Transcript Document
chapter twenty
Human Resource Management
McGraw-Hill/Irwin
International Business, 11/e
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
Recognize the importance of creating a company
“global mindset”
Understand the relationship between competitive
strategies and HR management approaches
Compare home country, host country, and third
country nationals as IC executives
Understand the difficulties of finding qualified
executives for international companies (IC)
Understand what an expatriate is and the
challenges of and opportunities of an expat
position
20-3
Learning Objectives
Realize the increasing importance of
accommodating the trailing spouse of an
expatriate executive
Remember some of the complications of
compensation packages for expatriate executives
20-4
The Global Mindset
• Expatriate
– A person living outside citizenship country
• Global Mind-set
– A mind-set that combines an openness to
and an awareness of diversity across
markets and cultures with a propensity and
ability to synthesize across this diversity
20-5
International HRM Approaches
• Ethnocentric
– Hiring and promoting employees on the basis of
parent company’s home country frame of reference
• Polycentric
– Hiring and promoting employees on the basis of
specific local context of the subsidiary
20-6
International HRM Approaches
• Regiocentric
– Hiring and promoting employees on the basis of the
specific regional context of the subsidiary
• Geocentric
– Hiring and promoting employees on the basis of
ability and experience without considering race or
citizenship
20-7
Strategic Approach, Organizational Concerns, and the
International Human Resource Management Approach to
Be Used
20-8
Recruitment, Selection and Training
• Parent Country National (PCNs) or Home
Country National
- Study of language and culture
• Host Country National (HCN)
– Hired in the host country
• Third Country National
20-9
Recruitment, Selection and Training
• Third Country National (TCN)
– May accept lower wages and benefits than will
employees from the home country
– May also come from a culture similar to that of
the host country
– May have worked for another unit of the IC and
be familiar with policies, procedures and people
– Common approach in developing countries
– May not be welcome by host country
– May come from an international agency
– Greater use as companies take geocentric view
20-10
Expatriates
• Family
– Nine of ten expatriate failures family-related
– Unhappy spouses major reason for early return
– Company losing a “million-dollar corporate-training
investment” in executive
20-11
Language Training
• Language Trap
– International business person speaks only
home language
– English language has become lingua
franca
– Chinese new “hot” language to know
20-12
Expatriate Services
• Health care programs to assist
companies and expatriates with
– Claims administration
– Language
– Translations
– Currency conversions
– Service standardization
– www.ExpatExpert.com
– www.branchor.com
20-13
Expatriate Services
• Banking services
– Online, 24-hour assistance
• Training
– Culture and language
• House hunting, utilities hook up, grocery and hardware
shopping, long-distance care for relatives, schools,
organizations, and cultural items
20-14
Compensation
Salaries
Paying home country nationals the same
salaries as their domestic counterparts
permits worldwide consistency
bonuses
Increasing use of third country nationalsoften treated like PCNs
Trend to pay HCNs same base
20-15
Total compensation Costs for Sending an
Expatriate American Manager to Russia
20-16
Allowances
• Housing Allowance
– Permits executive to live at same standard as at home
• Cost-of-Living Allowance
– Based on differences in price of food, utilities,
transportation, entertainment, clothing, personal
services, and medical expenses as compared to home
• Allowances for Tax Differentials
– Ensures expatriates will not have less after-tax pay at
home
20-17
Allowances
• Education Allowances
– Insures children receive education equal to that at home
• Moving and Orientation Allowances
– Household effects and language instruction
20-18
Ranking of 50 Cities from Most to
Least Expensive, 2006
20-19
Bonuses
• Bonuses
– Expatriate employee compensation
payments in addition to base salary and
allowances because of hardship,
inconvenience, or danger
– Bonuses include
• Overseas premiums
• Contract termination payments
• Home leave reimbursement
20-20
Compensation Packages
• For expatriate employees, packages
incorporate many types of payments or
reimbursements and must take into
consideration exchange rates and
inflation
20-21
Hardship Differential Pay Premiums for
Selected Cities and Countries, 2006
20-22
Compensation Packages
Can Be Complicated
• Allowances and percentage of base salary are
usually paid in host country currency
– Percentage usually 65 to 75 percent, with remainder
banked where employee directs
• What Exchange Rate?
– Must be chosen
– More difficult in countries with exchange controls and
nonconvertible currencies
20-23
Compensation of Third
Country Nationals
• Trend toward applying the same
compensation plan to third country
nationals as home country expatriates
• Problems can arise in
– The calculation of income tax differential
when American expatriate compared with
expatriate from another country
– Home leave bonus
20-24
International Status
• Entitles expatriate employee to allowances
and bonuses applicable to the place of
residence and employment
• Perks
– Compensate executives while minimizing taxes
• Private pension plan
• Retirement payment
• Life Insurance
• Hidden slush funds (can be illegal)
• Club membership
• Company house
• Foreign affiliate directorship
20-25