Management

Managing Global Human Resources

Erol Baki

Management 330 - Theory, Practice, & Application

John Lemire

May 13, 2005

The environment in which business competes is rapidly becoming globalized. More and more companies are entering international markets by exporting their products overseas, building plants in other countries, and entering into alliances with foreign companies. Global competition is driving changes in organizations throughout the world. Companies are attempting to gain a competitive advantage, which can be provided by international expansion. Deciding whether to enter foreign markets and whether to develop plants or other facilities in other countries is no simple matter and many human resource issues surface. (Noe, Hollenbeck, Gerhart, and Wright; 534)

Doing business globally requires that adaptations be made to reflect cultural and other factors that differ from country to country and from continent to continent. The nature and stability of political systems vary in character and stability, with contracts suddenly becoming unenforceable because of internal political factors. Human resource regulations and laws vary among countries in character and detail. In many countries in Western Europe, laws on labor unions and employment make it difficult to reduce the number of workers because required payments to ex-employees can be very high. Equal employment legislation exists to varying degrees. In some countries, laws address issues such as employment discrimination and sexual harassment.

Cultural forces represent another important concern affecting international human resource management. Culture is composed of the societal forces affecting the values, beliefs, and actions of a distinct group of people. (Mathis & Jackson, 171) Cultural differences certainly exist between nations, but also between countries. Getting individuals from different ethic or tribal backgrounds to work together may be very difficult in some parts of the world. Culture is important to human resources for two reasons. It determines the other factors - political-legal, economic and education-human capital factors. Culture affects human capital, because if education is greatly valued by culture, then members of the community try to increase their human capital. (Noe, Hollenbeck, Gerhart, and Wright; 537) Economic conditions vary also from country to country. Many lesser-developed nations are receptive to foreign investment in order to create jobs for their growing populations. In many developed countries, especially in Europe, unemployment has grown, but employment restrictions and wage levels remain high.

The internationalization of U.S. corporations has grown than the internationalization of human resource management. International human resource management differs from domestic human resource management in several ways. In the first place, it places a greater emphasis on functions and activities such as relocation, orientation, and translation services to help employees adapt to a new and different environment outside their own country. Assistance with tax matters, baking, investment management, home rental while on assignment, and coordination of home visits is also usually provided by the human resource department. Larger corporations have a full-time staff of human resource managers devoted to assisting globalization. For example, McDonald's has a team of HR directors who travel around the world to help country managers stay updated on international concerns, policies, and programs. The human resource department in an overseas unit must be particularly responsive to the cultural, political, and legal environments. Companies such as Shell, Xerox, Levi Strauss, Digital, and Honeywell have made a special effort to create codes of conduct for employees throughout the world to make certain that standards of ethical and legal behavior are known and understood. (Sherman, Bohlander, and Snell; 633)

A growing number of organizations that operate only within one country are recognizing that they must change and develop a more international perspective. Organizations may pass through three stages that are import-export (national) companies, multinational enterprises (MNE), and global organizations. National companies do not become global companies immediately. Involvement in international HRM depends greatly on a company's phase of globalization. Import-export firms. Firms in the first phase of globalization simply move products across national boundaries. The firm does not employ people in other countries, except a few managers responsible for negotiating business agreements. These agreements usually involve buying or selling complete products or services. Import-export firms need to understand their trading partners' cultures and usually must overcome communication barriers to negotiate agreements. Negotiations are usually done by expatriate representatives, but expatriates are not employed as extensively by import-export firms as by multinational enterprises. HR policies and practices remain relatively unchanged from the company's traditional home-base practices. (HR Magazine,06-01-1995)

Multinational enterprises (MNEs). Firms in the second phase of globalization have strategic corporate units located in foreign countries. Part of the firm's goods or services may be produced in one country, then possibly moved to another country for additional assembly, and ultimately distributed to other countries where they are sold by employees of the firm. MNEs typically make extensive use of expatriate managers who are sent from headquarters to oversee foreign operations. Expatriate managers play important strategic roles. They coordinate between subsidiaries and headquarters, implement strategy, ensure the quality and effectiveness of organizational control systems, and manage global information systems. They also gain expertise in international business skills that are critical to ensuring that top executive positions are filled by competent replacements with the necessary international experience and perspectives. Multinational enterprises hiring workers in foreign countries must create and administer HR practices adapted to each country. In addition to hiring, some of the most significant HR issues for MNEs are training a foreign workforce, complying with the host country's employment laws,