Home, Host, or Third-Country Employees

Three traditional options for staffing international assignments:

Parent (home) country nationals–employees who work for organization in country where organization is headquartered.

Host country nationals–employees who live in a different country where a work assignment takes place.

Third-country nationals–employees with skill sets needed for international assignments but are not citizens of either home or host country.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Our next consideration is where we will source the individual from for an international assignment. We have three generic options, each of which may be the best in some circumstances:

Parent- (home-) country nationals–People who work for the organization in the country where the organization is headquartered.

Host-country nationals–People who live in a different country where a work assignment will take place.

Third-country nationals–People who happen to have a skill set needed for an international assignment but who are not citizens of either the home or host country.

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Ethnocentric, Geocentric,
or Polycentric Organizations

Ethnocentric organizations tend to believe their values and culture are superior to others and choose to staff international operations with home-country managers.

Geocentric organizations believe in managing globally, using best people worldwide. Involves use of third-country nationals, parent, and host country employees.

Polycentric organizations emphasize adapting to local culture and practices while using mostly host-country employees.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Outsourcing Alternatives

Outsourcing–process of hiring another organization to do work that was previously done within host organization.

Offshoring–associated with outsourcing assigned to a particular country.

Companies, such as Nike, do not own manufacturing facilities and outsources. So, they often offshore all of their products.

Onshoring–process of shuttering operations in other countries and bringing work back to home country to stimulate employment.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Developing and Managing
Global Human Resources

To achieve HR success on a global scale, companies must select right individuals, train appropriately, and support with resources.

International assignments different considerations.

Recruiting and selecting internationally

Negotiating assignments

Tax consequences

Relocation expenses

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Ultimately, in many industries at least, the company will consider international operations of some type to gain a competitive advantage over its competitors. And along with the creation of an international presence, the complexity of the firm goes up even more. This is the point at which HR must become a different and more complex department. International operations require us to rethink every major function in HRM. For example:

Staffing. Home-country, host-country, and third-party employees all require different sourcing, training, disciplinary actions, and compensation and may require many other differences in management.

Training. From orientation to culture and religion, to language problems and managing infrastructure, training will need to be modified. For instance, safety training will need to be provided in multiple languages in many cases, and it will have to be accomplished so as to comply with multiple country laws and regulations.

Employee and labor relations. Different countries’ laws concerning employee relations require HR to become competent in legal issues where the company operates. Many countries’ labor laws are strongly oriented toward protection of the individual employee–much more so than in the United States–and the HR manager must become competent in all of these legal differences. In addition, cultural attitudes and national laws also affect when and how employees are disciplined.

Compensation. Should the company pay local average wages, home-country average wages, or other wage levels? How do incentives work with employees from different cultures?

These are just a few of the many issues that must be taken into account as we move from a single.

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Expatriate Training Considerations

Expatriates are employees who leave home country to work in another country.

Costs of training and preparing expatriates are high. No guarantees employees who achieve success domestically will prosper elsewhere.

To ensure success, there must be preparation in culture and communication.

Due to inadequate preparation, U.S. employers have not experienced much success in placing American workers overseas. Japanese and German companies have been sending workers to the U.S. for decades and established structured approaches to expatriates and repatriation.

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

Compensating a Global Workforce

Pay, benefits, and incentives take different dynamics for a global workforce.

Considerations include cost of living adjustments and pay differentials. These alternatives should be considered:

Balance sheet approach

Split pay approach

Negotiation approach

Localization approach

Lump sum option

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Lussier, Human Resources Management 3e. © SAGE Publications, 2019.

The obvious first question about compensation in a global environment is whether compensation in various countries needs to be different and, if so, why and how do we compensate a global workforce fairly.

Balance sheet approach. The most common method to manage expatriate compensation is called the balance sheet approach. Using the balance sheet approach, the organization continues to pay the individual at a rate equivalent to their home-country salary, and usually in their home currency, while providing allowances during an overseas assignment to enable that employee to maintain their normal standard of living. Obviously, this is only necessary when an individual is moving to a higher-cost environment and out of their home country.

Split-pay approach. A variant on the balance sheet approach is to use split pay. In fact, about half the organizations in a recent survey said that they use split pay as at least part of their compensation strategy. Split pay is a process where the organization pays the individual partly in home-country currency and partly in the currency of their work location. This allows the individual to lower currency exchange rate risks in moving money from one location to another and to pay obligations in both their home location and their work location much easier than if all their pay were in one currency.

T. Shelton, “Global Compensation Strategies: Managing and Administering Split Pay for an Expatriate Workforce,” Compensation and Benefits Review (Jan/Feb 2008), 40, pp. 56–60.

ORC Worldwide, 2006 Worldwide Survey of International Assignment Policies and Practices, (New York, NY: ORC, 2007).

Local-Plus Approach. In this option, the employee will receive compensation based on the host country’s ordinary pay structures, and then receive allowances to allow them to more closely match their living standard in their home country. So, for example, if the host country has similar salary structures, but much higher taxes, the employee will get an allowance to help pay the higher tax costs. The same can be done for housing, educational assistance, transportation, etc.

Herod, R. (2017, May 15). Local-plus expatriate policies are on the rise. SHRM, https://www.shrm.org/resourcesandtools/hr-topics/global-hr/pages/local-plus-expatriate-policies-are-on-the-rise.aspx , retrieved August 1, 2017.

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The Worldwide Labor Environment

Demands for union representation and fair labor practices are gaining greater emphasis in global environment.

Effects are evident in developing countries as they expand globally:

China

Brazil

South Korea

Czech Republic

France

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