Expert answer:Critical Thinking Question
Expert answer:READING 14.1: Project GlobeREADING 14.2: Cross-Cultural Management and Organizational Behavior in AfricaHow can employers be more successful with retention of repatriates? (Critical Thinking Question 5, page 626, in the textbook.) Prepare a 1200 (approximately) word paper.
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612 | Part 2
Implementation of Strategic Human Resource Management
T
he strategic business decisions being made by modern organizations increasingly involve some
plan to conduct business that was previously conducted domestically in the global arena. In some
cases, this may involve a minimal physical presence in another country; in others, it may involve
setting up operations that will eventually exceed the size of domestic operations. We no longer live in a
domestic economy, as evidenced by diminished trade barriers and regional economic alliances, such as
the North American Free Trade Agreement (NAFTA) and the European Union (EU) as well as the
acceleration of global financial markets and information networks. Tremendous opportunities exist to
market goods and services abroad, particularly in less-developed countries; to participate in joint ventures with foreign organizations; and to outsource operations to other countries as a means of lowering
costs. When one considers that less than 10 percent of the world population resides in the United
States and that many domestic consumer markets are saturated, it should not be surprising that an
increasing number of organizations are developing strategies to expand internationally.
These strategic opportunities are resulting in employers sending an increasing number of
employees abroad to start up, manage, and develop their global operations. While a greater
D moved abroad, an increasing number of U.S. domestic
percentage of the U.S. workforce is being
workers are natives of other countries. A
These trends are not just limited to larger organizations as
they once were; small- and medium-size employers are taking advantage of international
I
opportunities, and their workforces are becoming
more culturally diverse.
An organization might focus on expanding
globally
for a number of reasons. Foreign countries
L
may present enhanced market opportunities. In addition, expanding the scope and volume of
Y result in economies of scale in production as well as
operations to support global initiatives could
in the administrative side of the organization. Competitive pressure may require an organization to
,
enter foreign markets to keep pace with industry leaders. Finally, acquisition activity may result in
the ownership of a foreign-based organization or subsidiary.
Regardless of the reasons a company may have for expanding operations globally, human resource
(HR) management is critical to the successR
of any global endeavor. If one adopts the perspective that HR
strategy must be derived from corporate strategy
Y and that people do determine an organization’s success
or failure, then the HR function needs to be a key strategic partner in any global undertakings.
A and establishment of global operations.
Ironically, HR is often neglected in the planning
N
Strategic Global HR at McDonald’s
2
When fast-food king McDonald’s initially expanded outside the United States, it followed a very
ethnocentric approach to going global.6U.S. expatriates were sent abroad to develop the new sites
and maintain as much consistency as possible with domestic operations. Locals were
7
“McDonaldized”—taught the specific operations
and business plans developed back in the United
States. This approach has evolved over5
the years to one that is now very polycentric. When opening locations outside the United States, expatriates are rarely used and HR professionals at
McDonald’s partner closely with localsBto develop an operation that fits with local culture, customs, and lifestyles. A four-phase approach is used in which HR has a specific and critical role to
U
play at each step. The first phase, development preparation, usually begins 18–24 months prior to
the actual opening. During this phase, HR researches issues such as compensation and benefits,
considers recruiting strategies, and secures a labor attorney or consultant. The second phase,
resources selection, takes place 8–12 months prior to opening. HR takes the information gathered
in phase one and begins to develop specific HR programs and plans and determines staffing
needs and compensation levels. The third phase, resource development and strategy implementation, takes place 3–8 months prior to opening. HR puts together employee handbooks, considers
the effects of local labor laws on operations, and begins to implement its staffing plan by hiring
employees. The final phase, preopening preparation, begins 90 days prior to opening.
Here, HR conducts training and lays the groundwork for the performance review system. McDonald’s strategy for its global operations includes HR as a key strategic partner,
facilitating the implementation of the human and cultural dimension of the operation for
maximum success.2
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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Chapter 14
Global Human Resource Management | 615
The language of material goods can be similarly used to signify power, success, and status. In
some cultures, these indicators are of critical importance in establishing one’s personal and professional identity. In an organizational setting, this language might be communicated through generous perks such as a company car and might be further evidenced by executive salaries that are
many times those of lower level workers. Organizations that establish and maintain pay compression plans are attempting to silence this kind of language.
The language of friendships considers how we form interpersonal relationships. For example,
are friendships formed and dissolved quickly or are they built on a foundation over a long period
of time? Is there a mutual sense of ongoing obligation in interpersonal relationships or are they
more transient and maintained only as long as both parties see some benefit? Some cultures communicate status via material goods; other cultures communicate status through one’s network of
friends and the support this network provides.
The language of agreement considers how consensus is reached among people. For example,
are formal, written contracts signed under an oath of law the norm in business negotiations or is a
D
simple handshake sufficient guarantee?
Is it acceptable to debate someone with whom you do not
agree and, if so, is it acceptableA
to debate in front of others?
A key issue that impacts an organization’s success in the global arena is an awareness of
I
cultural differences and the development
of both a business strategy and corresponding HR
strategy that is consistent withLthe culture of the host country. Although it is beyond the scope
of this chapter to detail how cultural differences might impact people management systems, a
culture in which negotiations Y
are based on trust and friendship that is built over time might
pose some difficulty for an American, who might be used to getting down to business and nego,
tiating without developing any kind of interpersonal connection. Also, the candor and outspokenness for which Americans are known could conflict with the styles of those from other
cultures. In short, when cultures come together in organizational settings, special consideration
R such as power dynamics and relationships, norms of particmust be paid to managing processes
ipation and decision making, and
Y performance management and compensation systems to prevent misunderstandings.
A organizations also have their own cultures. As a result, deciMuch as societies have cultures,
sion makers need to examine the interface between the culture of the organization and the culture
N
of the host country in determining whether an appropriate fit exists and, subsequently, in developing an optimal business strategy and appropriate HR management strategies. For example, if the
organization strongly values diversity, what will be done when a host country’s culture fails to sup2 it is acceptable to discriminate on the basis of gender, race,
port these values? In many cultures,
ethnicity, age, disability, and sexual
6 orientation. Does the organization extend its ban on smoking
to all overseas locations? Will it prohibit facial hair on employees or prohibit employees from
7 lunches? What will happen in a culture in which bribes are an
enjoying a glass of wine with their
accepted and expected means of conducting business?
5
In going abroad, an organization needs to decide what HR policies will be implemented in
the host country and needs toB
make these decisions prior to arrival. These decisions will force
top managers to confront a number of ethical decisions and may test the strength of the organizaU need to be resolved relative to incompatible local and corporate
tion’s culture. Conflict issues will
cultures. Decision makers need to understand which values the organization holds so deeply that it
will not compromise, even in the face of significant financial consequences. Although these ethical
decisions can present difficult choices, they can help to strengthen the organization’s mission,
strategy, and employment practices.
National culture can have a significant effect on an organization’s ability to utilize strategic
HR. A culture that is oriented toward tradition, for example, might not understand the logic of,
or resist, any kind of planning. Certain cultures have stringent rules regarding staffing and may
require the organization to employ individuals assigned to it by a centralized labor bureau. Individuals in some very strict hierarchical cultures would probably not respond well to upward performance feedback programs. In some cultures, it is considered inappropriate for a worker to report
to a manager who is younger than the subordinate. The inappropriateness of using direct eye contact in conversation in some cultures might bias the results of the employment interview process.
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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Chapter 14
Global Human Resource Management | 619
The same principles and practices of general HR management apply with a few additional concerns. First, it is critical to assess the ongoing training needs of the expatriate employee and family
after they have arrived at the host country. Particularly if this is the first time an employee of the
organization has been assigned to a particular country, it is likely that some unanticipated events
that require additional support and training could materialize. Second, performance management
will be more of a challenge; the expatriate’s functional boss is usually located domestically, and
others in the organization may not be aware of how economic, social, and political conditions
and everyday living situations impact the expatriate’s performance. Third, many aspects of
employee and labor relations will be localized. The expatriate may have to manage a local workforce under far more challenging conditions than those presented domestically. The expatriate
may also have to manage the dynamics of being a foreign manager of local employees. Finally,
compensation for the expatriate will be different. It is costly to send an employee overseas, usually
amounting to as much as three times the employee’s annual domestic salary. Income tax payments
for the employee may be complicated and costly. Benefits such as armed security guards or private
D may be necessary. Although compensation for expatriates is
schooling for the employee’s children
often outsourced, organizationsA
need to be very careful in this regard; compensation is a key strategic issue not only from a cost perspective but also in impacting the employee family’s ability to
I compensation to a third party who does not fully understand
live in the host country. Outsourcing
the organization’s overall strategy
L or have a holistic appreciation of all of the organization’s HR
systems could result in disaster.
There are three traditionalYapproaches to determining expatriate compensation. The first is
the balance-sheet method. With this approach, salary is based on home country pay, and addi,
tional expenses associated with relocation and the assignment itself are added to arrive at an overall reimbursement and compensation level. These expenses might include the cost of housing in
the host country, furniture, household help, a car and driver, or spousal/partner assistance. This
R gains a sense of equity and fairness in the compensation
approach ensures that the expatriate
package; however, the local employees,
particularly if they are poor, may sense some inequity.
Y
This system can be complex to administer, but it is still widely used, particularly for short-term
A
or temporary assignments.
The higher-of-home-or-host approach takes into account the employee’s salary at home and
N
adjusts it upward, as necessary, to account for a higher cost of living in the host country. This
approach is usually accompanied by standard perquisites for executives in the host country and is
used most commonly for intermediate term assignments of indefinite duration.
2 to a host country on a permanent basis, the localization
When the employee is assigned
approach is usually used. Here,6the employee’s salary is converted to the host country equivalent.
Depending on the country, salary structures, and the cost of living, this approach can initially
result in a salary decrease for7the employee. Localization has become an increasing popular
approach for organizations now used by upward of 78 percent of employers.8
5
Expatriate selection assignments are some of the most critical decisions that organizations make
relative to their global operations.
BThe success or failure of an expatriate assignment can easily determine the fate and success of an organization’s entry into a new global market. Much of the focus of
U concerned with the selection and training of expatriates and their
expatriation has traditionally been
accompanying family members. However, this focus has been expanding to involve the active and
ongoing management of the expatriate assignment after the relocation has taken place.9
In establishing general HR policy for the day-to-day management of all employees abroad—
locals as well as expatriates—the organization also needs to make a strategic decision as to the
level of standardization it desires across locations. Heenan and Perlmutter identified four different
approaches an organization can take in setting and enforcing policy: ethnocentric, polycentric,
regiocentric, and geocentric, as illustrated in Exhibit 14.4.10
An ethnocentric approach involves exporting the organization’s home country practices and
policies to foreign locations. This strategy is often used by organizations whose competitive strategy is focused on creating an image. An ethnocentric approach can be beneficial in allowing standardization, integration, and efficiency. However, if it is forced on another culture that does not
subscribe to the values on which the practices are based, there can be severe problems. Some
9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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628 | Part 2
Implementation of Strategic Human Resource Management
Resource Management, article 019786, January, 2007,
published atwww shrm.org/global/news/published/XMS_
019786.asp.
27.
Iyer, R. and Shroff, V. “Ensuring Compliance with
Employment Laws in India,” Society for Human Resource
Management, article 026877, October-November, 2008,
published at www.shrm.org/hrresources/lrptpublished/
CMS026877.asp.
28.
Gross and Minot, 2007, op. cit.
29.
Grossman, R. “HR’s Rising Star in India,” HR Magazine, 51, (9), September 2006, pp. 46–52.
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9781305234758, Strategic Human Resource Management, Fourth Edition, Mello – © Cengage Learning All rights reserved No distribution allowed without express authorization
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630 | Part 2
Implementation of Strategic Human Resource Management
“cognitive complexity” and psychological maturity to handle
life and work in a foreign setting. And they are likely to hear
or read that they must “walk in the shoes of people from different cultures” in order to be effective.9 There is nothing
wrong with such advice, and the scholars and writers who
proffer it have often been pioneers in the field. But it is insufficient for a manager who is likely to assume, mistakenly, that
being open minded in Atlanta, Helsinki, and Beijing will be
perceived identically, or that walking in someone else’s shoes
will feel the same in Houston, Jakarta, and Madrid. Because of
the lack of scientifically compiled information, businesspeople
have not had sufficiently detailed and context-specific suggestions about how to handle these cross-cultural challenges. This
is a particular problem for those in leadership positions.
Although there are universal aspects of leadership, information about which will be presented shortly, people in different countries do in fact have different criteria for assessing their
leaders.10 The issue for the American manager is whether the
attributes that made him or her successful as a leader in the
United States will also lead to success overseas, be of no value
or, worst of all, cause harm in the foreign operation. Using the
findings from an extensive research effort known as the Global
Leadership and Organizational Behavior Effectiveness
(GLOBE) project, this article provides a few answers to the
questions about the universal and culture specific aspects of
leadership. We will present specific information about key cultural differences among nations and connect the “dots” on how
these differences influence leadership. This information should
help a typical global executive better understand the leadership
challenges s/he faces while managing operations outside the
United States. It will also provide suggestions on how to
more effectively cope with such challenges.
To make the GLOBE findings come alive, we will follow
a hypothetical American executive who has been given two
years to lead a project based in four different countries: Brazil, France, Egypt, and China. This hypothetical project
involves developing a somewhat similar product for the
four different markets. The project team in each country is
tasked with the marketing of a new technology in the telecommunications industry. The executive will work with local
employees in each location. Success will be determined by
two criteria: the executive’s ability to produce results and to
show effective leadership in different cultures and settings.
The four countries represent different continents and very
diverse cultures. Brazil is the most populous and economically
important South American country. France is the largest, most
populous, and most economically developed Latin European
country. Egypt is the largest and most populous Arab country.
China is the fast growing giant economy with unprecedented
growth in its economic and diplomatic power in the world. We
chose these countries to provide context specific analysis leading to general recommendations for global executives. Our
choice of countries was guided by our efforts to cover a wide
range of cultures. Before turning to our hypothetical scena …
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