CU MBA SEM IV International HRM

5.1 INTRODUCTION Globalization has been a trend for the past two decades. The organisations become multinational, with offices in a variety of countries throughout the world. Globalization is considerably more than just relocating labour-intensive operations to nations with lower labour costs. Globalization entails bringing highly inventive organisations from all over the world together to pay the same salaries. Human Resources is primarily responsible for establishing a global business culture. Human Resources is the department in charge of the company's culture growth and improvement. The importance of a shared corporate culture in a multinational organisation cannot be overstated. Around the Globe, the organisation cannot act in the same way. The formation of a shared corporate culture, on the other hand, is challenging. The countries are distinct. The HR role is to form an international team that will build a cohesive corporate culture and values. Human Resources plays a critical role in determining the necessary training courses for managers. HR must encourage managers to enrol in the courses. They must comprehend the origins of corporate culture and how they are expected to behave on a global scale. Employees and managers must communicate with colleagues from all around the world. Global decisions are made through a single mode of communication, a problem- solving methodology, and identification with the organisation. The first global function should be human resources. It has to implement internationally managed HR processes that are centred on the development of global talents and an uniform strategy. The first internationally managed HR procedures are usually performance management and talent management. The unified and internationally controlled performance management method aids in the administration of individual businesses in countries as well as the identification of the organization's future global leaders. Global Human Resources is able to find the organization's greatest skills and relocate them to different nations. It is difficult to implement global mobility, but global organizations require global managers, who are able to run difficult projects over continents. Global Human Resources are required for the identification of global leaders. HR professionals must be trained on global policies and managed from a variety of centres of excellence throughout the world. Globalization necessitates the development of new skills and competences. Managers must think globally and identify opportunities for the organisation on a global scale. They must be able to negotiate with people from various cultural backgrounds. HR must adjust its processes, procedures, policies, and training to make it easier for managers to integrate into 101 CU IDOL SELF LEARNING MATERIAL (SLM)

the organization's global world. HR's role is to assist the organisation in becoming a true global organisation. It has to look for opportunities to move different processes around the Globe as the organization is more competitive than the other participants on the market. 5.2 HR STRATEGY 5.2.1: CONCEPT: A Human Resource strategy is a business’s overall plan for managing its human capital to align it with its organisation goals. The Human Resource strategy sets the direction for all the key areas of HR, including hiring, performance appraisal, development, and compensation. The HR strategy is thus a long-term plan that dictates HR practices throughout the organization.HR Strategy is the strategy adopted by an organization which aims at integrating an organization’s culture, its employees and system by coordinating a set of actions to get the required business goals. Therefore, it must be aligned to the organization's mission, vision and goals. The characteristics of the industry in which the organizations are to be analyzed and its competitive advantage need to be determined for developing an HR strategy. Human resources management is essential, even crucial for the functioning of your organization. Any viable business needs human resources, or talent, to move forward the enterprise mission, values and principles. And of course, to do the work. Strategic human resource management enables alignment between the HR or HR function and your company's business goals. Human resource strategy differs from traditional HR in a couple of important ways. HR strategy is long-term and focuses on workforce planning as well as development from a forward-thinking viewpoint. Traditional HR, or personnel as it was once referred to as, is focused more on the transactional nature of Human Resources, such as reviewing applications, maintaining a census of FTEs (full-time equivalents) and signing up talent for insurance benefits. Strategic human resource management, on the other hand, focuses on aligning employee qualifications with the organization's workforce needs. This type of HR management provides employee training and development to prepare the workforce for company expansion, as well as the employee's professional growth. What is HR Strategy? 102 CU IDOL SELF LEARNING MATERIAL (SLM)

HR Strategy is the strategy adopted by an organization which aims at integrating core human resource aspects like organization’s culture, its employees, partners, training, incentives and overall system by coordinating a set of actions to get the required business goals. Therefore, it must be aligned to organization’s overall mission, vision and goals. The characteristics of the industry in which the organizations are to be analyzed and its competitive advantage need to be determined for developing an HR strategy. 5.2.2 HR STRATEGY DIMENSIONS The four key dimensions must be addressed in order to develop HR strategy: 1.Culture: It is the beliefs, rules and style of management of the organization. 2.Organization: It is the structure, job types, job descriptions and reporting lines of the organization. 3.People: The most important part of the organization is its people. The skills level, employee potential and the capability of the management constitutes the people. 4.Human Resources Systems: It is the people focused mechanism which deliver the correct strategy for the organization - recruitment, communications, training and development, compensation and benefits etc. 103 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 5.2.1: Dimension of HR Strategy 5.2.3 IMPORTANCE OF HR STRATEGY: The senior managers frequently, while managing people, element focus on only one or two dimensions and neglect the other people. Typically, companies prefer to relieve their managers of bureaucracy and push for more creative and entrepreneurial spirit but then the management fail to develop a suitable compensation and training system. When the mentioned creative or entrepreneurial flair does not appear from the employee’s work, the managers blame the employees and not the system. If an organization wants to retain the quality of work then its duties are not only to retain talented staff but also the organization needs to be reviewed and the training and compensation benefits need to be improved in order to facilitate employees in a better way. This is where HR strategy comes into picture. Strategy makes sure that all the core aspects of human resource management are in sync and aligned with the overall strategy. If employees are trained to become creative then the results and incentives and the overall company culture has to align accordingly to show results which are as per the company's overall strategy and mission. 104 CU IDOL SELF LEARNING MATERIAL (SLM)

Strategic Role of HR in Global Organization The strategic role of Human resources Management in such a scenario is to ensure that HRM policies are in tandem with and in support of the firm’s strategy, structure and controls. Specifically, when we talk of structures and controls the following become worth mentioning in the context of Global HRM.  Decision Making: There is a certain degree of centralization of operating decision making. Compare this to the International strategy, the core competencies are centralized and the rest are decentralized.  Co-ordination: A high degree of coordination is required in wake of the cross- cultural sensitivities. There is in addition also a high need for cultural control.  Integrating Mechanisms: Many integrating mechanisms operate simultaneously 5.3RELATIONSHIP BETWEEN HR STRATEGY AND EMPLOYEE PERFORMANCE What Employees Do is Based on What They Have and Feel: The initial impact of HR practices is on what employees have and feel. Recruitment, selection, training and development are all aimed at bringing in or building certain skills, enabling employees to effectively perform their jobs. In addition, their experience with these practices, along with rewards, performance management and communication, shapes workers’ perceptions of the company’s fairness and desirability. And those perceptions then influence their commitment, motivation and engagement. • What employees do is largely a function of what they have, because they cannot be productive if they don’t have the right skills. • What they do is also a function of what they feel, because they may choose not to be productive if they have negative feelings toward the organization. Ultimately, HR strategy has the most significant impact on what employees actually do on the job. If the strategy focuses on customer service, for example, it will affect things like whether employees are friendly and helpful, whether they give the right answers and solve customers’ problems. If the strategy is about efficiency, it will encourage employees to look for ways to lower costs or operate more efficiently. Do they engage in cost-saving behavior or waste time and money? The bottom line is that what employees actually do will decide how well the business strategy is executed. In the end, what employees do is the critical link in executing strategy. Because what employees do depends on what they have and feel, HR 105 CU IDOL SELF LEARNING MATERIAL (SLM)

strategies need to focus simultaneously on building skills, motivation and behavior for a successful business strategy. Employee Actions Affect Business Success: There are five types of employee behavior relevant to a company’s success. 1. Task behaviorrefers to things that employees are supposed to do as part of their jobs (from the bare minimum to the maximum). 2. Discretionary behavior refers to employees using their discretion to go above and beyond their job descriptions—such as the airline gate agent who races to return a forgotten briefcase. 3. Counterproductive behavioris all those things we do not want to see our employees doing: stealing supplies, taking long personal calls, even sabotaging products or equipment. 4. Attendance is the extent to which employees show up on time. Although perfect attendance is neither possible nor even desired (in the case of a sick employee), workers who call in sick when they feel fine create scheduling hassles and reduce productivity. 5. Turnover, of course, refers to an employee leaving the organization. Again, zero turnover is neither possible nor desired, but excessive turnover of average employees results in additional replacement costs, and turnover of an outstanding employee (if replaced by a less skilled employee) may result in a permanent decrease in productivity. In discussing HR strategy, productivity is usually measured using the number of products produced or delivered divided by the number of full-time employees (FTEs) or number of labor hours. If employees are engaged in positive behaviors, fewer will be needed for a high level of output. On the other hand, careless or deliberate mistakes and negative employee behavior can cause product defects, some of which can’t be repaired. In some industries—such as mining and refining—accidents can be costly or fatal, and HR strategies must be developed to encourage safe behavior of employees. Employee Actions Affect Customers: Any employee who interacts with customers has the potential to elicit positive or negative experiences. HR strategy has influenced what employees feel and do, with significant impact on customers and company profits. Employee Actions Affect Company: 106 CU IDOL SELF LEARNING MATERIAL (SLM)

Finances Employee behavior can affect your firm’s financial outcomes, especially in its impact on operations and customer service. For instance, when quality and productivity decrease, there is an immediate impact on expenses if products must be destroyed, reworked or produced at higher cost. When customers get defective products or services, they will take their business elsewhere, obviously affecting the firm’s revenue stream. As revenues decrease and expenses increase, the firm’s profitability will soon deteriorate. Every HR practice costs money to develop and time to implement and deliver. These costs go directly to the organization’s bottom line. For instance, being selective in hiring may result in better employees, but it will cost more in terms of testing and interviewing. In addition, providing more training for employees will increase their skills and potentially their attitudes, but every day of training costs both real money—for travel, accommodations, meals, trainer fees—and days when the employee is off the job. You shouldn’t think in terms of doing more and more HR strategy, because at some point you will have diminishing returns when the additional investment in the practice costs more than the benefit gained. Do implement high- performance HR practices that increase productivity but don’t let their costs surpass the benefits—or there’s no real financial gain for the company. In order to create efficient HR practices that don’t cost more than they are worth, you need a plan, or strategy map, to keep you on track. Fig 5.3.1: HR Strategy and Performance 5.4GLOBAL HUMAN RESOURCES STRATEGY The following human strategy is appreciated by most of the Global Organization to ensure the effectiveness and efficiency in the global operation. 107 CU IDOL SELF LEARNING MATERIAL (SLM)

1. Break all the \"local national\" glass ceilings The first, and perhaps most fundamental, step toward building a global H.R. program is to end all favoritism toward managers who are nationals of the country in which the company is based. Companies tend to consider nationals of their headquarters country as potential expatriates and to regard everyone else as \"local nationals.\" But in today's global markets, such \"us-versus-them\" distinctions can put companies at a clear disadvantage, and there are strong reasons to discard them:  Ethnocentric companies tend to be xenophobic -- they put the most confidence in nationals of their headquarters country. This is why more nationals get the juicy assignments, climb the ranks and wind up sitting on the board -- and why the company ends up with a skewed perception of the world. Relatively few multinational companies have more than token representation on their boards. A.B.B. is one company that recognizes the danger and now considers it a priority to move more executives from emerging countries in eastern Europe and Asia into the higher levels of the company.  Big distinctions can be found between expatriate and local national pay, benefits and bonuses, and these differences send loud signals to the brightest local nationals to learn as much as they can and move on.  Less effort is put into recruiting top-notch young people in overseas markets than in the headquarters country. This leaves fast-growing developing markets with shallow bench strength.  Insufficient attention and budget are devoted to assessing, training and developing the careers of valuable local nationals already on the company payroll. Conventional wisdom has defined a lot of the pros and cons of using expatriates versus local nationals. (See Exhibits I and II). But in an increasingly global environment, cultural sensitivity and cumulative skills are what count. And these come with an individual, not a nationality. After all, what exactly is a \"local national\"? Someone who was born in the country? Has a parent or a spouse born there? Was educated there? Speaks the language(s)? Worked there for a while? All employees are local nationals of at least one country, but often they can claim a connection with several. More frequent international travel, population mobility and cross- border university education are increasing the pool of available hybrid local nationals. Every country-connection a person has is a potential advantage for the individual and the company. So it is in a multinational company's interests to expand the definition of the term \"local national\" rather than restrict it. 108 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Trace the lifeline Based on the company's business strategy, identify the activities that are essential to achieving success around the world and specify the positions that hold responsibility for performing them. These positions represent the \"lifeline\" of your company. Typically, they account for about 10 percent of management. Then define the technical, functional and soft skills needed for success in each \"lifeline\" role. As Ms. Major of I.B.M. notes, \"It is important to understand what people need to develop as executives. They can be savvy functionally and internationally, but they also have to be savvy inside the organization.\" This second step requires integrated teams of business and H.R. specialists working with line managers. Over time, they should extend the skills descriptions to cover all of the company's executive posts. It took 18 months for I.B.M. to roll out its worldwide skills management process to more than 100,000 people in manufacturing and development. A good starting point is with posts carrying the same title around the globe, but local circumstances need to be taken into account. Chief financial officers in Latin American and eastern European subsidiaries, for example, should know how to deal with volatile exchange rates and high infiation. Unilever circulates skills profiles for most of its posts, but expects managers to adapt them to meet local needs. Compiling these descriptions is a major undertaking, and they will not be perfect because job descriptions are subject to continuous change in today's markets and because perfect matches of candidates with job descriptions are unlikely to be found. But they are an essential building block to a global H.R. policy because they establish common standards. The lifeline and role descriptions should be revisited at least annually to ensure they express the business strategy. Many companies recognize the need to review the impact of strategy and marketplace changes on high-technology and R&D roles but overlook the fact that managerial jobs are also redrawn by market pressures. The roles involved in running an emerging market operation, for example, expand as the company builds its investment and sales base. At I.B.M., skills teams update their role descriptions every six months to keep pace with the markets and to inform senior managers which skills are \"hot\" and which the company has in good supply. 3. Build a global database to know who and where your talent is The main tool of a global H.R. policy has to be a global database simply because multinational companies now have many more strategic posts scattered around the globe and must monitor the career development of many more managers. Although some multinational companies have been compiling worldwide H.R. databases over the past decade, these still 109 CU IDOL SELF LEARNING MATERIAL (SLM)

tend to concentrate on posts at the top of the organization, neglecting the middle managers in the country markets and potential stars coming through the ranks. I.B.M. has compiled a database of senior managers for 20 years, into which it feeds names of promising middle managers, tracking them all with annual reviews. But it made the base worldwide only 10 years ago. Now the company is building another global database that will cover 40,000 competencies and include all employees worldwide who can deliver those skills or be groomed to do so. I.B.M. plans to link the two databases by 2000. Unilever has practiced a broader sweep for the past 40 years. It has five talent \"pools\" stretching from individual companies (e.g., Good Humor Breyers Ice Cream in the United States and Walls Ice Cream in Britain) to foreign subsidiaries (e.g., Unilever United States Inc. and Unilever U.K. Holdings Ltd.) to global corporate headquarters. From day one, new executive trainees are given targets for personal development. Those who show the potential to move up significantly are quickly earmarked for the \"Development\" list, where their progress through the pools -- company, national, business group and/or region, global, executive committee -- is guided not only by their direct bosses but by managers up to three levels above. \"We want bigger yardsticks to be applied to these people and we don't want their direct bosses to hang on to them,\" explains Herwig Kressler, Unilever's head of remuneration and industrial relations. To make sure the company is growing the general management talent it will need, the global H.R. director's strategic arm reaches into the career moves of the third pool -- those serving in a group or region -- to engineer appointments across divisions and regions. To build this type of global H.R. database, you should begin with the Step 2 role descriptions and a series of personal-profile templates that ask questions that go beyond each manager's curriculum vitae to determine cultural ties, language skills, countries visited, hobbies and interests. For overseas assignments, H.R. directors correctly consider such soft skills and cultural adaptability to be as important as functional skills. The fact that overseas appointments are often made based largely on functional skills is one reason so many of them fail. 4. Construct a mobility pyramid Evaluate your managers in terms of their willingness to move to new locations as well as their ability and experience. Most H.R. departments look at mobility in black-or-white terms: \"movable\" or \"not movable.\" But in today's global markets this concept should be viewed as a graduated scale and constantly reassessed because of changing circumstances in managers' lives and company opportunities. This will encourage many more managers to opt for overseas assignments and open the thinking of line and H.R. managers to different ways to use available in-house talent. 110 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 5.4.1: Mobility Pyramid Some multinational companies, for example, have been developing a new type of manager whom we term \"glopats\": executives who are used as business-builders and troubleshooters in short or medium-length assignments in different markets. Other multinational companies are exploring the geographical elasticity of their local nationals. Consider the five-level mobility pyramid in Exhibit III. To encourage managerial mobility, each personal profile in your database should have a field where managers and functional experts assess where and for what purposes they would move. When jobs or projects open, the company can quickly determine who is able and willing to take them. Managers can move up and down a mobility pyramid at various stages of their career, often depending on their family and other commitments. Young single people or divorced managers, for example, may be able and eager to sign up for the glopat role but want to drop to a lower level of the pyramid if they wish to start or restart a family life. Or seasoned senior managers may feel ready to rise above the regional level only when their children enter college. I.B.M. uses its global H.R. database increasingly for international projects. In preparing a proposal for a German car manufacturer, for instance, it pulled together a team of experts with automotive experience in the client's major and new markets. To reduce costs for its 111 CU IDOL SELF LEARNING MATERIAL (SLM)

overseas assignments, I.B.M. has introduced geographic \"filters\": a line manager signals the need for outside skills to one of I.B.M.'s 400 resource coordinators, who aims to respond in 72 hours; the coordinator then searches the global skills database for a match, filtering the request through a series of ever-widening geographic circles. Preference is often given to the suitable candidate who is geographically closest to the assignment. The line manager then negotiates with that employee's boss or team for the employee's availability. The shape of a company's mobility pyramid will depend on its businesses, markets and development stage and will evolve as the company grows. A mature multinational food- processing company with decentralized operations, for example, might find a fiat pyramid adequate, whereas a multinational company in a fast-moving, high-technology business might need a steeper pyramid with proportionately more glopats. Kevin Barham and Marion Devine, \"The Quest for the International Manager: A Survey of Global Human Resource Strategies\" (Economist Intelligence Unit, 1991). 5. Identify your leadership capital Build a database of your company's mix of managerial skills by persuading people to describe the information in their c.v.'s, their management talents and their potential on standard personal-profile templates. Jump-start the process by having your senior managers and those in the lifeline posts complete the forms first. Add others worldwide with the potential to move up. Include functional specialists who show general management potential. Require over time that every executive join the global H.R. system. This makes it harder for uncut diamonds to be hidden by their local bosses. Recognizing that people's situations and career preferences shift over time, hold all managers and technical experts responsible for updating their c.v.'s and reviewing their personal profiles at least once a year. Companies should make it clear that individual inputs to the system are voluntary but that H.R. and line managers nevertheless will be using the data to plan promotions and international assignments and to assess training needs. Be mindful of the personal privacy provisions in the European Union's new Data Protection directive and similar regulations forthcoming in Japan that basically require employee consent to gather or circulate any personal information. 6. Assess your bench strength and skills gap Ask each executive to compare his or her skills and characteristics with the ideal requirements defined for the executive's current post and preferred next post. Invite each to propose ways to close any personal skills gaps -- for example, through in-house training, mentoring, outside courses or participation in cross-border task forces. 112 CU IDOL SELF LEARNING MATERIAL (SLM)

Compare the skills detailed in the personal assessments with those required by your business strategy. This information should form the basis for your management development and training programs and show whether you have time to prepare internal candidates for new job descriptions. Unilever uses a nine-point competency framework for its senior managers. It then holds the information in private databases that serve as feeder information for its five talent pools. The company thoroughly reviews the five pools every two years and skims them in between, always using a three- to five-year perspective. In 1990, for example, its ice cream division had a strategic plan to move into 30 new countries within seven years. Unilever began hiring in its current markets with that in mind and set up a mobile \"ice cream academy\" to communicate the necessary technical skills. I.B.M. applies its competency framework to a much broader personnel base and conducts its skills gap analyses every six months. Business strategists in every strategic business unit define a plan for each market and, working with H.R. specialists, determine the skills required to succeed in it. Competencies are graded against five proficiency levels. Managers and functional experts are responsible for checking into the database to compare their capabilities against the relevant skills profiles and to determine whether they need additional training. Their assessments are reviewed, discussed and validated by each executive's boss, and then put into the database. \"Through the database, we get a business view of what we need versus what we have,\" explains Rick Weiss, director of skills at I.B.M. \"Once the gaps are identified, the question for H.R. is whether there is time to develop the necessary people or whether they have to be headhunted from the outside.\" 7. Recruit regularly Search for new recruits in every important local market as regularly as you do in the headquarters country. Develop a reputation as \"the company to join\" among graduates of the best universities, as Citibank has in India, for example. The best way to attract stellar local national recruits is to demonstrate how far up the organization they can climb. Although many Fortune 500 companies in the United States derive 50 percent or more of their revenues from non-domestic sales, only 15 percent of their senior posts are held by non-Americans. There may be nothing to stop a local national from reaching the top, but the executive suite inevitably refiects where a company was recruiting 30 years earlier. Even today, many multinational companies recruit disproportionately more people in their largest -- often their longest-established -- markets, thereby perpetuating the status quo. To counter such imbalances, a multinational company must stress recruitment in emerging markets and, when possible, hire local nationals from these markets for the middle as well as 113 CU IDOL SELF LEARNING MATERIAL (SLM)

the lower rungs of its career ladder. Philips Electronics N.V., for example, gives each country subsidiary a target number of people to bring through the ranks for international experience. Some go on to lengthy international careers; others return to home base, where they then command more respect, both in the business and with government officials, as a result of their international assignments. 8. Advertise your posts internally Run your own global labor market. In a large company, it is hard to keep track of the best candidates. For this reason, I.B.M. now advertises many of its posts on its worldwide Intranet. Unilever usually advertises only posts in the lower two pools, but this policy varies by country and by business unit. Routine internal advertising has many advantages in that it:  Allows a competitive internal job market to function across nationalities, genders and other categories.  Shows ambitious people they can make their future in the company.  Makes it harder for bosses to hide their leading lights.  Attracts high-fiyers who may be ready to jump ship.  Helps to break down business-unit and divisional baronies.  Reduces inbreeding by transferring managers across businesses and divisions.  Gives the rest of the company first pick of talent made redundant in another part of the world.  Solidifies company culture.  Is consistent with giving employees responsibility to manage their own careers. There are also certain disadvantages to this practice: Line managers have to fill the shoes of those who move; a central arbiter may need to settle disputes between departments and divisions, and applicants not chosen might decide to leave. To prevent that, disappointed applicants should automatically be routed through the career development office to discuss how their skills and performance mesh with their ambitions. I.B.M. used to hire only from the inside, but five years ago it began to recruit outsiders -- including those from other industries -- to broaden thinking and add objectivity. Unilever is large enough that it can garner a short list of three to five internal candidates for any post. Yet it still fills 15 percent to 20 percent of managerial jobs from outside because of the need for specialist skills and because of the decreasing ability to plan where future growth opportunities will occur. 9. Institute succession planning 114 CU IDOL SELF LEARNING MATERIAL (SLM)

Every manager in a lifeline job should be required to nominate up to three candidates who could take over that post in the next week, in three months or within a year, and their bosses should sign off on the nominations. This should go a long way toward solving succession questions, but it will not resolve them completely. The problem in large multinational companies is that many of today's successors may leave the company tomorrow. In addition, managers name only those people they know as successors. Third, the chief executives of many multinational companies keep their succession plans -- if they have any -- only in their heads. This seems to overlook the harsh realities of life and death. A better approach is that of one European shipping magnate who always carries a written list with the name of a successor for the captain of every boat in his fieet. 10. Challenge and retain your talent Global networks that transfer knowledge and good practices run on people-to-people contact and continuity. Executive continuity also cuts down on turnover, recruitment and opportunity costs. As international competition for talent intensifies, therefore, it becomes increasingly important for companies to retain their good managers. Monetary incentives are not sufficient: the package must include challenge, personal growth and job satisfaction. A policy should be adopted that invites employees to grow with the company, in every market. In addition, a career plan should be drawn up for every executive within his or her first 100 days in the organization. And plans should be reviewed regularly to be sure they stay aligned with the business strategy and the individual's need for job satisfaction and employability. Overseas assignments and cross-border task forces are excellent ways to challenge, develop and retain good managers. They can also be awarded as horizontal \"promotions.\" This is particularly useful since the fiat organizations currently in fashion do not have enough levels for hierarchical promotions alone to provide sufficient motivation. Unilever has long had a policy of retentive development and manages to hold on to 50 percent of its high-fiyers. As an integral part of its global H.R. policy, it develops the \"good\" as well as the \"best.\" Unilever reasons realistically that it needs to back up its high-fiyers at every stage and location with a strong bench of crisis-proof, experienced supporters who also understand how to move with the markets. Unilever bases these policies on three principles: 1. Be very open with people about the company's assessment of their potential and future. 115 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Pay people well -- and pay those with high potential really well, even though it may look like a distortion to others. 3. Don't hesitate too long to promote people who have shown ability. Sometimes this policy involves taking risks with people. But the point of a good system is to enable a company to place bets on the right people. 5.5THE COMPETENCY REQUIRED FOR INTERNATIONAL MANAGERS. Cross-cultural communication skills: Any role or function in international business means working in diverse workplace with people from a different country or background to yours. Whether they’re a colleague, a client, or a customer, understanding how to communicate across cultures is an absolutely indispensable skill. It requires no small amount of sensitivity, respect, and diplomacy. It also requires an open mind and, often, a little bit of research. Make an effort to learn, understand, and appreciate cultural differences and nuances when it comes to communication. Knowing, for instance, how people from other cultures interpret workplace confrontation or something as simple as maintaining eye contact can help to avoid misunderstandings and facilitate better workplace communication. And good communication is good for business. Of course, listening skills are an often-overlooked element of effective communication. When you’re working with colleagues or customers abroad, actively listening is more important than ever, especially if there is a language barrier. Excellent networking abilities If you want to work in international business, developing a strong network of connections outside of your home country is essential. Successful networking can open the door to unexpected business opportunities overseas, and some reports claim that up to 80% of jobs are now landed through networking. While online platforms like LinkedIn make it easier to find and maintain professional connections abroad, excellent in-person networking ability is still among the key skills for success in international business. Mastering your “elevator pitch” and attending industry networking events is one useful way meet like-minded professionals and grow your connections. Of course, like cross-cultural communication, networking skills also require 116 CU IDOL SELF LEARNING MATERIAL (SLM)

diplomacy, tact, and a listening ear—remember that you’re building a relationship rather than simply selling your skills. For ambitious international business professionals, one of the most valuable networking opportunities is often going to business school. From your peers to your professors, the people you’ll meet on an MBA or Executive MBA program will come from all over the world and boast a diverse range of skills and expertise, making them strong candidates as future collaborators or colleagues. Collaboration For success in international business, it’s not enough to simply build a network — you need to work well with others. The ability to collaborate and work together for a common purpose is fundamental in the business world. It requires humility, allowing others to take the lead and share credit for success. It also requires confidence to tackle problems, give and receive feedback, and respectfully fight your cause. In an international business environment, collaborating with team members from other cultures is especially beneficial. First, it’s an opportunity to use and develop your cross- cultural communication skills. Secondly, it will expose you to new perspectives and ways of addressing difficult business problems. The most inspiring and successful business leaders are often the best collaborators, knowing that collective brainpower can accelerate company success. Interpersonal influence The ability to influence others is fundamental to business success, whether you’re trying to persuade an investor to secure funding for your new venture, encourage an employee to adopt a new way of working, or convince a customer to buy your product. The best business leaders gain influence by developing good professional relationships and building respect — meaning communication, networking, and collaboration can all culminate in influence. Mastering interpersonal influence eliminates the need for a hard sell, encouraging others to get on board with your ideas because they understand the value you offer. It’s the ability to be assertive, without being aggressive. In international business, it’s a skill that will serve you well in pitching for new business, negotiating deals, and motivating diverse teams. That’s why it’s a core competency in the Hult leadership curriculum. Adaptive thinking In today’s VUCA business environment, you must have the confidence to react and adapt quickly, thinking “out of the box” to solve problems. Adaptive thinkers thrive in an ever- 117 CU IDOL SELF LEARNING MATERIAL (SLM)

changing environment, making them well placed for success in international business. But how can you develop adaptive thinking skills? According to a 2015 article in Forbes, impulse control, humility, and curiosity breed adaptive thinking. When a swift response is needed in a critical business situation, adaptive thinking means taking thoughtful action rather than giving in to impulsion. It also means accepting when old solutions are no longer fit for purpose. Adaptive thinking was previously the remit of military commanders, taking decisive action in times of danger and uncertainty. Today it’s a tactical skill demanded of global professionals. Emotional intelligence In today’s HR terms, you’re more likely to hear people valuing “EQ” over the more traditional measure of “IQ”. Strong emotional intelligence is noted as a critical skill when it comes to how to do international business. That’s because it influences nearly every aspect of business interaction. Emotionally intelligent people are self-aware and in control of their emotions, meaning they are better able to react calmly in critical or stressful business situations and adapt flexibly to change. They are also able to work together effectively, collaborating and communicating well thanks to above-average interpersonal skills and a strong sense of empathy. To help develop the valuable professional skills associated with strong emotional intelligence, a research team from Ashridge Executive Education at Hult International Business School is investigating the role mindfulness practice can play in leadership training. Resilience To succeed in international business unequivocally demands mental toughness and resilience. On a practical level, working across time zones and cultures involves long hours. Failure and setbacks are also a fact of life in the business world, but defeat isn’t. This is where resilience comes in. [Tweet “Failure and setbacks are a fact in the business world, but defeat isn’t.”] Going hand-in-hand with emotional intelligence, resilience is a key characteristic for success, allowing you to rise to meet the inevitable challenges of global business, maintain motivation, overcome risks, and recover quickly from hardship. 5.6 SUMMARY  A Human Resource strategy is a business’s overall plan for managing its human capital to align it with its organisation goals. The Human Resource strategy sets the direction for all the key areas of HR, including hiring, performance appraisal, development, and compensation. 118 CU IDOL SELF LEARNING MATERIAL (SLM)

 Strategic human resource management enables alignment between the HR or HR function and your company's business goals.  HR STRATEGY DIMENSIONS: The four key dimensions must be addressed in order to develop HR strategy: o 1.Culture: o 2.Organization: o 3.People: o 4.Human Resources Systems:  The strategic role of Human resources Management in such a scenario is to ensure that HRM policies are in tandem with and in support of the firm’s strategy, structure and controls.  Global Human Resources Strategy o Break all the \"local national\" glass ceilings o Trace the lifeline o Build a global database to know who and where your talent is o Construct a mobility pyramid o Identify your leadership capital o Assess your bench strength and skills gap o Recruit regularly o Advertise your posts internally o Institute succession planning o Challenge and retain your talent  The Competency Required for International Managers – o Cross-cultural communication skills: Make an effort to learn, understand, and appreciate cultural differences and nuances when it comes to communication. o Excellent networking abilities - Mastering your “elevator pitch” and attending industry networking events is one useful way meet like-minded professionals and grow your connections 119 CU IDOL SELF LEARNING MATERIAL (SLM)

o Collaboration - In an international business environment, collaborating with team members from other cultures is especially beneficial. o Interpersonal influence - Mastering interpersonal influence eliminates the need for a hard sell, encouraging others to get on board with your ideas because they understand the value you offer. o Adaptive thinking – Helps to thrive in an ever-changing environment, making them well placed for success in international business. o Emotionally intelligent people are self-aware and in control of their emotions, meaning they are better able to react calmly in critical or stressful business situations and adapt flexibly to change. 5.7 KEYWORDS 1. Full Time Equivalents: FTEs are most widely used by companies to determine their employees’ workload, with the perspective of trying to determine how many part-time employees and the hours they work add up to the same number of hours worked by full-time employees. 2. Glass Ceilings- The term glass ceiling refers to a metaphorical invisible barrier that prevents certain individuals from being promoted to managerial- and executive-level positions within an organization or industry. 3. Conventional Wisdom - is - the generally accepted belief, opinion, judgment, or prediction about a particular matter 4. Bench Strength - The competence and number of employees ready to fill vacant leadership and other positions. 5. Skill Gap - The term “skills gap” describes a fundamental mismatch between the skills that employers rely upon in their employees, and the skills that job seekers possess. 6. Top Notch - excellent; of very good quality 5.8 LEARNING ACTIVITY 1.What is the role of Organization in defining the HR Strategy? _________________________________________________________________________ __________________________________________________________________________ 2. Why it is important for the business to maintain global database? 120 CU IDOL SELF LEARNING MATERIAL (SLM)

_________________________________________________________________________ __________________________________________________________________________ 5.9 UNIT END QUESTIONS A. Descriptive Questions: Short Answers: 1. Explain the concept of Strategy. 2. State the importance of HR Strategy. 3. What is the meaning of ‘Trace the Lifeline’? 4. Define Leadership Capital and state its significance. 5. Why succession planning is important aspect of Global HR Strategy? Long Answers: 1. How HR Strategy defines the Efficiency of the International Organization? 2. Discuss the relation between HR strategy and Employee Performance. How this relation is used to define the Global Success? 3. Explain Mobility Pyramid. 4. Describe the impact of bench strength and skill gaps. 5. What are the competencies necessary for Global Managers? B. Multiple Choice Questions: 1. The skills level, employee potential and the capability of the management constitutes the ___________________. a. people. b. HR System c. Organization d. Culture 121 CU IDOL SELF LEARNING MATERIAL (SLM)

2. What kind of Decision making is preferred in the Global Organization? a. Decentralized b. Centralized c. Informal d. Decentralized at Top and centralized at Functional Level. 3. What should be the focus of HR Strategies? a. Building Skills b. Motivation c. Incentive Plans d. Both a & b 4. What type of behaviour is referred to things that employees are supposed to do as part of their jobs? a. Discretionary Behaviour b. Counterproductive behavior c. Task Behaviour d. Attendance 5. What type of people are on the move frequently and handle short and medium term assignments? a. Glopats b. Regionals c. Mobile Local nationals d. Globals Answers 122 1- a; 2 – b ; 3 – d; 4 – c; 5 – a; CU IDOL SELF LEARNING MATERIAL (SLM)

5.10 REFERENCE Text Book:  Wilhelm Schmeisser, Dieter Krimphove, Rebecca Popp, International Human Resource Management and International Labour Law, De Gruyter Oldenbourg,  Peter J. Dowling, Marion Festing and Allen D. Engle, Sr., International Human Resource Management, Cengage Learning EMEA  By Veronica Velo, Cross-Cultural Management, Business Expert Press  Srinivas R. Kandula International Human Resource Management , SAGE Publications Pvt. Ltd  Pravin Durai, Human Resource Management, Pearson India Reference Book  K Aswathappa , Sadhna Dash, International Human Resource Management, McGraw Hill  Gary Dessler, Fundamentals of Human Resource Management, Pearson  Ekta Sharma, Strategic Human Resource Management and Development, Pearson India  Parissa Haghirian, Successful Cross-Cultural Management, Business Expert Press Open Sources:  https://www.Shrm.org/  https://www.ncbi.nlm.nih.gov/  https://www.futurelearn.com/  International Journal of Human Resource Studies  changingminds.org  assignmentpoint.com  interculturalmanagement.fandom.com  diva-portal.org  cvs.edu.in 123 CU IDOL SELF LEARNING MATERIAL (SLM)

 strategy-business.com  www.mbaknol.com (Integrity-Asia & ispatguru)  publications.anveshanaindia.com  smallbusiness.chron.com  resources.workable.com  whatishumanresource.com  resources.workable.com  jigsawacademy.com  www.personio.com 124 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 6: MULTINATIONAL PERFORMANCE MANAGEMENT STRUCTURE 6.0 Learning Objective 6.1 Introduction 6.2 Performance Management in Global Context 6.2.1 Concept: 6.2.2 Importance of Expatriate Performance for Global Business: 6.3 International Performance Management: 6.3.1 Pre-Requisite Of International Performance Management: 6.3.2 Variables Affecting Expatriate Performance: 6.4 Challenges of international performance management 6.5 Developing International Staff and Multinational Team 6.6 Summary 6.7 Keywords 6.8 Learning Objective 6.9 Unit End Questions 6.10 References 6.0 LEARNING OBJECTIVE After studying this unit, you will be able to:  Explain the Performance Management in the International Business  Describe the pre-requisites and factors affecting International Performance Management  Outline the challenges in the International Performance Management  Describe the significance of Developing Multinational Staff and Team 6.1 INTRODUCTION Businesses need to be able to manage their performance well. It assists them in aligning their employees, resources, and systems with their strategic objectives through both formal and 125 CU IDOL SELF LEARNING MATERIAL (SLM)

informal processes. It also serves as a dashboard, alerting managers to potential problems and letting them know when they need to make changes to keep the business on track. When it comes to performance management, organizations that get it right become formidable competitive machines. “Coming together is a beginning; keeping together is progress; working together is success,” said Henry Ford. The simple principle of “what gets measured gets done” underpins effective performance management. The simple idea of “what gets measured gets done” underpins effective performance management. A corporation should build a cascade of measures and targets from its top-level strategic objectives down to the everyday operations of its frontline staff in an ideal system. Managers keep a close eye on such measures and meet with their teams on a regular basis to discuss progress toward attaining the goals. Good performance is rewarded, whereas poor performance prompts corrective action. 6.2 PERFORMANCE MANAGEMENT IN GLOBAL CONTEXT 6.2.1 CONCEPT: The process of performance management starts with the joining of a new incumbent in a system and ends when an employee quits the organization. Performance management can be regarded as a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework. It is a means for promoting superior performance by communicating expectations, defining roles within a required competence framework and establishing achievable benchmarks. According to Armstrong and Baron (1998), Performance Management is both a strategic and an integrated approach to delivering successful results in organizations by improving the performance and developing the capabilities of teams and individuals. Performance management is an ongoing communication process which is carried between the supervisors and the employees throughout the year. The process is very much cyclical and continuous in nature. A performance management system includes the following actions.  Developing clear job descriptions and employee performance plans which includes the key result areas (KRA') and performance indicators.  Selection of right set of people by implementing an appropriate selection process. 126 CU IDOL SELF LEARNING MATERIAL (SLM)

 Negotiating requirements and performance standards for measuring the outcome and overall productivity against the predefined benchmarks.  Providing continuous coaching and feedback during the period of delivery of performance.  Identifying the training and development needs by measuring the outcomes achieved against the set standards and implementing effective development programs for improvement.  Holding quarterly performance development discussions and evaluating employee performance on the basis of performance plans.  Designing effective compensation and reward systems for recognizing those employees who excel in their jobs by achieving the set standards in accordance with the performance plans or rather exceed the performance benchmarks.  Providing promotional/career development support and guidance to the employees.  Performing exit interviews for understanding the cause of employee discontentment and thereafter exit from an organization. A performance management process sets the platform for rewarding excellence by aligning individual employee accomplishments with the organization’s mission and objectives and making the employee and the organization understand the importance of a specific job in realizing outcomes. By establishing clear performance expectations which includes results, actions and behaviours, it helps the employees in understanding what exactly is expected out of their jobs and setting of standards help in eliminating those jobs which are of no use any longer. Through regular feedback and coaching, it provides an advantage of diagnosing the problems at an early stage and taking corrective actions. To conclude, performance management can be regarded as a proactive system of managing employee performance for driving the individuals and the organizations towards desired performance and results. It’s about striking a harmonious alignment between individual and organizational objectives for accomplishment of excellence in performance. 6.2.2 IMPORTANCE OF EXPATRIATE PERFORMANCE FOR GLOBAL BUSINESS: Improve Local Market Knowledge By living and working in export territories, expatriates gain a deeper understanding of local market conditions, business practices and cultural factors than employees who try to 127 CU IDOL SELF LEARNING MATERIAL (SLM)

conduct overseas business from headquarters. This local understanding and awareness help organizations reduce risk and avoid mistakes that could limit market success. Instill Company Culture Expatriates work closely with overseas subsidiaries, distributors, agents and joint venture partners to ensure they understand the parent companies’ culture, standards and values. They also use their understanding of cultural differences to modify any of those factors in line with local business practices. By instilling parent company culture and practices, expatriates ensure customers receive a consistent standard of service in all export territories. Transfer Knowledge Expatriates transfer knowledge and skills to overseas partners. If they are setting up manufacturing operations, for example, expatriates can help partners implement corporate working practices and quality standards or use techniques and technologies developed in the parent company. Expatriates working with local distributors or agents can provide partners with product and market knowledge and develop joint programs to improve market penetration. Increase Local Control By appointing expatriates to manage business in export territories, organizations can increase business and financial control over local operations. They establish financial and operational targets with business partners, work with them to achieve targets and monitor performance. They provide headquarters with accurate reports and are in a position to take remedial action if partners are not able to meet targets. Expatriates also ensure that local partners comply with policies and procedures and quality and customer service standards. Develop Management Talent Appointing employees to overseas assignments helps organizations develop their management skills and competencies. Expatriates learn to recognize and understand the diversity of local market conditions in different territories, giving them a broader perspective on marketing. They also develop the leadership and interpersonal skills to manage or collaborate with multicultural teams. Developing management talent through expatriate assignments helps organizations develop the skills to succeed in global markets. Changing Role 128 CU IDOL SELF LEARNING MATERIAL (SLM)

While expatriates make an important contribution to helping their organizations develop export markets, their role is changing, according to TLNT, a website dedicated to talent management and human resources. Organizations increasingly recognize the value of developing local talent in export markets as a way of meeting the needs of individual markets. Rather than sending a succession of expatriates to run local operations, they encourage expatriates to develop local successors who can take over responsibility. 6.3 INTERNATIONAL PERFORMANCE MANAGEMENT: International performance management is the evaluation of an individual who works in a foreign subsidiary on a temporary basis to transfer knowledge or develop global leadership skills. At its best, international performance management should feed into the global goals of the business. 6.3.1 Pre-requisite of International Performance Management: Developing a system that will work successfully across markets is a significant challenge for a global human resources manager. Define, facilitate and encourage performance Ultimately the goal of an expatriate performance management system is to define, facilitate and encourage performance in the individual and the teams they work with. Your company’s international performance management system should enable managers of expat employees to set specific, realistic, measurable goals that feed into the overall objectives of the business. However, setting goals is not sufficient for success, the programme should also contain a method of assessing performance on several occasions over a year. To achieve the goals that have been set, employees need to be able to facilitate performance through removal of barriers like outdated equipment or software, poor procedures and micro- management. However, international employees may encounter further difficulty with government requirements or personal safety depending on where they are based. Flexibility needs to be included in this regard when developing an expat performance management system. Finally, encouraging performance has been shown to be another marker of a successful international assignment. The methods for encouraging performance may vary from country to country. While additional remuneration may work successfully at headquarters, time off or other special privileges may be more valued in other countries. The easiest way to find out 129 CU IDOL SELF LEARNING MATERIAL (SLM)

what may work best is to survey international employees. Once agreed it is essential that the appraisal process is transparent and fair. Training Essential to successful international performance management is a clear and effective training plan for all stakeholders. Once complete, managers need to be held accountable for implementing the process across their own employees, ideally in the form of their own performance appraisal by senior management and/or human resources. Cross-cultural differences When creating a performance development plan that is going to work cross-culturally the differences in how performance feedback should be provided needs to be accounted for. For example, in some European cultures feedback should be direct and actionable where as in some Asian cultures the same feedback could cause unacceptable loss of face for the employee. Therefore, it is important to understand the culture on the ground when creating guidelines on how feedback should be provided. In addition to skill sets, another element of effective expat performance is personal health and wellbeing. Ensure your employees have the international health insurance protection they need to excel. 6.3.2 VARIABLES AFFECTING EXPATRIATE PERFORMANCE: When attempting to determine expatriate performance, it is important to consider the impact of the following variables and their interrelationship: The compensation package. The task – the assignment task variables and role of the expatriate. Headquarters’ support. The environment in which performance occurs – the subsidiary or foreign facility. Cultural adjustment – of the individual and the accompanying family members. Figure 6.3.1 depicts these variables and forms the basis upon which we will explore the nature of the international assignment, how performance is managed, the criteria for assessment and the other elements that comprise an effective performance management system. Compensation package. It is essential that we recognize the importance of remuneration and reward in the performance equation. 130 CU IDOL SELF LEARNING MATERIAL (SLM)

Perceived financial benefits, along with the progression potential associated with an overseas assignment, are often important motives for accepting the posting. If these expectations are not realized during the assignment, the level of motivation and commitment is likely to decrease, thus affecting performance. Task. Expatriates are allocated to foreign operations to perform certain jobs, as previously stated. Four such jobs were recognized by Hays14: The chief executive officer, often known as a subsidiary manager, is in charge of overseeing and directing the entire international operation. Compensation Cultural Task Adjust- ment Expatriate Performance Host Head- Environ- quarter Support ment Fig 6.3.1: Expatriate Performance The structure reproducer is in charge of building or duplicating a structure in a foreign subsidiary that is comparable to one that he or she is familiar with from another area of the organisation. He or she could, for example, be developing a marketing strategy, putting in place an accounting and financial reporting system, or establishing a manufacturing facility. The troubleshooteris the person who is dispatched to a foreign subsidiary to investigate and resolve a specific problem. The operativeis the individual whose assignment is to perform functional job tasks in an existing operational structure, in generally lower level, supervisory positions. 131 CU IDOL SELF LEARNING MATERIAL (SLM)

Recently, as part of a larger topic about \"corporate governance,\" some interesting presentations on executive performance management were given. The developing duties, responsibilities, and institutional safeguards to ensure a full, accurate, and unbiased assessment of top level managers have been widely cited for this crucial task group. In a recent review of cross-cultural performance management systems, Caligiuri identifies four basic types of international assignments: ‘technical assignments’ – short-term knowledge transference activities, said to make up 5 to 10 per cent of expatriate assignments; ‘developmental assignments’ – focusing on in-country performance and the acquisition of local or regional understanding by the assignee, said to make up 5 to 10 per cent of assignments; ‘strategic assignments’ – high-profile activities that focus on developing a balanced global perspective, said to make up 10 to 15 per cent of assignments; and ‘functional assignments’ – described as more enduring assignments with local employees that involve the two-way transfer of existing processes and practices, said to make up between 55 and 80 per cent of assignments. Accurately measuring performance in the tasks inherent in technical and functional assignments may require a smaller number of sources and a greater focus on more defined output criteria (projects completed, contracts signed, etc.) Given their more complicated, subjective duties, assessing progress in developmental and strategic assignments is likely to involve a broader range of local and global players and opinions. Environmental elements are often thought to be more under a multinational's control than task variables. Activity variables can be better analyzed and adjusted as a result of this relative control, depending on the level of position and the type of the task. Along with the specifics of the task, the multinational, like any other organization, determines the role that accompanies each task position. A role is an organised set of actions associated with a specific position. Although an individual's interpretation and performance of a part can be influenced, the role itself is predefined. The parent firm (role sender) predetermines the role of the expatriate (role recipient) in the foreign assignment, and role expectations can be clearly conveyed to the expatriate before departure. Black and Porter discovered that American expatriates working in Hong Kong behaved similarly to those in the United States. A role is an organised set of actions associated with a specific position. Although an individual's interpretation and performance of a part can be influenced, the role itself is predefined. The parent firm (role sender) predetermines the role of the expatriate (role recipient) in the foreign assignment, and role expectations can be clearly conveyed to the expatriate before departure. Black and Porter 132 CU IDOL SELF LEARNING MATERIAL (SLM)

discovered that American expatriates working in Hong Kong behaved similarly to those in the United States. As Torbiorn explains Organizational norms, in terms of parent-company expectations of the manager, and the set of cultural norms that the manager holds in relation to other cultural and organisational norms that may be represented by other role senders, influence the content of the managerial role as perceived by both the individual manager and the parent company. Thus, organisational and cultural norms interact to establish the manager's role content. The challenge for the expatriate manager arises from the fact that the function is defined in one country but carried out in another. That example, cultural norms surrounding the set of actions that identify a ‘manager in the United States' may differ from those considered appropriate for a manager’s role in an important emerging economy such as Indonesia. Headquarters’ support. The expatriate assignment varies from a domestic relocation in that it requires the individual (and maybe accompanying family members) to relocate to a foreign environment outside of their usual cultural comfort zones. The primary incentive for taking the assignment may be professional or financial, but it is frequently combined with a true sense of loyalty and commitment to the sending company. As previously said, the process of adjusting to a new environment usually results in a variety of emotional and psychological reactions to novel conditions faced during the stay in the host country. The level of headquarters’ support provided to the individual and the family is an important performance variable. Host environment. The environment has an impact on all jobs, but it is more important in expatriate management. The international context, according to Gregersen et al., can be a major predictor of expatriate performance due to differences in sociological, legal, economic, technical, and physical demands. As a result, expatriate performance should be evaluated in both an international and an organisational context. As a result, the five key constraints outlined above in terms of multinational strategy and subsidiary goal formulation are important factors to consider when managing expatriate performance. It's crucial to know what kind of operation the expatriate will be allocated to China. Conflicting parent company goals are a regular issue in overseas joint ventures, and they can make the expatriate's job more challenging. An expatriate IJV manager may find it challenging to serve two masters and face a high level of confusion about the impact of various IJV goal expectations on their performance rating. Similarly, the stage of international business will have an impact on the expatriate's success. An expatriate in charge of establishing a new facility in a foreign 133 CU IDOL SELF LEARNING MATERIAL (SLM)

country, particularly in a developing or growing market, may confront different problems and limits than an expatriate manager in charge of a well-established facility. Cultural adjustment. The process of cultural adjustment may be a critical determinant of expatriate job performance. Indeed, much of the literature reviewed in our discussion of the cause of expatriate ‘failure’ covers the process of adjustment. It is likely that expatriates and their families will have some difficulty adjusting to a new environment, and this will impact on the manager’s work performance. The dilemma is that adjustment to a foreign culture is multifaceted, and individuals vary in terms of their reaction and coping behaviors. Determining the relevance of adjustment to the new environment when assessing expatriate work performance may be problematical. The five variables – compensation package, task, headquarters’ support, host environment and cultural adjustment – reviewed above, and shown in Figure 6.3.1, are not mutually exclusive, but interact in a way that has significant implications for the appraisal of international employees’ performance. Designers and users of performance management systems need to be conscious of, and responsive to, the impact of these variables. 6.4 CHALLENGES OF INTERNATIONAL PERFORMANCE MANAGEMENT There are many challenges associated with expatriate performance management. Although we have listed some below, they are likely to vary by business. Ideally work to identify the challenges your company is likely to encounter and attempt to mitigate them in the expatriate performance management plan. Environmental variations Performance management systems rarely work in the same way domestically and internationally. Environmental variations including; different growth rates, the immediate environment and differences in performance, usually mean international performance appraisals need to be unique to each expatriate manager. Time and distance Improvements in technology make this less of an issue than it once was, but time differences and local infrastructure will impact on performance and appraisals. This is particularly true of expats working in underdeveloped countries. Cultural adjustment The employee’s ability to adjust to the organisational culture within the subsidiary, as well as the wider culture within their new country, is likely to impact performance. An understanding 134 CU IDOL SELF LEARNING MATERIAL (SLM)

of the local organisational culture by the HR team, the management team and the employee will facilitate the creation of a measurable international performance management system. Inconsistency of implementation Like all performance development, it will only be successful if implemented consistently in company subsidiaries. Oversight of this may be a challenge if most Human Resource functions are centralized to headquarters, meaning some employees thrive while others are left directionless. Tips for international performance management Developing a system that will work successfully across markets is a significant challenge for a global human resources manager. To further compound the situation, there is very little best practice research as existing studies do not focus on the same variables or countries. Define, facilitate and encourage performance Ultimately the goal of an expatriate performance management system is to define, facilitate and encourage performance in the individual and the teams they work with. Your company’s international performance management system should enable managers of expat employees to set specific, realistic, measurable goals that feed into the overall objectives of the business. However, setting goals is not sufficient for success, the programme should also contain a method of assessing performance on several occasions over a year. To achieve the goals that have been set, employees need to be able to facilitate performance through removal of barriers like outdated equipment or software, poor procedures and micro- management. However, international employees may encounter further difficulty with government requirements or personal safety depending on where they are based. Flexibility needs to be included in this regard when developing an expat performance management system. Finally, encouraging performance has been shown to be another marker of a successful international assignment. The methods for encouraging performance may vary from country to country. While additional remuneration may work successfully at headquarters, time off or other special privileges may be more valued in other countries. The easiest way to find out what may work best is to survey international employees. Once agreed it is essential that the appraisal process is transparent and fair. Training Essential to successful international performance management is a clear and effective training plan for all stakeholders. Once complete, managers need to be held accountable for implementing the process across their own employees, ideally in the form of their own performance appraisal by senior management and/or human resources. 135 CU IDOL SELF LEARNING MATERIAL (SLM)

Cross-cultural differences When creating a performance development plan that is going to work cross-culturally the differences in how performance feedback should be provided needs to be accounted for. For example, in some European cultures feedback should be direct and actionable where as in some Asian cultures the same feedback could cause unacceptable loss of face for the employee. Therefore, it is important to understand the culture on the ground when creating guidelines on how feedback should be provided. In addition to skill sets, another element of effective expat performance is personal health and wellbeing. Ensure your employees have the international health insurance protection they need to excel. 6.5 DEVELOPING INTERNATIONAL STAFF AND MULTINATIONAL TEAM More and more businesses are relying on a geographically diverse workforce to flourish in today’s global economy. They assemble and manage a global team that combines the greatest global functional experience with in-depth, local knowledge of the most promising markets. Consequently, they benefit from international diversity by bringing together people from many cultures with a wide range of work experiences and viewpoints on strategic and organizational issues. All of this helps multinational corporations compete in today’s global economic market. When everyone is locally working and everyone shares the same office space, it is hard enough to form a successful work group. However, when team members come from various nations and functional backgrounds and operate in separate places, communication can quickly degrade, misunderstandings can arise, and collaboration may quickly devolve into distrust. Remote employees and coworkers from various backgrounds have grown increasingly common in the recent years and has only surged since the pandemic began. This implies that managers need to manage a global team and be in charge of leading teams of people with a variety of professional as well as cultural backgrounds, locations, and work ethics. Managing a global workforce effectively needs exceptional leadership and communication abilities, as well as a keen understanding of cultural differences. Effectively communicating, motivating, and celebrating your team requires time, understanding, and effort. Great things happen when your welcome diversity and empower people throughout your global workforce. Understanding and adopting the professional work techniques of different cultures is a necessity in order to build and manage a global team. But that is a challenging task to take on. 136 CU IDOL SELF LEARNING MATERIAL (SLM)

Global teams are nothing new, but the obstacles of working with a widely spread geographical team are constantly changing and increasing. Here are 10 suggestions that can help in bridging the gaps that come with working on a team that is geographically and culturally diverse. 1. Increase communication Regular and frequent communication is a salient step to manage a global team. Regularly scheduled online team meetings are a way to stay connected and clearly communicate information across to all team members. Meetings also provide valuable opportunity for team members to exchange information in real time, keep employees informed about organizational developments, track progress, clarify doubts, identify areas that are experiencing issues and more. It is also important to recognize the variation in time zones. Set up a process or a system that allows for people in different time zones to get on the same page. This will also help avoid feelings of disconnection among team members. For eg. You can schedule your emails to be received when your team member starts work or you can fix a time in the day or week for a video call that includes the whole team. When it comes to maximizing team’s productivity and cooperation, choosing the right communication channels and establishing a routine and a culture is critical. 2. Make use of common platforms Effective cooperation is critical to the success or failure of global initiatives; therefore, teams must be able to communicate and interact quickly and effectively. Working on the same platforms and making use of the same tools, using the same calendars and timetables, and communicating through the same channels are all part of this. You can also use platforms like Slack to help the team collaborate better and stay connected no matter where they are and what the time is. When it comes to project management and tracking, it is important that everyone is on the same page and can see everything in real time. 3. Establish a schedule to talk with the entire team Meetings should be considered as critical chances for collaboration. Because your common time will be limited, make the most of it by working on a collective project or analyzing concepts or ideas. To make the most of these time frames, create a framework and distribute an agenda so that personnel may arrive prepared. Make use of applications such as Zoom, Google Meet or similar online conference platforms. Encourage everyone to turn on their video cameras so that you can see each other. Virtual face-to-face interaction can boost team bonding. 137 CU IDOL SELF LEARNING MATERIAL (SLM)

4. Build connections Create a virtual community that encourages cross-cultural collaboration and communication. Team empowerment should be nurtured and expanded, by including yourself in whatever you and your team decide to do. Multiple connections with the company can powerfully influence behaviors. Then, to keep your team members organized, engaged, and productive, leverage technology and collaboration tools. Employees who work in an office often have a different experience than those who work at remote locations. While you want employees to connect with the company’s overall culture, you also want to provide each area the opportunity to establish connections and communicate its own team culture. Internationality is an important component of the employment experience. It is thrilling, and it is representative of your group, celebrate the unique culture of each region. 5. Make resources available to all members Provide support to global colleagues by sharing the resources they require to succeed. If needed, provide language training classes that can bridge the communication gap, or a social intranet where multinational coworkers may access learning modules and exchange expertise. 6. Create a project management system Create a project management system and make full use of it. You might be tempted to wing it and manage everything via email if you are working with a small team, but this is quite risky. Project management systems are useful for managing global teams because they help organize documents and communication information into projects, making it easier to locate them afterwards. They also assist with the organization and storage of shared data. If you only use email to operate your business, communication might get lost in the emails. 7. Build trust When your team members are able to speak honestly and understand the reasoning of another person, global teams perform well. As a team leader, establish a workplace culture where employees feel free to be open and honest with their managers and team members. Spontaneous, unstructured communication is a terrific technique to encourage natural dialogue. Ask questions about topics that are important to your team and use this as a chance to understand your team better. Create a trusting environment when individuals feel comfortable speaking honestly. This fosters an environment in which individuals are more comfortable giving feedback, accepting constructive criticism, and sharing information and ideas. 138 CU IDOL SELF LEARNING MATERIAL (SLM)

8. Address and work with cultural differences Begin by conversing with your team members to get a better understanding of the many cultural backgrounds that are represented by your team. Determine how these differences might affect everyone engaged and how they might inform alternative ways to work. Creating a positive environment for these discussions can help you gain a deeper understanding of various cultural requirements. 9. Embrace obstacles Distractions, such as a barking dog, or a noisy neighbor or the washing machine, can substantially impair a remote team member’s ability to concentrate and generate high-quality work when working from home. Consider giving an alternate workplace option, such as a co- working space in their area, to stimulate efficiency. This will provide them with a professional work setting even though they are not in the same city as the rest of the team. This may also encourage spontaneous networking, which may boost productivity significantly. 10. Stay on top of things Especially in the case of a global team, try to stay on top of things that require your personal attention, like feedback. This will ensure that other team member’s aren’t wasting time waiting for your response. So be sure to stay on top of your emails rather than let messages pile up in your inbox. This will only improve efficiency and avoid frustrations among team members. If you are managing a global team in today’s economy, occasionally it may seem a little overwhelming, but the rewards far exceed the problems. Focus on encouraging cooperation, innovation, and, ultimately, productivity. That is the way to manage a global team successfully. You can effectively lead your global team to success with regular and meaningful communication and the proper resources. 6.6 SUMMARY  Performance management can be regarded as a systematic process by which the overall performance of an organization can be improved by improving the performance of individuals within a team framework.  Importance Of Expatriate Performance for Global Business: o Improve Local Market Knowledge 139 o Instill Company Culture CU IDOL SELF LEARNING MATERIAL (SLM)

o Transfer Knowledge o Increase Local Control o Develop Management Talent o Changing Role  International performance management is the evaluation of an individual who works in a foreign subsidiary on a temporary basis to transfer knowledge or develop global leadership skills.  Pre-requisite of International Performance Management: o Define, facilitate and encourage performance o Training o Cross-cultural differences  VARIABLES AFFECTING EXPATRIATE PERFORMANCE: o When attempting to determine expatriate performance, it is important to consider the impact of the following variables and their interrelationship: o The compensation package. o The task – the assignment task variables and role of the expatriate. o Headquarters’ support. o The environment in which performance occurs – the subsidiary or foreign facility. o Cultural adjustment – of the individual and the accompanying family members.  Challenges of International performance management o Environmental variations o Time and distance o Cultural adjustment o Inconsistency of implementation  Developing International Staff and Multinational Team: 140 CU IDOL SELF LEARNING MATERIAL (SLM)

o Increase communication o Make use of common platforms o Establish a schedule to talk with the entire team o Build connections o Make resources available to all members o Create a project management system o Build trust o Address and work with cultural differences o Embrace obstacles o Stay on top of things 6.7 KEYWORDS 1. Oversight of a system or process is the responsibility for making sure that it works efficiently and correctly. 2. Inconsistent · lacking in harmony between the different parts or elements. 3. Cultural Adjustment - assimilating to the new culture 4. A parent company is a company that has a controlling interest in another company, giving it control of its operations 5. The operative is the individual whose assignment is to perform functional job tasks in an existing operational structure, in generally lower level, supervisory positions. 6.8 LEARNING ACTIVITY 1.How Expatriate performance indicates loyalty towards Employer? ___________________________________________________________________________ ___________________________________________________________________________ 2. Justify Compensation is the main driving force behind Expatriate Performance. ___________________________________________________________________________ ___________________________________________________________________________ 6.9 UNIT END QUESTIONS A. Descriptive Questions: 141 Short Answers 1. Explain the concept of Performance Management System. CU IDOL SELF LEARNING MATERIAL (SLM)

2. State and brief the pre-requisites of Pre-requisite of International Performance Management. 3. Highlight the impact of Host Environment on Expatriate Performance. 4. Why local control is increased due to expatriate performance? 5. Discuss the actions of Performance Management System. Long Answers: 1. Describe the Performance Management System in the Global Context. 2. Discuss the Importance Of Expatriate Performance For Global Business. 3. Comprehend the Variables Affecting Expatriate Performance. 4. Explain the challenges of International Performance Management. 5. Write a note on Significance of Developing Multinational Team. B. Multiple Choice Questions: 1. KRA acronym stands for a. Key Responsibility Area b. Key Result Area c. Key Report Area d. Key Random Area 2.How Performance management process sets the platform for rewarding excellence? a. by aligning individual employee accomplishments with the organization’s mission and objectives b. By Considering Organization ROI c. By Considering Employee Feedback by its team d. By Aligning Employee Performance with Customer Satisfaction 3. Which process sets the platform for rewarding excellence by aligning individual employee accomplishments with the organization’s mission and objectives? a. Performance Management b. Human Resource Planning c. Job Analysis d. Recruitment 4. Who is in charge of building or duplicating a structure in a foreign subsidiary that is comparable to one that he or she is familiar with from another area of the organisation. a. The troubleshooter b. The structure reproducer 142 CU IDOL SELF LEARNING MATERIAL (SLM)

c. The operative d. The chief executive officer 5. What type of assignments have high-profile activities that focus on developing a balanced global perspective? a. Technical Assignments b. Developmental Assignments c. Strategic Assignments d. Functional Assignments Answers 1 – b; 2 – a; 3 – a; 4 – b; 5 - c; 6.10 SUGGESTED READINGS Text Book:  Wilhelm Schmeisser, Dieter Krimphove, Rebecca Popp, International Human Resource Management and International Labour Law, De Gruyter Oldenbourg,  Peter J. Dowling, Marion Festing and Allen D. Engle, Sr., International Human Resource Management, Cengage Learning EMEA  By Veronica Velo, Cross-Cultural Management, Business Expert Press  Srinivas R. Kandula International Human Resource Management , SAGE Publications Pvt. Ltd  Pravin Durai, Human Resource Management, Pearson India Reference Book  K Aswathappa , Sadhna Dash, International Human Resource Management, McGraw Hill  Gary Dessler, Fundamentals of Human Resource Management, Pearson  Ekta Sharma, Strategic Human Resource Management and Development, Pearson India  Parissa Haghirian, Successful Cross-Cultural Management, Business Expert Press Open Sources:  https://www.Shrm.org/  https://www.ncbi.nlm.nih.gov/  https://www.futurelearn.com/  International Journal of Human Resource Studies  changingminds.org 143 CU IDOL SELF LEARNING MATERIAL (SLM)

 assignmentpoint.com  interculturalmanagement.fandom.com  diva-portal.org  cvs.edu.in  strategy-business.com  www.mbaknol.com (Integrity-Asia & ispatguru)  publications.anveshanaindia.com  smallbusiness.chron.com  resources.workable.com  whatishumanresource.com  resources.workable.com  jigsawacademy.com  www.personio.com 144 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT 7- INTERNATIONAL COMPENSATION SYSTEM STRUCTURE: 7.0 Learning Objective 7.1 Introduction 7.2 International Compensation 7.2.1 Definition And Concept: 7.2.2 Objectives: 7.2.3 Major Components in An International Compensation Package 7.3 Approaches and practices 7.4 Factors Affecting International Compensation Strategy 7. 5 Managing People in International Firms 7.5.1 Expatriation Process: 7.5.2 Repatriation Process 7.6 Summary 7.7 Keywords 7.8 Learning Activity 7.9 Unit End Questions 7.10 References 7.0 LEARNING OBJECTIVE After studying this unit, you will be able to:  Explain the Objective and Components of International Compensation Management  Compare the different approaches in International Compensation  Outline the factors that affect the International Compensation Management  Describe the significance of Expatriation and Repatriation Process 145 CU IDOL SELF LEARNING MATERIAL (SLM)

7.1 INTRODUCTION To counter-balance is the literal meaning of compensation. Compensation in the context of human resource management refers to the money and other advantages received by an employee in exchange for providing services to his company. Money and benefits may be received in a variety of forms, including monetary remuneration and various advantages linked with the employee's service to the employer, such as provident fund, gratuity, insurance scheme, and any other payment or benefit the employee receives in lieu of such payment. Cascio has defined compensation as follows: “Compensation includes direct cash payments, indirect payments in the form of employee benefits and incentives to motivate employees to strive for higher levels of productivity” Based on above description of compensation, we may identify its various components as follows: 1. Wage and Pay: Wage and salary are the most crucial aspects of remuneration, and they are required regardless of the type of company. Wage is a term that refers to remuneration for workers, specifically hourly-rate payments. The term \"salary\" refers to the remuneration paid to white-collar employees, such as managers. Wages and salaries are paid for a set length of time and are usually unrelated to an employee's output at any given time. 2. Incentives: Incentives are payments made to employees in addition to their earnings and salaries. These are frequently tied to productivity, either in terms of increased output or cost savings, or both. These incentives may be given on individual basis or group basis. 3. Fringe Benefits: Fringe benefits are those that are provided to employees that have a long- term impact, such as provident fund, gratuity, or pension; or are provided in response to specific events, such as medical benefits, accident relief, health and life insurance; or are provided to facilitate job performance, such as uniforms, canteens, and recreation. 4. Perquisites: These are usually given to managerial people to help them perform their jobs better or to keep them in the company. Company cars, club membership, free residential housing, paid vacationexcursions, stock options, and other perks are examples of such perks. 7.2 INTERNATIONAL COMPENSATION 7.2.1 DEFINITION AND CONCEPT: 146 CU IDOL SELF LEARNING MATERIAL (SLM)

International compensation can be defined as the provision of monetary and non-monetary rewards, including base salary, benefits, and perquisites, long- and short-term incentives, valued by employees in accordance with their relative contributions to MNC performance. Its broad HRM purpose is to attract, retain, and motivate those personnel required throughout the MNC currently and in the future. Job evaluation is the means by which internal relativities and compensable factors, those elements such as skills, physical and mental demands, and responsibilities that comprise an individual’s work role in the MNC and contribute to its performance, are determined. 7.2.2 OBJECTIVES: 1. Attracting and Retaining Personnel From organisation’s point of view, the compensation management aims at attracting and retaining right personnel in the organisation. In the Indian corporate scene, there is no dearth of personnel at operative levels but the problems come at the managerial and technical levels particularly for growing companies. Not only they require persons who are well qualified but they are also retained in the organisation. In the present day context, managerial turnover is a big problem particularly in high knowledge-based organisations. 2. Motivating Personnel Compensation management aims at motivating personnel for higher productivity. Monetary compensation has its own limitations in motivating people for superior performance. Alfie Kohn (an American author and lecturer who has explored a number of topics in education, parenting, and human behavior.) has gone to the extent of arguing that corporate incentive plans not only fail to work as intended but also undermine the objectives they intend to achieve. He argues that this is due to inadequate psychological assumptions on which reward systems are based. His conclusions are as follows: 1. Rewards punish people-their use confirms that someone else is in control of the employee. 2. Rewards rupture relationships-they create competition where teamwork and collaboration are desired. 3. Rewards ignore reasons-they relieve managers from the urgent need to explore why an employee is effective or ineffective. 4. Rewards discourage risk taking-employees tend to do exactly what is required to earn the reward, and not any more. 5. Rewards undermine interest-they distract both manager and the employee from consideration of intrinsic motivation. 147 CU IDOL SELF LEARNING MATERIAL (SLM)

Notwithstanding these arguments, compensation management can be designed to motivate people through monetary compensation to some extent. 3. Optimizing Cost of Compensation Compensation management aims at optimizing cost of compensation by establishing some kind of linkage with performance and compensation. It is not necessary that higher level of wages and salaries will bring higher performance automatically but depends on the kind of linkage that is established between performance and wages and salaries. Compensation management tries to attempt at this. 4. Consistency in Compensation Compensation management tries to achieve consistency-both internal and external-in compensating employees. Internal consistency involves payment on the basis of criticality of jobs and employees’ performance on jobs. Thus, higher compensation is attached to higher- level jobs. Similarly, higher compensation is attached to higher performers in the same job. Level of jobs within an organisation is determined by job evaluation. External consistency involves similar compensation for a job in all organisations. Though there are many factors involved in the determination of wage and salary structure for a job in an organisation which may result into some kind of disparity in the compensation of a particular job as compared to other organisations, compensation management tries to reduce this disparity. 7.2.3MAJOR COMPONENTS IN AN INTERNATIONAL COMPENSATION PACKAGE International Compensation is an internal rate of return (monetary or non monetary rewards / package) including base salary, benefits, perquisites and long term & short term incentives that valued by employee’s in accordance with their relative contributions to performance towards achieving the desired goal of an organization. The following are the major components of an international compensation package. 148 CU IDOL SELF LEARNING MATERIAL (SLM)

Fig 7.2.1: International Compensation 1. Base Salary This term has a slightly different meaning in an international context than in a domestic one. In the latter case, it denotes the amount of cash compensation that serves as a benchmark for other compensation elements like bonus, social benefits. For the expatriate, it denotes the main component of a package of allowances directly related to the base salary and the basis for in-service benefits and pension contributions. Base salary actually forms the foundation block of the international compensation. 2. Foreign Service Inducement Premium This is a component of the total compensation package given to employees to encourage them to take up foreign assignments. This is with the aim to compensate them for the possible hardships they may face while being overseas. In this context, the definition of hardship, the eligibility criteria for premium and the amount and timing of this payment are to be carefully 149 CU IDOL SELF LEARNING MATERIAL (SLM)

considered. Such payments are normally made in the form of a percentage of the salary and they vary depending upon the tenure and content of the assignment. In addition, sometimes other differentials may be considered. For instance: if a host country’s work week is longer that of the home country, a differential payment may be made in lieu of overtime. 3. Allowances One of the most common kinds of allowance internationally is the Cost-of-Living Allowance (COLA). It typically involves a payment to compensate for the differences in the cost of living between the two countries resulting in an eventual difference in the expenditure made. A typical example is to compensate for the inflation differential. COLA also includes payments for housing and other utilities, and also personal income tax. Other major allowances that are often made are:  Home leave allowance  Education allowance  Relocation allowance  Spouse assistance (compensates for the loss of income due to spouse losing their job) Thus, multinationals normally pay these allowances to encourage employees to take up international assignments to make sure that they are comfortable in the host country in comparison to the parent country. 4. Benefits The aspect of benefits is often very complicated to deal with. For instance, pension plans normally differ from country to country due to difference in national practices. Thus all these and other benefits (medical coverage, social security) are difficult to imitate across countries. Thus, firms need to address a number of issues when considering what benefits to give and how to give them. However, the crucial issue that remains to be dealt with is whether the expatriates should be covered under the home country benefit programmes or the ones of the host country. As a matter of fact, most US officials are covered by their home country benefit programmes. Other kinds of benefits that are offered are:  Vacation and special leaves  Rest and rehabilitation leaves  Emergency provisions like death or illness in the family These benefits, however, depend on the host country regulations. 5. Incentives In recent years some MNC have been designing special incentives programmes for keeping expatriate motivated. In the process a growing number of firms have dropped the ongoing premium for overseas assignment and replaced it with on time lump-sum premium. The 150 CU IDOL SELF LEARNING MATERIAL (SLM)