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Staffing, Training, and Compensation for Global Operations

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Christal Bartlett

on 31 October 2013

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Transcript of Staffing, Training, and Compensation for Global Operations

Staffing, Training, and Compensation for Global Operations
A vital component of implementing global strategy is international human resource management. It is increasingly being recognized as a major determinant of success or failure in international business. Their functions include recruiting and selecting employees, providing preparation and training, and setting up appropriate compensation and performance management programs. A particular importance is the management of expatriates-
employees assigned to a country other than their own.

the first level of planning, decisions are required on the staffing policy suitable for a particular kind of business, its global strategy, and its geographic locations.
Culture Shock
Staffing For Global Operations
Managerial staffing abroad falls into one or more of the following staffing modes-ethnocentric, polycentric, regiocentric, and global approaches.

When a company is at the internationalization stage of strategic expansion, and has a centralized structure, it will likely use a
ethnocentric staffing approach
to fill key managerial positions.

Polycentric staffing approach
, local managers-
host country nationals
are hired to fill key positions in their own country. This is more effective when implementing a multinational strategy. These managers are naturally familiar with the local culture, language and ways of doing business, and they already have many contacts in place.
In a
Regiocentric staffing approach, recruiting is done on a regional basis.
This can produce a specific mix of PCN's, HCN's, and TCN,s according to the needs of the company or the product strategy.
What factors influence the choice of staffing policy?
As a practical matter, however, the choice often depends on the availability of qualified manages in the host country. The choice of staffing policy has a considerable influence on organizational variables in the subsidiary, such as the locus of decision-making authority, the methods of communication, and the perpetuation of human resource management practices.
Global staffing approach
, the best managers are recruited from within or outside of the company, regardless of nationality.
This Practice-recruiting third country nationals
has been used for some time by many European multinationals. This provides a greater pool of qualified and willing applicants from which to choose, which, in time, results in further development of global executive cadre.
, they usually bring more cultural flexibility and adaptability to a situation, as well as bilingual or multilingual skills.
it is more cost effective to transfer and pay managers from some countries than other because their pay scale and benefits are lower.
That is,
parent-country nationals
are familiar with company goal, products, technology, policies and procedures. This policy is most likely to be used where a company notes the inadequacy of local managerial skills.
Without exception, all phases of IHRM should support the desired strategy of the firm. In the staffing phase having the right people in the right places at the right times is a key ingredient to success in international operations. An effective managerial cadre can be a distinct competitive advantage for a firm. Most MNCs tend to start their operations in a particular region y selecting primarily from their own pool of managers. Overtime, they tend to move to predominantly polycentric or regiocentric policy because...
Increasing pressure from local governments to hire locals.
The greater costs of expatriate staffing, particularly when the company has to pay taxes from the parent-company in both countries.
Managing Expatriates
An important responsibility of IHR managers is that of managing expatriates-
those employees who they assign to positions in other countries
-whether from the headquarters country or third countries.
The selection of personnel for overseas assignments is a complex process.
The need to ascertain whether potential expatriates have the necessary cross-culture awareness and interpersonal skills for the position is often overlooked.
It is key to know whether candidates personal and family situation is such that everyone i likely to adapt to the local cultures.
Five categories of success for expatriate managers: job factors, relational dimensions such as cultural empathy and flexibility, motivational state, family situation, and language skills.
Expatriate Selection
Expatriate Performance Management
May other reasons, besides poor performance contribute to expatriate failure.
Large percentage is due to poor planning and preparations for the transitions of the manager and his/her family.
67% of respondents cited family concerns as as the main cause of assignment failure.
The following is a synthesis of the factors frequently mentioned by researcher and firms as the major causes of expatriates failure:

Selection based on headquarters criteria rather than assignment needs.
Inadequate preparation, training, and orientation prior to assignment.
Alienation or lack of support from headquarters.
Inability to adapt to local culture and working environment.
Problems wit spouse and children-poor adaptation, family unhappiness.
insufficient compensation and financial support.
poor programs for career support and repatriation.
Preparation and training for cross-culture interactions are critical.
The direct cost alone of a failed expatriate assignment is estimated to be from $200,000 to 1.2 million.
In 2005 only 20% of companies had formal cross-culture training for expatriates.
Foreign companies provide considerably more training and preparation for expatriates than U.S countries.
Therefore, it is not hard to understand why Japanese expatriates experience significantly fewer incidents of failure than their U.S counter-parts.

Expatriate Training and Development
Cross culture Training
• Complex and deals with deep rooted behaviors
• The actual process of cross cultural training should involve the expatriate learning both content and skills that will improve interaction with host- country individuals by reducing misunderstanding and inappropriate behaviors.
• Black and Mendenhall suggest that trainers should use the social learning theory process using the behavioral science techniques of incentives and rehearsal until the trainee internalizes the desired behaviors and reproduces them
• The result is a state of adjustment, representing the ability to effectively interact with host nationals.

Sub-culture shock
• This occurs when a manager is transferred to another part of the country where there are cultural differences- essentially from what he or she perceives to be a” majority” culture to a minority one.
• The shock comes from feeling an Immigrant in one’s own country.

• For instance, someone going from New York to Texas would experience considerable cultural differences between the two states.

Training techniques as classified by Tung
• Area studies , that is , documentary programs about the countries geography , economics , socio-political history , and so forth
• Culture assimilators , which expose its trainees to the kinds of situations they are likely to encounter that are critical to successful interactions
• Language training-
• Sensitivity training and
• Field experiences – exposure to people from other cultures within the trainees own country.
Ronen’s training techniques suggest
• Specific techniques such as workshops and sensitivity training including a field experience called the host family surrogate, where the MN pays for and places an expatriate family with a host family as part of an immersion and familiarization program.
• There is a particular need to anticipate potential problems with the interaction of expatriates and local staff

Compensating Expatriates

The effectiveness of managers at foreign locations is crucial to the success of a firms operations because of the lack of proximity to, and control by, headquarters executives. The ability of expatriates to initiate and maintain cooperative relationships with local people and agencies will determine the long –term success, even the viability, of the operation. In a real sense, a company’s global cadre represents its most valuable resource. Proactive management of that resource by headquarters will result in having the right people in the right place at the right time, appropriately trained, prepare d, and supported. MNC’s using g these IHRM practices can anticipate the effective management of the foreign operation, the fostering of expatriates careers, and ultimately, the enhanced success of the corporation.

• The goal of this training is to ease the adjustment to the new environment by reducing culture shock
• Culture shock is a state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture.
• The cause of culture shock is the trauma people experience in new and different cultures, where they lose the familiar signs and cues that they had used to interact in daily life where they must learn to cope with a vast array of new cultural cues and expectations.
• The symptoms of culture shock range from mild irritation to deep seated psychological crisis
• The stages of culture shock as described by Oberg are :

• The goal of this training is to ease the adjustment to the new environment by reducing culture shock
• Culture shock is a state of disorientation and anxiety about not knowing how to behave in an unfamiliar culture.
• The cause of culture shock is the trauma people experience in new and different cultures, where they lose the familiar signs and cues that they had used to interact in daily life where they must learn to cope with a vast array of new cultural cues and expectations.
• The symptoms of culture shock range from mild irritation to deep seated psychological crisis
• The stages of culture shock as described by Oberg are :
1. Honeymoon- when positive attitudes and expectations , excitement and a tourist feeling prevail
2. Irritation and hostility, the crisis stage when cultural differences results in problems at work, at home and in their daily life leaving the expatriate with a feeling of being homesick. And disoriented, lashing out at everyone.
3. Gradual adjustment -, a period of recovery, in which the “patient” gradually becomes able to understand and predict , patterns of behaviour, use the language and deal with daily activities and the family starts to accept their new life.

4. Biculturalism-the stage where the manager and family grow to accept appreciate local people and practices and are able to function effectively in two cultures.

• The significance of an appropriate compensation and benefits package to attract retain, and motivate international employees cannot be overemphasized.
• Compensation is a crucial link between strategy and its successful implementation: There must be a fit between compensation and the goals for which the firm wants managers to aim so that they will not be exploited; MNC employees need to perceive equity and good will in their compensation and benefits.
• To ensure that expatriates do not lose out through their over sees assignment , the balance sheet approach is often used to equalize the standard of living between the host country and the home country and to add some compensation for inconvenience or qualitative loss.
• However, recently some companies have begun to base their compensation package on a goal of achieving a standard of living comparable to that of that host country managers, which does help resolve some of the problems of pay differentials.

• Managing PCN compensation is a complex challenge for companies with overseas operations. All components of the compensation package must be considered in light of both home- and host country legalities and practices. Those components include:

• Salary- local salary buying power and currency translation , as compared with home salary bonuses or incentives for dislocation

• Taxes-Equalize any differential effects of taxes as a result of expatriate’s assignment

• Allowances : relocation expenses ; cost –of living adjustments , housing allowances assignment and allowance to maintain house at home ; trips for expatriate and family private education for children

• Benefits-Health insurance ; stock options
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