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Case 5

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Miranda Burnes

on 24 October 2013

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Transcript of Case 5

Question 1
Case 5
Question 2
Question 3
Question 4
Question 5
Local and international?
Managing complex employment expectations.

Kate Mudge 3130796
Miranda Burnes 3111044

Case Recap
Case summary
Akiko Nishimura
- Expatriate employee
- Currently on an expatriate assignment in India
- Wants to organise a new expatriate assignment with the same company to Singapore
Puja Malik
- HR manager for the company
- Explains to Akiko new company policies regarding expatriate assignments
- Akiko no longer eligible for full expatriate contract
- Instead offered a new 'local international contract' which provides much fewer benefits
Key Issue
Policies Regarding Expatriate Assignments have been changed
New 'Local International' Policy
more cost effective solution to international transfers of employees that don't meet stricter expatriate program requirements
Policy not deemed as fair for employees = reduced satisfaction and increased employee turnover
Solutions
Describe the content of a 'traditional' expatriate package, and the reasons of the company to provide such benefits. What limitations do you see in this contract when it comes to handling the company's emerging needs?
Content of a 'traditional' expatriate package
Reasons of the company to provide such benefits
Limitations in this contract when it comes to handling emerging needs
Make a SWOT analysis of the Local International policy using information from the case
Local International Policy
Compensation Approach
SWOT Analysis
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
Compare the employers' and employees' needs regarding international mobility on a local international contract. What elements would have to be included in a package if they were to answer these needs.
Employer
Needs regarding International mobility
Employee
Elements to include in package to meet needs
To what extent do you believe the distinction between the three groups of assignment packages to be fair?
Comparison of Packages
Equity Theory
Referent Others
Procedural Justice
Fairness of
Process
What can the company do to provoke positive behavioural intentions in relation to packages?
What does the company need to take into consideration in order to make the Local International Policy for this new international employee population be applicable on a global basis? Formalize your arguments and propose a suggestion of policy framework
Applies to 'talent' employees on job or career assignments
Program no longer than 3 yrs- must return home at contract expiry
Home based salary and incentives
Settling in allowance
Medical Check up
Visa and permits
Travel costs
Allowance for housing and school
Retention bonus
Allowances according to local needs
Career development
Employee satisfaction
Reduced turnover
Retain talent
Increase global competitiveness - developing global leaders
Greater financial performance - reduce need to hire externally

Reasons specified in case
As a career assignment for talent employees to gain international experience
As a job assignment to transfer knowledge across boarders
Additional reasons
*** Expatriates must meet expectations of their roles in order for businesses to realize benefits!!!
Roles of an expatriate
Class activity
Agent of direct control
Agent of socializing
Network builder
Transfer of competence and knowledge
Boundary Spanner
Language node
(Dowling, Festing & Engle, 2013)
Emerging needs
Vision to be 'one' company

Economic crisis
= Pressure to reduce costs

Expatriates not returning to home country
Limitations
Affordability of expatriate program with current large employee expatriate
Inequality of pay in view of local employees
Expatriates must return home within 3yrs
International Mobility

For international assignments where the foreigners wish to stay abroad either permanently, or longer than 3 yr expatriate program
Locally based contract with some additional benefits from home country
Salaries based on local schemes from individual host countries
Include some additional benefits, but they are temporary =
Settling in allowance
Medical check up
Visa and permits
Travel costs (outward journey and one trip home during first year only)
Local International Policy
Any financial support ends after 2 yrs - contract becomes a normal local contract

Aims to localise employees - provide some initial support but phase this down slowly as they get more use to local living
Continued...
(Maike Anderson, 2011, as cited in Dowling, Festing & Engle, 2013)
No home country support
= LOCAL CONTRACT
Some home country support
= LOCAL INTERNATIONAL CONTRACT
Substantial home country support
=EXPATRIATE CONTRACT
Local international Program

Host country salary rate
+ additional temporary relocation allowances
=Local plus approach
Local-Plus approach
(Dowling, Festing & Engle, 2013)
More cost effective for company
Increases pay equity in host countries
Provides a response to an emerging business need
Lack of benefits for employees
Reduce attractiveness of packages
Disgruntled employees (Akiko)
Localisation of employees reduces mobility
Policy isnt applicable to all nations
Local plus compensation approach = decrease employee loyalty (Dowling, Festing & Engle, 2013)
Money saved used for business expansion
Reduced employee mobility problematic if company needs change
Reduced competitiveness or purchasing power in terms of recruiting labour
Higher employee turnober and loss of talent from the company
LOCAL CONTRACT

Local based salary
For employees new to company
LOCAL INTERNATIONAL CONTRACT

Local based salary + some additional (temporary) benefits
For 'talent' employees NOT on career/job assignments
2 yr duration then changes to local contract
EXPATRIATE CONTRACT

Home/parent country based salary
For 'talent' employees AND those on career or job assignments
3 yr maximum duration
(Maike Anderson, 2011, as cited in Dowling, Festing & Engle, 2013, p. 308 [figure three])
Social comparisons regarding input/output ratios to determine equity

Inputs = effort, education, sacrifice, experience
Outcomes = salary, compensation

.

(Pritchard, 1969; Huseman, Hatfield & Miles, 1987; Morand & Merriman, 2012)
Those on traditional expatriate contracts:
HCN's/Local Employees
Unequal ratios
:
more money for almost equal inputs
Those on Local international contracts:
i)
HCN's/local employees
Fairly equal:
same local salaries for same job
ii)
Other employees on international assignments in other higher income nations
Slightly unequal:
same inputs but different outcomes
Those on purely local contracts:
Others in local country that are on expatriate contracts
Unequal:
same inputs but with lower compensation
"Perceived fairness of procedures which are used to determine outcome decisions"
(Folger & Konovsky, 1989, as cited in Fernandes & Awamleh, 2006, p.702)
Eligibility and application of various packages
Length of employment abroad
Whether you are deemed a 'talent' employee
Whether you're on a career or job assignment
In terms of process (procedural justice)
- Seems reasonable
Problems:
Employee commitment
Motivation
Job satisfaction
Distress and tension
Solutions in terms of fairness:
Communicate motivations behind creating new policies
Change current package distinctions
Create one standard expatriate package for all employees
Determine salary based on merit
Any additional benefits paid in a standardized way for all contracts
= Greater equity for employees + links salary to productivity benefiting business
Compensation approach
Traditional expatriate package
Balance sheet approach
Parent/Home country salary rate
+ Additional living expenses
+ Financial inducement
=
Balance Sheet Approach
(Dowling, Festing & Engle, 2013)
(Lazarova & Caligiuri, 2001; Oracle, 2012; Dowling, Festing & Engle, 2013)
"The movement of employees from one position to another within a organization"
Employee Mobility
(Oracle, 2012, p.1)
Main drivers of international mobility of skilled workers
1. Imbalances of supply and demand lead to greater demand for foreign skills
2. Employee career and earning prospects
3. Attractiveness of the organisation
4. Strategies of individuals seeking international experience
(Guellec & Cervantes, 2001)
Increased workforce mobility

Ensure supply of skilled workers

Cost effective

Transfer of knowledge across boarders

Retain expatriates
Easy transition in new country

Gain international experience/ Career development

Live comfortably

Increasing number of women in expatriate programs
Needs regarding
International mobility
Elements to include in package to meet needs
Flexible program duration

High employee mobility.

Reduce costs covered by company

Implement policies/practices to ensure employee is successfully completing roles

Provide incentives for expatriates to stay in company
Supportive expatriate program

Option extend expatriate program or commence new program in another country

Financial incentives

Flexible programs that cater for family/spouse
Class survey
What is your main driver if given the opportunity to participate in an expatriate program?
(Lazorova & Caligiuri, 2001; Oracle, 2012)
(Lazorova & Caligiuri, 2001; Oracle, 2012; Bouslsset, et al., 2013)
The Trend
Companies are utilizing localization more than ever.
Recognition of the global nature of a multinational company
Alignment with the local business environment
Cost savings
What is stopping the Policy from being applicable globally?

more cost effective solution to international transfers of employees that don't meet stricter expatriate program requirements

Policy not deemed as fair for employees = reduced satisfaction and increased employee turnover
RECAP OF KEY ISSUES
Policies Regarding Expatriate Assignments have been changed
*NEED TO OVERCOME *
Managing employee expectations
Need to implement greater communication to employees about policy change
Loss of benefits she will receive on the Local international contract will not effect her as much if she received adequate information about the change
Increase incentives in Local International Policy Framework
Suggestion One
Suggestion two
(Hauser, 2003)
Localization in China
Prominent destination for foreign and intra-Asia relocation
ISSUE
Companies moving to China market = need for experienced talent but prohibited by cost of expatriate program and wide disparity between expatriate and locally hired employees
=Mixture of expectations
SOLUTION
Receive a China based salary with ADDITIONAL incentives (based on merit) e.g higher salary, housing or company car
'Company's using these approaches realize savings between 35-50 % compared to their expatriate package'
(Hauser, 2003, p.23)
Compromise

1. Email ALL company employees about the change - include link to policy on company web page for more information
2. Create an electronic user friendly guide/manual explaining the policy in colloquial terms
3. Create Mentor programs

SUGGESTIONS=
(Hauser, 2003)
Satisfies company =

Reduced turnover
Reduce costs
Retain talent
Increased productivity
Increased organisational learning
Satisfies Employee =
Increased incentives
Increased motivation
Increased loyalty
Job security
Akiko can either =

1. take the package anyway and move with her family (unsatisfied, lacking remuneration and other benefits)
2. Stay in current contact in New Deli without her family (de-motivated, unsatisfied and distressed about her family splitting)
* As a result could potentially leave company
= LOSS OF TALENT + INCREASED EMPLOYEE TURNOVER
Company needs to re think local international expatriate policy
Class activity
YOUR SUGGESTIONS?
Outcome
Example
Basic Local International Expatriate package
(adapted from case)
+
Additional incentives
(based on merit)
=

Standardized =
Level 1 = Pay rise
Level 2 = Pay rise + company telephone
Level 3 = Pay rise + company telephone + company car
Class Activity
Who thinks this process for selecting what package employees are eligible for is fair? Why?
Position filling
Management development
Organisational development
Class Activity
Fairness of outcomes
???
Survey
Akiko clearly thinks it unfair
Our opinion:
Criteria & process seem reasonable
Outcomes make the distinctions unfair
Full transcript