Chapter 14 Human Resource Selection and Development Across Cultures The specific objectives of this chapter are: 1. IDENTIFY the three basic sources that MNCs can tap when filling management vacancies in overseas operations in addition to options of subcontracting and outsourcing. 2. DESCRIBE the selection criteria and procedures used by the organization and individual managers when making final decisions. Chapter 14 Human Resource Selection and Development Across Cultures The specific objectives of this chapter are: 3. DISCUSS the reasons why people return from overseas assignments, and present some of the strategies used to ensure a smooth transition back into the home-market operation. 4. DESCRIBE the training process, the most common reasons for training, and the types of training that often are provided. Chapter Human Resource Selection and Development Across Cultures The specific objectives of this chapter are: 5. EXPLAIN how cultural assimilators work and why they are so highly regarded. 14 4 Sources of Human Resources MNCs can use four basic sources for filling overseas positions: Home-country Nationals (Expatriates) Expatriate managers who are citizens of the country where the multinational corporation is headquartered Sometimes called headquarters nationals Most common reason for using home- country nationals, or expatriates, is to get the overseas operation under way 5 Sources of Human Resources MNCs can use four basic sources for filling overseas positions: Home-country Nationals (Expatriates) Host-country Nationals Local managers hired by the MNC They are familiar with the culture They know the language They are less expensive than home- country personnel Hiring them is good public relations 6 Sources of Human Resources MNCs can use four basic sources for filling overseas positions: Home-country Nationals (Expatriates) Host-country Nationals Managers who are citizens of countries other than the country in which the MNC is headquartered or the one in which the managers are assigned to work by the MNC These people have the necessary Third-country Nationals expertise for the job 7 Sources of Human Resources MNCs can use four basic sources for filling overseas positions: Home-country Nationals (Expatriates) Host-country Nationals Individuals from a host country or a third-country national who are assigned to work in the home country The use of inpatriates recognizes the need for diversity at the home office Use of inpats helps MNCs better Third-country Nationals Inpatriates develop their global core competencies MNCs can subcontract or outsource to take advantage of lower human resource costs and increase flexibility 8 Selection Criteria for International Assignments General Criteria Many criteria are used in selecting managers for overseas assignments including: Adaptability Education Independence Knowledge of local language Self-reliance Motivation Physical & emotional health Support of spouse & children Age Leadership Experience 9 Rank of Criteria in Expatriate Selection Adapted from Table 14–1: Rank of Criteria in Expatriate Selection 10 Selection Criteria for International Assignments Adaptability to Cultural Change Organizations examine a number of characteristics to determine whether an individual is sufficiently adaptable. Work experiences with cultures other than one’s own Previous overseas travel Knowledge of foreign languages Recent immigration background or heritage Ability to integrate with different people, cultures, and types of business organizations 11 Selection Criteria for International Assignments Adaptability to Cultural Change Organizations examine a number of characteristics to determine whether an individual is sufficiently adaptable. Ability to sense and accurately evaluate developments in the host country Ability to solve problems within different frameworks and perspectives Sensitivity to differences of culture, politics, religion, and ethics Flexibility in managing operations on a continuous basis despite lack of assistance and gaps in information 12 Development of Satisfaction in Host Country Note: Satisfaction scale: 1 = extremely low; 7 = extremely high. Adapted from Figure 14–1: Development of Satisfaction in Host Country over Time 13 Selection Criteria for International Assignments Adaptability to Cultural Change Those who were best able to deal with their new situation had developed coping strategies characterized by sociocultural and psychological adjustments including: Feeling comfortable that their work challenges can be met Being able to adjust to their new living conditions Learning how to interact well with host-country nationals outside of work Feeling reasonably happy and being able to enjoy dayto-day activities 14 Activities That Are Important for Expatriate Spouses Adapted from Table 14–2 :Activities That Are Important for Expatriate Spouses (scale: 1–5, 5 very important) 15 Activities That Are Important for Expatriate Spouses Adapted from Table 14–2 :Activities That Are Important for Expatriate Spouses (scale: 1–5, 5 very important) 16 Selection Criteria for International Assignments Other Considerations Applicants better prepare themselves for international assignments by carrying out the following three phases: Phase I Focus on self-evaluation and general awareness include the following questions: Is an international assignment really for me? Does my spouse and family support the decision to go international? Collect general information on available job opportunities 17 Selection Criteria for International Assignments Other Considerations Applicants better prepare themselves for international assignments by carrying out the following three phases: Conduct a technical skills assessment – Do I have Phase I Phase II the technical skills required for the job? Start learning the language, customs, and etiquette of the region you will be posted Develop an awareness of the culture and value systems of the geographic area Inform your superior of your interest in the international assignment 18 Selection Criteria for International Assignments Other Considerations Applicants better prepare themselves for international assignments by carrying out the following three phases: Phase I Phase II Phase III Attend training sessions provided by the company Confer with colleagues who have had experience in the assigned region Speak with expatriates and foreign nationals about the assigned country Visit the host country with your spouse before the formally scheduled departure (if possible) 19 International Human Resource Selection Procedures Anticipatory Adjustment Training Previous experience In-country Adjustment Individual’s ability to adjust effectively Ability to maintain a positive outlook, interact well with host nationals, and to perceive and evaluate the host country’s cultural values and norms correctly Clarity of expatriate’s role in the host management team Expatriate’s adjustment to the organizational culture Nonwork matters 20 The Relocation Transition Curve Perceived Competence 1. Unreality The feeling that the relocation is a dream 2 6. Search for Meaning 3. Interest Understanding reasons for success and failure. New models/personal theories created A deeper exploration of the environment and a realization that it is fundamentally different from home 5 3 1 7. Integration of New Skills and Behavior Acceptance of the new environment 5. Experimentation and Testing of New Approaches Practice phase – trying to do things differently Feedback of results – success and failure 2. Fantasia The feeling of enchantment and excitement in the new environment 6 7 4 4. Acceptance of Reality “Letting go” of past comfortable attitudes and realizing you are a stranger in a strange land Beginning of Transition Adapted from Figure 14–2: The Relocation Transition Curve Time 21 Common Elements of Compensation Packages Compensating expatriates can be difficult because there are many variables to consider Most compensation packages are designed around four common elements: Allowances COMPENSATION Base Salary Taxes PACKAGE Benefits 22 Relative Cost of Living in Selected Cities Tokyo Oslo Zurich Hong Kong Copenhagen Paris London New York Singapore Stockholm Seoul New York = 100 Adapted from Figure 14–3: Relative Cost of Living in Selected Cities (New York = 100) 23 Relative Cost of Living in Selected Cities Frankfurt Beijing Moscow Rome Tel Aviv Mexico City Toronto Prague Jakarta Warsaw Kuala Lumpur New York = 100 Adapted from Figure 14–3: Relative Cost of Living in Selected Cities (New York = 100) 24 Relative Cost of Living in Selected Cities Johannesburg Bangkok Cairo Buenos Aires Sao Paulo Manila New York = 100 Adapted from Figure 14–3: Relative Cost of Living in Selected Cities (New York = 100) 25 Common Elements of Compensation Packages Base salary Amount of money that an expatriate normally receives in the home country Benefits Should host-country legislation regarding termination of employment affect employee benefits entitlements? Is the home or host country responsible for the expatriates’ social security benefits? Should benefits be subject to the requirements of the home or host country? Which country should pay for the benefits? Should other benefits be used to offset any shortfall in coverage? Should home-country benefits programs be available to local nationals? 26 Common Elements of Compensation Packages Allowances Cost-of-Living Allowance Payment for differences between the home country and the overseas assignment. Designed to provide the expatriate the same standard of living enjoyed in the home country May cover a variety of expenses, including relocation, housing, education, and hardship Incentives A growing number of firms have replaced the ongoing premium for overseas assignments with a one-time, lump-sum premium 27 Common Elements of Compensation Packages Taxes Tax equalization An expatriate may have two tax bills for the same pay Host country U.S. Internal Revenue Service MNCs usually pay the extra tax burden 28 Employer Incentive Practices Around the World Adapted from Table 14–3: Employer Incentive Practices Around the World 29 Tailoring the Compensation Packages Balance-sheet approach Ensure the expatriate does not lose money from the assignment Complementary approach Negotiate to work out an acceptable ad hoc arrangement Localization Pay the expatriate a salary comparable to local nationals Lump sum method give expatriate a lump sum of money Cafeteria approach Compensation package that gives the individual a series of options Regional system Set a compensation system for all expatriates who are assigned to a particular region 30 Individual and Host-Country Viewpoints Individual desires Why do individuals accept foreign assignments? Greater demand for their talents abroad than at home Host-country desires Whom would it like to see put in managerial positions? Accommodating the wishes of HCOs can be difficult: They are highly ethnocentric in orientation They want local managers to head subsidiaries They set such high levels of expectation regarding the desired characteristics of expatriates that anyone sent by the MNC is unlikely to measure up 31 Quality of Life in Select Major Metropolises, 2002 Zurich Vancouver Vienna Sydney Copenhagen Frankfurt Stockholm Amsterdam Brussels San Francisco Tokyo Paris Singapore New York = 100 40 50 60 70 80 90 100 110 Adapted from Figure 14–4: Quality of Life in Select Major Metropolises, 2002 (New York 100) 32 Quality of Life in Select Major Metropolises, 2002 Madrid New York London Rome Hong Kong Buenos Aires Kuala Lumpur Johannesburg Sao Paulo Mexico City Shanghai Moscow New Delhi Belgrade New York = 100 40 50 60 70 80 90 100 110 Adapted from Figure 14–4: Quality of Life in Select Major Metropolises, 2002 (New York 100) 33 Beliefs of Home-Country Organization Expatriates Adapted from Table 14–4: Beliefs of Home-Country Organization Expats 34 Repatriation of Expatriates Reasons for returning to home country Most expatriates return home from overseas assignments when their formally agreed-on tour of duty is over Some want their children educated in a home-country school Some are not happy in their overseas assignment Some return because they failed to do a good job Readjustment problems “Out of sight, out of mind” syndrome Organizational changes Technological advances Adjusting to the new job back home 35 Time Back in Home Country Effectiveness of Returning Expatriates 6 Years 5 Years 4 Years 3 Years 2 Years 1 Year 1.0 1.5 Low 2.0 2.5 3.0 3.5 Neutral Effectiveness Adapted from Figure 14–5: Effectiveness of Returning Expatriates 4.0 4.5 5.0 High 36 Repatriation of Expatriates Transition strategies Repatriation Agreements Firm agrees with individual how long she or he will be posted overseas and promises to give the individual, on return, a job that is mutually acceptable Some of the main problems of repatriation include: Adjusting to life back home Facing a financial package that is not as good as that overseas Having less autonomy in the stateside job than in the overseas position Not receiving any career counseling from the company 37 Human Resource Management Practices in Select Countries Adapted from Table 14–5: Human Resource Management Practices in Select Countries 38 Training in International Management Four basic philosophic positions Ethnocentric MNC Stresses nationalism and often puts home-office people in charge of key international management positions 39 Training in International Management Four basic philosophic positions Ethnocentric MNC Polycentric MNC Places local nationals in key positions and allows these managers to appoint and develop their own people 40 Training in International Management Four basic philosophic positions Ethnocentric MNC Polycentric MNC Regiocentric MNC Relies on local managers from a particular geographic region to handle operations in and around that area 41 Training in International Management Four basic philosophic positions Ethnocentric MNC Polycentric MNC Regiocentric MNC Geocentric MNC Seeks to integrate diverse regions of the world through a global approach to decision making 42 Training in International Management Corporate Reasons for Training Ethnocentrism The belief that one’s own way of doing things is superior to that of others Personal reasons To train overseas managers to improve their ability to interact effectively with local people in general and with their personnel in particular Increasing numbers of training programs address social topics – these programs also focus on dispelling myths and stereotypes by replacing them with facts about the culture 43 Model for the Development of Multinational Managers Increasing effectiveness of expatriate and repatriated executives Feedback Internal relations External relations Family relations Relations with host government Feedback Review terms and conditions of assignment Increase cultural awareness Increase knowledge of the host country Headquarters relations Relations with home government Impart working knowledge of the foreign language Increase conflict management skills Minimize re-entry problems How much development? Feedback Knowledge about cultural, political, economic, business, legal, and social factors of the host country Awareness of the needs and expectations of the different parties interested in international operation Awareness of the problems of family relations in the host country Feedback Behavioral simulation Orientation Area study Language instruction Cross-cultural group Case method Postarrival training Re-entry training Evaluation Effectiveness of the expatriate executives Feedback Re-entry training Evaluation Effectiveness of the repatriated executives Problem recognition Development objectives Assessment of development needs Feedback Predeparture training Overall objective Orientation & training Intergroup problem solving Adapted from Figure 14–6: A Model for the Development of Multinational Managers Development method Intermediate result Desired result Development method Desired result 44 Model for the Development of Multinational Managers Use your cursor to “Click” on the text box you want to view in a larger format. Then use the following buttons to: Return to the full model on slide #44 Return to the previous slide Advance to the next slide You may also use your space bar or click (not on a button) to skip the “enlarged views” of this model and go on to the next topic Adapted from Figure 14–6: A Model for the Development of Multinational Managers 50 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Provide information about things such as geography, climate, housing, and schools 51 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Familiarize the individual with Cultural Orientation cultural institutions and value systems of the host country 52 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Programmed learning techniques Cultural Orientation Cultural Assimilators designed to expose members of one culture to some of the basic concepts, attitudes, role perceptions, customs, and values of another culture 53 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Provide information about things Cultural Orientation Cultural Assimilators Language Training such as geography, climate, housing, and schools 54 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Develop attitudinal flexibility Cultural Orientation Cultural Assimilators Language Training Sensitivity Training 55 Cross-Cultural Training Programs Major types of cross-cultural training programs Environmental Briefings Send participant to the country of Cultural Orientation Cultural Assimilators Language Training Sensitivity Training Field Experience assignment to undergo some of the emotional stress of living and working with people from a different culture 56 Cross-Cultural Training Programs Steps in cross-cultural training programs Send participant country Local instructors and a translator observe to thethe pilot trainingof program or examine written training materials assignment to undergo some of Educational designer debriefs the observation with the and the emotional stress of living translator, curriculum writer, and local working with instructors people from a The group examines thedifferent structureculture and sequence, ice breaker, and other materials to be used in the training The group collectively identifies stories, metaphors, experiences, and examples in the culture that fit into the new training program The educational designer and curriculum writer make necessary changes in training materials 57 Cross-Cultural Training Programs A variety of other approaches can be used to prepare managers for international assignments Send participant to the country of including: assignment to undergo some of Visits to the host country the emotional stress of living and Briefings by host-country managers working with people from a In-house management programs different culture Training in local negotiation techniques Analysis of behavioral practices that have proven most effective 58 Contingency Approach to Cross-Cultural Training 1–4 Weeks Less than a Week LOW HIGH Immersion Approach Level of Rigor 1–2 Months+ Cross-Cultural Training Approach LOW Length of Training HIGH Affective Approach Information Giving Approach LOW Length of Stay 1 Month or less MODERATE Degree of Integration 2-12 Months Adapted from Figure 14–7: A Contingency Approach to Cross-Cultural Training HIGH 1-3 Years 59 Types of Training Programs Global Leadership Development The Global Leadership Program (GLP) A consortium of leading U.S., European, and Japanese firms, global faculty, and participating host countries Provide an intensive international experience Develop a global mindset Instill cross-cultural competency Provide an opportunity for global networking 60 Tichy Development Matrix Deep High Risk Long Time Adapted from Figure 14–8: The Tichy Development Matrix Low Risk Little Time Team Organization Individual Pair Superficial Required Approach Action Learning Emerging Trend Current Approach Old Way Developing Awareness Target of Change Developing Cognitive Understanding Long Time Developing Skills High Risk Developing New Problem-Solving Approaches Developing Fundamental Change Deep Depth of Change Superficial Low Risk Little Time 61 Case BP’s Global Shift 1.Discuss John Browne’s leadership style. How would you characterize his approach to global leadership? 2.How much of an impact do you think BP’s marketing efforts will have on shareholder value? 3.Discuss the pros and cons of BP’s strategy in Russia, both short-term and long-term. 4.Do you think Browne’s initial plan to back the U.S. government’s proposal to open up the Arctic Refuge in Alaska was a mistake? If so, why? 5.Discuss the difficulties of simultaneously securing growth and promoting social responsibility for oil and gas firms. What are the major challenges? 6.Given BP’s huge commitment to re-branding itself as “socially responsible,” do you think customers will believe this message from a company that, by nature, contributes to environmental pollution? What other relationships/ associations could BP develop that would be more credible? 7.Do you view corporate social responsibility initiatives as a barrier to entry for new oil and gas concerns?