Human Resources Selection and Development

1. Human ResourcesSelection and Development Chapter 14

2. Sources of Human Resources • Home country nationals • Host country nationals • Third-country nationals • Inpatriates • Outsourcing

3. Expatriate • Any person who lives and works outside the country of which he/she is a citizen • Includes home-country nationals, third-country nationals, and inpatriates • In most countries, expatriates must have work visas from the government of the country where they live & work

4. Home-country Nationals • Are citizens of the country where the MNC is headquartered but live & work elsewhere • Often used • To start up operations (most common reason) • To provide technical expertise • To help the MNC maintain financial control over the operation • In top management positions

5. Host-country Nationals • Citizens of the country where they live & work • They are familiar with the culture and know the language • They are less expensive than home-country personnel • Host-country governments often prefer use of host-country nationals and some require it (nativization) • Hiring them is good public relations • U. S. companies tend to rely heavily on host-country nationals

6. Third-country Nationals • People who are citizens of neither the home country or the host country • Example: A Mexican, employed by an American company, working in Argentina • The employee's native country and the country where he works are often in the same geographic region

7. Advantages of Third-Country Nationals • They often require less compensation than home-country nationals • If they are from the same geographic region as the host country and also know the company's culture, they can often achieve objectives better than other types of managers • Have cross-cultural skills • Provide a global or transnational image

8. Inpatriates • Persons who work in the home country and are citizens of a different country • Advantages of inpatriates • Help to develop global core competencies • Provide diversity and an international perspective in the home office • Improve career opportunities for company managers who are not from the home country

9. Outsourcing • Buying goods or services from a firm in one country for use in another • Can significantly reduce overhead & labor costs • Quality and timeliness are sometimes problems • Can create public relations problems in the home country • Job losses in the home country • Abuse of foreign workers by overseas contractors • Liability issues from unsafe products

10. Adaptability to change Independence Self-reliance Physical & emotional health Age Experience Education Knowledge of local language Motivation Adaptability of spouse and family Leadership skills Criteria for Selecting Managersfor Overseas Assignments

11. Adaptability to Cultural Change • Work experiences with cultures other than one’s own • Previous overseas travel • Knowledge of foreign languages • Recent immigration background or heritage • Ability to integrate with different people, cultures, and types of business organizations

12. Adaptability to Cultural Change (2) • Ability to sense and accurately evaluate events in the host country • Ability to solve problems within different frameworks and perspectives • Sensitivity to differences of culture, politics, religion, and ethics • Flexibility in managing operations on a continuous basis despite lack of assistance and gaps in information

13. Indicators of Successful Adaptationto Another Culture • Feeling comfortable that their work challenges can be met • Being able to adjust to new living conditions • Learning how to interact well with host-country nationals outside of work • Feeling reasonably happy and being able to enjoy day-to-day activities

14. Adjustment to Another Culture • Anticipatory adjustment occurs before the foreign assignment begins • Results from training and previous experience • In-country adjustment starts when the employee begins to work in the new country.

15. Factors in In-country Adjustment • Individual’s ability to adjust effectively • Ability to maintain a positive outlook, interact well with host nationals, and to perceive and evaluate the host country’s cultural values and norms correctly • Clarity of expatriate’s role in the host management team • Expatriate’s adjustment to the organizational culture • Non-work matters, such as how well the expatriate's family adapts

16. Selection Procedures • Both technical competence and adaptability should be considered • Interviews are a common selection tool. • Both the employee and the spouse may be interviewed • Home-country and host-country interviewers may be used • Adaptability screening: the process of evaluating how well the employee's family is likely to stand up to the stress of overseas life

17. Selection Procedures (2) • Adjustment model: explains the factors in successful adjustment to the employee and sometimes the spouse • Some employees withdraw from consideration • Psychological testing of the employee • Used less often than interviews • Many managers believe that interviews are more effective than testing.

18. Compensation • Compensating expatriates can be difficult because there are many variables to consider • Most compensation packages are designed around four elements: • Base salary • Benefits • Allowances • Taxes

19. Compensation Details • Base salary: the amount of money that an expatriate would receive for doing the same job in the home country • Used as a basis to establish salary in the host country • Serves as benchmark against which bonuses and benefits are calculated • Salary may be paid in home country currency, host country currency, or a combination of the two

20. Compensation Details (2) • Benefits: a substantial portion of expatriate compensation • Is the home country or the host country responsible for the expatriate's social security benefits? • Should home-country benefits programs be available to host-country nationals?

21. Compensation Details (3) • Allowances • Relocation allowance • Cost-of-living allowances are paid when the employee must incur extra costs that he would not pay in the home country • Examples: housing allowance, and the costs of private schools for the employee's children • Hardship allowance: Often paid to employees who work in a country with difficult living conditions

22. Compensation Details (4) • Allowances (continued) • Foreign service premium • In the past, a foreign-service premium was often a monthly payment that continued as long as the employee worked overseas • Many firms have eliminated the ongoing foreign-service premium. • Today, a one-time, lump sum foreign service premium is often paid at the start of the overseas assignment to provide cash for immediate expenses.

23. Compensation Details (5) • Taxes • An expatriate may be required to pay income taxes to both the host country and his/her native country • The company compensates the employee for the extra amount of tax

24. Compensation Details Summary The cost of an expatriate employee = salary costs + benefit costs + allowance costs + tax costs

25. Compensation Approaches • The compensation package must be cost-effective and should be seen as fair • Balance-sheet approach: ensure that the expatriate does not lose money from the foreign assignment • Complementary (negotiation) approach: Negotiate compensation with each employee • Localization: Pay the expatriate a salary comparable to local nationals

26. Compensation Approaches (2) • Lump sum method: give expatriate a pre-determined amount of money. Employee decides how to spend it. • Cafeteria approach: Offer the employee a choice among various compensation options, with a limit on total costs • Regional system: Set up a compensation system for all expatriates who are assigned to a particular region

27. Expatriate Motivations forAccepting a Foreign Assignment • Greater demand for their talents abroad than at home • Enhancement of an international business career • Attraction of living overseas • Motives are affected by occupation and by the home country of the employee

28. Desires of Host-Country Employees • Usually prefer local managers • They set such high levels of expectation regarding the desired characteristics of expatriates that anyone sent by the MNC is unlikely to measure up

29. Repatriation of Expatriates • Reasons for returning to the home country • Most expatriates return home when their agreed-on tour of duty is over • Some want their children educated in a home-country school • Some are not happy in the overseas assignment • Some return early because they failed to do a good job

30. Repatriation of Expatriates (2) • Readjustment problems • “Out of sight, out of mind” syndrome: the expatriate may not have been considered for jobs that he/she could do well • Organizational changes may have: • eliminated the jobs for which the expatriate is well-qualified • reduced the importance of the expatriate's position or department • The new job may be seen as a demotion.

31. Repatriation of Expatriates (3) • Readjustment problems • Technological advances may have made the expatriate's skills obsolete • The former expatriate may not have an opportunity to use skills gained abroad. • The former expatriate's salary and benefits may be lower than they were abroad. • The former expatriate has to readjust to home-country culture and adjust to a new job

32. Repatriation of Expatriates (4) • Transition strategies: Help smooth the adjustment from an overseas to a home-country assignment • Repatriation agreement: addresses the concerns of the individual and the company before the foreign assignment begins. • Keep the expat involved in home office communication and projects during the foreign assignment. • Appoint a higher-level manager as a career mentor for the expatriate (helps to avoid "out of sight, out of mind" problem).