Business Explain: Global Human Resource Management

How can organized labor influence strategic choices in international business?

A firm's ability to integrate and consolidate its global operations to realize experience curve and location economies can be limited by organized labor, thus constraining the pursuit of a transnational or global standardization strategy.
Concerns of organized labor

Labor unions generally try to get better pay, greater job security, and better working conditions for their members through collective bargaining with management. Can refuse to go to work if they don't get their way.

Another concern of organized labor is that an international business will keep highly-skilled tasks in its home country and farm out only those low-skilled tasks to foreign lands. The Bargaining power of organized labor is reduced.

When an international business attempts to import Employment Practices in contractual agreements from its home country, these practices are alien to the host country, organized labor fears the change will reduce its influence and power.

Strategy of organized labor

Organized labor has responded to the increased bargaining power of multinational corporations by taking three actions:
1. Trying to establish international labor organizations.
2. Lobbying for national legislation to restrict multinationals..
3. Trying to achieve international regulations on multinationals through such organizations as the US.
These efforts have not proven any success.

Approaches to labor relations

The main differences in approaches between international businesses is the degree to which labor relations activities are centralized or decentralized. There is now a trend towards more centralized activities, although historically they have always been decentralized. Firms are beginning to understand that much of the competitive advantage can be found in the organization of a plant.

How and why can performance appraisal systems vary across nations?

Performance appraisal systems are used to evaluate the performance of managers against criterias that the firm believes to be important for the implementation of strategy and to maintain competitive advantage. It is an important part of a firm's control system, which is directly related to the organizational architecture.

Most commonly, two groups evaluate expatriate managers; host-country managers and home-country managers, who both are subject to bias. Host-country managers are often biased by their cultural frame of reference and expectations, while home-country managers rely much on hard data since they lack knowledge of what is going on in foreign operations.

Several things can reduce bias in the appraisal process, such as promoting that more weight should be given to an on-site manager's appraisal than an off-site one. The on-site is more likely to evaluate the "soft" variables (relationship with workers, culture,etc.) ["hard" = numbers, profits, computer based]. Cultural bias may be eliminated if manager and on-site manager has same nationality.

How and why can compensation systems vary across nations?

Compensation should be adjusted to reflect national differences in economic circumstances and compensation practices. So how should a firm pay its expatriate managers?

Should the pay be equalized on a global basis or paid according to prevailing standards in each country?

Many firms use a global standard today. The balance sheet approach equalizes purchasing power across countries so employees can enjoy same living standard in their foreign posting as they did at home. The components of the typical expatriate compensation package are a base salary, foreign service premium, allowances, taxation and benefits.

How can management development and training programs increase the value of global human capital?

These two processes involve educating employees to give them new skills and competencies that are required for certain positions in foreign positions. Once the employees are abroad, they improve their cross-cultural literacy while simultaneously attaining new skills from the host-country. Finally, moving employees around creates a strong informal network for sharing information and knowledge within the firm. All of these things help a firm achieve its strategic goals, thus increase the value and profitability of the firm.

Why do managers fail to thrive in foreign postings?

Expatriate failure is the premature return of an expatriate manager to his or her home country. The reasons for this happening are multiple, but often related to the manager's or managers partner's inability to adjust in the foreign country.

Especially the partner may find it difficult to settle in a new environment if regulations prohibit them from working and therefore find it harder to make new friends.

Critical features of an individual who is to settle down in a new environment is strong self-esteem and confidence. He or she should be able to orientate amongst new people and have a willingness to communicate perhaps even in the host country language. Furthermore, the perceptual ability is a critical feature; whether an individual can empathize, be nonjudgmental and non evaluative in interpreting the behaviour of host-country nationals.

In conclusion, a global mindset is the ultimate attribute of a global manager.

What are the pros and cons of different approaches to staffing policy in international business?

Ethnocentric approach

Key management positions are filled by employees of same nationality as the firm. Why?

→ They may believe the host country lacks qualified individuals to fill senior management positions.
→ The best way to maintain a unified corporate culture
→ If the firm is trying to create value by transferring core competencies to a foreign operation, it may believe that the best way to do it is to transfer parent-country nationals who have knowledge of the competence to the foreign operation.

The ethnocentric approach could limit advancement opportunities for host-country nationals due to resentment resulting in lower productivity. It can also lead to cultural myopia (=the lack of interest in learning/seeing the good in other cultures)

Polycentric approach

Requires host-country nationals to be recruited to manage subsidiaries while key positions at corporate HQs have home-country nationals filling positions.

The firm is less likely to suffer from cultural myopia with this approach and it is also less expensive to implement.

On the other hand, host-country nationals have limited ability to gain experience outside their own country and cannot progress beyond senior positions.

Geocentric approach

When the firm seeks the best people for key positions throughout the organization, regardless of nationality, which is the most common approach. It makes the best use out of its human resources and helps the firm build a cadre of international executives who feel at home working in different cultures.

What is the strategic role of human resource management in international business?

People are the center of a firm's organizational architecture, and for a firm to outperform its rivals in the global marketplace, the right people must sit on the right positions. The human resource management function has critical impact on the people of a firm through the use of staffing, training, compensation, and performance appraisal activities.

HRM can be a critical source of high productivity and competitive advantage in global economy. It also has a critical role to play in implementing a firm strategy.