Managing a Global Workforce

Managing a

Global Workforce

Managing a

Global Workforce

Challenges and Opportunities in

International Human Resource Management

Charles M. Vance

Yongsun Paik

M.E.Sharpe

Armonk, New York

London, England

Copyright © 2006 by M.E. Sharpe, Inc.

All rights reserved. No part of this book may be reproduced in any form

without written permission from the publisher, M.E. Sharpe, Inc.,

80 Business Park Drive, Armonk, New York 10504.

Library of Congress Cataloging-in-Publication Data

Vance, Charles M., 1952–

Managing a global workforce : challenges and opportunities in

international human resource management / by Charles M. Vance and Yongsun Paik.

p. cm.

Includes bibliographical references and index.

ISBN-13 978-0-7656-1069-0 (cloth : alk. paper)

ISBN-10 0-7656-1069-8 (cloth : alk. paper)

1. International business enterprises—Personnel management. 2. Personnel management.

I. Paik, Yongsun, 1956– II. Title.

HF5549.5.E45V46 2006

658.3—dc22 2006005775

Printed in the United States of America

The paper used in this publication meets the minimum requirements of

American National Standard for Information Sciences

Permanence of Paper for Printed Library Materials,

ANSI Z 39.48-1984.

~

BM (c) 10 9 8 7 6 5 4 3 2 1

INTRODUCTION AND OVERVIEW v

To our dear wives and precious children:

the global source of our support and inspiration.

CONTENTS vii

vii

Contents

Foreword xi

Preface xiii

1. INTRODUCTION AND OVERVIEW

Attracting Factory Workers in China 3

Introduction 4

Global Market Context 5

Key Perspectives in Global Workforce Management 25

Book Overview 30

Summary 31

Questions for Opening Scenario Analysis 32

Case 1.1. The United Nations of Bananas 32

Case 1.2. MNC Collaboration in Social Responsibility 34

Recommended Website Resources 35

2. CULTURAL FOUNDATIONS OF INTERNATIONAL HUMAN

RESOURCE MANAGEMENT

International Merger Misery at DaimlerChrysler 36

Introduction 37

Understanding Culture 37

Major Models of National Culture 39

Cultural Convergence versus Divergence 50

Final Caveats on Culture and Global Workforce Management 54

Summary 56

Questions for Opening Scenario Analysis 57

Case 2.1. Cross-Cultural Assessment over a Cup of Coffee 57

Case 2.2. Culture Conflict South of the Border, Down Mexico Way 58

Recommended Website Resources 59

viii CONTENTS

3. CHANGES AND CHALLENGES IN THE GLOBAL LABOR MARKET

Vietnamese Vendors in Prague 61

Introduction 62

Globalization 62

Technological Advancements 63

Changes in Labor Force Demographics and Migration 65

Emergence of the Contingent Workforce 73

Offshore Sourcing 77

Global Workforce Management Challenges 79

Summary 80

Questions for Opening Scenario Analysis 80

Case 3.1. Free Movement of Labor Across National Borders 80

Case 3.2. Europe: The New Destination for Latino Workers 82

Recommended Website Resources 84

4. THE KEY ROLE OF INTERNATIONAL HRM IN

SUCCESSFUL MNC STRATEGY

Is Accenture’s Global Face Really a Facade? 85

Introduction 86

Knowledge Transfer 86

Global Leadership Training and Development 87

Strategic Control Needs 88

Competitive Strategies of Multinational Corporations 89

Structuring for Optimal Global Performance 93

Linking Human Resource Management Practices to Competitive

Strategy and Organizational Structure 95

Paradigm Shift of International Human Resource Management from

Contingency Model to Process Development 98

Summary 101

Questions for Opening Scenario Analysis 102

Case 4.1. Lenovo’s Purchase of International Business Machine

(IBM) PC Division 102

Case 4.2. Foreign Buyouts Heighten Tensions in Germany 104

Recommended Website Resources 105

5. GLOBAL HUMAN RESOURCE PLANNING

“Who Are Our Employees, Anyway?” 106

Introduction 107

From Strategy to Decisions about Work Demand and Labor Supply 108

External Environmental Scanning 109

Job Design for Meeting Global Strategy Work Demand 113

Sources of Global Labor Supply for Meeting Work Demand 122

CONTENTS ix

HR Planning for the Long-Term 132

Summary 135

Questions for Opening Scenario Analysis 136

Case 5.1. HR Planning for Executive-Level Gender Diversity 136

Case 5.2. A Google Search—For Talent 137

Recommended Website Resources 138

6. GLOBAL STAFFING

Global Staffing at the Royal Dutch/Shell Group 139

Introduction 140

General Factors Affecting Global Staffing 141

Global Recruitment of Human Resources 155

Global Selection of Human Resources 162

Summary 168

Questions for Opening Scenario Analysis 169

Case 6.1. MNC Staffing Practices and Local Antidiscrimination Laws 169

Case 6.2. Local Staffing for Global Business Outsourcing Success 171

Recommended Website Resources 172

7. GLOBAL WORKFORCE TRAINING AND DEVELOPMENT

Motorola University 174

Introduction 175

Strategic Role of Training and Development in the Global Marketplace 176

Fundamental Concepts and Principles for Guiding Global

Training and Development 178

Training Imperatives for the Global Workforce 188

Summary 200

Questions for Opening Scenario Analysis 201

Case 7.1. Training and Retaining Qualified Managers in China 201

Case 7.2. HCN Supervisory Training Needs 202

Recommended Website Resources 204

8. MANAGING INTERNATIONAL ASSIGNMENTS

Expatriate Innocence Abroad 205

Introduction 206

Expatriate Preparation, Foreign Assignment, and Repatriation 207

International Assignment Considerations for Special Expatriates 216

New and Flexible International Assignments 223

Summary 229

Questions for Opening Scenario Analysis 229

Case 8.1. Working in a Sheltered Enclave in Shanghai, China 229

Case 8.2. Re-Entry Shock: A Family Affair 230

x CONTENTS

Recommended Website Resources 232

Appendix 8.1. Important International Business Travel Considerations 233

9. GLOBAL WORKFORCE PERFORMANCE MANAGEMENT

Puzzling Performance Appraisal 239

Introduction 240

Performance Management Process 243

Important Considerations for Global Performance Management 247

Planning and Implementing Global Performance Appraisals 258

Summary 267

Questions for Opening Scenario Analysis 267

Case 9.1. Upstream Performance Management: Culture Shift at Citigroup 268

Case 9.2. Customizing HCN Performance Appraisal Design 269

Recommended Website Resources 270

10. COMPENSATION FOR A GLOBAL WORKFORCE

Compensation Convergence 271

Introduction 272

Managing Compensation on a Global Scale: Fundamental Practices 273

Key Compensation Considerations for Expatriates, HCNs, and TCNs 290

Summary 298

Questions for Opening Scenario Analysis 298

Case 10.1. Europe Straining under Pension System Burden 298

Case 10.2. Executive Pay: Increasing the Threat of China’s Wealth Gap 299

Recommended Website Resources 301

11. GLOBAL EMPLOYEE RELATIONS

Union Trouble in Korea’s Auto Industry 302

Introduction 303

Current ER Issues 303

Influence of MNCs and Unions on Global ER 310

Summary 330

Questions for Opening Scenario Analysis 330

Case 11.1. At Domino’s, ER Begins with Managers 330

Case 11.2. Age Discrimination in the Workplace 332

Recommended Website Resources 333

Notes 335

Index 385

About the Authors 399

FOREWORD xi

xi

Foreword

In the past two decades or so, most societies around the world have experienced

changes, unparalleled in scale and scope to those encountered in preceding centu￾ries. These include the globalization of industries; regional economic integration;

the formation of international strategic alliances across firms in different industries

and countries; the lowering of immigration and emigration barriers to the movement

of people, thus contributing to growing diversity in the workforce; and quantum

advances in telecommunications that enable almost instantaneous access to informa￾tion and communication at the click of a mouse (Tung 1998a).

To cope with these dynamics, organizations have to develop and retain a cadre of

globally minded executives who can move with chameleon-like ease from one coun￾try to another. The development and retention of this cadre of executives who have

perfected the art of acting local worldwide—referred to by some as “corporate diplo￾mats” (Saner, Yiu, and Sondergaard 2000)—are not easy. Some companies lose market

share and prospective business because their executives are unable to perform effec￾tively in other countries. Thus, companies have to recruit and develop such talent.

However, even after a company has successfully hired and nurtured this talent, with

the emergence of “boundaryless” careers (Tung 1998b), organizations have to work

hard to retain these people. Increasingly, highly skilled and qualified employees are

willing to leave their country of origin to relocate elsewhere, for career, personal,

and/or financial reasons. In other words, in order for a company to survive and thrive

in this new calculus of global competition, they have to effectively manage their

human resources, including their selection, training and development, compensation

and retention. Thus, human resource management has become pivotal to a firm’s

global competitiveness because capital and technology cannot be effectively allo￾cated nor transferred across international boundaries in the absence of people.

This book by Charles Vance and Yongsun Paik seeks to address many of the

challenges and opportunities that arise in the context of international human resource

management. Drawing upon research findings, the chapters examine how environ￾mental and institutional constraints, including culture, impact human resource plan￾ning and other human resource functions of international firms. Abundant up-to-date

examples from around the world are provided along with short case studies to high-

xii FOREWORD

light the issues presented in the text. A very useful feature of the book is the inclu￾sion of relevant websites that readers can access the latest information on issues that

bear on international human resource management.

In all, the Vance and Paik book is an effective tool to prepare our students, both

graduates and undergraduates, to understand the dynamics and issues pertaining to

managing a global workforce. The case studies should encourage students to analyze

situations that may actually arise as they enter the real world of business after gradu￾ation. Practitioners should also benefit from the wealth of information contained in

the book to enable them to better deal with the opportunities and challenges associ￾ated with managing diversity, cross-border international assignments, and manage￾ment of international strategic alliances.

Rosalie L. Tung, FRSC

The Ming & Stella Wong Professor of International Business

Simon Fraser University (Canada)

REFERENCES

Saner, R.; Yiu, L.; and Sondergaard, M. 2000. “Business Diplomacy Management: A Core Competency

for Global Companies.” Academy of Management Executive, vol. 14, no. 1, pp. 80–92.

Tung, R.L. 1998a. “A Contingency Framework of Selection and Training of Expatriates Revisited.”

Human Resource Management Review, vol. 8, no. 1, pp. 23–27.

———. 1998b. “American Expatriates Abroad: From Neophytes to Cosmopolitans.” Journal of World

Business, vol. 33, no. 2, pp. 125–44.

PREFACE xiii

xiii

Preface

As this text goes to press we are witnessing extraordinary changes, pressures, and

challenges confronting profit and non-profit organizations throughout the world.

Organizations struggle to prosper and even survive under the continually developing

influence of globalization, with its increasing market accessibility and openness,

technological advancements, cross-border direct and virtual exchanges and interac￾tions, common cultural convergence, often unpredictable and adversarial sociopolitical

environments, and especially unrelenting competition. Within this global context,

we note many difficult and vexing workforce-related challenges, such as those faced

in Europe driven by pressures for greater economic flexibility, and forcefully illus￾trated by recent demonstrations, and even violence, in France in protest against new

employment laws that favor business staffing needs and promote long term increased

employment at the short term expense of younger workers.

In Asia, with multinationals’ ongoing experience and technological advancements,

we find India’s low cost but talented labor force supporting that country’s continu￾ing development as a major leader in cost-saving offshore foreign direct investment

arrangements (both in-house and outsourced) in many forms of more mundane back

office business processes, as well as competitive high-tech research and develop￾ment. The People’s Republic of China, following nearly two decades of remarkable

economic growth accompanied by unfathomable societal sacrifice, displacement,

and pain, is experiencing increasingly frequent and uncharacteristically vocal pro￾tests from its citizenry, now met by a major official shift by the central government

epitomized in its “People First” policy. Companies planning for business develop￾ment in China should consider possible implications for their internal operations and

practices of this newly espoused priority in China involving the present and future

labor force. Indeed, in China and beyond, many business leaders consider the inter￾nal and external environments in which they must operate to be in a state of crisis.

But as a Chinese word for crisis (weiji) carries with it the double meanings of both

“threat” and “opportunity,” organizations large and small throughout the world may

find that their effective management of their workforce can serve to seize opportuni￾ties to propel them ahead within the globally competitive arena.

xiv PREFACE

In our many years of teaching executive, graduate, and undergraduate programs

and courses related to global workforce issues, we have felt the need to emphasize

the critical role of the human resource function in achieving organizational objec￾tives. In addition, we have recognized that managers and leaders have a central re￾sponsibility in supporting and implementing this human resource function, with the

professional assistance of human resource specialists. However, we have not been

satisfied with existing texts on international human resources that seem directed

more at human resource specialists rather than the more generalist managers and

senior decision makers in charge of strategy formulation and implementation. Exist￾ing texts also have focused primarily on the challenges and needs of expatriates of

the multinational firm’s home country at the unfortunate neglect of host country and

third country nationals, as if the expatriates were the only members of the global

workforce that matter. In addition, employees involved in a firm’s contracted and

outsourced work largely have been left out of the picture. We therefore have written

this text to provide a more complete and comprehensive picture of the challenges

and opportunities in managing an organization’s total global workforce.

We have many people to thank, who have contributed much to the development

of this text, including our past students with whom we have shared in the develop￾ment of new insights related to the continually evolving and expanding arena of

international human resource management. We are especially grateful to editor Harry

Briggs of M.E. Sharpe, whose very helpful professional guidance, great patience,

and encouragement have been essential to the successful completion of this text. We

are particularly indebted to Irene Chow of the Chinese University of Hong Kong,

Sully Taylor of Portland State University, and Mark Mendenhall of the University of

Tennessee at Chattanooga for their helpful feedback and guidance on our work. Our

work also has been greatly influenced by numerous academics and practitioners in

the field throughout the world with whom we have interacted over the years at pro￾fessional meetings and through other professional communications, and under whose

influence we are continually learning.

We are also grateful for the early vision and continuous support of Dean John

Wholihan of Loyola Marymount University in encouraging our gaze toward the glo￾bal marketplace. And we are truly indebted to the tremendous leadership of Loyola

Marymount University’s former MBA director Dan Stage, whose inspired Com￾parative Management Systems international study tour program provided us with

many invaluable opportunities for international field research and professional net￾working, so very influential in the development of our ideas and perspectives. We

also express thanks to our past MBA research assistants, Jason Recacho and Geoffrey

Lewis, who were of great help with manuscript organization and refinement details.

Finally, we are extremely grateful to our talented, generous friend and administra￾tive assistant, Kathe Segall, who from the beginning provided great care and support

for the development of this text, and who at the close made a special concerted effort

and reorganization of her work priorities to help us finally get our completed manu￾script out the door.

Although we are very pleased with the result of our work, we acknowledge our

human limitations and possible errors in our attempt to provide a comprehensive,

PREFACE xv

useful picture of international human resource management. We also know how

quickly this picture can change. We therefore invite those who use this text—

students, instructors, and practitioners alike—to give us feedback, whether confir￾matory or corrective, and share insights, thus joining with us in a collegial effort to

better understand the current and developing challenges and opportunities in man￾aging a global workforce.

Charles M. Vance ([email protected]) and

Yongsun Paik ([email protected])

Los Angeles