Transcript Slide 1

COURSE: GLOBAL BUSINESS MANAGEMENT
MGT610
DR. DIMITRIS STAVROULAKIS
PROFESSOR OF HUMAN RESOURCE MANAGEMENT
DEPT OF ACCOUNTING
TEI OF PIRAEUS
Unit 8: Expatriate Management &
Global Leadership
Expat assignments
The 20 Most Expensive Cities
to Live in the World: 2010
1. Moscow
11.Milan
2. London (2009: #16)
12.St. Petersburg
3. Seoul
13.Paris
4. Tokyo (2009: #1)
14.Singapore
5. Hong Kong
15.New York City (2009: #8)
6. Copenhagen
16.Dublin
7. Geneva
17.Tel Aviv
8. Osaka
18.Rome
9. Zurich
19.Vienna
10. Oslo
20.Beijing
The 30 Most Expensive Cities
to Live in the World as an Expat: 2010
1. Tokyo
11.Bern
2. Oslo
12.Basel
3. Luanda
13.Libreville
4. Nagoya
14.Helsinki
5. Yokohama
15.Moscow
6. Stavanger
16.Paris
7. Kobe
17.Abidjan
8. Copenhagen
18.Abuja
9. Geneva
19.Tel Aviv
10. Zurich
20.Seoul
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
Stockholm
Jerusalem
Kinshasa
Vienna
Brussels
Berlin
Canberra
Rio de Janeiro
New York
Sydney
Best expat development
Germany
Canada
Spain
Least popular expat
experience
UAE
China
Best for wealth, luxury &
accommodations
Singapore
UAE
USA
(2008)
Best salaries
India
Hong Kong
.
Identifying International Managers:
Parent Country Nationals
 Expatriate managers who are citizens
Home-country Nationals
of the country where the MNC is
headquartered, with a more than 1year tenure. Sometimes called
headquarters nationals, or ParentCountry Nationals (PCN).
 Separation allowance: Payment of
overseas premium to employees who
take on foreign assignments without
families. Generally covers all excess
expenses plus tax differential.
 When their assignment is completed
and they come back, they are called
thereafter repatriates.
Pros & Cons of PCN
Advantages:
 Impose the HQ policy and exercise control over subs.
 Share a common culture and educational background.
 Facilitate communication and coordination with the HQ.
Disadvantages:
 Lack of knowledge about the host country (culture, language,
customs, market, business environment).
 Cost of an expat may rise up to 200% of his/her salary at home,
as it includes housing, school, travel, spousal allowances.
 Some countries scrutinize foreign employees and pose limits
concerning their number.
Identifying International Managers:
Host Country Nationals (HCN)
.
 Local managers hired by the MNC.
 They are familiar with the market,
language & culture.
Home-country Nationals
 They are less expensive than home-
country personnel
 Hiring them is good for public relations
Host-country Nationals
 In certain countries skilled personnel is
hard to find.*

HCN may be not familiar with the
corporation culture and practices.
 Communication problems with the HQ
may arise.
Identifying International Managers:
Third-Country Nationals (TCN)
.
Home-country Nationals
 Expats from one country working for a
foreign MNC in a 3rd country (e.g. an
Indian working for IBM in Korea).
 Particularly useful in countries of low
social capital (Saudi Arabia, Turkey).
 Their cost is lower than the respective of
Host-country Nationals
PCN.
 Experts in their field & adjustable to
international environments.
Third-country Nationals
 They are familiar with the company
culture and practices.
 May cause resentment among locals, as
they limit chances of HCN to promotion.
Identifying International Managers:
Inpatriates
.
Home-country Nationals
 Individuals from a host country who
are assigned to work in the HQ
 The use of inpatriates recognizes the
need for diversity at the home office
Host-country Nationals
 Employment of inpats helps MNCs to
develop global competencies
Third-country Nationals
Inpatriates
Expat management trends
 Microsoft, Siemens & Morgan Stanley among others have been
shifting more and more activities to Russia, China & India, where
they can find skilled, highly trained employees at considerably
lower salaries than in their home country.
 Number of expatriates per country varies according to the
domestic social capital. Among the USA MNCs, more than 60% of
employees are American in Saudi Arabia, but less than 1% is
American in Europe-based subs.
 The right mixture of PCN and HCN has to be discovered. For
example, Unilever since the 30s had been developing competent
HCN to replace costly PCN. However, it soon discovered that the
cultural glue holding together the firm was dangerously diluted.
 By the time of creation of a new sub, the number of expats is very
high. Subsequently it decreases, as local managers become
familiar with operations. Thereafter it increases again, as local
operations are incorporated within a global framework and
experienced managers are required. Finally the number slumps,
as competent managers are developed at the local level.
 Expats are eminent in the host country as “the people from HQ”,
therefore they have to retain their status and image.
International Experience & Promotions
 In most MNCs international experience is indispensable for
promotion. In Colgate-Palmolive, Cargill, ExxonMobil, 3M, and
IBM it is important to have international assignments early in a
person’s career. Astra Zeneca encourages by all means employees
to go international.
 Michael Angus, CEO of Unilever said: “Most people who rise
toward the top of our business will have worked in at least two
countries, probably three. They will probably speak another
language and they most certainly will have worked in different
product areas.”
 Few MNCs today limit their search for senior-level executive
talent to their home countries: Bank of America former CFO Al de
Molina began his ascent to the top in his native
Cuba.
USA is the most global corporate country in the world:
 Business programs of famous schools (Harvard, Stanford, MIT)
are attended by foreign students at percentages ranging from 26%
to 38%.
 US Corporations actively promote executives with diverse cultural
backgrounds:
o Five CEOs of Coca Cola had been foreign, including the present
Turkish-born Muhtar Kent. In addition, eight of its top nine line
executives are from outside the U.S.
o
Medtronic: CEO Omar Ishrak grew up in Bangladesh.
o
Avon: CEO Andrea Jung is Chinese-Canadian.
o 3M: George Buckley, CEO, will be succeeded by Swedish-born
Inge Thulin. Half of 3M's executive committee comes from outside
America.
 By contrast, CEOs and executives of leading companies in
Germany, India, Korea, Japan and China are almost all natives of
their home countries.
Women expats
 PepsiCo: Indira Nooyi (53) CEO since October 1,
2006. A Madras native and graduate of the Yale
School of Management, Nooyi said she is “humbled”
to be chosen as CEO by the PepsiCo board after
serving since May 2001 as President and CFO*.
 Even though women compose 49% of the MNC workforce in the
USA, only 6% are expats (or 13% according to another survey).
 A survey (“Passport to Opportunity: U.S. Women in Global
Business”) found that respondents believed women aren’t as
internationally mobile as men; yet 80% of female expatriates said
they’ve never turned down a relocation assignment, compared
with 71% of men. Inaccurate stereotypes may account for much
of this discrepancy.
 Certain cultures are rather anti-feminist (Japan, China,
Singapore, Hong-Kong), where it might be difficult for locals to
take orders from a woman.
Expats are sent abroad in order to perform the following tasks:
 CEO, Director or General Manager of a sub.
 Structure Reproducer: A person sent abroad in order to
duplicate (start-up) the domestic operation in a foreign country.
 Technical Expert
 Troubleshooter: Sent abroad to solve business or personnel
problems.
 Operative: Sent abroad to perform functional tasks (accounting,
sales, manufacturing) usually as a supervisor.
Another classification focuses on expat roles (Harzig):
 The bear is responsible for ensuring application of decisions
made in the HQ.
 The bumble-bee undertakes to vaccinate the sub with company
culture and to socialize local employees. To this end, Unilever
encourages mobility of employees from country to country.
 The spider has to weave an informal communication network
within the sub, but also between sub and HQ, as well as between
subs.
Selection Criteria for International Assignments
General Criteria
.
Adaptability

Education

Decision skills

Knowledge of local language
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Self-reliance

Cultural sensitivity
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Physical & emotional health
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Motivation

Age

Support of spouse & children
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Experience

Coaching capabilities

Resourcefulness

Negotiating skills
Decision for International Assignment
Self Evaluation and Preparation (1)
.
 Focus on self-evaluation and general awareness
Phase I
include the following questions:
Is an international assignment really for me?
Does spouse and family support the decision to go
international?
 Collect information on job requirements
Decision for International Assignment (cont)
Self Evaluation and Preparation (2)
.
 Conduct a technical skills assessment – Do I have
the technical skills required for the job?
 Get the approval of the company. In many MNCs
Phase I
Phase II
the whole family has to undergo interviews by a
committee with the participation of representatives
from the host country. The candidate is also
submitted to psychological tests, and may be
examined by Assessment Centers.
 Start learning the language, customs, and etiquette
of destination country
 Develop an awareness of the culture and value
systems of the geographic area
Decision for International Assignment (cont)
Self Evaluation and Preparation (3)
.
Phase I
 Attend training sessions organized by the company.
 Confer with colleagues who have had experience in
the assigned region.
Phase II
 Visit the host country with spouse & kids before the
formally scheduled departure.
Phase III
Expat Training
 Should begin 9–12 months in advance of the assignment. Besides
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the modules described below, additional courses may be offered.
Even though English is spoken worldwide, it is never enough.
Language training may be very costly. Siemens retains more than
400,000 employees abroad. Offers 10 language programs
consisted of 8 levels; each level requires attendance of 80-100
hours. International meetings of ABB executives are conducted in
English. Branches of Commerz Bank communicate in English.
At least some training should be offered to the expat family.
Local managers should also undergo training in order to adjust
with expats. They might offer additional training to expats too.
Components of expat training program:
 Cognitive level: Includes introductory issues and language
principles.
 Affective level: Aims at providing necessary psychological
and managerial skills through case studies, role-playing, and
critical incidents.
 Impression level: Includes a family visit to the target country.
Provides field experiences, insight into cultural nuances, and
.
.
extended language training.
Expat Training (cont)
Cornerstones of expat training in Matsushita (SMILE):
o Specialty: The needed skill, capacity, or knowledge.
o Management ability: The ability to motivate employees.
o International flexibility: Willingness to learn and ability to
adapt.
o Language facility
o Endeavor: Vitality and perseverance in the face of difficulties.
The Relocation Transition Curve
6. Search for Meaning
Perceived Competence
3. Interest
1. Unreality
The feeling that
the relocation
is a dream
A deeper
exploration of the
environment and a
realization that it is
fundamentally
different from home
2
2. Fantasia
The feeling of
enchantment
and excitement
in the new
environment
Beginning of Transition
.
6
4
7
7. Integration
of New Skills
and Behavior
Acceptance of the
new environment
5
3
1
Understanding reasons for
success and failure. New
models/personal theories
created
5. Experimentation and
Testing of New Approaches
Practice phase – trying to do things
differently Feedback of results –
success and failure
4. Acceptance of Reality / Cultural Shock
“Letting go” of past comfortable attitudes and
realizing you are a stranger in a strange land
Time
Factors backing expat success
Expatriate Failure
 Expatriate failure is the premature (and unwanted) return of an
expatriate manager to the home country.
 MNCs sometimes focus mostly on the technical background of
candidates, downplaying the role of personality.
 Strong support to the expat during the adaptation period is
necessary.
 Failure may be demonstrated through poor performance,
personal dissatisfaction, inability to adjust, lack of acceptance by
locals, inability to identify a local successor.
 Cost depends on the extent of failure and the status of the person
involved. Roughly estimated, an expatriate failure may cost
between $250,000 and $1 million, without including the impact
on overseas operations.
 The assumption that people everywhere respond in similar
fashion to the same images, symbols, and slogans has severely
hurt USA MNCs till recently. Between 16% and 40% of American
expatriates in developed countries fail; almost 70% of Americans
assigned to developing countries fail.
18-28
Rates Of Expat Failure
.
Reasons of Expat Failure
 The main reasons for U.S. expatriate failure are:
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The inability of an expatriate's spouse to adapt
The manager’s inability to adjust
Other family-related reasons
The manager’s personal or emotional maturity
The manager’s inability to cope with larger overseas
responsibilities
 The main reason for European expatriate failure is:

The inability of the manager’s spouse to adjust
 The main reasons for Japanese expatriate failure are:

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The inability to cope with larger overseas responsibility
Difficulties with the new environment
Personal or emotional problems
Lack of technical competence
The inability of spouse to adjust
.
The Global Mindset
Properties of the global executive (Barham and Heimer, 1998):
 Champion of international strategy
 Cross-border coach and mediator
 Intercultural mediator and change agent
Global mindset is more a way of being than a set of skills. Or, a
set of attitudes that predispose individuals to balance competing
priorities (business, country, functional) in iternational
situations. Global mindset in essense means balancing
perspectives.
“The global manager must not only be attentive to …
organizational cultures, values, and beliefs that reach well
beyond the manager’s own cultural, technical, and managerial
background, but she/he must also be a consummate reframer of
the boundaries of the world in which she/he works.” (Briscoe,
Schuler, 2004: 288).
.
The Global Mindset (cont)
The most essential experience towards acquiring a global mindset
is to live and work in more than one radically different cultures.
Cultural shock is an unpleasant necessity. John Pepper, former
CEO and then Chairman of the board of directors of Proctor &
Gamble stated: (reported by Briscoe & Schuler)
 “There are a few things that totally change your life, and
taking my first international assignment in Italy was just
that kind of experience. Of all the career changes that I have
had, the international assignment was the most important
and developmental. It changed me as a person.”
Nevertheless, proximity to a foreign culture through conventional
work does not suffice to this end. To develop cultural
competency, one must take deliberate steps to learn about
another country’s or culture’s practices and values. One must
make a concerted effort to learn about the deep values that
motivate people and provide the context for their actions*.