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The attrition rate for expatriates is about double that of non-expatriates. How do MNCs increase expatriate retention? What are the three reasons for poor expatriate retention? Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.
Herdesky, H. (2011). International management: Managing across the borders and cultures. (7 ed., pp. 359-362). Upper Saddle River: The Pearson Education Company.
(Herdesky, 2011)
Chapter 9 ‘ siaffing’ Training’ and
Compensation for
Global Operations
333
elobalperspectiveremainaSourceol.debatcaboutstaffincpnli::’,u’nonghutnanresource
i,unug.*.nt prorerrionii’J.l ,,”frti “rl.nt”d
iffi”il;i “‘ ee.1-1r’-ea
Brown Bovert;’ tor
example, has 500 ‘o”‘”*
i’*iuttiutt* *P “:”
;;;”J euery two to lhree ycars’ thus
developing
a considerabl” *un ur”n1″
ri ilJr. *t,n global ex neri”nt”’14
For MNCs baseo in Europe
and Asia, h;;;;;;ce policies at ail levels
of the organtza-
tion are greatly influenced by
the home-.oonoritr,ir*”unJporitit*’
For Jaoanese subsidiaries
i
n
singapore, Malaysia, “J;;d;’
for example’ ;;;t* itim within and expectations
of long-
term loyalty ro an At
Matsushita, however, ,1″”u”” “lt”ti” compa-
nies. rrs candidates “r;’;;i;;;; SMILE:
specialty (required skill, knowledge),.manag-*””, “iilrv international flexibility (adaptability), endea”or (p”””u”‘unt” in the t-ace
of difficultY;.2s
MANAGING EXP&TRIATES
Thesuruelidentifiedthreesignific.antchallengesfacittgCorpo.ratians:findingstlit. fnmilies*contplete
their assig,wnettis’ and retaining’t”” “i’iWu” Gnanc Gloeal Rgt-ocartoN AnimportantresponsibilityoflHRmanagersisthatofmanagingexpatriates-thoseemploy- in other countries-whether from the headquarters third countri”r. fvrori lruitinutionuls underestimate function in the selection, training, u””urturuii””, “”0 GMAC Clobal R”l;;;; iuru”i_-u **ri*’io” 3″r*1, “i 1s1^multinaiional that68percentofcorporationsareboostingtr,”i.”*p]oy”*assignmentefforts’ofthose, ,n! nu*n”‘ of being transt’erred or stay
at the same level as last Year’ poiicies in place to govern these assignments’ of the 20a MNCs sun’eyed by HR consultanc)’ Mercer’ the
twmber oJ, internatio,al assignnrcrts irl, thtr”past tlwsecottqlattiessaidtheyhavestrategiesinplacetohelpens.ll.etheirsuccess’-,
Expatriate $eiection
The selection of personnel for overseas assignments is tion afe based on the same success factors u, in tt’e domesticiening’ be considered, relative to the specific .i.”u.rtun””s of each international many pefsonnel ctireciors have a long-stunOfi, ingrained ates simply on the basis of their domestic tracklrectirds ancl ascertain whether potential expatriates have the necessary sonal skills for the position is ioo often overlooked. In their research four connries-Germany, Japan, the United Kingdom, and the Peirperl examined the differences in irequency of using various selection ;
their rresults arc shown in Exhibit 9-3, though of course they are not mutually While all fbur highly rated “Technical/prof’essional skills,” the highest score for panies was the expatriate’s willingness to go (let’s assunle thai’s a relative term, all those being considered must be willing to go); for the Japane>e sample’ it was the company,’; reflecting their tladitional long-1es emplol’menr contract’ Note’ sonality ihciors,” which seenrs the closesr “cultural ?gaptabilitl in the United States companies than those in Japan.2g
l ‘ir. :l; :’!. il;t i
$,
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,t: ‘t”
{ lr
* it it ij ,{i s ,{ Germany U.K. Japan U.S. Total N F p(r)
Technical/prot’essional skills Experience in the company 4.50 5.06 3.30 5.75 4.66 1
3.26 s.55 5. 11
5.20 5.43 4.78 3.M 1.70
5.28 4.87 2.38
130
129 126
130 129 15.07 *** 2.09 ns 22.23 *** 334 Part 4 ” Global Human Resources Management
EXFIiBIT S-3 Frequency of use of Expatriate Selection Criteria
Each item was rated on a 6-point scale (1=never to 6=always). “-p..0i Source: Zsuzsanna Tungli and Mauri peiperl, “Expatriate Practices in German, Japanese, U.K., and U.5. Multinational Companies:
n comparative survey 6f Changes,” Human Resources Management Journal 48 no. 1 (2009): 153-71. Copyright 2009 lohn Wiley’
Reproduced with permission of John Wiley.
Research by Mansour Javidan points to thlee major global mind-set attdbutes that success-
1bl expatriates possess:
. Intellectual capital, or knowledge, skills, understanding and cognitive complexity.
. Psychological capital, or the ability to t’unction successfully in the host country through . Social capital, or the ability to build trusting relationships with local stakeholders, whether It is also important to assess whether the candidate’s personal and farnily situation is such
that everyone is likely to adapt to the local culture. Studies have shown there are five categories
of success tbr expatriate managers: job factors, relational ditnensions such as cultural empathy
and flexibility, motivational state, family situation, and language skills. However, deciding
before the expatriate goes on assignment whether he or she will be successtul in ihose dimen- skills, for example, *oy L” easy to ascertain, characteristics such as flexibility and cultural hand. Human Resource managers wish for ways to prejudge such capabilities of candidates for
assignments in order to avoid the many problerns and considerable expense that can lead to
expatriate failure (discussed turther in this chapter and the next)’
In order to ad{ress the problem of predicting how rveil an expatriate ‘uvill perform on an
overseas assignment, Tye and Chen studied factors that HR mana-sers used as predictors of
expatriate success. They found that the greatest predictive value ir’as in the expatriate character-
istics of stress tolerance and extraversion, and less on domestic q c-irk erperience, gender, or
even international experience. The results indicate that a mana-uer r’,’hrr is ertraver-ted (sociable,
taikative) and who has a high tolerance lbr stress (typically experienced in ne*. different confexts
such as in a “toreign” country) is more likely to be able to adjust to thr’ ile\r’ environment, the
new job, and interacting wirh diverse people than those u ithoui ll’rse characteristics. Chapter 9 ” Statfing, Training, and Compensation for clobal operations 335
HR seiection procedures, then, often include seeking out managers with ihose characteristics
because they know there will be a greater chance for successful job performance, and a lesser These expatriate success I’actors are based on studies of American expatriates, One could
argue that the requisite skills are the same tbr managers fiom any country-and particularly so
fbr thir to reiocate, and strength ol the relationship between the expatriate and the firm.3z
*xpatrfr at* ff *rf*rc?saix{e trWtrffi {eS*$?effit
White 89 perceilt of contpanies formally assess a canclitlate’s job skills prior to a Decicling on a slatfing policy and selecting suitable managers are logical first steps, but they do
not alone ensure success. When staffing overseas assignments with expatriates, tor example, to the nerv environment has been fbund to be a major-in fact, the most frequently cited- Trends Survey, 67 percent of respondents cited family concerns as the main cause for assign- major causes of expatriate failure:
. selection based on headquarters criteria rather than assigrunent needs
. inadequate preparation, training, and orientation prior to assignment
. alienation or lack of support from headquarters
. inability to adapt to locai culture and working environment
. problems with spouse and children-poor adaptation, family unhappiness
. insufllcient compensalion and financial suppott
. poor programs for career support and repatriation.
After careful selection based on the specific assignment and the long-term plans of both Hsi-An Shih et al. conducted a study in which they’ intervieu’ed expatriates and human pay among those ltve companies are ;;-*r– .: =:,-:.r:-i 9-J. 338 Part 4 ” Global Human Resources Management
EXHIBIT 9-5 IHRM Process to Maximize Effectiveness of Expatriate Assignments
tp Furtuut” Potential ProblemAreas I
I Ivt I J
i Y Develop Contract
* Candidate lacks cultural familiarity Career needs of spouse. fGf”., candidate (and family) with best match with host country; culturat l_l9onsult re-assignment needs with candidate.
I **” on suitable financial and support package to maintain expatriate (and I assignment; commit help for spouse’s careen
[_”ecide Provide predeparture training as agreed for cultural awareness; Ianguage Periodically evaluate effectiveness I Retrain and resolve problems, or early repatriation if .l i v ii I development on reentry Get feedback on experiences.jL_ Y i I expatriateb experience in the firm and develop global Debrief expatriarc and family Cross-eultural Training
Training in language and practical affairs is quite straightforward, but cross-cultural training ctiLTUR€ SHoeK The goal of training is to ease the adjustment to the new environment by chaprer 9 . staftlng, Training, and cornpensation for Global operations 339
a{e the common dysfunctiona} resuits of culture shock-often leading to the manager giving up
and going home.- Culture shock usually progrcsses through four stages, as described by Oberg: (1) honeymoon,
when positive atiitudes and expectations, excitement, and a tourist feeling prcvail (which may
last up to several weeks); (2) initation and hostility, the crisis stage when cultural differences homesick and clisoriented, lashing out at evelyone (many never get past this stage); (3) grqdual
adjustment, a period of recovery in which the “patient” gradually becomes able to understand
and predict pattelrs of behavior, use the language, and deal with daily activities, and the family
starti to accept their new life; and (4) bicnlturalism, the stage in which the manager and family
members grow to accept and appreciate local people and practices and arc able to function effec-
tively in two cultures.46 Mury never get to the fourth stag€-operating acceptably at the third
stage-but those who do report that their assignment is positive and growth oriented.
SLTBeULTURE SHOeK Similar to culture shock, though usually less extreme, is the experience where there are cultural diff-erences-essentially from what she or he perceives to be a “majority”
culture lo a “minority” one. The shock comes from feeling like an “immigrant” in one’s own
country and being unprepared for such dif’ferences. For instance, someone going from New ranches and high technology to Bible-belt attitudes and laws and to areas with a mostly Trainlng Techniques
Many training techniques are available to assist overseas assignees in the adjustment process.
These techniques are classified by Tung as (l) area studies, that is, documentary programs about which expose trainels to the kinds of situations they are likefu to encounter that are critical to
successful interactions; (3) tanguage trcining; (4) sensitivitlt trainins; and (5) Jietd experiences- using these training methods in a complementary fashion, giving the trainee increasing levels of sonal approaches have been found to be comparable, with the most effective intercultural train-
ing occurring when trainees becorne awarc of the differences between their own cultures and the
ones they are planning to enter,49 workshops and sensitivity training, including a field experience called the host-famil), sun’ogate, sion and familiarization program.s0 Although this is certainly a convenience, the impact of host-country (or in-country) programs
can be far greater than those conducted at home because crucial skilis, such as overcoming cul-
tural differences in intercultural relationships, can actually be experienced during in-country substitute tbr on-the-job training (OJT) in the early stages of the careers of those managers they
hope to develop into senior-level global managers. Colgate-Palmolive-whose overseas sales ui *unug”.’ one who has seen several environments i’irsthand.”5: Er.hibit 9-6 shows some other Chapter 10 ” Developing a Global Management Cadre 359
very likety turn down the assignment. They decline because they cannot afford to iose the income
or because the spouse’s career may be delayed entirely if he or she is out of the workforce for a
few years. As women continue ro move up the corporate^ladder, the accompanying (“trailing”)
,pour” is often male-estimated at more than 25 percent.20 Companies such as Hewiett-Packard,
Shell, Medtronic, and Monsanto offer a variety of options to address the dual-career dilemma’
Clearly, then, the selection process must include spouses, partners and entire families.
Clobal assignments must take account of the expatriate’s personal concerns and future career;
otherwise the company will they face the possibility of early return and a possible doubling is 13 percent for all employees, comparedto25 percent tbr expatriate employees during assign-
ments, and27 percent within one year of completing assignments. Those assignees indicated that
they felt their firms did not appreciate the difliculties of their overseas stints; nor did they fully
utiiize the expatriates’ skills on reiurn to the home country.2l two months of language training and cultural familiarization. Nissho Iwai, a Japanese trading
company, gets together managers and spouses whs are leaving Japan with foreign managers and
spouses who are on their way there. In addition, the lirm provides a year of language training and
information and services for Japanese children to attend schools abroad. Recent research on 321
American expatriate spouses around the world shows that effective cross-cultural adjustment try
spouses is more likely (1) when frms seek the spouse’s opinion atrout the international assign-
ment and the expected standard of living and (2) when the spouse initiates his or he-Lown prede-
parture training (thereby supplementing the minimal training given by most firms).22
Expatriate Retention
Marwgers returningfiom expatriate assignments are hvo to three times more likely
to lecue the company within a year becatrse attention has not been paid to their
carcers and the way they fit back ittto the corporute sftucture back home.23
Firms must design support services to provide timely help for the manager and, theref-ore, ar’e pafi
of the effective management of an overseas assignment. The overall transition process experienced
by the company’s international management cadre over time is shown in Exhibit 1O-2.It compris-
es three phases of transition and adjustment that must be managed for successful socialization to a
new culture and resocialization back to the old culture. These phases are (l) the exit transition liom the expatriate has r-eceived; (2) the entry transition to the host country, in which successful accultura-
tion (or ealiy exit) will depend largely on monitoring and support; and (3) the entry transition to the home country or to a n”* hori country, in which the level of reverse culture shock and the
ease ofre-acculturation will depend on previous stages ofpreparation and support’24
A company may derive many potential benefits fiom carefully managing the careers of its
expatriates. by helping *unug”ri make the right moves for their careefs, the company will
be able to rerain people with increasing global experience and skiils.
But fi-om the individual manager’s perspective. most people understand that no one can
bettel look out for one’s interests than oneself. With that in mind, managers must ask thernselves,
and their superiors, what role each overseas stint will plaf in career advancement and what
proactiye roL each will play in one’s own career. Retaining the returning expatriate within the
“o1npuny “dg” about double that of non-expatriates. Researchers in the 2008 Global Relocation trends Survey
found the reasons for this to be that:
. Expatriates are mole marketable and receive more aliracli’. e oft-ers from other employers’
. Expatriates find that their compensation packages on cl.erseas assignments a1’e mofe . Expatriates feel unappreciated and dissatisfred both Jurir:e an,J after the assignment and It is essential, therefbre, that the company pays careiul ai.tnt:*il lc maintaining and retaining
the expatriate by rnanaging both the assignment and the reFa:::li;,rn ca rhe expatriate and the family’ 360 Part 4 . Clobal Human Resources Management
EXHIBIT 10-2 The Expatriate Transition Process.
Exit tronsition Home counlry
Exil
I . Considered for expotriotion intemotionql business 4. Considered for ossignmeni Intry confronlulion ond briefing Adiustment
12. Monitoring ond suppo* Exit
15. Considered for tronsfer 16. Withdrowol Entry tronsition
Adiustment Home couniry or Entry
I 8- Deooriure ond lrovel culhure shock
Adiurtment / (initiol’confrontotion]
Ad justment Exil lronsition
Host counlry
Ir’l “l
success:
kilurer –_–_.’-‘–>
THE ROLE OF REPATRIATICIN IN DEVELOPING A GLOBITL In the international assignment, both the manager and the company can benefit from the improvement in their managerial skills and self-conhdence. Some of these acquired skills, as
repofied by Adler, include the following:
. Managerial skills, not technical skilts: learning how to deal with a wide range of people, . Tolerance for ambiguity: making decisions with less infonnation and more uncertainty . Mnltiple perspectives: learning to understand situations from the perspective of local . Ability to work with and manage others: iearning patience and tolerance-realizing that with others and empathize with them.26
In addition to the managerial and cross-cultural skills acquired by expatriates, the compa-
ny benetits fiom the knowledge and experience those managers gain about how to do business
overseas, and about new technology, local marketing, and competitive information. Expatriates
have long served as facilitators of intra-firm knowledge transfer and application. Traditionally,
it has been assumed that the role of expatriates is panly to bring knowledge from the corporate e\pariates acquiring knowledge while on international assignment bring it back to the center r1 of the organization or disseminate it across other subsidiaries.2T For exarnple. Berthoin describedfive types of knowledge gained ub.;;Jl;orledge_.1bout what ie.g,, diferences in cusromerpreferences)’ why (e’g’, understanding ho; dift”r”n””, lrJr, .rorr-.u1turar understand_ing)’ how (e’g’, managemenr skills srich as delegating rrrponriuiliuesl, rrhen (e.g., knowledgeabout the effect of timing), and who iru., r”rm”rrnif, .riutJ ,rr. life of an assignment).They point out that expatriate **p”.irn”‘”‘no-t only brings by the organizarionupon return”‘2e La)-arcva and rarique rurna tr,ut ,”u”*l .;il,i*, have to be met in orderto successfully transfer knowledge: nrr, ,ttuirrr” repatriates t *u” to,iu) have valuabre knowledgeto transfer and (b) be modvateJro ,runrr”r;”, f”;;i;;;;, sicJnl,r, rhar organizarions needto (a) have the righr roors to capture t””*i”oeq “rp”*i””rrtrirt#tio-, iilustrates the condi-ttons and process br whilf klowledp[ ruyu”.ru*ssfully integrated inro rhe organizarion.The company shourd thereforJposition itsetr to mn”nr-ir-o;;o enhanced managemenrknowlcdge ir ir wanrs 13,.!.11eron sl;;rv;;perienced r”r”r;;;;;’.udr”_-un essenriar ingre-dient for global competitiveness-in particular where rhere t, ; il; i”r..” of shared rearningamong the organization s global *unug”ir’-ir the company “onu”y.a “l;”rg”**;i-o*, * better service ilr”ir?’urto*”rs, and_as a sidebenefit*to store the knowledge ,gi
$i l*a’
3i
:f.: iB
i::
,;.
ri” il r1.l i ri i EXHIET’ 10-3 conditions for Knowledge Transfer upon Repatriation.
/’n-i/ uQreer \ ,__r_:,._
i- –‘—*–‘-, si&
Source: Mila Lazarova anq ,,Knowledge 362 Part 4 ” Global Human Resources Management
among its employees worldwide and io improve client service, By using its intranet to link Black and Gregersen’s research of 750 U.S., European, and Japanese companies concluded . They focus on knowledge creation and global leadership development.
. They assign overseas posts to people whose technical skills are matched or exceeded try . They end expatdate assignments with a deliberate repatriation pro””rr.32
A successful repatriation program, then, starts before the assignment. The company’s top GLOSAL MATSASEIVIEruT TSAMS
MNCs realize it is essential to maximize their human assets in the form of global management The team’s ability to work effectively together is crucial to the company’s success. In addi- the Timberland U.K. sales conference planning team. In the past, the company’s large sales con- For global organizations and alliances. the same cross-cultural interactions hold as in When a firm responds to its global enr ironment with a global strategy and then organizes * li i:
l)
Chapter 10 . Developing a Global Management Cadre 369
WORKIruG UTffiHIN LSCAT LABOR RELATIONS SYSTEMS
lf you have to close a plant in ltaly, in France, in Spain or in Gerrnany, you have Ja’coe Btrronet-t’l, An important variable in implementing strategy and maximizing host-country human resources of a multinational enterprise (MNE) will operate in a foreign country. Differences in economic, The lmpact of l.lnions on gusin€sses
European businesses, fbr example, continue to be undermined by their poor labor relations and
by inflexible regulations. As a result, businesses have to mcve jobs overseas to cut labor costs,
resulting from a refusal of unions to grant any reduction in employment protection or beneflts operational decisions. However, some change may be on the horizon to provide relief to busi-
nesses in Europe as some unions grant concessions to tirms in order to keep theirjobs. Recently,
unions in Germany, France, and italy have been losing their battle to derail labor-market reforms
by the governments in those countries who are increasingly concerned that excess regulation and
benefits to workers are smothering growth opportunities. mine their workplace relationships. This process may be through verbal agreement and job
descriptions, or through a union’s written labor contract, which has been reached through negotia-
tion in collective bargaining between workers and managers. The labor contmct detennines rights
regarding workers’pay, benefits,job duties, hring procedures, retirernent, layoffs, and so on.
The prevailing labor relations system in a country is important to the international manager
because it can constrain the strategic choices and operational activities of a firm operating formance and well-being; (2) the role and impact of unions in the relationship; and (3) specific OrEanized Labcr Around the llUorld
The percentage of the workforce in trade unions in industrialized countries has declined in the The numbers do not show the nature of the system in each country. In most countries, a sin- States have two systems-one fbr the organized and one for the unorganized. Each, according 37O Part 4 , Global Hunran Resources Management
unionized employees, whereas unorganized employees can only bargain individually, usually with The traditional trade union structures in Western industrialized societies have been Industrial labor relations systems across countries can only be understood in the context of The resulting agreements from bargaining also vary around the world. A written, legally Other variables of the collective bargaining process are the objectives of the bargaining Most Europeans are covered by collective agreements, whereas most Americans ar-e not, In Japan, labor militancy has long been dead, since labor and management agreed 40 years In the industrialized wodd, tumbling trade Lrarriers are also reducing the power of trade l1′
; iil i i,f
t’; ,n
ti! r:ii:;
irl i: 11 i $ FJ.*.s,; t!, s ill 3l ,it
6 ig ii.rl r ii ‘&; a fi lr Chapter 10 . Developing a Global Mana-l;:’,.:. .- $i” ;irt
In China, for example. in a surprising move, the govemment has passed a new law that will Protests arose after Wal-Nlart Stores, the world’s biggest retailer, was forced to accept Itt rutme, the All-China Federution of Trade Unions (ACFTU) is a vqst union burcau- Tus Ecoxonnnr, Workers’ basic rights tbr reasonable working conditions, safety, and even the right to get eonvergenee Versus Blvergence in l-abor Systems In October 2006 the Internationai Trade Union Confederation (ITUC) was fomed in Vienna, Political changes, external competitive forces, increased open trade, and frequent moves Other pressures toward convergence of labor relations practices around the world come from 772 Part 4 ” Clobal Human Resources Management
trXHlBlT 1S-? Trends in Global Labor Relations Systems
Forces to Maintain or Global competitiveness National labor relations systems and traditions Technological standardization, IT Agencies monitoring world labor practices
of these associations provide unions and firms with infomation about differences in labor condi-
tions around the world.90 Exhibit 10-7 shows the major forces lbr and against convergence in labor
relations systems.
ADApTtrufi TO LglCAL. ttitDUSTRtAL RELATI$Ns SYgTElVlS Although forces for convefgence
are founcl in labor relations systems around the world, as discussed previously, for the most paft,
MNCs still adapt their practices largely to the traditions of national industriai relations systems, with
considerable pressure to do so. Those companies, in fact, act more like local employers, subject
to local and country regulations and practices. Although the reasons for continued divergence in
systems seem fewer, they are very strong: Not the least of these reasons are political ideology
a-nd the overall social structure and history of industriai practices. In the European Union (EU)’
where states are required to maintain parity in wage rates and benefits under the Social Charter
of the Maastricht Treaty, a powerful defense of cultural identity and social sysiems still exists,
with considerable resistance by unions to comply with those requirements. Managers in those
MNCs also recognize that a considerable gap often exists between the labor laws and the en-
forcement of those laws-in pafticular in less developed countries.
THE TUAFTA ANA LABOR RELATIONS lN MEXleO About 40 percent of the total worktbrce in more than 25 workers unionized. HoweveL, government control over union activities is very
strong, and although some strikes occur, union control over members remains rather weak.91
MNCg are required by government regulation to hire Mexican nationals for at ieast 90 percent of
their.w6rkfor.ce; preference must be given to Mexicans and to union personnel. In reality’ however,
the government permits hiring exceptions. overall cost of operating there-utilizing the advantages of the NAFTA-and the Mexican gov-
ernment wants to continue to attract that investment, as it has for many years before NAFIA’
Mexican workers claim that some of the large U.S. companies in Mexico violate basic laLror
rights and cooperate with pro-government iabor leaders in Mexico to break up independent
unionr. Workers there beiieve that MNCs routinely use blacklists, physical intimidation, and
economic pressure against union organization and independent labor groups that oppose
Mexican government policies or the pro-government Confederation of Mexican Workers ittir example illustrates the complexities of labor rejations uhen a firm operates in other through ttre NRfle or the EU. Of interest are the diftereue= e*1ong NAFTA nations in labor Canada or the United States, a number of costly beneitts ir,r llerican u’orkers are required, such
as 15 days of pay tbr a Christmas bonus and 90 day’s of .e ‘ ar::l;e lowing Comparative Management in Focus examines iab’rr r’=.;l:.’ns in Germany.
t* rr^ni”* r””- ,o be similar to those of western
on the basis ;il;;;.*acteristics the firm calls
(particularlv motivational ability)’
fungoug” iu”iii’y’ “tO
abre cantritrates for ctssignnrcnts, trrtpi,ii’ ,r,liiyirr-,,,a.thei|
on’u their assignnrcrfts end’26
20AB SurveY’
ees who they assign to positions
country or
the importance of the human resource
evaluation of expatriates’ The 2008
firms-found
95 percent say they plan to either increar”
‘mployees
Whilethenunrbelofemployerssendingstaffabroadisontherise,onlyhalfactuallyhave
research shows’
44 percent have increased
two ye.ars, but only.56 percent of
a complex.process’ The criteria tbr selec-
but additional criteria must
position’ Unfofiunately’
pmctice.of selecting potential expatri-
their technical expertise’zS The need to
cross-cultural awareness and interper-
of 136 large MNCs based in
United States-Tungli and
criteria for expatriates
exclusive criteria’
the German com-
since presumably
“experience in
also’ that “per-
” lest. lvas given a far lower ratittg
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Personality faciors (e.g., oPen
mind, fl exibility, resilience)
Leadership skills
The ability to work in teams
Previous performance appraisals
Family’s willingness to go
Educational qualifi cations
Previous international experience
Language proficiency
Loyalty to the company
Knowledge of new locality
Age
Gender
5.42
5.27
5.16
5.19
4,9r
4.66
4.58
3.88
4.39
4.58
3.45
2.69
5.28
4.94
5.13
4.84
4.34
4.69
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4.03
3.4′,
3.23
2.78
2.lo
5.05
s.65
5.47
5.11
3.32
3.89
4.67
5.22
4.11
4.32
4.84
3.89
5.09
5.13
4.24
4.47
4.76
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internal acceptance of different cultures and a strong desire to learn from new experiences’
they are employees, supply chain partners or customers’30
sions poses considerable problems fbr reeruitment and selection purposes. Whereas language
adjustment-widely acknowiedged as most vital tbr expatriates-are difficult to judge before-
turnover iikelihoorl.3 1
foreign postirtg, le.ss than holf go through the sanrc process for culturu[ ,ruitabilitl.
Even fetver gattge whether the fcmtily will cope.33
many other reasons, besides poor selection, contribute to expatriate failure among U.S. multi-
nationals. A larye percentage of these failures can be attributed to poor preparation and plan-
ning fbr the entry and reentry transitions of the manager and his or her family. One important
variable, for example, often given insutTicient attention in the selection, preparation, and sup-
port phases, is the suitability and adjustment of the spouse. The inability of the spouse to adjust
reason for expatriate failure in U.S. and European companies.s4 In the 2005 Global Relocation
rnent failure. They cited spouse dissatislaction as the primary reason, which they attributed
to cultural adjustment problems and lack of caleer opportunities in the host country.3s Yet only
about half o1 those companies studied had included the spouse in the interviewing process.
In addition, although research shows that human relational skills are critical for overseas work,
most of the U.S. fir’rns surveyed failed to include this factor in their assessment of candidates.36
The following is a synthesis of the factors frequently mentioned by researchers and firms as the
:he organization and the candidates, plans must be made for the preparation, training, and devel-
rpment of expatriate managers. In the following sections we discuss training and development
:nd then compensation. However, it is usefirl to note that these should be components of an inte-
*ated performance management program, specilic io expatriates, which inclu
:esource professionals in global information technology companies headquartered in five different
,!!untries. These wele Applied Materials (American) ivith 16.t)00 empioyees in 13 countlies,
Hilachi High Technologies (Japanese) with 470,000 enrplcl’ees in i3 counu’ies, Philips Electronics
)utch) with 192,000 employees in 60 countdes, Samsung iKru’ean ] w ith 1 73,000 employees in 20
: r”jntries, and Winbond Electronics (Taiwanese) rvith -17.{X)0 emplcl ees in six countries. Shih et al.
:,-,:nd that those companies used standardized fbtms from heailqa*fiers. rather than tailoring thern
.;, the host environment: as such they reflected the cornpanl ;uiiure but not the local cultute in
.,.i’rich those expatriates were operating. There also riar i:,-i; ,.:i irr-the-.iob training from those
-:nrpanies.37 The diiTerBnces in procedures fbr goal seuin!-. i€riii|r1t:i1.e ;lFraisal. training, anci per-
‘,inance-reiated
I
I
1
I
I
Select expatriate *-* —–*-,-_-***,**
I
Assess development and support needs –h-
Family relations and concerns.
Relations with host managers/community/
government.
Coordination with headquarters.
| fl exibility/experience.
I family) in host country Agree on career development resulting frrom the
together on training needs.
ffaining; familiarity with host countrygovernmenVlocal communiry/local
firm operations and business practices/laws.
Provide trip to host if time allows.
Provide local mentor for post-amival training and orientation,
Provide headquarters menror for contact/support.
Get regular feedback.
and problem areas I unresolved.
I
Repatriate after successful assignment ._ -* | Provide supportfor repatriation for reentry-culture shock and for career
l
lntegrate value-added to tirm ‘— —* l-e-uide process of knowledge management to inregrate
I LTnagement cadre’*t
to improye IHRM process
is not; it is complex and deals with deep-rooted behaviors. The actual process of cross-cultural
training should result in the expatriate learning both content and skills that will improve
interactions with hostcountry individuals by reducing misunderstandings and inappropriate
behaviors.
reducing culture shock-a state of disorientation and anxiety about not knowing how to behave in
an unfamiliar culture. The cause of culture shock is the trauna people experience in new and dif-
ferent cultures, where they lose the iamiliar signs and cues that they had used to interact in daily
life and where they must learn to cope with a l-ast arral’ of nerv cultural cues and expectations.as
The symptoms of culture shock range from mild in-itadcn to deep-seated psychological panic or
crisis. The inability to work effectively, stress uiihin :he tamilyl and hostility toward host nationals
It is helpful to recognize the stages of culture shock to understand what is happening.
resuit in probiems at work, at home, and in daily living-expatriates and family members feel
of subculture shock, This occurs when a manager is transfered to another part of the country
York to Texas will experience considemble differences in attitudes and lifestyle between those
two states. These differences exist even within Texas, with cultures that range from roaming
Mexican heritage.4T
the country’s geography, economics, sociopolitical history, and so forth; (2) culturc assimilators,
exposure to people from other cultures within the trainee’s own country.a8 Tung recommends
personal involvement as she or he progresses through each method. Docurytentary and interper-
Sirnilarly categorizing training methods, Ronen suggests specific techniques, such as
where the MNC pays for and places an expatriate family with a host family as part of an immer-
Most training programs take place in the expatriate’s own country prior to leaving.
training rather than simply discussed.Sl Some MNCs are beginning to recognize that there is no
represent two-thirds of its yearly revenue-is one company tvhose management development
programs adhere to this philosophy. Alter training at headqua*ers, Colgate employees become
associate product managers in the United States or abroad-and, according to John R. Garrison,
then manager of recruitment and development at Coigate, the)’ must earn their stripes by being
prepared to country-hop every ferv years. In fact, says Garrison.,”That’s the definition of a glob-
global management development programs for junior emp1o1 ee s.
of the chances for employee attrition. The GMAC survey revealed that the annual turnover rate
At Procter & Gamble, employees and spouses destined for China are senf to Beijing tbr
the homc country, the success o{.whic,h’will be det–rrnined loge-ty by tLe quality o€ pteparerinn
back
(assuming he oi she has been effective) is vitallf imponant in orcier to gain the knowl-
una benefit tiom the assignment. Yet, as discussed earlier. the attrition rate for expatriates is
g”n”ron, than at home and go from one compan)’ lc a:lrlher iLr take advantage of that’
leave the compuny.2’5
(onticipotory
sociolizotion)
2. Sensitivity to other cultures
3. Generof troining,
expertise
5. Sensitivity trr fie host culture
6. Predeporture troining
./. selectron
8. Deporture ond trovel
9. Arrivol ond initiol
I 0. On-site orieniotion
I l. Culture shock
I 3. Acculturotion, odoptotion
14. Foilure or success
or repotriolion
‘I 7. Orientotion, coreer counseling
new host country
I9. Ariivol ond ;niriol confroniotion
20. Orientofion ond briefing
21 . Reverse culfure shock or new
22. Monitoring ond support
23. Acculturotion, odoptotion
Enlry tronsition
(odoptotion)
d
MANAGEMENT CADRE
enhanced skills and experience gained by the expatriate. Many returning executives repol’t an
to adapt to their cultures through compromise, and not to be a dictator’
about the process and the outcome.
employees and businessPeoPle.
managers abroad are in the minority qryong local people; learning to communicate more
headquarlers to subsidiariesi however, it is clear that thete is a potenlial strategic advantage when
Clr:tier l0 ” Developing a G.lobal Managemenr C:cr
“uttur”
“rr,’
“oouimJot.dge about curture differ-ences but also creates insights about HQ*uiriaiuiy .rtulonr, i.-oo,’iriiri.t i,t.u, about improvingbusiness could be deriveJi8 H”*;;;;;r”i”*a uy LazarovaunJ nrrqu., .,reparriates, moriva-tion to contribute to collectiu” o.gunaio#i”u.ing i, p.i*ur;ry jJu..n uy rhe fit between rheirindividual career obiectives and ,i”.”*”.^o.”rr”p*J”‘r,rl,pffiit”.tt”tt”red
“J!u1.L:”,..,i’l;#, incenrives for reparriaresto share their knowledge. Knowledg” ,t””ri”i is optimized *i,”n irr'” ,ype of knowredge gainedby reparriates is matched uy ttre rigii t”r*i”og” tiansfer ,r,””r,unir*r_for example by assign_ing reparriates ro srraregic ;”u*r-:;;;;”,i”ur””, opport_unities provided by rhe organizationare congruent with repatriate career goals and
”
“””nrir”i”i” good returning man-agers, rhen their potenriat tnu::l kn.*;;;; iu not ontyioriuu, utro
ro anorher organi_zation that hires that peruon’ This.can n” i”w ir,”*ental to the company,s competitive sfance.some companies a.e becoming qrit” ,u*y-udout how to use rechnology to utilize shared knowl_edge to develop their global
“l”o “^f”riir* of their managers around the world in case thevleave the company. That knoiredg”, ii;;;”;e argued, i, un-uru”t io which the company hasrn’ested large amounts of’resourceslon” tu”t *uvy company is Booz-Alren & Hamilton, whichinstituted a Knowledge on-Line (Koit;;;;;;er as a means ro enhance knowredge sharing
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! Tronrf.riools-,,)/ –“-*-
l[llz.Tgrigue,
lra*sfer LGon eE;3i-;s itcn,,, Journalof wortd Business 40 no. q eootsl:16i_i)t,;;;ffi; w*h p*,_,s:,: – :, i :i,nier.
islands of information separated by geography and platform-specihc applications, the renowned
consulting firm has enabled its 2,000 private sector consultants to collect and share firm-wide
their best thoughts and expertise.3l
that those companies that lepofied a high degree ofjob satisfaction and strong perfbrmance, and that
experienced limited turnover, used the following practices when making intemational assignments:
their sross-cultural abilities.
management must set up a culturc that conveys the message that the organization regards inter-
national assignments as an integral part ofcontinuing career developrnent and advancement, and
that it values the skills of the returnees. The company’s objectives should be reflected in its long-
range plans, commitmeni, and compensation on behalf of the expatriate. GE sets a rnodel tbr
effective expatriate career management. With its 500 expatriates worldwide, it takes care to
select only the best managers for overseas iobs and then commits to placing them in specific
positions upon reentry.
leams so they can share resources and manage the transnational transfer of knowledge. The telm
glotral management teams descriLres collections of managers in or from several countries who
must rely on group collaboration if each member is to experience optimum success and goal
achievement. Whirlpool International, for example, is a U.S.-Dutch joint venture, with adminis-
trative headquarters in Comerio, Italy, where it is managed by a Swede and a six-person manage-
ment team from Sweden, Italy, Holiand, the United States, Belgium, and Germany. To achieve
the individual and collective goals of the team members, international teams must “provide the
means to communicate corporate culture, develop a global perspective, coordinate and integmte
the global entelprise, and be responsive to local market needs.”33 The role and importance of
international teams increase as the firm progresses in its scope of international activity. Similarly,
the manner in which multicultural interaction affects the fim’s operations depends on its level
of international involvement, its environment, and its strategy.
tion, technology facilitates ef-fective and efficient teamwork around the world. This was fbund by
t’erences were cumbersome to organize because their offices were in France, Germany, Spain,
Itaiy, and the United Kingdom. Then the team started using the British Telecom (BT) Conf’erence
Call system for the anangements, which saved them much travel and expense. The company
subsequently adopted the BT Conference Call system for the executive team’s country meet-
ings.34 Teleconf’erencing an<1 videoconf'erencing are now much of the way of life for global busi-
nesses. However, research indicates that face-to-face megtings are the best way to kick off a
virtual team project so that the members can a-qree on goals and schedules ancl who is responsi-
ble for what. IBM pro.iect teams starl with a1l members in a personal meeting to help to build an
understanding of the olher members' cultures and set up a trusting relationship.ss
MNCs, and, in addition, considerabiy nrore interaction takes place with the external enviLonment
at all levels of the organization. Therefbre, giobal teamwork is vital, as are the pockets of cross-
cultural teamwork and interactions that occur at many boundaries.36 For the global company,
worldwide competition and markets necessl€te giobal teams for strategy development, both for
the organization as a whole and for the local units to respond tq their markets.
with a networked “glocal” structur€ (see Chaorer 8 ), various types of cross-border teams are
necessary for global integration and iocal difterentration. These include teams between and
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to discuss the possibiliry *’ith the state, the local communities, the trade uttiotts;
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Fonner Deput-v Chairman of PirelliTo
for productivity is that of the labor relations environment and system within which the managers
political, and legal systems result in considerable variation in labor relations systems across
countries. It is the responsibility of the IHRM function to monitor the labor relations systems in
host countries and advise local managers accordingly. In fact that infbrmation should be consid-
ered as one input to the strategic decision ofwhether to operate in a particular country or region.
in order to keep the iobs at home. In addition, non-European firms wishing to operate in Europe
have to carefully weigh the labor relations systems and their potential etTect on strategic and
The term labor relations refers to the process through which managers and workers deter-
there. The three main dimensions of the labor-management relationship that the manager will
consider are (1) the participation of labor in the affairs of the firm, especially as this affects per-
human resource policies in terms of recruitrnent, trcining, and compens ation.Tl Constraints take
the form of (1) wage levels that al’e set by union contracts and leave the foreign firm little flexi-
bility to be globally competitive, (2) limits on the ability of the foreign firm to vary etnployment
levels when necessary, and (3) limitations on the global integration of operations of the foreign
firm because of incompatibility and the potential for industrial conflict.72
last decade, most notably in Europe. In the U.S., union membership t’ell from a third in 1950
to about 12 percent in 2006.73 This global trend is attributable to various factors, including an
increase in the proportion of white-collar and service workers as proportionafe to manufacturing
workers, a rising proportion of temporary and part-time workers, off shoring of jobs to gain
lower wage costs, and a reduced belief ia unions in the younger generations.T4 In addition, the
global economic decline and loss of jobs in 2009 put downward pressure on union demands and
power when the fbcus changed tojob retention rather than increased benefits.
gle dominant industrial relations system applies to almost all rvorkers. Both Canada and the United
to Adams, has “dilTerent rights and duties of the parties, terms and conditions of employment, and
structures and processes of’decision making.” Basically, in North America, an agent represents
little capability to afiect major strategic clecisions or policies or conditions of employment.?s
in industrial unions, representing all grades of employees in a specific industry, atd craft
tutiottso based on certain occupational skills. More recently, the structure has been conglomerate
unionsn representing members in several industries-for example, the metal workers unions ir Europe,
which cut across industries, and general unions, which are open to most employees within
a country.T6 The system of union iepresentation varies among countries. In the United States,
most unions are national and represent specific groups of workers-for example, truck drivers or
airline pilots-so a company may have to deai with several different nation;l unions. A single
U.S, firm-rather than an association of firms representing a worker classification-“ngug*,
in its own negoliations. In Japan, on the other hand, it is common for a union to represent all
workers in a company. In recent years, company unions in Japan have increasingly coordinated
their activities, leading to some lengthy strikes.
the variables in their environment and the sources of origins of unions. These include government
regulation of unions, economic and unemployment factors, technological issues, and G influence
of religious organizations. Any of the basic processes or concepts of labor unions, therefore, may
vary across countries, depending on where and how the parties have their power and achieve their
objectives, such as through parliamentary action in Sweden. For example, collective bargaining in
the United States and Canada rcfers to negotiations between a labor union local and management.
Horvever, in Europe collective bargaining takes place between the employer’s organization and
a trade union at the industry level.l7 This difference means that North America’s decentralized,
plant-level, collective agreements are more detailed than Europe’s industry-wide agreements
because of the complexity of negotiating myriad details in multi-employer bargaining. In Germany
and Austria, for example, such details are delegated to works councils by legal mandate.T8
binding agreement for a specific period, common in Northern Europe and North America, is less
prevalent in Southern Europe and Britain. In Britain, France, and Italy, bargaining is fiequently
informal and results in a verbal agreement valid only until one party wishes to renegotiate.Tg
and the enforceability of collective agreements. Because of these differences, managers
in MNEs overseas realize that they must adapt their labor relations policies to local conditions
and regulations. They also need to bear in mind that, while U.S. union membership has
declined by about 50 percent in the last 20 years, in Europe, overall, membership is still quite
high, particularly in Italy and the United Kingdom-though it, too, has been falling but from
much higher levels.
Unions in Europe are part of a national cooperative culture between government, unions, and
management, and they hold more power than in the United States. Increasing privatization will
make governments less vulnerable to this kind of pressure. It is also interesting to note that some
labor courts in Europe deal separately with employment matters from unions and works councils.
ago on a deal for industrial peace in exchange forjob security. Unions in Japan have little official
clout, especially in the midst of the Japanese recessicln. In addition, not much can be negotiated,
since wage rates, working hours, job security, health benefits, overtime work, insurance, and the
like have traditionally been legislated. However, global competition is putting pressure on com-
panies to move away from guaranteed job security’ and pay. Often, however, the managers and
labor union representatives are the same people, a fact that serves to limit confrontation, as well
as does the cultural norm of maintaining harmonious relationships.
unions because competitive multinational companies have more freedom to choose alter-native
productive and sourcing locations. Most neu. union *’orkers-about 75 percent-will be in
emerging nations, like China and Mexico, where u.ages are low and unions are scarce. However,
in some countries like India, outmoded labor lar*’s are very restrictive for MNEs, making it diffi-
cult to lay off employees under any circumstances {i:rcing foreign companies to be very careful
in their selection of new employees.
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grant power to labor unions. in spite of protests by foreign companies with factories there.
The order was in response ro a lharp rise in labor tension and protests about poor working condi-
tions and industrial accidents.si] The All-China Federation of Trade Unions claimed that foreign
employers often force workers to rvork overtime, pay no heed to labor-safety regulations, and
deliberately find fault with the \r’orkers as an excuse to cut their wages or fine them. The move,
which underscores the go\rernment s growing concern about the widening income gap and
threats of social unrest, is sening oiT a battle with American and other foreign corporations that
have lobbied against it by hinting thar they may build fewer factories in China.8l
unions in its Chinese outlets; other MNCs then joined the effort to get the Chinese government
to reverse its decision. State-controlled unions in China have traditionally not wielded much
power; however atfer years of reports of worter abuse, the government seems determined to give
its union new powers to negotiate worker contracts, safety protection and workplace ground
rules.82 However, in spite of such well-publicized incidences, the union situation in China is gen-
erally regarded as stated in The Econorrisf as follows:
crQc)’ runn’tlg from the nqtional level to small enterprises. In practice it is controlled
14, the Conntwtist Party at the national level and, in companies, is mostly a tool of
the management.
August 1,2009.83
paid are often ignored by Chrnese managers. Hopefully, as discussed in Chapter 2, the improved
social responsibility of foreign limrs operating there might exert pressure for better working con-
ditions for Chinese employees.
The vorltl trude union rnol)entent is poised to follow the lead of turtsnational com-
panies, by extending its reach and throwing off the shackles of national bound{tries.
{Jnions are about to go global.sa
comprising the affiliated organizations of the fonner ICFTU and WCL, plus eight other national
irade union organizations, to form a global body.ss The ITUC represents 166 million workers
through its 309 affiliated organizations in 156 countries and teritories. Its objective is to provide
“a countervailing force in a society that has changed enormously, with workers’ rights being flout-
ed under the pressure created by the curent trajectory of ‘race to the bottom’ globalization.”s6
oJ’MNCs around the world are forces working toward convergence in labor systems. Convergence
occurs as the migration of management and workplace practices around the world reduce work-
place disparities from one country to another. This occurs primarily as MNCs seek consistency and
coordination among their foreign subsidiaries and as they act as catalysts for change by “exporting”
new fbrms of work organization and industrial relations practices.sT It also occurs as harmonization
is sought, such as ibr the EC countries, and as competitive pressures in free+rade zones, such as the
NAFTA countries, eventually bring about demands for some equalization of benefits for workers.ss
It would appear that econornic globalization is leading to labor transnationalism and will bring
about changes in labor rights and democracy around the world.8g
the activities and monitoring of labor conditions woddwide by various organizations. One of these
organizations is the International Labor Organization (IlO)–cornprising union, employer, and
govemment representation-whose mission is to ensure that humane conditions of labor are main-
tained. Other associations ofunions in differentcountries include various international trade secre-
tariats representing workers in specific industries. The activities and communication channels
Forces for Global Convergence e Current System -+ Establish Divergent Systems
MNC presence or consolidation initiatives Social systems
Political change Local regulations and practices
New market economies Political ideology
Free-trade zones: harmonization Cultural norms
(EU), competitive forces (NAFTA)
Declining role of unions
Mexico is unionized, with about 80 percent of workers in industrial organizations that employ
Many foreign firms set up production in Mexico at least in part for the lower wages and
(cTM).’
countries-particularly with linkages and interdependen;e anlons those countries’ such as
law in the private sector. For example, while the minimum rl a-ge in )lexico is far less than that in
pa1’. For comparison, the fci-
