BSAD 310 Spring 2017 - CH 14

Chapter 14: Global Issues

for Human Resource Managers

2Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.

Globalization of Business and HRM

• The major factor increasing the complexity of the environment is the globalization of markets.

• There are significant cultural differences between countries and regions.

• In many cases, there are multiple cultures in a single country. All of this makes global business more challenging.


Reasons for Business Globalization

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

• Increase Business: If large corporations want to grow, they have to globalize.

• The Global Village: Refers to companies conducting business worldwide without boundaries

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Exhibit 14-1: Major Trade Agreements

Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.


Declining Trade Barriers and the World Trade Organization (WTO)

• The World Economy– Becoming mutually beneficial and

essential for economic vitality to expand global trading partnerships.

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


Declining Trade Barriers and the World Trade Organization (WTO)

• Declining Barriers of Distance and Culture– Communication to most parts of the world

today is instantaneous. – Individuals can travel from one part of the

world to another within a day.


The Rise of Trade Blocs• Trade Blocs

– Groups of countries that form associations to facilitate movement of goods across national borders.

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


The Rise of Trade Blocs• 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.


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 as it relates to the following dimensions:– Staffing – Home country, host country, or

third-party employees require different sourcing, training, and compensation.


Is HRM Different in Global Firms?

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

– Employee and Labor Relations – Differing country labor laws require HR to be aware of the variations.

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


Legal, Ethical, and Cultural Issues

• Legal, ethical, and especially cultural issues also have to be examined by companies considering global operations.

• International Labor Laws– Employment and labor laws in different

countries are highly complex. – An organization will need to do significant

research before moving any operations into another country to avoid violating that country’s labor laws.


U.S. Law• According to the EEOC, employees working in the

United States or its territories are protected by EEO laws.

• U.S. citizens who are employed outside the United States 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 a U.S. citizen and employed by a foreign company in a country outside the United States, the laws of that country would apply, and he or she would not be protected by U.S. EEO laws.


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.


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.


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.

• See Exhibit 14-2 on page 358.


Hofstede’s Dimensions of Culture

• Power-Distance – Low Versus High• Individualism Versus Collectivism• Masculinity Versus Femininity• Uncertainty Avoidance – High Versus

Low• Long-Term Orientation Versus Short-

Term Orientation


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.


Staffing Choices: 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


Advantages of Parent (Home) Country Nationals

• Generally have a better understanding of the organization, strategy, structure, and culture of the business.

• Allows managers to gain international experience

• More effective communication with parent-country management


Disadvantages of Parent (Home) Country Nationals

• Language differences may be a problem.

• Compensation may be more of a problem than with host-country nationals.

• Country culture may create barriers to success for employee and family.


Advantages of Host-Country Nationals

• Minimizes language and culture problems

• Compensation generally easier and based on local pay scale

• Less expensive than moving someone to the country

• Better understanding of local business laws, culture, and customs


Disadvantages of Host-Country Nationals

• Company culture and ways of doing business may create problems.

• May create more problems communicating with the parent office

• Loyalty to the country may outweigh loyalty to the company.


Advantages of Third-Country Nationals

• Can hire the best talent from wherever they are located

• May be less expensive than either parent or host-country managers

• May be more advantageous than parent country managers due to similar culture and/or language with host


Disadvantages of Third-Country Nationals

• Still may have company culture and business process issues

• Host-country government may create barriers to third-party managers.

• Income and other tax rules can be complex.


Exhibit 14-3: Advantages and Disadvantages of Parent, Host, and Third-country Nationals

Source: Dörrenbächer, C., Gammelgaard, J., McDonald, F., Stephan, A., & Tüselmann, H. (2013). Staffing foreign subsidiaries with parent country nationals or host country nationals? Insights from European subsidiaries (No. 74). Working Papers of the Institute of Management Berlin

at the Berlin School of Economics and Law (HWR Berlin


Outsourcing as an Alternative to International Expansion

• 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.


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 need different considerations– Recruiting and selecting internationally

• Negotiating assignments• Tax consequences• Relocation expenses


Expatriate Training and Preparation

• Expatriates: Employees who leave home country to work in another country

• Costs of training and preparing expatriates are high, with no guarantee that employees who achieve success domestically will prosper elsewhere.


Expatriate Training and Preparation

• Cultural Training– Preparing employees for expatriate

assignments will primarily be a training process in cross-cultural training.

– Culture shock can occur when we move from one culture to another.

• Communication Training– Expatriates require language training and

other communication types (verbal, nonverbal and symbolic).

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Exhibit 14-4: Culture Shock

Lussier and Hendon, Fundamentals of Human Resource Management. © 2017, SAGE Publications.


Repatriation After Foreign Assignments

• A series of steps need to occur to get an expatriate back into the home country work routine:– Reentry training– Job training into a position commensurate

with the employee’s level of expertise– Mentoring assistance– A show of appreciation for the employee’s

international service


Compensating Your 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


Incentives in Global Firms• Effective global leaders are a vital asset that

can offer a competitive advantage within organizations today.

• In some emerging-market countries, variable pay is a higher proportion of overall compensation than in most developed markets.

• However, in other countries, variable pay still has negative connotations, especially as an individual incentive.


Benefit Programs Around the World

• Benefit programs must adapt to the part of the world in which employees work and live.

• Some countries mandate certain benefits that are not required in other countries, and we have no choice but to offer them.

• In other cases, the living conditions may be such that different benefit packages just make sense.


Trends and Issues in HRM• Globalization of Business Is a Trend

– 59% of 1,200 CEOs in a survey said they plan to increase the number of their international assignments as part of their HR strategy.

• The Worldwide Labor Environment– Brazil’s labor regulations tend to favor the

employee over the employer and provide strong protection for unions.

– South Korea’s laws concerning labor relations are similar to those in the United States.