Managing_a_Global_Workforce_Challenges_and_Opportu…_—-_5_Global_Human_Resource_Planning.pdf


106 CHAPTER 5

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5 Global Human Resource Planning

“WHO ARE OUR EMPLOYEES, ANYWAY?”

“We are treated like animals,” Sudaryanti, a 23-year-old garment worker from a Gapfactory in Indonesia, said through an interpreter. “We are abused if we do not workthe way the supervisor wants.” Sudaryanti—who, like many Indonesians, uses onlyone name—was in the United States with several other Indonesian workers to raiseawareness of poor labor conditions in factories used by San Francisco-based Gap,Inc. These garment workers from Indonesia are appealing to consumers in the UnitedStates to boycott Gap products to protest labor conditions at factories in SoutheastAsia, Africa, and Latin America. Charging that many of the Gap-contracted factoriesare sweatshops, the workers said conditions were inhumane.

In a twenty-four-page study on working conditions in Gap factories, the Union ofNeedletrades, Industrial and Textile Employees (UNITE) accused Gap of poor healthand safety conditions in their contracted factories. While Gap does pay minimumwage in most of the countries where it hires factories, it is still hard for most workersto make ends meet, said Ginny Coughlin, the director of UNITE’s Global Justice forGarment Workers Campaign. Some workers in the company’s Lesotho factories, forexample, earn about 30 cents an hour.

The report also alleged union-busting activities by management and, in some in-stances, corporal punishment to force laborers to meet quotas. UNITE’s study citedalleged abuses at Gap factories in Cambodia, Lesotho, Indonesia, Bangladesh, ElSalvador, and Mexico. A spokeswoman for Gap said the factories were not ownedby Gap but were independently contracted by Gap and other companies.1

It is true that the employees in UNITE’s study were technically not employees ofGap. But for companies like Gap that outsource much of their work offshore tocontractors and subcontractors around the globe, can they really afford the potentialnegative consequences to their reputation and public relations by not including con-siderations about these “outsourced” employees as they engage in effective globalhuman resource planning? Perhaps organizations today need to broaden the defini-tion of who their employees really are.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 107

INTRODUCTION

Human resource planning provides the essential link between MNC strategy andpeople—those who make strategy work—including outsourced workers as in theopening scenario. For success in the global business arena, human resource planningshould be part of the strategic management process, both in terms of strategy formu-lation and strategy implementation. Critical involvement of global human resourceplanning in the strategy formulation process includes scanning the environment foropportunities and threats and taking an inventory and assessment of the organization’scurrent human resources.2 Without an internal assessment of the organization’s hu-man capability, strategic plans can be laid that, at least for the present and near fu-ture, are far too ambitious and unrealistic, leading to possibly wasted time andresources when this reality crashes upon attempts to implement the strategy. Humanresource decision making cannot be an afterthought; it must be an integral part of theinternational business strategy formulation process, ideally involving HR profes-sionals as key members on the strategic planning team.3

Global HR planning should be responsive to both the short-term and long-termneeds and plans of the organization and its worldwide operations. For example, if acompany’s goals in a particular international business venture are only exploratoryor temporary in nature, it would most likely make sense to seek a short-term ortemporary labor supply to meet the corresponding uncertain or temporary work de-mand. Or where an organization is expecting to capitalize on a long-term futuregrowth opportunity in a particular foreign market, such as China or South America,it should include in its global HR planning specific considerations about efforts inlocal employee recruitment, training, and succession planning to ensure the long-term availability of an effective supply of managers and business professionals tolead this eventual international expansion activity. Thus, whether the scope for glo-bal HR planning is for the near future or for the much longer term, it should link withcompany strategic planning to develop policies, plans, programs, and activities thatprovide the human talent to help carry out and achieve those strategic plans.

Unfortunately, much of the literature fails to include global HR planning as thecritical nexus between strategic planning and specific HR practices, such as in thearea of employee selection and staffing, where we often see an immediate move intoa discussion about how to effectively select and prepare expatriates for foreign as-signments. In this particular case there is a premature assumption that an expatriateis the appropriate form of human talent to fill foreign work demand before adequatethought is taken about the strategic objectives and the characteristics of the particu-lar work demand—and home country expatriates are not always the most cost-effective supply of human talent. In fact, they often represent the most expensive!The lack of HR planning for linking HR practices to the strategic goals and objec-tives of the firm make the organization vulnerable to the fads and popular practicesof the day, which typically address business goals and needs in only a superficial,noncustomized way. Before staffing and other detailed action plans are made, thereshould be thoughtful consideration, as part of careful global HR planning, about thenature of the present and future work demand and potentially viable sources of labor

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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108 CHAPTER 5

supply—wherever they may be, both in the short-term and long-term—that serve toachieve the strategic objectives of the firm.

In this chapter we will examine the important role of HR planning in carrying out anMNC’s strategic plans effectively through the people factor as well as in preparing theorganization throughout its worldwide operations for optimal long-term productivityin utilizing human resources. Important considerations for the HR planning functionthat we will consider include the determination of work demand and labor supplybased on strategic objectives, external environment scanning, work organization andjob design, and analysis of important sources of labor supply. In addition, we willexamine long-term HR planning issues including forecasting labor supply trends andopportunities, building global capability, and succession planning strategies.

FROM STRATEGY TO DECISIONS ABOUT WORK DEMAND ANDLABOR SUPPLY

Once international business strategies are determined, specific cost-effective (that is,highly effective at minimal expense) implementation or action plans must be consid-ered. Global HR planning plays a central role in this implementation phase in deter-mining both what kinds of human work and tasks need to be carried out and who willdo this work. The what component in this HR involvement may be considered part ofwork demand; it leads directly to decisions regarding work organization and design,such as breaking down larger business performance plans and goals into specificcoordinated and integrated tasks, responsibilities, and jobs for people to perform.The who component of global HR planning for strategy implementation comprisesmany different kinds of decisions related to the supply of appropriate human re-sources or labor with specific skills to address the identified work demand.

It is important to keep in mind, as suggested in Figure 5.1, that actual work de-mand identified in global HR planning should be driven by and based on the company’sinternational business strategies and plans, and that considerations about labor sup-ply should in turn be based on the nature of the immediately identified (short-term)and forecasted (long-term) work demand. In effective global HR planning there shouldbe a logical flow from strategy to work demand to labor supply, with each stepconsistent with and responsive to the previous step. For example, a business expan-sion strategy from Chicago to Argentina should not, at least primarily, involve workassignments (that is, work demand) that investigate European markets, or seek to beimplemented solely by Chicago headquarters employees (labor supply) that are com-pletely ignorant of Spanish. Nor should assignments be undertaken involving multi-national virtual teams unless there is a clear connection with company strategy aswell as a solid indication that a team design is a viable way to address work demand.

Company strategy can be directed both at what the company desires to do (for

Figure 5.1 Global HR Planning

Global Strategies and Plans → Work Demand → Labor Supply → Successful Implementation

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 109

example, increase production inventories, expand and customize products or ser-vices for a new foreign market, or increase market share in a particular economicregion) and what the company desires to become, such as in terms of internal strate-gic capability and competence.4 We will examine these latter, rather longer-terminternal-developmental company objectives later in this chapter. But considerationsabout company work translated from short-term and longer-term strategic objectivesas well as decisions regarding human resources that will enable the company to meetwork demand should not be made without a careful scanning and assessment of theexternal environment, which can greatly influence those work demand and laborsupply decisions. We now will briefly examine critical factors in the external envi-ronment that should be monitored on an ongoing basis as part of a thorough, effec-tive HR planning effort.

EXTERNAL ENVIRONMENTAL SCANNING

Business leaders today must continually scan the environment and maintain awarenessof changing and developing challenges—presented by threats and opportunities—tosuccessfully carrying out business plans and competing in our global marketplace.With its close interface with strategic planning, HR planning personnel should alsocontinuously scan the environment for the array of complex, interrelated challengesthat present themselves.5 The major overarching current trends, influences, and de-velopments discussed earlier, including globalization, contingent work arrangements,technological advancements, changing demographics, and national culture, must bemonitored regularly in terms of their implications for new work demand and theability to meet that demand through human labor or automation. Other importantexternal challenges pertinent to global HR planning that should be assessed on anongoing basis include labor market conditions and characteristics, opportunities andrestrictions presented by foreign governments and other organizations concernedwith labor interests, global competition, cross-national cooperation and conflict, andthe impact of broad economic forces and market changes on labor supply cost-effectiveness.

LABOR MARKET CONDITIONS AND CHARACTERISTICS

One of the primary engines driving our increasing globalization is the opportunitypresented by increased demand for manufactured goods to satisfy an ever-increasingworld consumer appetite. The opportunity is especially attractive with the burgeoninggrowth in the sourcing of the manufacturing operations for these goods to countriessuch as China, Vietnam, Romania, Malaysia, India, Brazil, Portugal, Mexico, and Thai-land representing attractive labor markets where the labor supply is plentiful, of anadequate skill level, and relatively inexpensive compared with the labor supply in moredeveloped countries. In fact, some countries with a relatively low-cost labor force alsohold a comparative advantage in terms of technical skills, such as India and the coun-tries of Central and Eastern Europe, which are attracting considerable high-tech workdemand, in addition to back-office administrative services, to be filled by their low-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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110 CHAPTER 5

cost but highly skilled computer programmers and engineers.6 Inevitably, market forcesof supply and demand come into play in global HR planning. As more firms sourcetheir work to a foreign country with an attractive, heretofore low-cost labor force, thereis increasing competition for a limited labor supply, which then eventually drives upthe cost of labor for the MNC, as has recently been reported regarding labor character-istics in southern coastal regions of China.7

Within the increasing globalization movement, human resource planning shouldinclude a careful and ongoing scanning of various national labor markets to identifyparticular opportunities or potential problems related to the supply of labor to supportongoing MNC strategic objectives. Scanning of global labor markets might considercurrent levels of adult literacy and technical skills among the present labor force. Aswith the earlier example, the United Kingdom is significantly behind France and Ger-many in the number and proportion of the national labor force achieving craft-levelqualifications in engineering and technology, suggesting that plans for expanding heavyR&D and high-tech business activities into the European Union might favor Germanyor France where the global labor force would be more capable of supporting thesemore demanding and knowledge-intensive business activities.8 Of course, in cases whereMNCs open operations in host countries that have a plentiful labor supply for low-skilled jobs but lack a sufficient supply to meet higher skilled and technical workdemand, they should maintain flexibility and mobility to supply the needed higherskilled labor through expatriate assignments from the home country. Or they mightseek such higher skilled labor from a third country, as is common in U.S. manufactur-ing plants in Mexico along the U.S.–Mexico border where a large percentage of tech-nical employees and mechanical engineers come from India.

GOVERNMENTS AND OTHER LABOR INTEREST ORGANIZATIONS

Inevitable threats to the rapid expansion of globalization fostered by the low cost oflabor in developing countries arise both from home as well as abroad in those hostcountries where the sourced operations are located. A company in its home countrycan feel strong social pressure in terms of patriotism and national solidarity to notmove jobs (work demand) to other countries, which would result in the immediateloss of jobs and an increase in national unemployment—the latter often more of afear than reality.9 This protectionist fervor has escalated in the United States in theheat of state and national politics with legislation efforts aimed at curbing U.S. com-pany offshore outsourcing by removing associated tax incentives.10 Governmentsand influential unions supported by those governments can also impede or com-pletely prohibit certain kinds of work, such as those related to key industries andnational security, from being sourced to other countries.

In their negotiations with MNCs for initial or renewed foreign direct investmentwithin their borders, host country governments also can require, for optimal FDI spilloverof knowledge and skills, that MNCs staff their local operations with targeted levels ofhost country supervisors and managers (with appropriate training provided), or placejoint venture requirements to encourage sharing of expertise.11 Of course, MNCs thathold a much more inclusive perspective of their global human resources beyond those

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 111

located within the headquarters country borders will recognize host country employeeleadership development and higher-level staffing as an opportunity to continue to pur-sue the strategic goal of building a truly global workforce.

Governments in host country low-cost labor markets are becoming very competi-tive in providing MNCs with attractive incentives in the form of tax breaks and exemp-tions from certain costly labor regulations in exchange for foreign direct investment.12

Yet they also can begin to exact increasing costs for the access to and use of its laborsupply in the form of higher taxes and the passage and enforcement of more costly andrestrictive labor laws. These foreign governments also can require significant com-pany payments to address the social costs of employee job displacement when theMNC determines to close operations in that country and move to another country withmore favorable labor and other operational costs.13 In addition, local labor unions—and, increasingly, international and local NGOs and other international bodies thatmonitor labor concerns (for example, the United Nation’s International Labour Orga-nization)—can place great pressure on MNCs to improve HR policies and practicesrelated to labor standards, job security, equal opportunity, compensation and benefits,and skill development.14 Of course, many MNCs will readily bear the costs of develop-ing host country workers to build internal talent and increase efficiencies as well asgain a favorable reputation within the host country as a job provider and contributor tothe local economy. And in the longer term these developing host economies, with apositive history with the MNC, represent a growing and amiable consumer market.15

GLOBAL COMPETITION

Companies compete both at home and abroad to attract and retain customers by at-tempting to consistently deliver high-quality products and services at lower costs. Or-ganizations also compete for the human talent itself that drives competitive advantage.Essential to an organization’s ability to succeed in the increasingly competitive globalarena—whether or not an organization even ventures abroad—is its ability to attractand deploy a motivated, innovative, team-oriented, cooperative, responsive, flexible,and competent workforce at all levels. This ability has been central to Toyota’s growthand success in building a reputation for high quality and reliability, and for SouthwestAirline’s ongoing profitability (despite pre- and post-9/11 industry distress) and lead-ing performance in important customer service measures.16 Therefore, a critical func-tion of HR planning is to continuously watch the competition and scan the environmentfor best practices in employee recruitment, selection, placement, work design, trainingand development, compensation, change and performance management, and other HRmanagement practices that contribute to a world-class, high-performing workforce.

CROSS-NATIONAL COOPERATION AND CONFLICT

Several different regional and multinational trade treaties and agreements among vari-ous countries have important HR planning implications related to business conductedwith and within participating countries. Such treaties and agreements include the Or-ganization for Economic Cooperation and Development most of the countries of West-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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112 CHAPTER 5

ern Europe plus North America, South Korea, Japan, and Australia), the North Ameri-can Free Trade Agreement (Canada, the United States, and Mexico), and the Associa-tion of South East Asian Nations (Indonesia, the Philippines, Thailand, Singapore,Maylasia, Vietnam, Laos, Cambodia, Brunei, and Burma or Myanmar). The most for-malized and integrated of these treaties is the European Union (with twenty-five mem-bers as of March 21, 2006, and four candidate members), which has adopted a commonconstitution and, at least for most of its members, a common currency (the euro).17

Important HR planning implications of these agreements include joint ventureformation and appropriate staffing to promote treaty country partnerships, standard-ization and harmonization of acceptable HR practices, formation and staffing ofregional headquarters and HR functions corresponding to treaty member geographicarrangements, movement of workforce operations across participating national bor-ders to take advantage of operational efficiencies, and appropriate cross-culturalawareness skill development for those involved with treaty country interactions.18 Inaddition, managers and decision makers must be aware of important current andchanging guidelines and even detailed requirements that these multiple-country agree-ments can have related to professional licensing, union representation, benefits, train-ing, work standards, and worker rights.19

Economic studies on new market development as a result of the formation of theregional trade blocs of the European Union and NAFTA have demonstrated impressiveincreases in work demand and associated labor supply utilization for participating coun-tries. In fact, some U.S. manufacturing companies have been able to survive and becomeeven more competitive because of NAFTA, which provided a cheaper supply of laborfor lower-end manufacturing requirements, while they retained and even expanded theirhigher-end manufacturing and design operations in the United States. However, at timestreaty arrangements may also provide a threat and lead to particular cost advantagesfavoring companies headquartered in treaty member countries, where the overall cost ofbusiness can become increasingly expensive so as to outweigh the low cost of labor.Such has been the case for several Japanese and Korean MNCs along the U.S. border inMexico that have pulled out and relocated their increasingly expensive Mexicanmaquiladora operations due to their new less-favorable status and now costly tariffs andother requirements as companies representing non-member countries of NAFTA.

Aside from various forms of global cooperation, serious forms of conflict withinand between countries, including localized and global terrorism, can have importantimplications for the human side of business and must be attended to as part of HRplanning. Ongoing trade wars and skirmishes between countries can present obstaclesfor foreign business development in those countries, including those associated withhuman resource staffing and utilization. More serious cross-country conflicts, such asthat between Pakistan and India, can also thwart regional business stability and busi-ness development efforts affecting HR planning. Internal country instability and vio-lence, such as guerrilla and civil warfare or a coup d’état, can have a debilitating impacton company plans. For example, Fidel Castro’s overthrow of the Batista regime in1959 and the Ayatollah Khomeini’s takeover of Iran in 1978 had a crippling effect ontheir respective countries’ foreign direct investment and associated international laboractivity. In fact, both situations featured a significant emigration of labor to safer and

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 113

more viable political havens, such as the United States and Western Europe. And so-cial and political unrest in such countries as Colombia, Ecuador, China, and Russia hascreated a demand for extra surveillance, security, and protective services, such as inthe oil industry where foreign executive bodyguard services are in great demand.20

JOB DESIGN FOR MEETING GLOBAL STRATEGYWORK DEMAND

Once work demand that directly addresses the implementation of company strategyand business objectives has been identified, decisions are needed regarding work orga-nization and design, involving breaking down larger business performance plans andgoals into specific coordinated and integrated tasks, responsibilities, and jobs for peopleto perform. The work responsibilities and tasks, as well as the qualifications or require-ments necessary to perform them (for example, knowledge, skills, and abilities), areconsidered in detail through a process called job analysis.21 The job analysis processforms the basis upon which key employment decisions related to recruitment, selec-tion, training, performance appraisal, and compensation are made.22 Major methods ofjob analysis include incumbent employee observation, interviews, questionnaires, orkeeping a diary or log; when jobs are new, expert input by experienced managers orother professionals often can be usefu1.23 The process of job analysis typically resultsin the development of a document known as a job description, listing the duties andresponsibilities, working conditions, supervision or reporting arrangements, and knowl-edge and skills required to perform the job effectively. This document should be re-viewed regularly and discussed with employees and revised if necessary to ensure thatwork performance expectations are clearly understood.

We now will examine some major factors influencing global work design. Wealso will consider major forms of international working arrangements, includingwork assignment accommodations, which are utilized for implementing internationalbusiness strategic goals and objectives. The roles and contributions of these factorsand general work arrangements should be considered as part of overall HR planningon a global scale and should be considered broadly to include to all MNC employ-ees, whether they come from the home country or abroad.

PRIMARY FACTORS INFLUENCING GLOBAL WORK DESIGN

Given an identified work demand in some foreign environment, several potentiallycritical factors must be considered in the design of work that meets that work de-mand. These factors include cultural adaptation considerations, regulatory influenceon work design, labor market skill levels, available technology and infrastructure,and personal accommodation needs.

Cultural Adaptation Considerations in Work Design

As in so many other areas involving detailed workplace implementation in internationalbusiness, local cultural characteristics must be considered in the effective design of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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work. Although general tasks and responsibilities for similar jobs can be identified fromcentral corporate headquarters, their specific working conditions and arrangements intheir foreign location should be carefully examined to ensure a good fit with local cul-tural norms and expectations. For example, in cultures characterized by high powerdistance (such as the Philippines, Mexico, and Venezuela), reporting relationships areexpected to be more formal and distant, whereas in cultures with lower power distance(such as Austria, Israel, and Denmark), these relationships are generally more comfort-ably experienced as informal and with closer and open interaction.24 In one recent studywe compared the perceptions of Mexican, U.S., and Indonesian lower-level manufac-turing employees about what they regarded as appropriate and inappropriate supervi-sory behaviors and found that these employees differed significantly across nationalcultures, where U.S. and Indonesian employees differed from Mexican employees, forexample, in placing a premium on a supervisor’s honesty and identifying such supervi-sory behaviors as “disciplines and criticizes in public” and “flaunts power” as having aparticularly negative impact on worker performance. These findings support the reputedhigh level of power distance in Mexican culture, with the tendency to ascribe to Mexi-can managers and supervisors the privilege, based on their position of power, of choos-ing whether to be honest and follow through on past promises, or to flaunt positionpower or criticize in public. This study demonstrated that a common set of supervisorybehaviors that could be prescribed from MNC headquarters would not likely fit thediffering expectations and preferences of subordinate employees in those different coun-ties but would need to be customized to fit the local culture.25

National and local cultures may differ in the extent that they emphasize personalor group structures in their personal and work activities—those preferring individualstructures being high on individualism while those preferring group or team struc-tures being high in collectivism. The most individualistic countries include the UnitedStates and other English-speaking countries, whereas the most collectivist countriesinclude Venezuela, Colombia, and Pakistan.26 Employees in Japan’s highly collec-tivistic culture have been known to identify their job affiliation with a particularcompany in a very personal way, such as, “I belong to Kentucky Fried Chicken ofJapan.”27 Thus, in highly collectivistic countries it may be more appropriate in cer-tain work situations to design jobs as part of a highly interactive and interdependentteam, where working space itself is designed to be common and open (for example,no separating offices or cubicles) to encourage optimal team interaction. However,such a physical work design can prove disturbing to those accustomed to more pri-vacy, as was found in a study of U.S. interns working in Japan who were very un-comfortable with the open, exposed office and laboratory workspaces.28

Regulatory Influence on Work Design

Different governments might have specific restrictions about how work is organizedand carried out. In particular, they may specify how work is organized for breaks forrest and even prayer time (such as in some Islamic regimes) or how many hours a daya business can remain open (for example, in Germany until 1998, most stores werenot allowed to remain open past 6 P.M.).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 115

As examined in Global Workforce Challenge 5.1, governments also might specifyhow many hours a week employees can work and give very tight restrictions on theavailability of overtime. Governments might also differ to a great extent in which theyeither have or enforce regulations on the design of work that ensures employee safety.

Labor Market Skill Levels

Depending on the levels of skills and knowledge available in the labor force, jobscan be designed with more or less technical complexity or requiring more or less

GLOBAL WORKFORCE CHALLENGE 5.1

HR PLANNING WITH FEWER WORKING HOURS

In keeping up with work demand as part of HR planning, the number of hours employees haveavailable to work make up an important part of the planning equation. In 2002, France extended itslaw reducing the workweek to thirty-five hours from thirty-nine for companies with fewer than twentyemployees. Vacations have nearly doubled since the 1970s in several European countries, includingItaly, Spain, and the Netherlands—with about six weeks being the annual norm across Europe.According to the OECD, the average German worker puts in about 1,400 hours a year, a 17 percentdecrease since 1980. Although unions and governments have asserted that these reduced work hourmeasures have created or saved jobs, unemployment still remains high and the economy stagnant.

European and other MNCs in Western Europe are becoming more concerned about their abilityto compete globally with the reduced work hours in the equation—it isn’t just the higher cost of wages.Caterpillar, Inc., the U.S. maker of heavy machinery, added seventy new workers at its plant inGrenoble to cope with the reduced hour change, bringing the total work force in France to 2,300. Likemany other companies, Caterpillar chose an option in the law to let workers take more vacation daysin lieu of reducing their weekly thirty-nine hours to thirty-five. But it quickly found that projects weredelayed because too many people were out of the office on a given day. “If our only competition andcustomers came from France, it would not be an issue,” says Laurant Rannaz, head of humanresources for Caterpillar in France. “But they come from around the world.”

For some smaller companies that can’t afford to hire new workers to make up for the reductionin hours, the results have been disastrous. In the wine cellar of her French seventeenth-centuryfarmhouse near Dijon, Veronique Perrin worries that she may have to sell her longtime familyvineyard. Her three workers no longer come in on Fridays as a result of the law change. Anothercompany that provides labels for the 50,000 bottles of wine that she makes each year can no longerkeep up with her demand because it has lost worker hours. However, for bigger companies,globalization allows the flexibility to move operations with greater work-hour flexibility to meetdemand. Even though Europe boasts high-skilled, well-trained, and educated workers, companiessay the shorter work hours make the higher costs for these workers even harder to justify. Therefore,companies have altered their workforce growth plans. For example, since the 1990s, French carmakerPSA Peugeot Citroen more than doubled the size of its workforce outside of France to 68,000, whileits domestic workforce shrunk by 4,000. In Germany, Volkswagen AG expanded its foreign workforceby two-thirds while keeping its domestic workforce at twenty-year-old levels. The company nowmakes its trademark Golf in Slovakia, Brazil, and South Africa in addition to Germany and all of itsnew Beetles in Mexico.

Source: Adapted from C. Rhoads, “Clocking Out: Short Work Hours Undercut Europe inEconomic Drive,” Wall Street Journal, 2 August 2002, A1, A6.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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careful supervision (also part of the work design). Where a labor force possesses ahigh level of knowledge and skills, jobs can be designed to include higher levels ofcomplexity and technology, with more tasks than might be appropriate in an areawhere the labor force is less educated. And where fewer tasks are involved for eachjob a greater number of employees might be required to satisfy the work demand.One U.S. multinational toy manufacturer found that its plant in Tijuana, Mexico,was able to design work with enough complexity and integration with technologyto manufacture products there in three days. In China, where the local labor wasabundant and much cheaper but did not, at that time, have the level of labor forceskills to support work with such technical complexity, its operation took threeweeks to produce the same products.

Available Technology and Infrastructure

Work design must also take into account such factors as the availability and devel-opment of technology in the local area of business operations as well as the sur-rounding infrastructure supporting business. Where technology is unavailable, workmust be designed in a more simplified form, which, as in the previously mentionedChina example, often results in the need for many more employees to handle manymore simplified tasks. Technology might be available, but it lacks the needed sup-portive infrastructure (for example, available and affordable electricity, computersupport systems, communications, transportation, and so on) to make its utiliza-tion practical and viable. As new technologies are being developed and utilized inmany countries, including developing nations, human work is constantly beingredesigned around tasks that are now automated, requiring higher employee skillsand resulting in a worldwide drop in manufacturing jobs due to increased efficien-cies and automation.29

Personal Accommodation Needs

In addition to the need to accommodate the design of jobs to fit the cultural and skilllevel requirements of employees, individual employees may have unique circum-stances that might influence the design of their work. For example, where long com-mutes are required, longer but fewer work days might be arranged,30 and/or workmay be designed on a “telework” basis that can be performed independently at homeor at some other more convenient remote location with regular communications withthe traditional office or worksite via telephone, fax, or the Internet (such as via e-mail and website upload and download). The Netherlands leads the world in thegreat and rapid increase in telework, involving 18 percent of the workforce.31 In fact,it is estimated that more than 137 million workers worldwide engage in telework onat least a part-time basis. Survey results give evidence that employees worldwidedesire to have more opportunities for telework and that their top priority is to obtainincreased flexibility to control their own working time to provide better balance withpersonal life demands and interests.32

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 117

ALTERNATE FORMS OF INTERNATIONAL WORK ARRANGEMENTS

Besides traditional full-workday arrangements at the company worksite (and thesetraditional workdays can differ dramatically around the world, such as in Latin coun-tries that often take an early afternoon extended lunch and rest period and then returnto work until much later in the evening, such as 8 P.M. or 9 P.M.), various alternateforms of working arrangements might be made to fit the global work demand needsof the organization and its employees. Common alternate forms of these interna-tional work arrangements include extensive travel, short-term foreign assignments,expatriate assignments, inpatriate assignments, virtual expatriate assignments, andmultinational virtual teams.

Extensive Travel

Some kinds of regional sales and management jobs require almost constant travel tovarious business locations in a country or economic region. These kinds of jobs mayrequire regular and frequent customer contact, active coordination of various geo-graphically dispersed business partners, or ongoing supervision that cannot be re-placed completely by virtual contacts. Extensive travel work arrangements are oftenpart of an early and developing phase of business development and might eventuallyresult, as business becomes more established and predictable, in more permanentassignments at the worksites to where the previous travel had been targeted. Theycan also be part of a regional assignment, such as with an executive who works atregional headquarters in Brussels but travels considerably during the week to otheroperations in Western Europe and returns home to a Paris suburb on weekends. Be-sides the added travel expense, extensive travel can grow very burdensome and tiringfor the traveler as well as severely interfere with the traveling employee’s personallife. One single American woman in Vienna, whose regional work in business devel-opment in the health care industry involved extensive travel, commented to us thatalthough her work constituted an exciting growth experience for her, she felt that thetremendous amount of travel required of her greatly interfered with her personal lifein not providing adequate stable time in one location to develop personal and mean-ingful relationships outside of work.

Short-Term Foreign Assignments

With increasing priorities for cost savings and localization of talent, short-term for-eign work assignments, or sometimes called secondments, ranging from a few monthsto a year, are on the rise.33 Where sufficient work is developed in a foreign location,employees might be sent there temporarily, such as on a two-month assignment, orfor multiple work periods at the foreign location over an extended length of time.Short-duration foreign assignments can provide an interesting break, challenge, andprofessional development opportunity for employees who have worked in the samedomestic location for a long period of time. However, when the assignments becomemore frequent and require more time at the foreign location than back at the home

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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118 CHAPTER 5

workplace, their attractiveness can begin to diminish significantly—again with grow-ing operational costs perceived by the organization and personal life–balance costsas perceived by the employee. Frequently we have noted that foreign short-termwork assignments, particularly to the same foreign worksite, lead to extended orexpatriate work assignments for two to five years and more at the foreign location.One American expatriate working for Intel Corporation in Rome remarked to us thatafter nearly a year of spending one week at home after working the rest of eachmonth in Rome on what originally had been foreseen as a short-term work assign-ment, he finally made a request and was allowed to move his family to Rome andconvert to an extended expatriate assignment.

Expatriate Assignments

Traditionally organizations, particularly in earlier stages of their business expansionabroad, have sent managers as expatriates from their home country locations—oftencompany headquarters—for three years or longer. The demand for their services hasbeen based primarily on the need to fill a critical skills gap by transferring operatingknowledge and techniques and general managerial skills held by the expatriate to thedistant subsidiary, thereby allowing the MNC to more directly provide coordinationand controls to ensure that the foreign subsidiary is performing up to MNC expecta-tions and consistent with MNC strategy. In the course of filling this position theretypically is a transfer of knowledge and skills from the expatriate to members of thelocal workforce, whether formally through training efforts or informally through theexpatriate’s behavior modeling and daily work interactions with local employees.Much of the focus of this knowledge transfer has been on the cognitive domain in theform of specific, concrete knowledge about procedures, techniques, and methods foraccomplishing tasks. In addition, there are likely other valuable forms of learningtransfer in the “emotional intelligence” or affective domain such as with productiveattitudes and values as well as higher-level thinking, team building, and problem-solving skills. For example, David Cheung, who has worked in different financialmanagement capacities since 1994 in Motorola (China) Electronics Ltd., and is cur-rently the CFO for Otis China in Tianjin, noted the following regarding his experi-ence with American expatriates, including interns that were abroad primarily fortheir own experience and development:

In my opinion, expatriates have played an important role in China’s progress, in teachingthe Chinese technical knowledge as well as problem-solving and managerial skills. OurAmerican managers here usually bring in a sense of “you can do it” spirit. They usually aremore outgoing, friendly, treating everyone as equal, and are more able to lead a team andget people motivated to improve and bring about changes. I have often had foreign internsin my organizations. Very often, they are people full of energy, ideas, enthusiasm, and greatmotivation, which had a positive impact on my organizations by their good example. TheAmericans are usually not shy about things even when they don’t know the subject well.They have the confidence to learn and to try. This is what many of the local Chinese em-ployees need to learn.34

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 119

This immediate purpose of filling a critical skills gap with accompanying knowledge/skill transfer for optimal MNC control appears to be the most common assignmentobjective for expatriates.35 Two additional major purposes for sending expatriatesabroad include supporting individual learning and global competency developmentfor future company leadership as well as organization development of the host op-eration and MNC as a whole.36 Vladimir Pucik has differentiated between demand-driven foreign site work and learning-driven international assignments, wherecompanies increasingly recognize that cross-border mobility afforded by expatriateassignments represents a valuable learning tool and opportunity for the exaptriate.37

Gary Oddou has identified two types of expatriates: those assigned to go abroad tofix a problem and those identified as “high potentials” for the firm who are assignedabroad to build global business competencies.38 Particular purposes of organizationdevelopment served by expatriate assignments have been described as effecting glo-bal workforce socialization to common values and priorities, widespread global ori-entation and core competency development, and development of informal networks.39

More recent work on the expatriate assignment’s potential contributions to organi-zation development has expanded the focus to include organizational learning andeffective global knowledge management, where expatriates, upon returning to MNCheadquarters (regional or global), potentially serve as important sources of knowl-edge and learning for the organization about foreign markets.40

Despite the previously listed beneficial purposes of the expatriate assignment,some significant disadvantages should be considered before automatically structur-ing work to be fulfilled through expatriate job designs. First, expatriate assignmentscan be very expensive. The maintenance costs of expatriates in a host country rangefrom three to ten times the cost of domestic employees with similar responsibili-ties.41 Second, the frequency of premature terminations of expatriate assignments orfailure to achieve the assignment goals are reported at disturbing levels.42 One U.S.study showed that nearly one-third of expatriates who remained in their positions didnot perform to the level of expectation of their superiors back at headquarters.43

Third, an over-reliance on the use of expatriates for management and leadershipresponsibilities in foreign operations can lead to limited development of other mem-bers of the MNC workforce not coming from MNC headquarters, contributing to anoverall underutilized and underdeveloped global talent pool.44 Fourth, the strict andexclusive use of expatriates for managing foreign operations can significantly di-minish the breadth of experience-based perspectives about foreign markets that canbe returned back to MNC headquarters, limiting the MNC’s ability to innovate andcompete on a global scale due to its narrow, ethnocentric frame of reference.45

Inpatriate Assignments

A work assignment featuring the transfer of foreign managers from their host coun-try operation locations to global or regional headquarters on a semipermanent orpermanent basis is known as inpatriation.46 A major purpose of this kind of workassignment is to increase the foreign inpatriate manager’s understanding of companystrategy, culture, and critical operations and practices. And upon return to the host

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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120 CHAPTER 5

country in a position of leadership, this now more broadly experienced manager canexert greater control on the foreign operation consistent with MNC headquarters.47

And just as expatriates have traditionally been MNC agents of knowledge and skilltransfer to employees in the host operations, the returned inpatriate manager canserve as a knowledge transfer agent in a similar fashion—and perhaps with greatercredibility as someone originating from the host country workforce. Inpatriate man-agers, through their active involvement at MNC headquarters, can also serve to in-fuse knowledge of the corresponding host country market throughout the globalorganization as well as provide a means to enrich the MNC management team byadding a multicultural perspective to global strategy development.48

Inpatriation assignments are likely more appropriate for organizations of interme-diate and advanced levels of internationalization whose host country employees havesignificant experience with the company and that possess adequate capital resourcesto support such a long-term human resource investment. There may be other limita-tions and costs as well—many of which are similar to the challenges of cross-cul-tural adjustment, premature assignment termination, and assignment failure to meetgoals and objectives.49 Also, where great benefit can be achieved through the infu-sion of broader and multicultural perspectives within MNC management at com-pany headquarters, this value can be effectively achieved only if significantcross-cultural awareness and diversity training efforts and deep-seated, often stress-ful organizational culture changes are made to prepare the MNC to be receptive tothese new perspectives and supportive of the new inpatriate participants on the MNCmanagement team.50

Virtual Expatriate Assignments

Considering the high costs associated with expatriate assignments, and with moremanagers and executives preferring not to uproot themselves and their families forforeign assignments, companies are increasingly using assignments that combineshort travel trips with virtual interaction through telephone and cyberspace. In thesearrangements, virtual expatriates are traveling to the foreign operations for a shortperiod of time for direct interaction with local employees and managers and thencontinuing with follow-up direction, coordination, and supervision on a distancebasis through telephone and other electronic forms of interactive communicationincluding e-mail, video teleconferencing, the Internet, and company-controlledintranet sites—all considered forms of telework.51 The virtual arrangement allowsexecutives to take an assignment without subjecting them and their families to theculture shock of a move abroad. These arrangements also expose the employee tovaluable developmental global management issues, while still permitting closer touchwith the home office.

According to a PricewaterhouseCoopers survey of 270 organizations in twenty-fourEuropean countries employing 65,000 expatriates, there has been a significant increasein this practice, with about two-thirds of the companies employing virtual expats, upfrom 43 percent in 1997.52 More than 80 percent of the companies surveyed reportedemployees had turned down assignments because of dual-career problems or family

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 121

issues. Another major reason that executives are balking at overseas assignments wasidentified as the career risk of being far away from headquarters where key budgetingdecisions and informal power and politics maneuvering are played out. One Scottish-born executive who is in charge of the Middle East and Pakistan for SmithKline Beechamis not based in the Middle East but instead at the drugmaker’s London headquarters.But other than for personal convenience, he indicated being based in London improvedhis ability to garner limited company resources for his team, as in this statement: “Myrole is to get resources for my team, and being based at headquarters helps me lobbyfor them.”53 Despite their growing use in MNCs, virtual expatriate assignments willnot completely replace expatriate assignments because the latter work arrangementstill potentially holds a huge face-to-face advantage in solving problems in a timelyfashion as they arise, especially in building trusting and open communication relation-ships necessary for effective team performance—a potential limitation of the virtualassignment. Indeed, as one Australian executive for a U.S. multinational in Sydneywhimsically remarked to us, “Virtual expats are often called ‘seagull’ executives whoevery now and then suddenly swoop in, drop their ‘business’ on their foreign team, andthen fly back to headquarters.”

Global Virtual Teams

The globalization of business and the growing competitive trend of leaner and flatterorganizations using the best organizational talent available in the MNC, no matterwhere in the world that talent is located, have combined with new information andcommunications technologies leading to the formation and continued growth of com-plete or partial working arrangements known as global or multinational virtual teams.54

Global virtual teams have been described in different ways, with the virtual aspect ofthe team ranging from occasional to total reliance on communication technologiesas the medium for team interaction. But their work has three design components incommon: (1) responsible for formulating and/or implementing decisions that areimportant to their organization’s global strategy, (2) use a substantial amount of com-munications technology to support group member interactions, and (3) comprisemembers working and living in different countries. Most are knowledge-based teamsformed to improve organizational processes, develop new products, or satisfy com-plex customer problems.55 A distinct advantage of global virtual teams, especiallythose spread longitudinally around the world, is the ability to perform work asyn-chronously, helping global organizations bridge different time zones effectively andenabling teams to be productive over more than one work period. In addition, dis-persed members’ proximity to different customers, markets, practices, perspectives,and resources in their local contexts can enhance flexibility and innovation capabil-ity, thus increasing the ability of the team to balance local awareness with a broader,strategic perspective of the united global MNC team.56

Although there seems to be great potential in the use of global virtual teams, thereare several basic sociotechnical challenges in making them work effectively. Thesechallenges include managing conflict—a natural by-product of working groups—over differing cultural backgrounds and with much greater distances and delayed or

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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122 CHAPTER 5

asynchronous periods of interaction. Synchronous interaction in groups is a moreorderly process wherein verbal and nonverbal cues help regulate the flow of conver-sation, facilitate turn taking in discussion, provide immediate feedback, and conveysubtle meanings. In lean, asynchronous communication typically found in multina-tional virtual teams, especially those stretching across Asian, European, and Ameri-can time zones, the conveyance of cues is hindered, feedback is delayed, andinterruptions or long pauses in communication often occur.57 As will be discussedlater in chapter 8 on managing international assignments, global virtual teams mustfind workable solutions for overcoming the obstacle of asynchronous communica-tions and for temporally coordinating their interactions and flows of informationassociated with work schedules and deadlines, developing trust, aligning the pace ofefforts among group members, and agreeing on the time spent on particular tasks.58

SOURCES OF GLOBAL LABOR SUPPLY FOR MEETINGWORK DEMAND

Once work demand has been identified and human jobs (as opposed to automated orrobot-delivered work) have been designed into specific tasks and responsibilities,various sources of labor can be considered to fill this work demand. These sources oflabor may be regular or standard employees or employees that are often classified asnon-standard or contingent.

REGULAR OR STANDARD EMPLOYEES

Regular or standard employees have been better known in the past as “full-time” or“permanent” employees. However, these terms have been dropped largely due to thepresence of other employee groups (such as “temps,” or temporary employees) whoalso put in full working hours per day or week (that is, full-time). And especially inlitigious environments such as the United States, companies are avoiding the use oflanguage such as “permanent,” which can be interpreted by employees and the courtsas a guarantee of employment that would interfere with company flexibility in utiliz-ing needed restructuring or downsizing through employee layoffs. Regular or standardemployees often are considered full members of the organization and generally arerecipients of full benefits typically provided by the organization. These employeesoften are considered to be at the core of the organization’s employment picture, whereother “non-core” employees serve as layers beyond the core that provide work as neededand as afforded by the organization. As has been practiced by large Japanese firms formany years, the non-core employees serve as a protective buffer for their core em-ployee counterparts, and these non-standard employees tend to be the first ones to losetheir jobs or to have their working hours diminished in tight financial times.59

Before looking at non-standard or contingent employees, we first will considerthree major groups of regular employees as sources of labor in global human re-source planning: parent-country nationals, host-country nationals, and third-countrynationals. We also will examine their relative strengths and limitations as we con-sider their roles in ongoing global MNC operations.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 123

Parent-Country Nationals (PCNs)

PCNs are citizens, or at least legal residents, of the “home country” of the parentcompany or the country where the primary company headquarters is located. PCNsare also sometimes called “parent company nationals,” rather than parent countrynationals, perhaps to avoid a possible patronizing offense (which we have notedfirsthand in the past) that people might take with this term, especially when they arefrom former colonies of a parent country (such as Australia versus the United King-dom). Although in most uses of the term PCNs are presently employed by the MNC,they also could be members of the larger national labor force where the MNC isheadquartered.

A particular strength of a PCN as a labor source, especially one that comes from amanagerial or executive level within the MNC and has significant experience withthe MNC at company headquarters, is typically his or her understanding of the com-pany culture, priorities, and strategy and what it takes to be successful within theMNC. In addition, the experienced PCN is likely well networked within the MNCand has a good understanding of the key decision makers and power brokers withinthe organization. Company familiarity and connections are essential for effectiveMNC control, coordination, and integration of activities across the MNC,60 as wellas for competing for and obtaining needed company resources to support currentproject goals and activities. Employees who are recruited from within the nationallabor force where the MNC is headquartered likely share the same language andmight also share similar national cultural characteristics that influence business be-havior and decision making. However, particular limitations of PCNs include a pos-sible lack of familiarity with and difficulty in personally adjusting to a foreign businesslocation of the MNC. Related to this lack of foreign-site adaptability is the possibleinability to adjust headquarters policies and practices to fit the local job and businessrequirements of the foreign business operation.

Host-Country Nationals (HCNs)

HCNs are citizens or residents of a country that “hosts,” or provides local prop-erty and facilities, for MNC operations abroad. As a labor source, HCN employ-ees can come from the ranks of existing MNC employees in the host countryoperation, such as in the case of an employee from within the local foreign op-eration promoted to a management position or an inpatriate assignment. HCNemployees can also come from outside the firm and from within the surroundinghost country national labor force. Particular strengths of HCNs as a source oflabor include familiarity with the local culture, common business practices, andeconomic conditions. However, HCNs may at least initially lack a clear under-standing of the predominant national and organizational culture of MNC head-quarters, or its business priorities, accepted and expected business practices, andstrategic mind-set.61 HCNs might not share a common language with PCNs, thuspotentially posing a serious challenge to effective communications and businessinteractions.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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124 CHAPTER 5

Third-Country Nationals (TCNs)

When staffing a foreign operation in a host country, new employees could be citizens orresidents of a different third country apart from the parent or host country—third-countrynationals.62 TCNs can represent a useful alternative labor source for filling workdemand where the focus is on obtaining the most cost-effective labor, regardless ofwhat country the employee comes from. This staffing approach often follows anoverall regiocentric strategy, where regional employees are assigned as TCNs tonearby host country operations. For example, MNCs within the European Unionincreasingly are responding to opportunities presented by European integration byreclassifying intra-European assignments as a domestic job transfer that follows lo-cal pay structures than a traditional international relocation, which often incurs anarray of costly benefits and compensation measures such as housing allowances,cost-of-living differentials, and hardship premiums.63

However, significant disadvantages to the use of TCNs include their possible lackof understanding of the local HCN culture and difficulties with local public senti-ment and governmental obstruction where TCNs are perceived as taking away jobsfrom local HCNs. In addition, TCNs, like HCNs, may have language difficulty incommunicating effectively with PCNs and MNC headquarters, and they may nothave a clear understanding of MNC strategic priorities, accepted business practices,and organizational culture. As we once noted in a toy manufacturing plant in Tijuana,Mexico, owned by Mattel (headquartered in Los Angeles), where a large number ofmanufacturing engineers at the plant were from India, TCNs may be utilized despitepossible disadvantages due to their clear comparative advantages in technical com-petence and low cost.

CONTINGENT OR NON-STANDARD WORKFORCE

Contingent or non-standard employees are those who work on a flexible basis asneeded or contingent to an organization’s work demand and have neither an explicitnor implicit contract for continuing employment.64 These “on call” employees, intheir many different forms, represent a rapidly growing source of labor for fillingglobal work demand and serving to increase overall world employment, not just tofill in for layoffs and lost jobs.65 Estimates of the size of the contingent workforcevary, mostly because of the differing ways in which contingent or non-standard em-ployees are defined. Some estimates have described contingent workers as constitut-ing as high as 35 percent of the U.S. workforce.66 But the United States is not alonenor even in the lead in its significant reliance on contingent workers. As noted ear-lier, large Japanese firms have long used contingent workers to buffer their coreemployees from unemployment. Furthermore, the use of contingent workers is in-creasing in Canada and Mexico, and in Europe, especially in the Netherlands, GreatBritain, Spain, Sweden, and France.67 An international study estimated an average ofapproximately 25 percent of the world labor force is in “casual” non-standard orcontingent employment.68 For country sample comparisons, Figure 5.2 indicates bycountry the percent of the national labor force in non-standard employment.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 125

Although national culture and economic structure can have a major influence onthe extent of use of contingent employees, such as in Spain where changes to part-time working arrangements are preferred over layoffs, it is clear is that contingentworkers are a large and important component of the global workforce.69 Severallabor forecasters predict that the contingent or non-standard workforce will growfaster than the standard one for years to come.70

Reasons for Major Growth of the Contingent Labor Sector

The phenomenal worldwide growth of the contingent labor sector has been pro-moted by various interests, including companies, governments, and workers them-selves. We now will examine major reasons for this significant growth.

Promoting Company Flexibility. To meet increasing global competitive demand,contingent employees are used on an economical “as needed” basis, allowing thecompany to relatively easily adjust up or down the number of workers employed andtheir working hours based on the existing work demand, and thus not have to pay forexcess labor supply when work demand slackens.71

Supply Factors. In some cultures a large sector of the labor may be available towork only on a part-time basis, such as where women are expected to attend to mostof the childcare and other household management responsibilities.72 In several coun-tries we also have noted that senior citizens, with increased health and longevity,may return from complete retirement to the workplace on a part-time basis to gener-ate extra income and provide additional variety in their lives.

Screening Function. Temporary employees and their part-time employee coun-terparts who are working a smaller number of hours allow for management to sampletheir work performance before making a long-term commitment for more regularemployment. Such an approach also gives the potential new regular employee achance to get to really get to know the organization. Thus, this probationary processmay enhance the effectiveness of new standard-employee staffing decisions.73

Figure 5.2 County Sample Comparisons

% of Non-StandardCountry Employment

Spain 59.9Australia 33.0Sweden 27.3United States 26.1Japan 24.9United Kingdom 24.9Germany 21.4

Source: Adapted from J. Mangan, Workers Without Traditional Employment: An International Study ofNon-Standard Work. (Northampton, MA: Edward Elgar, 2000).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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126 CHAPTER 5

Technological Change. Significant changes in technology often lead to (a)outsourcing or reassigning work outside of the company to those specializing in newtechnology expertise, (b) automation of work and robotics that typically reduce thenumber of needed employees as well as change the nature of the work, and (c) rapidchanges that demand flexibility and diminish the need for long-term employmentcommitments—all of which lead to a greater demand for contingent employmentarrangements.74

Employment Legislation and Deregulation. Some forms of employment legisla-tion on behalf of “full-time” or regular employees, such as what many regard asvery generous employment benefits for regular employees in Scandinavian coun-tries, might therefore create an economic motive for companies to increase theiruse of part-time and other non-standard employees. Also, through deregulation,companies might become freer to utilize more flexibility in their staffing prac-tices, where part-time, temporary, and other contingent staffing arrangements typi-cally play a dominant role.75

In many European countries, temporary and part-time jobs have increased signifi-cantly in number. In fact, they have become the most important source of new jobs,partly because some governments have actively encouraged the use of non-standardemployees to reduce unemployment. This trend is likely to continue as governments,in their political interest, strive to promote economic growth and to increase employ-ment levels.76

Worldwide Growth in Numbers of Small Businesses. Many forces have contrib-uted to the global increase in the number of small businesses, including the increasein corporate outsourcing of functions, corporate downsizing, and the lure of beingone’s own boss. Unwilling or unable to handle specialized business functions pe-ripheral to the small company’s core competency (for example, security, payroll,marketing research, and staffing) and reluctant to employ a permanent workforce tohandle these activities, many small businesses outsource these services for a fee toconsultants, contractors, and special service vendors. In this way the small employeris not weighted down by the fixed costs of regular employees because the arrange-ment with the vendor firm can be terminated at the end of the contract period.77

Changes in Employer-Employee Relationships and Expectations. The longstandingpsychological contract between employers and employees of lifelong employmentand job security is greatly diminishing worldwide. Downsizing, such as followingprivatization (where excess employees were previously carried by state-owned en-terprises), due to workforce redundancies after mergers and acquisitions, as a resultof technological integration and productivity improvements, or simply due to com-panies worldwide trying to lower employment costs in the face of global competi-tion, has led to an increased sense of employees being their own free agents and notcommitted on a long-term basis to a single employer. Many employees who haveleft their employers have become independent contractors, marketing the knowl-edge and skills they acquired working for their previous employer. By obtaining new

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 127

work on a contingent basis, they also can add to their stock of knowledge and skills,thereby enhancing their employability.

Changes in Employee Personal-Life Needs and Lifestyle Preferences. In additionto changes in the psychological contract between employers and employees, majorchanges in employee needs, expectations, and lifestyles have come to alter workarrangements in the workplace. The dramatic increase, especially in developed coun-tries, in the number of working mothers and the rise of the two-career family haveled to the demands for flexible working arrangements provided by contingent em-ployment. Employees with responsibilities for the care of children or aging parents,or both, often secure contingent employment because of the flexibility in hours anddays worked.

Temporary work, traditionally reserved for the lower employee ranks, is also in-creasingly being seen as a way of life for some professional, technical, managerial,and executive employees. They enjoy the greater variety of temporary projects andassignments and prefer to work on a contingent basis because they gain a sense offreedom by not having to make a commitment to remain long-term with one em-ployer. Other employees prefer flexibility in the number of hours and days worked,providing them the freedom to pursue other interests.

Major Forms of Contingent or Non-Standard Employees

Contingent or non-standard employees, whether domestic or international, are clearlyimportant to an organization, yet they often are overlooked or are inadequately con-sidered as an important part of organizational performance and productivity. Thefollowing are major forms of contingent employees found in the global labor forcethat should be part of a company’s global HR planning process.

Part-Time Employees. Likely the most common source of the growing contingentlabor force to meet excess work demands, part-time employees typically work lessthan a country’s regular workweek on an ongoing basis.78 Typically on the company’spayroll or assigned through a temporary employment service, the eligibility of part-timers for company benefits depends on various factors, including the number ofhours worked and the terms of the company’s benefits plans. As mentioned earlier,the global part-time workforce continues to be dominated numerically by women.However, due to continuing changes in traditional work arrangements underlyingstandard employment (where men were traditionally predominant), the rate of growthof part-time employment tends to be higher for men than women. In fact, one recentstudy found that the growth rate of part-time employment is much higher for men inevery country of the European Union.79

Temporary Employees. Temporary employees represent another major source ofcontingent workers hired to help companies meet global work demand, althoughmany countries differ in the degree to which this “free agent” class of employees isacceptable. American businesses continue to lobby for changes in legislation, which

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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currently limits the number of visas for foreign workers who want to work tempo-rarily in the United States.80 The demand for temporary workers in Europe and Asiahas also grown. The temporary help industry in Europe today is about 50 percentlarger than that in the United States. Across Europe, companies have hired tempo-rary workers in large numbers to create a flexible labor force that can adjust to eco-nomic cycles.81

Although they originally were used to fill skill shortages, such as when a regularemployee was ill, or assist with the completion of projects having a finite duration,temporary employees are increasingly being used by companies to supplement theregular workforce on an ongoing basis, with the size of this group of employeesebbing and flowing, depending on the workload. These employees are often sup-plied by a temporary services agency, which retains the employees on their payroll,or may be in-house company employees—sometimes called “floaters,” who are onthe company’s payroll but typically not eligible for full company benefits.

Paralleling the rise of the global company has been the globalization of temporaryhelp firms that are major suppliers of temporary workers. To continue to providetemporary employees to their clients that are operating or expanding internationally,temporary staffing companies have also been expanding beyond their borders byopening foreign offices or by acquiring temporary-help firms in other countries.82

Employee Leasing. The use of employment leasing by MNCs has increased sig-nificantly, as indicated in studies with Japanese and European executives.83 Underan employee-leasing arrangement a company might transfer all employees, a largepart of the employees, or sometimes only the employees of a separate facility or siteto the payroll of an employee-leasing firm or Professional Employer Organization(PEO) in an explicit joint-employment relationship. The PEO then leases the work-ers back to the client company and administers the payroll and benefits, maintainspersonnel records, and performs most of the functions handled by an HR depart-ment. Besides saving the company on HR operational costs, depending on the coun-tries involved employee-leasing arrangements can also provide positive MNC taxbenefits as well as tax benefits for international professional employees. As onePEO’s slogan asserts, “We take care of your people so you can take care of yourbusiness.” However, serious problems can arise when companies fail to include peopleas a central part of their business planning—and it may be hard to lease back loyaltyand commitment that previously provided a source of competitive advantage.

Contracted Services. Specialized tasks, usually of a non-recurring nature and gen-erally requiring a high level of independence, professional judgment, discretion, andskill are frequently performed on a contract basis by individuals, such as consultants,or groups of professionals from special professional services firms. These profes-sionals often travel or work on projects far from their homes and may have multiyearor indefinite assignments, as is the case with an American consultant and profes-sional acquaintance of ours working for the government of the United Arab Emiratesin Abu Dhabi on the design and construction of their national airport.

Bechtel has found a significant improvement in its global projects through em-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 129

ploying contracted services. For example, for their copper and gold mines in Chile,they used to do all the engineering, design, and equipment purchase in the UnitedStates and then send their own construction people to work with employees in Chileto build a plant. Now Bechtel typically does the conceptual engineering in the UnitedStates and hires contracted Chilean mechanical and electrical engineers, more famil-iar with local conditions, to do all the detail engineering in Chile.84

Outsourced Services. When a company contracts with an organization to providethe ongoing, full managerial responsibility over a specific function, we move intothe domain of outsourced services. As in the opening scenario, Gap and many otherU.S.-based manufacturers, in seeking labor-cost savings to successfully compete inthe global marketplace, outsource the manufacturing of many of their products on along-term contract basis to firms in developing countries. But as mentioned previ-ously, such offshore outsourcing is not limited to lower-skill work processes. Manymultinationals are outsourcing their high-tech design functions offshore to countriessuch as India where skills are high yet labor costs are still low.85 Outsourcing higherskill but nonessential or non-core back-office operations (like payroll and account-ing) to countries such as India can reduce operating costs while simultaneously pro-viding a foothold in an important emerging market. GE Capital Corporation, whichmoved its development and back-office operation to India as early as 1997, nowemploys 2,000 people in its Indian office.86 In fact, such increasing long-term off-shore outsourcing arrangements of higher skilled functions has caused a rise in par-ent country concerns for the loss of national skill dominance and capability, previouslyheld in the parent country by the MNCs who are growing increasingly dependent ontheir outsourced contractors.87 Despite what might appear to be very attractive costsavings initially, companies should conduct careful HR planning prior to outsourcingto identify possible hidden costs and difficulties that have caused some firms toreverse their offshore outsourcing decisions.88 Through HR planning companies mustcarefully address such issues as skill and language requirements, labor costs bymarket, alternative talent pools, workforce training requirements, and work designrequirements.

MNC Concerns Regarding Contingent Employees

The contingent workforce represents a major source of labor that MNCs should con-sider carefully in their plans for filling work demand. In some less-developed coun-tries MNCs may actually gain greater social and political approval by employingmore host country employees on a part-time basis than fewer employees on a full-time or more standard basis. However, particularly in more developed economies, aheavy reliance on non-standard employees may bear a price related to reduced jobsatisfaction. It is not unreasonable to make a link between the increased global non-standard employment and decreased global measures of job satisfaction.89 In theUnited States and Europe, where the percent of the contingent workforce is on therise, the number of persons highly satisfied with employment terms and conditionshas fallen significantly and is lower in those countries such as Spain where non-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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130 CHAPTER 5

standard employment is most frequent. And where employee job satisfaction is low,organizations might suffer a reduction in workforce loyalty, commitment, and subse-quent reduced productivity.90

With regard to employee work that is completely outsourced, organizationscan suffer significant problems when they now consider that these employeesworking for outsourcing service firms are no longer their concern and responsi-bility. With the outsourcing arrangement comes a severing of direct control ofemployee work quality; decreased worker commitment, loyalty, and competencecan occur, which ultimately compromises productivity. For example, a majorworry that managers have with their outsourced call centers that often cross in-ternational borders is that those employees’ lack of commitment and identifica-tion with the company product or service may spill over into the quality of

GLOBAL WORKFORCE CHALLENGE 5.2

NOT EVERY JOB CAN BE SUCCESSFULLY MOVED ABROAD

When sales of their security software slowed in 2001, ValiCert, Inc., began laying off engineers inSilicon Valley to “offshore” employment and hire replacements in India for a fraction of the labor cost.ValiCert expected to save millions annually while cranking out new online security software for banks,insurers, and government agencies. There were optimistic predictions that the company would cut itsU.S. budget in half and hire twice as many people in India, and colleagues would swap work acrossthe globe every twelve hours, putting more people on tasks to complete them sooner. But whatactually happened was different.

The Indian engineers, who knew little about ValiCert’s software or how it was used, omittedfeatures that U.S. customers considered standard. The software had to be rewritten in Silicon Valley,delaying its release by months. U.S. programmers, accustomed to quick chats over cubicle walls,spent months writing detailed instructions for tasks assigned overseas, delaying new products. Fearand distrust thrived as ValiCert’s finances deteriorated, and co-workers, fourteen time zones apart,exchanged curt e-mails. Due to its floundering, a key project that had been offshored to employeesin India was brought back to the United States, a move that irritated some Indian employees.

Shifting work to India eventually did help cut ValiCert’s engineering costs by two-thirds, keepingthe company and its major products alive—and saving sixty-five positions that remained in the UnitedStates. But the company still experienced a difficult period of instability and doubt and recovered onlyafter its executives significantly refined the company’s global division of labor. The successful formulathat emerged was to assign the India team bigger projects rather than tasks requiring continualinteraction with U.S. counterparts. The crucial creative job of crafting new products and featuresstayed in Silicon Valley. In the end, exporting some jobs ultimately led to adding a small but importantnumber of new, higher-level positions in the United States. One of these new hires was Brent Haines,a software architect charged largely with coordinating the work of the U.S. and India teams. Thisresponsibility often means exchanging e-mail from home with engineers in India between 11 P.M. and3 A.M. California time, as Mr. Haines reviews programming code and suggests changes. Suchcollaboration requires extensive planning, he says, “something very unnatural to people in software.”

Source: Adapted from S. Thurm, “Lesson in India: Not Every Job Translates Overseas,” WallStreet Journal, 3 March 2004, A1, A10.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 131

customer interaction, such as with comments like, “Yes, I know what you mean. . . I don’t like the product either,” or “I’m not exactly sure . . . I don’t reallywork for this company.” There is also an ongoing concern about customer per-ceptions of company products or services provided by offshore employees,whether they are outsourced or actually employed by the MNC. To help buildcompany quality image and brand loyalty with customers, which might appearcompromised by low-cost offshore arrangements, many organizations are increas-ingly hesitant to disclose their ties to offshore workers. For example, although inthe past we have inquired at the end of a successful call center service interac-tion about the workplace country location of the service employee and learnedthat he or she was in India or the Philippines, we recently received the followingofficial response to the same inquiry from an employee working at a call centerfor a large financial services firm: “I’m very sorry, but for security purposes weare not allowed to disclose that information.”

Despite lacking direct control and the presence of distinct, formal organiza-tional boundaries, many organizations still deem the outsourced employees whodesign and manufacture their company products and provide company servicesas worthy of their ongoing consideration, retaining various practices and proce-dures in the outsourcing agreement to ensure the high quality of employee per-formance. For example, this consideration is at the root of intensive trainingprovided for internationally sourced call center workers on American culture,slang, and communication styles. And Japanese auto manufacturers, with theirconcern for consistent high quality, have long provided quality-improvementtraining for the employees of their outsourced U.S. auto parts suppliers—notsimply assuming that the outsourced organization will take care of this impor-tant area of employee management.91

As the opening case of this chapter illustrated, organizations can also suffersignificant costs in image and public relations—both at home and abroad—whenthey outsource employment services and, with this cost-savings strategy, alsodivorce a sense of social responsibility to the outsourced employees, who never-theless are still associated with the company’s product. Levi Strauss & Co., longnoted for being an employer of choice and having a strong commitment to socialresponsibility, appears to have a strong sense of their global employees—bothinternal and external—worthy of their HR planning and consideration. In 1991,Levi Strauss made basic worker rights a public priority by becoming the firstmultinational company to establish a comprehensive code of conduct, known as“Terms of Engagement,” designed to serve as a guide in the selection of coun-tries and foreign business partners (that is, contractors and subcontractors whomanufacture or finish Levi products and suppliers who provide the material) thatfollows workplace standards and business practices consistent with the company’semployee treatment values and policies. A team of internal inspectors auditsfacilities for compliance with the Terms of Engagement both before and afterLevi Strauss enters into a business relationship. Their inspectors currently moni-tor compliance at approximately 600 cutting, sewing, and finishing contractorsin more than sixty countries.92

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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132 CHAPTER 5

HR PLANNING FOR THE LONG-TERM

Besides regularly scanning the environment for threats and opportunities in the ex-ternal labor supply related to meeting immediate and short-term work demand forcarrying out MNC objectives, HR planning should also study external trends andconditions pertinent to the firm’s long-term survival and competitiveness. In addi-tion, MNCs should look internally for the long term to consider the MNC’s organiza-tional culture and core capabilities that it desires to build across its global workforcein the coming years as well as plan for the future managers and leaders who willsuccessfully direct the MNC.

GLOBAL WORKFORCE PROFESSIONAL PROFILE 5.1

CHRISTOPHER NORTH: LINKING SUCCESSFUL HR PLANNINGWITH SOCIAL RESPONSIBILITY AND HUMAN DEVELOPMENT

“We have a very significant interest in the immediate and long-term needs of the greater communityhere in Tijuana, as well as larger Mexico,” says Christopher North, vice president and generalmanager of Aerodesign de Mexico, part of C&D Zodiac, Inc., of the United States and Zodiac, S.A.,of France. Aerodesign’s 430 employees in its two buildings in Tijuana, near the California, U.S.–Mexico border, design and manufacture commercial aircraft interiors (such as seats, overhead bins,and lavatories) for major aircraft manufacturers such as Airbus and Boeing. North’s personalcommitment to the local community is evidenced by the non-profit organization founded by him andhis wife, Julianne, known as Build a Miracle, which builds homes and provides educational opportunityin impoverished areas of Tijuana. North adds, “And our interest in the community is further reflectedat Aerodesign in programs focused on employee education and training and in creative benefitsprograms such as housing subsidies.”

North’s interests in social issues in Mexico go back more than twenty years when he was anundergraduate at Loyola Marymount University in Los Angeles, where he and his wife started astudent service group organizing monthly trips to orphanages and communities in northern Mexico.Part of that effort included raising over $100,000 to purchase land and build a trade school at a boy’shome in Tecate, Mexico, which they ran hands-on after graduating and during the first six months oftheir marriage. From this experience, North saw firsthand a need to make up for the country’seducational system that, due to extreme poverty and administrative obstacles, was failing to prepareyouths for a future competitive labor market. After the completion of his MBA at UCLA, in 1991, Northfounded Aerodesign along with the owners of industry leader C&D Aerospace. North translated theneeds he had perceived in the non-profit sector into HR policies, such as the following:

• Educational expense reimbursement program for school-aged children of employees• Technical training and English language instruction• An on-site adult education school offering primary and secondary education to employees• Up to US$2,000 in building materials or cash as a home-down-payment subsidy

“We never say no to anyone asking to take an English or technical course,” says North. However,this commitment to education and skill development, for both employees and their family members,is not without significant benefit to the company. North adds, “With greater competence in English,

(continued)

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 133

COUNTRY LABOR FORECASTING

Environmental scanning should consider such longer-range factors as national birth-rate statistics, health conditions and mortality, the nature and quality of educationalsystems within a country, and changing demographic trends in workforce participationto gain a clearer picture of the nature of the global labor force available for supplyinglong-term future work demand (that is, for the next five or ten years).93 For example,several developed countries in Europe and Asia are reporting a significant decrease inbirth rate, presenting a challenging economic future with a larger percentage of olderworkers and retirees and fewer younger workers, placing increasing demands on health

Profile 5.1 (continued)

our Mexican managers don’t have to depend on me and other bilingual executives as they interactwith English-speaking customers and suppliers.” This development is especially important at Aerodesignbecause the company has no foreign-born employees besides North himself. “World Class Quality,Mexican Pride” adorns the wall above the main production area and embodies, among other things,the idea that at Aerodesign, there is no limit to how high local talent can rise. North further claims thata focus on training and the resultant ability of the company to support fully integrated finished productmanufacturing with engineering support has insulated the company against competition from otherlow-cost labor regions such as the Far East. Productivity and experience become more important thanthe impulse to move abroad in search of labor for under a dollar per hour.

The result of proactive HR policies such as those at Aerodesign in the long term is a strongerMexican labor force; in the short term the company enjoys increased workforce commitment and loyalty,directly translating into productivity and employee retention. In fact, at Aerodesign turnover averagesless than 12 percent annually, while maquiladora facilities commonly experience turnover above 100percent per year. North has developed a strategy for dealing with both turnover and lack of formaleducation: “One key to manufacturing success in Mexico, whether the issue is high turnover, the lackof experienced personnel, or both, is the identification and development of a core team, an A-list ofindividuals at all levels that can successfully move from one project or department to another and infusethe organization’s unique culture, competency, and spirit into new programs. Within this group, futureleaders and managers are groomed—there are success stories that motivate others to excel.”

Low turnover increases the reliability and certainty of a capable workforce that is available to meetwork demand—critical to effective human resource planning and achievement of business objectives.Besides education, provision of building materials, and down-payment assistance, North has initiatedother practices to build employee loyalty and retention, such as a subsidized lunch program andpayment of the employee portion of the social security tax. All of these benefits are provided by thecompany under programs that are income tax free to the employees. “While many companies providea lunch program or transportation subsidies, very few are aware of the existence of our other benefitsprograms, which by being tax free to the employees, increase their take-home pay and leverage ourpayroll expenditure to its maximum potential.” A final benefit of creating a desirable place to work isthe decrease in recruitment costs as internal employee referrals become the primary means of findingnew employees. According to North, because turnover has so many causes, there is no singleremedy, and only a multifaceted approach to the creation of a desirable workplace will minimize itsimpact. He does make it a point to debunk one myth about turnover in the border region. Northexplains, “One of the common misconceptions is that employees who come from the south to workhere only do so for a brief stay until they can find a way to get across the U.S. border. This is simplynot the case. The majority who come here to work for our company and other maquiladoras are muchmore likely to stay here or return to the south than to cross the border.”

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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134 CHAPTER 5

care and retirement benefits.94 In particular, Russia’s demographic profile has severalserious implications for the country’s economic future pertinent to HR planning. Ac-cording to one study, in the absence of large-scale immigration, Russia with its lowbirth rate will not have the labor resources to sustain high economic growth rates. Inaddition, poor health conditions and mortality will affect the quality of the workforceand make it all the more difficult to sustain the productivity improvements needed fordesired growth in support of continued economic transition.95 Related to national edu-cation trends, it has been reported that the United Kingdom is among the lowest inparticipation rate in advanced secondary education in countries of the European Unionand lags considerably behind Germany, France, and the Netherlands in the extent ofpost-school training that young people receive while same-aged cohorts pursue highereducation.96 Pertinent to MNCs in their long-range planning for international worksourcing, this information suggests that in the years ahead the labor market in theUnited Kingdom might have less of a local labor force capability for meeting the workdemand of high-tech and knowledge-based jobs.

HR PLANNING FOR GLOBAL CAPABILITY

Global HR planning should keep in mind what it wants to become in the long runrelated to organization capability—including shared organizational core competen-cies and culture and workforce alignment or shared mind-set—and plan its HR ac-tivities and policies accordingly.97 For example, Royal Dutch/Shell desired to developa “multicultural multinational” organization, where the senior management team atits London headquarters would become more globally competent in its long-rangeand top-level decision making. Therefore, to achieve this strategic objective it usedglobal HR planning to develop specific policies and practices in internationalworkforce staffing and development that resulted in thirty-eight countries being rep-resented among its London senior management team.98

International firms large and small also should carefully plan their selection, train-ing, performance management, and remuneration practices to support the acquisi-tion of common core priorities and competencies that promote alignment andcoordination across national boundaries.99 This increased alignment and coordina-tion in turn can contribute to faster, consistent, high-quality responsiveness to cus-tomer needs around the globe. For example, the great global success of McDonald’shas been based largely on the company’s ability to quickly transfer to foreign entre-preneurs the overall capability of managing the entire complex McDonald’s busi-ness system in a consistent manner, yet with sensitivity to local market conditions.In addition, the development of an MNC culture characterized by common values,beliefs, priorities, and identification with the company also creates a deep and en-during structural mechanism within the MNC to informally teach, influence, andreinforce desirable behavior throughout the MNC.

Companies that have as a major strategic objective to develop greater company-wideglobal leadership capability have been encouraged to increase, through global HR plan-ning, their number of young managers involved in extended foreign assignment experi-ences (including inpatriation). Here the expatriate is sent abroad more for the purpose of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 135

individual professional development (and collectively over time, organizational devel-opment) than for accomplishing more traditional business goals abroad.100 Furthermore,an expatriate assignment should be considered as only a part of the employee’s experi-ence with the organization; longer-range HR planning should consider expatriate return(repatriation), placement, and ongoing career development. In fact, some companies havecreated positions in charge of global talent management, where a professional or team isresponsible for setting up systems to identify potential leaders, track careers company-wide, provide and structure a variety of international experiences, and monitor assign-ment performance for future planning.101 Some MNCs also actively promote internalMNC sharing and dissemination of new knowledge and experience gained from foreignassignments for enhancing global orientation, alignment, and leadership capability.102

GLOBAL SUCCESSION PLANNING

Global succession planning concerns the selection of talented employees to replacesenior managers who leave the MNC because of retirement, reassignment, or forother reasons. Effective succession planning emphasizes minimizing disruption andconfusion arising from such leadership changes, with a view to implementing com-pany strategy and achieving organizational goals in a smooth and continuous man-ner. There is strong evidence that companies with a predetermined, formal successionplan for their senior managerial assignments, including two levels below the top,enjoy a higher return on investment than those without such a plan.103

Building on their long-range HR planning for developing desired capability and glo-bal leadership talent throughout the organization, MNCs should engage in careful glo-bal succession planning to reduce chance and uncertainty and ensure the availability ofsenior executive leadership talent for future company guidance. In some companies,succession planning is integrated into a twice-yearly people-review process. Global suc-cession planning first involves making a projection of future needs for senior managerswithin the firm. Then there is a careful selection from pools of promising managercandidates throughout the MNC to find those best suited to fill higher-level manage-ment positions. Finally, a flexible plan is formulated to ensure that these potential suc-cessors develop the core competencies needed to advance the strategic interests of theorganization. To further develop this plan, management and human resources shouldwork collaboratively with the identified, interested high-potential individuals to designsix-month, one-year, and three-year development activities—with regular opportunitiesfor feedback and reassessment—involving such activities as formal training, interna-tional virtual teams, short-term foreign assignments, and extended foreign assignments.104

SUMMARY

Global HR planning provides a vital link between MNC strategy and the implemen-tation of strategy through the human factor. Global HR planning should scan theenvironment for both immediate and longer-term threats and opportunities as theyinfluence the supply of labor and human talent to meet immediate and anticipatedlong-term work demand. This critical function also should carefully examine appro-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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136 CHAPTER 5

priate approaches for organizing and designing work and working arrangements tomeet company objectives as well as carefully consider sources of talent—both inter-nal and external—for filling work demand. Finally, HR planning should look inter-nally to design and coordinate various HR activities that build long-range capabilityto ensure MNC survival and competitiveness.

QUESTIONS FOR OPENING SCENARIO ANALYSIS

1. What changes in global work supply have taken place that contributed to thesituation of Gap and its global workforce?

2. What are possible forces that might contribute to an MNC’s lack of a senseof responsibility toward workers in different parts of the world who produceits products or deliver its services? In fact, what external forces can eveninterfere with this sense of responsibility?

3. Is this opening scenario dealing only with a global phenomenon? Can youthink of local work outsourcing arrangements where there is a clear gap be-tween the nature of treatment and benefits of an organization’s regular em-ployees and outsourced or contracted workers who also supply labor to meetthe organization’s work demand?

CASE 5.1. HR PLANNING FOR EXECUTIVE-LEVEL GENDER DIVERSITY

It isn’t easy for a woman to gain top-level positions in large MNCs, even in our “modern”age. This added difficulty for women reaching the executive suite should be a majorconcern for human resource planning, which aims at providing a capable workforce tomeet future work challenges and demands. Gender-based obstacles end up greatly limit-ing the talent pool for the company’s future leadership and leads to less insightful execu-tive teams that lack a diversity of perspectives and experiences that match a more evenlygendered, lower-level employee and customer profile. It is especially hard for women toget to the top in a firm that is in a masculine line of business, but Fran Keeth is a majorexception. Fran holds both global and regional positions with Shell. At the global levelshe is executive vice president chemicals and at the regional level she is president andCEO of Shell Chemical LP, the U.S. arm of Shell Chemicals Ltd., based in London. Franis the first woman to hold such lofty leadership in the chemicals industry.

Fran earned a bachelor’s degree in accounting and then went on for an MBA anda law degree, all from the University of Houston in Texas. She started her career inHouston in 1970, at Shell Oil Company, a subsidiary of a Royal Dutch/Shell, whereshe worked first as a secretary and studied at the same time. Fran held many differentpositions in Shell Oil Company. She worked in the finance and tax departments withincreasing responsibility, and in 1991, she became a general manager of ProductFinance. After twenty-two years with the company, in 1992, she was brought toLondon as a deputy controller, area coordinator for the East Australasia regions, andoil products finance manager. She left Shell in 1996, and worked for Mobil as theirworldwide controller. But one year later she returned to Shell and started to work in

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 137

Shell Chemicals as global executive vice president of finance and business systems.This position led her to the position of president and CEO of Shell Chemicals in2001, and finally to executive vice president chemicals in 2005.

Her resume seems to be quite usual, but Fran has said the fact that she is a womanmade it more difficult for her to advance in the company. She experienced the uniquesocial challenges of being a woman, such as being told to leave the conference roomduring a planning meeting, because the matter was “discussed only with managers,”the speaker assuming that as a woman she could not possibly be a manager. Fran saysthat one reason for women having difficulties is that it is often assumed that women arenot interested in international assignments and that they would not like to travel be-cause of their family. She believes that this reluctance on a woman’s part can be thecase in some situations, but it should not be an automatic assumption. A distinct advan-tage for Fran was her career path that was almost completely in finance, which is seenmore as a core function of the whole business rather than more support and secondaryfunctions of sales and marketing where women often reside and remain.

One of Fran’s main objectives now is to make it easier for women to develop theircareers and to gain more responsibilities in her company. By 2008, the companyaims to have 25 percent of its executive positions held by women. In 2001, the figurefor women in such positions in Shell Chemicals was 11 percent. She also has createdworkshops for managers to gain a better understanding of the stereotypes that arecommon when it comes to women in higher positions. The result she hopes to see isa change in the traditional way of thinking. “The new career-advancement systemwill be no less based on merit than it had been when a man was in charge,” Fran says.Instead, she predicts that Shell will have a broader talent pool and an environmentwhere women will have better chances to succeed. She adds, “They will be able toput more energy into their work; they won’t have to spend their time trying to fit in.”

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. Why would you say an MNC in its HR planning should be interested ingaining a greater representation of women employees across its various em-ployee levels, including the top leadership ranks?

2. What are particular obstacles that women might face in gaining higher posi-tions of responsibility in their organizations? Would you consider some in-dustries and specialties less conducive to increased women leadership?

3. What would you recommend for Fran Keeth to assist her in HR planning toachieve greater women representation among top management?

CASE 5.2. A GOOGLE™ SEARCH—FOR TALENT

As a leader in innovation, Google also is breaking tradition in its strategies for ensur-ing the availability of top human talent to meet work demand. On a sunny spring dayin Bangalore, India’s info-tech hub, a group of engineers and math majors, all intheir twenties, hunch over terminals at an Internet café. This event is the Google

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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138 CHAPTER 5

India Code Jam, a contest to find the most brilliant coder in South and SoutheastAsia. Participants are competing in writing some difficult code for a first prize ofUS$6,900 and a coveted job offer from Google, Inc., to work at one of its R&Dcenters. The contestants begin at 10:30 A.M., emerging exhausted three hours later.“It’s been incredibly difficult and awesome,” says Nitin Gupta, a computer scienceundergrad at the Indian Institute of Technology at Bombay.

Google has staged Code Jams in the United States, but this is its first such event inAsia, and there is an incredibly large response. Some 14,000 hopeful aspirants regis-tered from all over South and Southeast Asia for the first round in February. The topfifty from that event were selected for the finals in Bangalore: thirty-nine from India,eight from Singapore, and three from Indonesia. “It’s a dog-eat-dog world,” says Rob-ert Hughes, president of TopCoder, Inc., the Connecticut testing company that runs theCode Jams for Google. “Wherever the best talent is, Google wants them.” With thishighly publicized event, Google now has a new pool of Asian talent to choose from.According to Krishna Bharat, head of Google’s India R&D center, all the finalists willbe offered jobs—and Google needs them for its new but understaffed Indian center.

Google has faced a difficult staffing challenge due to fierce talent recruitment inIT, where engineering students are assured a job a year before they graduate. Addingto this challenge is Google’s exacting hiring standards that surpass most other em-ployers’. But the Code Jam serves as a useful shortcut through its usual staffingprocess, where applicants usually go through seven stages that can last months andat the end are likely to get rejected due to Google’s extremely high standards. ButGoogle has found that much of this screen is done through the Code Jam approach,resulting in a final pool of viable candidates.

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. How does the Code Jam method improve on more traditional HR planning ap-proaches to ensure timely availability of appropriate talent to meet work demand?

2. How is Google’s Code Jam effort consistent with an overall geocentric orregiocentric staffing approach?

3. Besides the rapid generation of viable candidates, what are other possible benefitsto Google of this highly publicized Code Jam event in South and Southeast Asia?

Source: Adapted from J. Puliyenthuruthel, “How Google Searches—For Talent.” Business Week, 11April 2005, 52.

RECOMMENDED WEBSITE RESOURCES

Human Resource Planning Society (www.hrps.org). A global association and network of senior humanresource executives, consultants, and university faculty and researchers.

Hewitt Associates (http://www.hewitt.com). A global human resources outsourcing and consulting firmdelivering a complete range of integrated services to help companies manage their total HR andemployee costs, enhance HR services, and improve their workforces.

RHR International (www.rhrinternational.com). Provides information and consulting services relatedto succession planning, high-potential employee development, and overall talent management.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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Managing_a_Global_Workforce_Challenges_and_Opportu…_—-_5_Global_Human_Resource_Planning.pdf


106 CHAPTER 5

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5 Global Human Resource Planning

“WHO ARE OUR EMPLOYEES, ANYWAY?”

“We are treated like animals,” Sudaryanti, a 23-year-old garment worker from a Gapfactory in Indonesia, said through an interpreter. “We are abused if we do not workthe way the supervisor wants.” Sudaryanti—who, like many Indonesians, uses onlyone name—was in the United States with several other Indonesian workers to raiseawareness of poor labor conditions in factories used by San Francisco-based Gap,Inc. These garment workers from Indonesia are appealing to consumers in the UnitedStates to boycott Gap products to protest labor conditions at factories in SoutheastAsia, Africa, and Latin America. Charging that many of the Gap-contracted factoriesare sweatshops, the workers said conditions were inhumane.

In a twenty-four-page study on working conditions in Gap factories, the Union ofNeedletrades, Industrial and Textile Employees (UNITE) accused Gap of poor healthand safety conditions in their contracted factories. While Gap does pay minimumwage in most of the countries where it hires factories, it is still hard for most workersto make ends meet, said Ginny Coughlin, the director of UNITE’s Global Justice forGarment Workers Campaign. Some workers in the company’s Lesotho factories, forexample, earn about 30 cents an hour.

The report also alleged union-busting activities by management and, in some in-stances, corporal punishment to force laborers to meet quotas. UNITE’s study citedalleged abuses at Gap factories in Cambodia, Lesotho, Indonesia, Bangladesh, ElSalvador, and Mexico. A spokeswoman for Gap said the factories were not ownedby Gap but were independently contracted by Gap and other companies.1

It is true that the employees in UNITE’s study were technically not employees ofGap. But for companies like Gap that outsource much of their work offshore tocontractors and subcontractors around the globe, can they really afford the potentialnegative consequences to their reputation and public relations by not including con-siderations about these “outsourced” employees as they engage in effective globalhuman resource planning? Perhaps organizations today need to broaden the defini-tion of who their employees really are.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 107

INTRODUCTION

Human resource planning provides the essential link between MNC strategy andpeople—those who make strategy work—including outsourced workers as in theopening scenario. For success in the global business arena, human resource planningshould be part of the strategic management process, both in terms of strategy formu-lation and strategy implementation. Critical involvement of global human resourceplanning in the strategy formulation process includes scanning the environment foropportunities and threats and taking an inventory and assessment of the organization’scurrent human resources.2 Without an internal assessment of the organization’s hu-man capability, strategic plans can be laid that, at least for the present and near fu-ture, are far too ambitious and unrealistic, leading to possibly wasted time andresources when this reality crashes upon attempts to implement the strategy. Humanresource decision making cannot be an afterthought; it must be an integral part of theinternational business strategy formulation process, ideally involving HR profes-sionals as key members on the strategic planning team.3

Global HR planning should be responsive to both the short-term and long-termneeds and plans of the organization and its worldwide operations. For example, if acompany’s goals in a particular international business venture are only exploratoryor temporary in nature, it would most likely make sense to seek a short-term ortemporary labor supply to meet the corresponding uncertain or temporary work de-mand. Or where an organization is expecting to capitalize on a long-term futuregrowth opportunity in a particular foreign market, such as China or South America,it should include in its global HR planning specific considerations about efforts inlocal employee recruitment, training, and succession planning to ensure the long-term availability of an effective supply of managers and business professionals tolead this eventual international expansion activity. Thus, whether the scope for glo-bal HR planning is for the near future or for the much longer term, it should link withcompany strategic planning to develop policies, plans, programs, and activities thatprovide the human talent to help carry out and achieve those strategic plans.

Unfortunately, much of the literature fails to include global HR planning as thecritical nexus between strategic planning and specific HR practices, such as in thearea of employee selection and staffing, where we often see an immediate move intoa discussion about how to effectively select and prepare expatriates for foreign as-signments. In this particular case there is a premature assumption that an expatriateis the appropriate form of human talent to fill foreign work demand before adequatethought is taken about the strategic objectives and the characteristics of the particu-lar work demand—and home country expatriates are not always the most cost-effective supply of human talent. In fact, they often represent the most expensive!The lack of HR planning for linking HR practices to the strategic goals and objec-tives of the firm make the organization vulnerable to the fads and popular practicesof the day, which typically address business goals and needs in only a superficial,noncustomized way. Before staffing and other detailed action plans are made, thereshould be thoughtful consideration, as part of careful global HR planning, about thenature of the present and future work demand and potentially viable sources of labor

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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108 CHAPTER 5

supply—wherever they may be, both in the short-term and long-term—that serve toachieve the strategic objectives of the firm.

In this chapter we will examine the important role of HR planning in carrying out anMNC’s strategic plans effectively through the people factor as well as in preparing theorganization throughout its worldwide operations for optimal long-term productivityin utilizing human resources. Important considerations for the HR planning functionthat we will consider include the determination of work demand and labor supplybased on strategic objectives, external environment scanning, work organization andjob design, and analysis of important sources of labor supply. In addition, we willexamine long-term HR planning issues including forecasting labor supply trends andopportunities, building global capability, and succession planning strategies.

FROM STRATEGY TO DECISIONS ABOUT WORK DEMAND ANDLABOR SUPPLY

Once international business strategies are determined, specific cost-effective (that is,highly effective at minimal expense) implementation or action plans must be consid-ered. Global HR planning plays a central role in this implementation phase in deter-mining both what kinds of human work and tasks need to be carried out and who willdo this work. The what component in this HR involvement may be considered part ofwork demand; it leads directly to decisions regarding work organization and design,such as breaking down larger business performance plans and goals into specificcoordinated and integrated tasks, responsibilities, and jobs for people to perform.The who component of global HR planning for strategy implementation comprisesmany different kinds of decisions related to the supply of appropriate human re-sources or labor with specific skills to address the identified work demand.

It is important to keep in mind, as suggested in Figure 5.1, that actual work de-mand identified in global HR planning should be driven by and based on the company’sinternational business strategies and plans, and that considerations about labor sup-ply should in turn be based on the nature of the immediately identified (short-term)and forecasted (long-term) work demand. In effective global HR planning there shouldbe a logical flow from strategy to work demand to labor supply, with each stepconsistent with and responsive to the previous step. For example, a business expan-sion strategy from Chicago to Argentina should not, at least primarily, involve workassignments (that is, work demand) that investigate European markets, or seek to beimplemented solely by Chicago headquarters employees (labor supply) that are com-pletely ignorant of Spanish. Nor should assignments be undertaken involving multi-national virtual teams unless there is a clear connection with company strategy aswell as a solid indication that a team design is a viable way to address work demand.

Company strategy can be directed both at what the company desires to do (for

Figure 5.1 Global HR Planning

Global Strategies and Plans → Work Demand → Labor Supply → Successful Implementation

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 109

example, increase production inventories, expand and customize products or ser-vices for a new foreign market, or increase market share in a particular economicregion) and what the company desires to become, such as in terms of internal strate-gic capability and competence.4 We will examine these latter, rather longer-terminternal-developmental company objectives later in this chapter. But considerationsabout company work translated from short-term and longer-term strategic objectivesas well as decisions regarding human resources that will enable the company to meetwork demand should not be made without a careful scanning and assessment of theexternal environment, which can greatly influence those work demand and laborsupply decisions. We now will briefly examine critical factors in the external envi-ronment that should be monitored on an ongoing basis as part of a thorough, effec-tive HR planning effort.

EXTERNAL ENVIRONMENTAL SCANNING

Business leaders today must continually scan the environment and maintain awarenessof changing and developing challenges—presented by threats and opportunities—tosuccessfully carrying out business plans and competing in our global marketplace.With its close interface with strategic planning, HR planning personnel should alsocontinuously scan the environment for the array of complex, interrelated challengesthat present themselves.5 The major overarching current trends, influences, and de-velopments discussed earlier, including globalization, contingent work arrangements,technological advancements, changing demographics, and national culture, must bemonitored regularly in terms of their implications for new work demand and theability to meet that demand through human labor or automation. Other importantexternal challenges pertinent to global HR planning that should be assessed on anongoing basis include labor market conditions and characteristics, opportunities andrestrictions presented by foreign governments and other organizations concernedwith labor interests, global competition, cross-national cooperation and conflict, andthe impact of broad economic forces and market changes on labor supply cost-effectiveness.

LABOR MARKET CONDITIONS AND CHARACTERISTICS

One of the primary engines driving our increasing globalization is the opportunitypresented by increased demand for manufactured goods to satisfy an ever-increasingworld consumer appetite. The opportunity is especially attractive with the burgeoninggrowth in the sourcing of the manufacturing operations for these goods to countriessuch as China, Vietnam, Romania, Malaysia, India, Brazil, Portugal, Mexico, and Thai-land representing attractive labor markets where the labor supply is plentiful, of anadequate skill level, and relatively inexpensive compared with the labor supply in moredeveloped countries. In fact, some countries with a relatively low-cost labor force alsohold a comparative advantage in terms of technical skills, such as India and the coun-tries of Central and Eastern Europe, which are attracting considerable high-tech workdemand, in addition to back-office administrative services, to be filled by their low-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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110 CHAPTER 5

cost but highly skilled computer programmers and engineers.6 Inevitably, market forcesof supply and demand come into play in global HR planning. As more firms sourcetheir work to a foreign country with an attractive, heretofore low-cost labor force, thereis increasing competition for a limited labor supply, which then eventually drives upthe cost of labor for the MNC, as has recently been reported regarding labor character-istics in southern coastal regions of China.7

Within the increasing globalization movement, human resource planning shouldinclude a careful and ongoing scanning of various national labor markets to identifyparticular opportunities or potential problems related to the supply of labor to supportongoing MNC strategic objectives. Scanning of global labor markets might considercurrent levels of adult literacy and technical skills among the present labor force. Aswith the earlier example, the United Kingdom is significantly behind France and Ger-many in the number and proportion of the national labor force achieving craft-levelqualifications in engineering and technology, suggesting that plans for expanding heavyR&D and high-tech business activities into the European Union might favor Germanyor France where the global labor force would be more capable of supporting thesemore demanding and knowledge-intensive business activities.8 Of course, in cases whereMNCs open operations in host countries that have a plentiful labor supply for low-skilled jobs but lack a sufficient supply to meet higher skilled and technical workdemand, they should maintain flexibility and mobility to supply the needed higherskilled labor through expatriate assignments from the home country. Or they mightseek such higher skilled labor from a third country, as is common in U.S. manufactur-ing plants in Mexico along the U.S.–Mexico border where a large percentage of tech-nical employees and mechanical engineers come from India.

GOVERNMENTS AND OTHER LABOR INTEREST ORGANIZATIONS

Inevitable threats to the rapid expansion of globalization fostered by the low cost oflabor in developing countries arise both from home as well as abroad in those hostcountries where the sourced operations are located. A company in its home countrycan feel strong social pressure in terms of patriotism and national solidarity to notmove jobs (work demand) to other countries, which would result in the immediateloss of jobs and an increase in national unemployment—the latter often more of afear than reality.9 This protectionist fervor has escalated in the United States in theheat of state and national politics with legislation efforts aimed at curbing U.S. com-pany offshore outsourcing by removing associated tax incentives.10 Governmentsand influential unions supported by those governments can also impede or com-pletely prohibit certain kinds of work, such as those related to key industries andnational security, from being sourced to other countries.

In their negotiations with MNCs for initial or renewed foreign direct investmentwithin their borders, host country governments also can require, for optimal FDI spilloverof knowledge and skills, that MNCs staff their local operations with targeted levels ofhost country supervisors and managers (with appropriate training provided), or placejoint venture requirements to encourage sharing of expertise.11 Of course, MNCs thathold a much more inclusive perspective of their global human resources beyond those

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 111

located within the headquarters country borders will recognize host country employeeleadership development and higher-level staffing as an opportunity to continue to pur-sue the strategic goal of building a truly global workforce.

Governments in host country low-cost labor markets are becoming very competi-tive in providing MNCs with attractive incentives in the form of tax breaks and exemp-tions from certain costly labor regulations in exchange for foreign direct investment.12

Yet they also can begin to exact increasing costs for the access to and use of its laborsupply in the form of higher taxes and the passage and enforcement of more costly andrestrictive labor laws. These foreign governments also can require significant com-pany payments to address the social costs of employee job displacement when theMNC determines to close operations in that country and move to another country withmore favorable labor and other operational costs.13 In addition, local labor unions—and, increasingly, international and local NGOs and other international bodies thatmonitor labor concerns (for example, the United Nation’s International Labour Orga-nization)—can place great pressure on MNCs to improve HR policies and practicesrelated to labor standards, job security, equal opportunity, compensation and benefits,and skill development.14 Of course, many MNCs will readily bear the costs of develop-ing host country workers to build internal talent and increase efficiencies as well asgain a favorable reputation within the host country as a job provider and contributor tothe local economy. And in the longer term these developing host economies, with apositive history with the MNC, represent a growing and amiable consumer market.15

GLOBAL COMPETITION

Companies compete both at home and abroad to attract and retain customers by at-tempting to consistently deliver high-quality products and services at lower costs. Or-ganizations also compete for the human talent itself that drives competitive advantage.Essential to an organization’s ability to succeed in the increasingly competitive globalarena—whether or not an organization even ventures abroad—is its ability to attractand deploy a motivated, innovative, team-oriented, cooperative, responsive, flexible,and competent workforce at all levels. This ability has been central to Toyota’s growthand success in building a reputation for high quality and reliability, and for SouthwestAirline’s ongoing profitability (despite pre- and post-9/11 industry distress) and lead-ing performance in important customer service measures.16 Therefore, a critical func-tion of HR planning is to continuously watch the competition and scan the environmentfor best practices in employee recruitment, selection, placement, work design, trainingand development, compensation, change and performance management, and other HRmanagement practices that contribute to a world-class, high-performing workforce.

CROSS-NATIONAL COOPERATION AND CONFLICT

Several different regional and multinational trade treaties and agreements among vari-ous countries have important HR planning implications related to business conductedwith and within participating countries. Such treaties and agreements include the Or-ganization for Economic Cooperation and Development most of the countries of West-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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112 CHAPTER 5

ern Europe plus North America, South Korea, Japan, and Australia), the North Ameri-can Free Trade Agreement (Canada, the United States, and Mexico), and the Associa-tion of South East Asian Nations (Indonesia, the Philippines, Thailand, Singapore,Maylasia, Vietnam, Laos, Cambodia, Brunei, and Burma or Myanmar). The most for-malized and integrated of these treaties is the European Union (with twenty-five mem-bers as of March 21, 2006, and four candidate members), which has adopted a commonconstitution and, at least for most of its members, a common currency (the euro).17

Important HR planning implications of these agreements include joint ventureformation and appropriate staffing to promote treaty country partnerships, standard-ization and harmonization of acceptable HR practices, formation and staffing ofregional headquarters and HR functions corresponding to treaty member geographicarrangements, movement of workforce operations across participating national bor-ders to take advantage of operational efficiencies, and appropriate cross-culturalawareness skill development for those involved with treaty country interactions.18 Inaddition, managers and decision makers must be aware of important current andchanging guidelines and even detailed requirements that these multiple-country agree-ments can have related to professional licensing, union representation, benefits, train-ing, work standards, and worker rights.19

Economic studies on new market development as a result of the formation of theregional trade blocs of the European Union and NAFTA have demonstrated impressiveincreases in work demand and associated labor supply utilization for participating coun-tries. In fact, some U.S. manufacturing companies have been able to survive and becomeeven more competitive because of NAFTA, which provided a cheaper supply of laborfor lower-end manufacturing requirements, while they retained and even expanded theirhigher-end manufacturing and design operations in the United States. However, at timestreaty arrangements may also provide a threat and lead to particular cost advantagesfavoring companies headquartered in treaty member countries, where the overall cost ofbusiness can become increasingly expensive so as to outweigh the low cost of labor.Such has been the case for several Japanese and Korean MNCs along the U.S. border inMexico that have pulled out and relocated their increasingly expensive Mexicanmaquiladora operations due to their new less-favorable status and now costly tariffs andother requirements as companies representing non-member countries of NAFTA.

Aside from various forms of global cooperation, serious forms of conflict withinand between countries, including localized and global terrorism, can have importantimplications for the human side of business and must be attended to as part of HRplanning. Ongoing trade wars and skirmishes between countries can present obstaclesfor foreign business development in those countries, including those associated withhuman resource staffing and utilization. More serious cross-country conflicts, such asthat between Pakistan and India, can also thwart regional business stability and busi-ness development efforts affecting HR planning. Internal country instability and vio-lence, such as guerrilla and civil warfare or a coup d’état, can have a debilitating impacton company plans. For example, Fidel Castro’s overthrow of the Batista regime in1959 and the Ayatollah Khomeini’s takeover of Iran in 1978 had a crippling effect ontheir respective countries’ foreign direct investment and associated international laboractivity. In fact, both situations featured a significant emigration of labor to safer and

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 113

more viable political havens, such as the United States and Western Europe. And so-cial and political unrest in such countries as Colombia, Ecuador, China, and Russia hascreated a demand for extra surveillance, security, and protective services, such as inthe oil industry where foreign executive bodyguard services are in great demand.20

JOB DESIGN FOR MEETING GLOBAL STRATEGYWORK DEMAND

Once work demand that directly addresses the implementation of company strategyand business objectives has been identified, decisions are needed regarding work orga-nization and design, involving breaking down larger business performance plans andgoals into specific coordinated and integrated tasks, responsibilities, and jobs for peopleto perform. The work responsibilities and tasks, as well as the qualifications or require-ments necessary to perform them (for example, knowledge, skills, and abilities), areconsidered in detail through a process called job analysis.21 The job analysis processforms the basis upon which key employment decisions related to recruitment, selec-tion, training, performance appraisal, and compensation are made.22 Major methods ofjob analysis include incumbent employee observation, interviews, questionnaires, orkeeping a diary or log; when jobs are new, expert input by experienced managers orother professionals often can be usefu1.23 The process of job analysis typically resultsin the development of a document known as a job description, listing the duties andresponsibilities, working conditions, supervision or reporting arrangements, and knowl-edge and skills required to perform the job effectively. This document should be re-viewed regularly and discussed with employees and revised if necessary to ensure thatwork performance expectations are clearly understood.

We now will examine some major factors influencing global work design. Wealso will consider major forms of international working arrangements, includingwork assignment accommodations, which are utilized for implementing internationalbusiness strategic goals and objectives. The roles and contributions of these factorsand general work arrangements should be considered as part of overall HR planningon a global scale and should be considered broadly to include to all MNC employ-ees, whether they come from the home country or abroad.

PRIMARY FACTORS INFLUENCING GLOBAL WORK DESIGN

Given an identified work demand in some foreign environment, several potentiallycritical factors must be considered in the design of work that meets that work de-mand. These factors include cultural adaptation considerations, regulatory influenceon work design, labor market skill levels, available technology and infrastructure,and personal accommodation needs.

Cultural Adaptation Considerations in Work Design

As in so many other areas involving detailed workplace implementation in internationalbusiness, local cultural characteristics must be considered in the effective design of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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work. Although general tasks and responsibilities for similar jobs can be identified fromcentral corporate headquarters, their specific working conditions and arrangements intheir foreign location should be carefully examined to ensure a good fit with local cul-tural norms and expectations. For example, in cultures characterized by high powerdistance (such as the Philippines, Mexico, and Venezuela), reporting relationships areexpected to be more formal and distant, whereas in cultures with lower power distance(such as Austria, Israel, and Denmark), these relationships are generally more comfort-ably experienced as informal and with closer and open interaction.24 In one recent studywe compared the perceptions of Mexican, U.S., and Indonesian lower-level manufac-turing employees about what they regarded as appropriate and inappropriate supervi-sory behaviors and found that these employees differed significantly across nationalcultures, where U.S. and Indonesian employees differed from Mexican employees, forexample, in placing a premium on a supervisor’s honesty and identifying such supervi-sory behaviors as “disciplines and criticizes in public” and “flaunts power” as having aparticularly negative impact on worker performance. These findings support the reputedhigh level of power distance in Mexican culture, with the tendency to ascribe to Mexi-can managers and supervisors the privilege, based on their position of power, of choos-ing whether to be honest and follow through on past promises, or to flaunt positionpower or criticize in public. This study demonstrated that a common set of supervisorybehaviors that could be prescribed from MNC headquarters would not likely fit thediffering expectations and preferences of subordinate employees in those different coun-ties but would need to be customized to fit the local culture.25

National and local cultures may differ in the extent that they emphasize personalor group structures in their personal and work activities—those preferring individualstructures being high on individualism while those preferring group or team struc-tures being high in collectivism. The most individualistic countries include the UnitedStates and other English-speaking countries, whereas the most collectivist countriesinclude Venezuela, Colombia, and Pakistan.26 Employees in Japan’s highly collec-tivistic culture have been known to identify their job affiliation with a particularcompany in a very personal way, such as, “I belong to Kentucky Fried Chicken ofJapan.”27 Thus, in highly collectivistic countries it may be more appropriate in cer-tain work situations to design jobs as part of a highly interactive and interdependentteam, where working space itself is designed to be common and open (for example,no separating offices or cubicles) to encourage optimal team interaction. However,such a physical work design can prove disturbing to those accustomed to more pri-vacy, as was found in a study of U.S. interns working in Japan who were very un-comfortable with the open, exposed office and laboratory workspaces.28

Regulatory Influence on Work Design

Different governments might have specific restrictions about how work is organizedand carried out. In particular, they may specify how work is organized for breaks forrest and even prayer time (such as in some Islamic regimes) or how many hours a daya business can remain open (for example, in Germany until 1998, most stores werenot allowed to remain open past 6 P.M.).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 115

As examined in Global Workforce Challenge 5.1, governments also might specifyhow many hours a week employees can work and give very tight restrictions on theavailability of overtime. Governments might also differ to a great extent in which theyeither have or enforce regulations on the design of work that ensures employee safety.

Labor Market Skill Levels

Depending on the levels of skills and knowledge available in the labor force, jobscan be designed with more or less technical complexity or requiring more or less

GLOBAL WORKFORCE CHALLENGE 5.1

HR PLANNING WITH FEWER WORKING HOURS

In keeping up with work demand as part of HR planning, the number of hours employees haveavailable to work make up an important part of the planning equation. In 2002, France extended itslaw reducing the workweek to thirty-five hours from thirty-nine for companies with fewer than twentyemployees. Vacations have nearly doubled since the 1970s in several European countries, includingItaly, Spain, and the Netherlands—with about six weeks being the annual norm across Europe.According to the OECD, the average German worker puts in about 1,400 hours a year, a 17 percentdecrease since 1980. Although unions and governments have asserted that these reduced work hourmeasures have created or saved jobs, unemployment still remains high and the economy stagnant.

European and other MNCs in Western Europe are becoming more concerned about their abilityto compete globally with the reduced work hours in the equation—it isn’t just the higher cost of wages.Caterpillar, Inc., the U.S. maker of heavy machinery, added seventy new workers at its plant inGrenoble to cope with the reduced hour change, bringing the total work force in France to 2,300. Likemany other companies, Caterpillar chose an option in the law to let workers take more vacation daysin lieu of reducing their weekly thirty-nine hours to thirty-five. But it quickly found that projects weredelayed because too many people were out of the office on a given day. “If our only competition andcustomers came from France, it would not be an issue,” says Laurant Rannaz, head of humanresources for Caterpillar in France. “But they come from around the world.”

For some smaller companies that can’t afford to hire new workers to make up for the reductionin hours, the results have been disastrous. In the wine cellar of her French seventeenth-centuryfarmhouse near Dijon, Veronique Perrin worries that she may have to sell her longtime familyvineyard. Her three workers no longer come in on Fridays as a result of the law change. Anothercompany that provides labels for the 50,000 bottles of wine that she makes each year can no longerkeep up with her demand because it has lost worker hours. However, for bigger companies,globalization allows the flexibility to move operations with greater work-hour flexibility to meetdemand. Even though Europe boasts high-skilled, well-trained, and educated workers, companiessay the shorter work hours make the higher costs for these workers even harder to justify. Therefore,companies have altered their workforce growth plans. For example, since the 1990s, French carmakerPSA Peugeot Citroen more than doubled the size of its workforce outside of France to 68,000, whileits domestic workforce shrunk by 4,000. In Germany, Volkswagen AG expanded its foreign workforceby two-thirds while keeping its domestic workforce at twenty-year-old levels. The company nowmakes its trademark Golf in Slovakia, Brazil, and South Africa in addition to Germany and all of itsnew Beetles in Mexico.

Source: Adapted from C. Rhoads, “Clocking Out: Short Work Hours Undercut Europe inEconomic Drive,” Wall Street Journal, 2 August 2002, A1, A6.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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careful supervision (also part of the work design). Where a labor force possesses ahigh level of knowledge and skills, jobs can be designed to include higher levels ofcomplexity and technology, with more tasks than might be appropriate in an areawhere the labor force is less educated. And where fewer tasks are involved for eachjob a greater number of employees might be required to satisfy the work demand.One U.S. multinational toy manufacturer found that its plant in Tijuana, Mexico,was able to design work with enough complexity and integration with technologyto manufacture products there in three days. In China, where the local labor wasabundant and much cheaper but did not, at that time, have the level of labor forceskills to support work with such technical complexity, its operation took threeweeks to produce the same products.

Available Technology and Infrastructure

Work design must also take into account such factors as the availability and devel-opment of technology in the local area of business operations as well as the sur-rounding infrastructure supporting business. Where technology is unavailable, workmust be designed in a more simplified form, which, as in the previously mentionedChina example, often results in the need for many more employees to handle manymore simplified tasks. Technology might be available, but it lacks the needed sup-portive infrastructure (for example, available and affordable electricity, computersupport systems, communications, transportation, and so on) to make its utiliza-tion practical and viable. As new technologies are being developed and utilized inmany countries, including developing nations, human work is constantly beingredesigned around tasks that are now automated, requiring higher employee skillsand resulting in a worldwide drop in manufacturing jobs due to increased efficien-cies and automation.29

Personal Accommodation Needs

In addition to the need to accommodate the design of jobs to fit the cultural and skilllevel requirements of employees, individual employees may have unique circum-stances that might influence the design of their work. For example, where long com-mutes are required, longer but fewer work days might be arranged,30 and/or workmay be designed on a “telework” basis that can be performed independently at homeor at some other more convenient remote location with regular communications withthe traditional office or worksite via telephone, fax, or the Internet (such as via e-mail and website upload and download). The Netherlands leads the world in thegreat and rapid increase in telework, involving 18 percent of the workforce.31 In fact,it is estimated that more than 137 million workers worldwide engage in telework onat least a part-time basis. Survey results give evidence that employees worldwidedesire to have more opportunities for telework and that their top priority is to obtainincreased flexibility to control their own working time to provide better balance withpersonal life demands and interests.32

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 117

ALTERNATE FORMS OF INTERNATIONAL WORK ARRANGEMENTS

Besides traditional full-workday arrangements at the company worksite (and thesetraditional workdays can differ dramatically around the world, such as in Latin coun-tries that often take an early afternoon extended lunch and rest period and then returnto work until much later in the evening, such as 8 P.M. or 9 P.M.), various alternateforms of working arrangements might be made to fit the global work demand needsof the organization and its employees. Common alternate forms of these interna-tional work arrangements include extensive travel, short-term foreign assignments,expatriate assignments, inpatriate assignments, virtual expatriate assignments, andmultinational virtual teams.

Extensive Travel

Some kinds of regional sales and management jobs require almost constant travel tovarious business locations in a country or economic region. These kinds of jobs mayrequire regular and frequent customer contact, active coordination of various geo-graphically dispersed business partners, or ongoing supervision that cannot be re-placed completely by virtual contacts. Extensive travel work arrangements are oftenpart of an early and developing phase of business development and might eventuallyresult, as business becomes more established and predictable, in more permanentassignments at the worksites to where the previous travel had been targeted. Theycan also be part of a regional assignment, such as with an executive who works atregional headquarters in Brussels but travels considerably during the week to otheroperations in Western Europe and returns home to a Paris suburb on weekends. Be-sides the added travel expense, extensive travel can grow very burdensome and tiringfor the traveler as well as severely interfere with the traveling employee’s personallife. One single American woman in Vienna, whose regional work in business devel-opment in the health care industry involved extensive travel, commented to us thatalthough her work constituted an exciting growth experience for her, she felt that thetremendous amount of travel required of her greatly interfered with her personal lifein not providing adequate stable time in one location to develop personal and mean-ingful relationships outside of work.

Short-Term Foreign Assignments

With increasing priorities for cost savings and localization of talent, short-term for-eign work assignments, or sometimes called secondments, ranging from a few monthsto a year, are on the rise.33 Where sufficient work is developed in a foreign location,employees might be sent there temporarily, such as on a two-month assignment, orfor multiple work periods at the foreign location over an extended length of time.Short-duration foreign assignments can provide an interesting break, challenge, andprofessional development opportunity for employees who have worked in the samedomestic location for a long period of time. However, when the assignments becomemore frequent and require more time at the foreign location than back at the home

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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118 CHAPTER 5

workplace, their attractiveness can begin to diminish significantly—again with grow-ing operational costs perceived by the organization and personal life–balance costsas perceived by the employee. Frequently we have noted that foreign short-termwork assignments, particularly to the same foreign worksite, lead to extended orexpatriate work assignments for two to five years and more at the foreign location.One American expatriate working for Intel Corporation in Rome remarked to us thatafter nearly a year of spending one week at home after working the rest of eachmonth in Rome on what originally had been foreseen as a short-term work assign-ment, he finally made a request and was allowed to move his family to Rome andconvert to an extended expatriate assignment.

Expatriate Assignments

Traditionally organizations, particularly in earlier stages of their business expansionabroad, have sent managers as expatriates from their home country locations—oftencompany headquarters—for three years or longer. The demand for their services hasbeen based primarily on the need to fill a critical skills gap by transferring operatingknowledge and techniques and general managerial skills held by the expatriate to thedistant subsidiary, thereby allowing the MNC to more directly provide coordinationand controls to ensure that the foreign subsidiary is performing up to MNC expecta-tions and consistent with MNC strategy. In the course of filling this position theretypically is a transfer of knowledge and skills from the expatriate to members of thelocal workforce, whether formally through training efforts or informally through theexpatriate’s behavior modeling and daily work interactions with local employees.Much of the focus of this knowledge transfer has been on the cognitive domain in theform of specific, concrete knowledge about procedures, techniques, and methods foraccomplishing tasks. In addition, there are likely other valuable forms of learningtransfer in the “emotional intelligence” or affective domain such as with productiveattitudes and values as well as higher-level thinking, team building, and problem-solving skills. For example, David Cheung, who has worked in different financialmanagement capacities since 1994 in Motorola (China) Electronics Ltd., and is cur-rently the CFO for Otis China in Tianjin, noted the following regarding his experi-ence with American expatriates, including interns that were abroad primarily fortheir own experience and development:

In my opinion, expatriates have played an important role in China’s progress, in teachingthe Chinese technical knowledge as well as problem-solving and managerial skills. OurAmerican managers here usually bring in a sense of “you can do it” spirit. They usually aremore outgoing, friendly, treating everyone as equal, and are more able to lead a team andget people motivated to improve and bring about changes. I have often had foreign internsin my organizations. Very often, they are people full of energy, ideas, enthusiasm, and greatmotivation, which had a positive impact on my organizations by their good example. TheAmericans are usually not shy about things even when they don’t know the subject well.They have the confidence to learn and to try. This is what many of the local Chinese em-ployees need to learn.34

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 119

This immediate purpose of filling a critical skills gap with accompanying knowledge/skill transfer for optimal MNC control appears to be the most common assignmentobjective for expatriates.35 Two additional major purposes for sending expatriatesabroad include supporting individual learning and global competency developmentfor future company leadership as well as organization development of the host op-eration and MNC as a whole.36 Vladimir Pucik has differentiated between demand-driven foreign site work and learning-driven international assignments, wherecompanies increasingly recognize that cross-border mobility afforded by expatriateassignments represents a valuable learning tool and opportunity for the exaptriate.37

Gary Oddou has identified two types of expatriates: those assigned to go abroad tofix a problem and those identified as “high potentials” for the firm who are assignedabroad to build global business competencies.38 Particular purposes of organizationdevelopment served by expatriate assignments have been described as effecting glo-bal workforce socialization to common values and priorities, widespread global ori-entation and core competency development, and development of informal networks.39

More recent work on the expatriate assignment’s potential contributions to organi-zation development has expanded the focus to include organizational learning andeffective global knowledge management, where expatriates, upon returning to MNCheadquarters (regional or global), potentially serve as important sources of knowl-edge and learning for the organization about foreign markets.40

Despite the previously listed beneficial purposes of the expatriate assignment,some significant disadvantages should be considered before automatically structur-ing work to be fulfilled through expatriate job designs. First, expatriate assignmentscan be very expensive. The maintenance costs of expatriates in a host country rangefrom three to ten times the cost of domestic employees with similar responsibili-ties.41 Second, the frequency of premature terminations of expatriate assignments orfailure to achieve the assignment goals are reported at disturbing levels.42 One U.S.study showed that nearly one-third of expatriates who remained in their positions didnot perform to the level of expectation of their superiors back at headquarters.43

Third, an over-reliance on the use of expatriates for management and leadershipresponsibilities in foreign operations can lead to limited development of other mem-bers of the MNC workforce not coming from MNC headquarters, contributing to anoverall underutilized and underdeveloped global talent pool.44 Fourth, the strict andexclusive use of expatriates for managing foreign operations can significantly di-minish the breadth of experience-based perspectives about foreign markets that canbe returned back to MNC headquarters, limiting the MNC’s ability to innovate andcompete on a global scale due to its narrow, ethnocentric frame of reference.45

Inpatriate Assignments

A work assignment featuring the transfer of foreign managers from their host coun-try operation locations to global or regional headquarters on a semipermanent orpermanent basis is known as inpatriation.46 A major purpose of this kind of workassignment is to increase the foreign inpatriate manager’s understanding of companystrategy, culture, and critical operations and practices. And upon return to the host

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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120 CHAPTER 5

country in a position of leadership, this now more broadly experienced manager canexert greater control on the foreign operation consistent with MNC headquarters.47

And just as expatriates have traditionally been MNC agents of knowledge and skilltransfer to employees in the host operations, the returned inpatriate manager canserve as a knowledge transfer agent in a similar fashion—and perhaps with greatercredibility as someone originating from the host country workforce. Inpatriate man-agers, through their active involvement at MNC headquarters, can also serve to in-fuse knowledge of the corresponding host country market throughout the globalorganization as well as provide a means to enrich the MNC management team byadding a multicultural perspective to global strategy development.48

Inpatriation assignments are likely more appropriate for organizations of interme-diate and advanced levels of internationalization whose host country employees havesignificant experience with the company and that possess adequate capital resourcesto support such a long-term human resource investment. There may be other limita-tions and costs as well—many of which are similar to the challenges of cross-cul-tural adjustment, premature assignment termination, and assignment failure to meetgoals and objectives.49 Also, where great benefit can be achieved through the infu-sion of broader and multicultural perspectives within MNC management at com-pany headquarters, this value can be effectively achieved only if significantcross-cultural awareness and diversity training efforts and deep-seated, often stress-ful organizational culture changes are made to prepare the MNC to be receptive tothese new perspectives and supportive of the new inpatriate participants on the MNCmanagement team.50

Virtual Expatriate Assignments

Considering the high costs associated with expatriate assignments, and with moremanagers and executives preferring not to uproot themselves and their families forforeign assignments, companies are increasingly using assignments that combineshort travel trips with virtual interaction through telephone and cyberspace. In thesearrangements, virtual expatriates are traveling to the foreign operations for a shortperiod of time for direct interaction with local employees and managers and thencontinuing with follow-up direction, coordination, and supervision on a distancebasis through telephone and other electronic forms of interactive communicationincluding e-mail, video teleconferencing, the Internet, and company-controlledintranet sites—all considered forms of telework.51 The virtual arrangement allowsexecutives to take an assignment without subjecting them and their families to theculture shock of a move abroad. These arrangements also expose the employee tovaluable developmental global management issues, while still permitting closer touchwith the home office.

According to a PricewaterhouseCoopers survey of 270 organizations in twenty-fourEuropean countries employing 65,000 expatriates, there has been a significant increasein this practice, with about two-thirds of the companies employing virtual expats, upfrom 43 percent in 1997.52 More than 80 percent of the companies surveyed reportedemployees had turned down assignments because of dual-career problems or family

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 121

issues. Another major reason that executives are balking at overseas assignments wasidentified as the career risk of being far away from headquarters where key budgetingdecisions and informal power and politics maneuvering are played out. One Scottish-born executive who is in charge of the Middle East and Pakistan for SmithKline Beechamis not based in the Middle East but instead at the drugmaker’s London headquarters.But other than for personal convenience, he indicated being based in London improvedhis ability to garner limited company resources for his team, as in this statement: “Myrole is to get resources for my team, and being based at headquarters helps me lobbyfor them.”53 Despite their growing use in MNCs, virtual expatriate assignments willnot completely replace expatriate assignments because the latter work arrangementstill potentially holds a huge face-to-face advantage in solving problems in a timelyfashion as they arise, especially in building trusting and open communication relation-ships necessary for effective team performance—a potential limitation of the virtualassignment. Indeed, as one Australian executive for a U.S. multinational in Sydneywhimsically remarked to us, “Virtual expats are often called ‘seagull’ executives whoevery now and then suddenly swoop in, drop their ‘business’ on their foreign team, andthen fly back to headquarters.”

Global Virtual Teams

The globalization of business and the growing competitive trend of leaner and flatterorganizations using the best organizational talent available in the MNC, no matterwhere in the world that talent is located, have combined with new information andcommunications technologies leading to the formation and continued growth of com-plete or partial working arrangements known as global or multinational virtual teams.54

Global virtual teams have been described in different ways, with the virtual aspect ofthe team ranging from occasional to total reliance on communication technologiesas the medium for team interaction. But their work has three design components incommon: (1) responsible for formulating and/or implementing decisions that areimportant to their organization’s global strategy, (2) use a substantial amount of com-munications technology to support group member interactions, and (3) comprisemembers working and living in different countries. Most are knowledge-based teamsformed to improve organizational processes, develop new products, or satisfy com-plex customer problems.55 A distinct advantage of global virtual teams, especiallythose spread longitudinally around the world, is the ability to perform work asyn-chronously, helping global organizations bridge different time zones effectively andenabling teams to be productive over more than one work period. In addition, dis-persed members’ proximity to different customers, markets, practices, perspectives,and resources in their local contexts can enhance flexibility and innovation capabil-ity, thus increasing the ability of the team to balance local awareness with a broader,strategic perspective of the united global MNC team.56

Although there seems to be great potential in the use of global virtual teams, thereare several basic sociotechnical challenges in making them work effectively. Thesechallenges include managing conflict—a natural by-product of working groups—over differing cultural backgrounds and with much greater distances and delayed or

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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asynchronous periods of interaction. Synchronous interaction in groups is a moreorderly process wherein verbal and nonverbal cues help regulate the flow of conver-sation, facilitate turn taking in discussion, provide immediate feedback, and conveysubtle meanings. In lean, asynchronous communication typically found in multina-tional virtual teams, especially those stretching across Asian, European, and Ameri-can time zones, the conveyance of cues is hindered, feedback is delayed, andinterruptions or long pauses in communication often occur.57 As will be discussedlater in chapter 8 on managing international assignments, global virtual teams mustfind workable solutions for overcoming the obstacle of asynchronous communica-tions and for temporally coordinating their interactions and flows of informationassociated with work schedules and deadlines, developing trust, aligning the pace ofefforts among group members, and agreeing on the time spent on particular tasks.58

SOURCES OF GLOBAL LABOR SUPPLY FOR MEETINGWORK DEMAND

Once work demand has been identified and human jobs (as opposed to automated orrobot-delivered work) have been designed into specific tasks and responsibilities,various sources of labor can be considered to fill this work demand. These sources oflabor may be regular or standard employees or employees that are often classified asnon-standard or contingent.

REGULAR OR STANDARD EMPLOYEES

Regular or standard employees have been better known in the past as “full-time” or“permanent” employees. However, these terms have been dropped largely due to thepresence of other employee groups (such as “temps,” or temporary employees) whoalso put in full working hours per day or week (that is, full-time). And especially inlitigious environments such as the United States, companies are avoiding the use oflanguage such as “permanent,” which can be interpreted by employees and the courtsas a guarantee of employment that would interfere with company flexibility in utiliz-ing needed restructuring or downsizing through employee layoffs. Regular or standardemployees often are considered full members of the organization and generally arerecipients of full benefits typically provided by the organization. These employeesoften are considered to be at the core of the organization’s employment picture, whereother “non-core” employees serve as layers beyond the core that provide work as neededand as afforded by the organization. As has been practiced by large Japanese firms formany years, the non-core employees serve as a protective buffer for their core em-ployee counterparts, and these non-standard employees tend to be the first ones to losetheir jobs or to have their working hours diminished in tight financial times.59

Before looking at non-standard or contingent employees, we first will considerthree major groups of regular employees as sources of labor in global human re-source planning: parent-country nationals, host-country nationals, and third-countrynationals. We also will examine their relative strengths and limitations as we con-sider their roles in ongoing global MNC operations.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 123

Parent-Country Nationals (PCNs)

PCNs are citizens, or at least legal residents, of the “home country” of the parentcompany or the country where the primary company headquarters is located. PCNsare also sometimes called “parent company nationals,” rather than parent countrynationals, perhaps to avoid a possible patronizing offense (which we have notedfirsthand in the past) that people might take with this term, especially when they arefrom former colonies of a parent country (such as Australia versus the United King-dom). Although in most uses of the term PCNs are presently employed by the MNC,they also could be members of the larger national labor force where the MNC isheadquartered.

A particular strength of a PCN as a labor source, especially one that comes from amanagerial or executive level within the MNC and has significant experience withthe MNC at company headquarters, is typically his or her understanding of the com-pany culture, priorities, and strategy and what it takes to be successful within theMNC. In addition, the experienced PCN is likely well networked within the MNCand has a good understanding of the key decision makers and power brokers withinthe organization. Company familiarity and connections are essential for effectiveMNC control, coordination, and integration of activities across the MNC,60 as wellas for competing for and obtaining needed company resources to support currentproject goals and activities. Employees who are recruited from within the nationallabor force where the MNC is headquartered likely share the same language andmight also share similar national cultural characteristics that influence business be-havior and decision making. However, particular limitations of PCNs include a pos-sible lack of familiarity with and difficulty in personally adjusting to a foreign businesslocation of the MNC. Related to this lack of foreign-site adaptability is the possibleinability to adjust headquarters policies and practices to fit the local job and businessrequirements of the foreign business operation.

Host-Country Nationals (HCNs)

HCNs are citizens or residents of a country that “hosts,” or provides local prop-erty and facilities, for MNC operations abroad. As a labor source, HCN employ-ees can come from the ranks of existing MNC employees in the host countryoperation, such as in the case of an employee from within the local foreign op-eration promoted to a management position or an inpatriate assignment. HCNemployees can also come from outside the firm and from within the surroundinghost country national labor force. Particular strengths of HCNs as a source oflabor include familiarity with the local culture, common business practices, andeconomic conditions. However, HCNs may at least initially lack a clear under-standing of the predominant national and organizational culture of MNC head-quarters, or its business priorities, accepted and expected business practices, andstrategic mind-set.61 HCNs might not share a common language with PCNs, thuspotentially posing a serious challenge to effective communications and businessinteractions.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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124 CHAPTER 5

Third-Country Nationals (TCNs)

When staffing a foreign operation in a host country, new employees could be citizens orresidents of a different third country apart from the parent or host country—third-countrynationals.62 TCNs can represent a useful alternative labor source for filling workdemand where the focus is on obtaining the most cost-effective labor, regardless ofwhat country the employee comes from. This staffing approach often follows anoverall regiocentric strategy, where regional employees are assigned as TCNs tonearby host country operations. For example, MNCs within the European Unionincreasingly are responding to opportunities presented by European integration byreclassifying intra-European assignments as a domestic job transfer that follows lo-cal pay structures than a traditional international relocation, which often incurs anarray of costly benefits and compensation measures such as housing allowances,cost-of-living differentials, and hardship premiums.63

However, significant disadvantages to the use of TCNs include their possible lackof understanding of the local HCN culture and difficulties with local public senti-ment and governmental obstruction where TCNs are perceived as taking away jobsfrom local HCNs. In addition, TCNs, like HCNs, may have language difficulty incommunicating effectively with PCNs and MNC headquarters, and they may nothave a clear understanding of MNC strategic priorities, accepted business practices,and organizational culture. As we once noted in a toy manufacturing plant in Tijuana,Mexico, owned by Mattel (headquartered in Los Angeles), where a large number ofmanufacturing engineers at the plant were from India, TCNs may be utilized despitepossible disadvantages due to their clear comparative advantages in technical com-petence and low cost.

CONTINGENT OR NON-STANDARD WORKFORCE

Contingent or non-standard employees are those who work on a flexible basis asneeded or contingent to an organization’s work demand and have neither an explicitnor implicit contract for continuing employment.64 These “on call” employees, intheir many different forms, represent a rapidly growing source of labor for fillingglobal work demand and serving to increase overall world employment, not just tofill in for layoffs and lost jobs.65 Estimates of the size of the contingent workforcevary, mostly because of the differing ways in which contingent or non-standard em-ployees are defined. Some estimates have described contingent workers as constitut-ing as high as 35 percent of the U.S. workforce.66 But the United States is not alonenor even in the lead in its significant reliance on contingent workers. As noted ear-lier, large Japanese firms have long used contingent workers to buffer their coreemployees from unemployment. Furthermore, the use of contingent workers is in-creasing in Canada and Mexico, and in Europe, especially in the Netherlands, GreatBritain, Spain, Sweden, and France.67 An international study estimated an average ofapproximately 25 percent of the world labor force is in “casual” non-standard orcontingent employment.68 For country sample comparisons, Figure 5.2 indicates bycountry the percent of the national labor force in non-standard employment.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 125

Although national culture and economic structure can have a major influence onthe extent of use of contingent employees, such as in Spain where changes to part-time working arrangements are preferred over layoffs, it is clear is that contingentworkers are a large and important component of the global workforce.69 Severallabor forecasters predict that the contingent or non-standard workforce will growfaster than the standard one for years to come.70

Reasons for Major Growth of the Contingent Labor Sector

The phenomenal worldwide growth of the contingent labor sector has been pro-moted by various interests, including companies, governments, and workers them-selves. We now will examine major reasons for this significant growth.

Promoting Company Flexibility. To meet increasing global competitive demand,contingent employees are used on an economical “as needed” basis, allowing thecompany to relatively easily adjust up or down the number of workers employed andtheir working hours based on the existing work demand, and thus not have to pay forexcess labor supply when work demand slackens.71

Supply Factors. In some cultures a large sector of the labor may be available towork only on a part-time basis, such as where women are expected to attend to mostof the childcare and other household management responsibilities.72 In several coun-tries we also have noted that senior citizens, with increased health and longevity,may return from complete retirement to the workplace on a part-time basis to gener-ate extra income and provide additional variety in their lives.

Screening Function. Temporary employees and their part-time employee coun-terparts who are working a smaller number of hours allow for management to sampletheir work performance before making a long-term commitment for more regularemployment. Such an approach also gives the potential new regular employee achance to get to really get to know the organization. Thus, this probationary processmay enhance the effectiveness of new standard-employee staffing decisions.73

Figure 5.2 County Sample Comparisons

% of Non-StandardCountry Employment

Spain 59.9Australia 33.0Sweden 27.3United States 26.1Japan 24.9United Kingdom 24.9Germany 21.4

Source: Adapted from J. Mangan, Workers Without Traditional Employment: An International Study ofNon-Standard Work. (Northampton, MA: Edward Elgar, 2000).

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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126 CHAPTER 5

Technological Change. Significant changes in technology often lead to (a)outsourcing or reassigning work outside of the company to those specializing in newtechnology expertise, (b) automation of work and robotics that typically reduce thenumber of needed employees as well as change the nature of the work, and (c) rapidchanges that demand flexibility and diminish the need for long-term employmentcommitments—all of which lead to a greater demand for contingent employmentarrangements.74

Employment Legislation and Deregulation. Some forms of employment legisla-tion on behalf of “full-time” or regular employees, such as what many regard asvery generous employment benefits for regular employees in Scandinavian coun-tries, might therefore create an economic motive for companies to increase theiruse of part-time and other non-standard employees. Also, through deregulation,companies might become freer to utilize more flexibility in their staffing prac-tices, where part-time, temporary, and other contingent staffing arrangements typi-cally play a dominant role.75

In many European countries, temporary and part-time jobs have increased signifi-cantly in number. In fact, they have become the most important source of new jobs,partly because some governments have actively encouraged the use of non-standardemployees to reduce unemployment. This trend is likely to continue as governments,in their political interest, strive to promote economic growth and to increase employ-ment levels.76

Worldwide Growth in Numbers of Small Businesses. Many forces have contrib-uted to the global increase in the number of small businesses, including the increasein corporate outsourcing of functions, corporate downsizing, and the lure of beingone’s own boss. Unwilling or unable to handle specialized business functions pe-ripheral to the small company’s core competency (for example, security, payroll,marketing research, and staffing) and reluctant to employ a permanent workforce tohandle these activities, many small businesses outsource these services for a fee toconsultants, contractors, and special service vendors. In this way the small employeris not weighted down by the fixed costs of regular employees because the arrange-ment with the vendor firm can be terminated at the end of the contract period.77

Changes in Employer-Employee Relationships and Expectations. The longstandingpsychological contract between employers and employees of lifelong employmentand job security is greatly diminishing worldwide. Downsizing, such as followingprivatization (where excess employees were previously carried by state-owned en-terprises), due to workforce redundancies after mergers and acquisitions, as a resultof technological integration and productivity improvements, or simply due to com-panies worldwide trying to lower employment costs in the face of global competi-tion, has led to an increased sense of employees being their own free agents and notcommitted on a long-term basis to a single employer. Many employees who haveleft their employers have become independent contractors, marketing the knowl-edge and skills they acquired working for their previous employer. By obtaining new

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 127

work on a contingent basis, they also can add to their stock of knowledge and skills,thereby enhancing their employability.

Changes in Employee Personal-Life Needs and Lifestyle Preferences. In additionto changes in the psychological contract between employers and employees, majorchanges in employee needs, expectations, and lifestyles have come to alter workarrangements in the workplace. The dramatic increase, especially in developed coun-tries, in the number of working mothers and the rise of the two-career family haveled to the demands for flexible working arrangements provided by contingent em-ployment. Employees with responsibilities for the care of children or aging parents,or both, often secure contingent employment because of the flexibility in hours anddays worked.

Temporary work, traditionally reserved for the lower employee ranks, is also in-creasingly being seen as a way of life for some professional, technical, managerial,and executive employees. They enjoy the greater variety of temporary projects andassignments and prefer to work on a contingent basis because they gain a sense offreedom by not having to make a commitment to remain long-term with one em-ployer. Other employees prefer flexibility in the number of hours and days worked,providing them the freedom to pursue other interests.

Major Forms of Contingent or Non-Standard Employees

Contingent or non-standard employees, whether domestic or international, are clearlyimportant to an organization, yet they often are overlooked or are inadequately con-sidered as an important part of organizational performance and productivity. Thefollowing are major forms of contingent employees found in the global labor forcethat should be part of a company’s global HR planning process.

Part-Time Employees. Likely the most common source of the growing contingentlabor force to meet excess work demands, part-time employees typically work lessthan a country’s regular workweek on an ongoing basis.78 Typically on the company’spayroll or assigned through a temporary employment service, the eligibility of part-timers for company benefits depends on various factors, including the number ofhours worked and the terms of the company’s benefits plans. As mentioned earlier,the global part-time workforce continues to be dominated numerically by women.However, due to continuing changes in traditional work arrangements underlyingstandard employment (where men were traditionally predominant), the rate of growthof part-time employment tends to be higher for men than women. In fact, one recentstudy found that the growth rate of part-time employment is much higher for men inevery country of the European Union.79

Temporary Employees. Temporary employees represent another major source ofcontingent workers hired to help companies meet global work demand, althoughmany countries differ in the degree to which this “free agent” class of employees isacceptable. American businesses continue to lobby for changes in legislation, which

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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128 CHAPTER 5

currently limits the number of visas for foreign workers who want to work tempo-rarily in the United States.80 The demand for temporary workers in Europe and Asiahas also grown. The temporary help industry in Europe today is about 50 percentlarger than that in the United States. Across Europe, companies have hired tempo-rary workers in large numbers to create a flexible labor force that can adjust to eco-nomic cycles.81

Although they originally were used to fill skill shortages, such as when a regularemployee was ill, or assist with the completion of projects having a finite duration,temporary employees are increasingly being used by companies to supplement theregular workforce on an ongoing basis, with the size of this group of employeesebbing and flowing, depending on the workload. These employees are often sup-plied by a temporary services agency, which retains the employees on their payroll,or may be in-house company employees—sometimes called “floaters,” who are onthe company’s payroll but typically not eligible for full company benefits.

Paralleling the rise of the global company has been the globalization of temporaryhelp firms that are major suppliers of temporary workers. To continue to providetemporary employees to their clients that are operating or expanding internationally,temporary staffing companies have also been expanding beyond their borders byopening foreign offices or by acquiring temporary-help firms in other countries.82

Employee Leasing. The use of employment leasing by MNCs has increased sig-nificantly, as indicated in studies with Japanese and European executives.83 Underan employee-leasing arrangement a company might transfer all employees, a largepart of the employees, or sometimes only the employees of a separate facility or siteto the payroll of an employee-leasing firm or Professional Employer Organization(PEO) in an explicit joint-employment relationship. The PEO then leases the work-ers back to the client company and administers the payroll and benefits, maintainspersonnel records, and performs most of the functions handled by an HR depart-ment. Besides saving the company on HR operational costs, depending on the coun-tries involved employee-leasing arrangements can also provide positive MNC taxbenefits as well as tax benefits for international professional employees. As onePEO’s slogan asserts, “We take care of your people so you can take care of yourbusiness.” However, serious problems can arise when companies fail to include peopleas a central part of their business planning—and it may be hard to lease back loyaltyand commitment that previously provided a source of competitive advantage.

Contracted Services. Specialized tasks, usually of a non-recurring nature and gen-erally requiring a high level of independence, professional judgment, discretion, andskill are frequently performed on a contract basis by individuals, such as consultants,or groups of professionals from special professional services firms. These profes-sionals often travel or work on projects far from their homes and may have multiyearor indefinite assignments, as is the case with an American consultant and profes-sional acquaintance of ours working for the government of the United Arab Emiratesin Abu Dhabi on the design and construction of their national airport.

Bechtel has found a significant improvement in its global projects through em-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 129

ploying contracted services. For example, for their copper and gold mines in Chile,they used to do all the engineering, design, and equipment purchase in the UnitedStates and then send their own construction people to work with employees in Chileto build a plant. Now Bechtel typically does the conceptual engineering in the UnitedStates and hires contracted Chilean mechanical and electrical engineers, more famil-iar with local conditions, to do all the detail engineering in Chile.84

Outsourced Services. When a company contracts with an organization to providethe ongoing, full managerial responsibility over a specific function, we move intothe domain of outsourced services. As in the opening scenario, Gap and many otherU.S.-based manufacturers, in seeking labor-cost savings to successfully compete inthe global marketplace, outsource the manufacturing of many of their products on along-term contract basis to firms in developing countries. But as mentioned previ-ously, such offshore outsourcing is not limited to lower-skill work processes. Manymultinationals are outsourcing their high-tech design functions offshore to countriessuch as India where skills are high yet labor costs are still low.85 Outsourcing higherskill but nonessential or non-core back-office operations (like payroll and account-ing) to countries such as India can reduce operating costs while simultaneously pro-viding a foothold in an important emerging market. GE Capital Corporation, whichmoved its development and back-office operation to India as early as 1997, nowemploys 2,000 people in its Indian office.86 In fact, such increasing long-term off-shore outsourcing arrangements of higher skilled functions has caused a rise in par-ent country concerns for the loss of national skill dominance and capability, previouslyheld in the parent country by the MNCs who are growing increasingly dependent ontheir outsourced contractors.87 Despite what might appear to be very attractive costsavings initially, companies should conduct careful HR planning prior to outsourcingto identify possible hidden costs and difficulties that have caused some firms toreverse their offshore outsourcing decisions.88 Through HR planning companies mustcarefully address such issues as skill and language requirements, labor costs bymarket, alternative talent pools, workforce training requirements, and work designrequirements.

MNC Concerns Regarding Contingent Employees

The contingent workforce represents a major source of labor that MNCs should con-sider carefully in their plans for filling work demand. In some less-developed coun-tries MNCs may actually gain greater social and political approval by employingmore host country employees on a part-time basis than fewer employees on a full-time or more standard basis. However, particularly in more developed economies, aheavy reliance on non-standard employees may bear a price related to reduced jobsatisfaction. It is not unreasonable to make a link between the increased global non-standard employment and decreased global measures of job satisfaction.89 In theUnited States and Europe, where the percent of the contingent workforce is on therise, the number of persons highly satisfied with employment terms and conditionshas fallen significantly and is lower in those countries such as Spain where non-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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130 CHAPTER 5

standard employment is most frequent. And where employee job satisfaction is low,organizations might suffer a reduction in workforce loyalty, commitment, and subse-quent reduced productivity.90

With regard to employee work that is completely outsourced, organizationscan suffer significant problems when they now consider that these employeesworking for outsourcing service firms are no longer their concern and responsi-bility. With the outsourcing arrangement comes a severing of direct control ofemployee work quality; decreased worker commitment, loyalty, and competencecan occur, which ultimately compromises productivity. For example, a majorworry that managers have with their outsourced call centers that often cross in-ternational borders is that those employees’ lack of commitment and identifica-tion with the company product or service may spill over into the quality of

GLOBAL WORKFORCE CHALLENGE 5.2

NOT EVERY JOB CAN BE SUCCESSFULLY MOVED ABROAD

When sales of their security software slowed in 2001, ValiCert, Inc., began laying off engineers inSilicon Valley to “offshore” employment and hire replacements in India for a fraction of the labor cost.ValiCert expected to save millions annually while cranking out new online security software for banks,insurers, and government agencies. There were optimistic predictions that the company would cut itsU.S. budget in half and hire twice as many people in India, and colleagues would swap work acrossthe globe every twelve hours, putting more people on tasks to complete them sooner. But whatactually happened was different.

The Indian engineers, who knew little about ValiCert’s software or how it was used, omittedfeatures that U.S. customers considered standard. The software had to be rewritten in Silicon Valley,delaying its release by months. U.S. programmers, accustomed to quick chats over cubicle walls,spent months writing detailed instructions for tasks assigned overseas, delaying new products. Fearand distrust thrived as ValiCert’s finances deteriorated, and co-workers, fourteen time zones apart,exchanged curt e-mails. Due to its floundering, a key project that had been offshored to employeesin India was brought back to the United States, a move that irritated some Indian employees.

Shifting work to India eventually did help cut ValiCert’s engineering costs by two-thirds, keepingthe company and its major products alive—and saving sixty-five positions that remained in the UnitedStates. But the company still experienced a difficult period of instability and doubt and recovered onlyafter its executives significantly refined the company’s global division of labor. The successful formulathat emerged was to assign the India team bigger projects rather than tasks requiring continualinteraction with U.S. counterparts. The crucial creative job of crafting new products and featuresstayed in Silicon Valley. In the end, exporting some jobs ultimately led to adding a small but importantnumber of new, higher-level positions in the United States. One of these new hires was Brent Haines,a software architect charged largely with coordinating the work of the U.S. and India teams. Thisresponsibility often means exchanging e-mail from home with engineers in India between 11 P.M. and3 A.M. California time, as Mr. Haines reviews programming code and suggests changes. Suchcollaboration requires extensive planning, he says, “something very unnatural to people in software.”

Source: Adapted from S. Thurm, “Lesson in India: Not Every Job Translates Overseas,” WallStreet Journal, 3 March 2004, A1, A10.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 131

customer interaction, such as with comments like, “Yes, I know what you mean. . . I don’t like the product either,” or “I’m not exactly sure . . . I don’t reallywork for this company.” There is also an ongoing concern about customer per-ceptions of company products or services provided by offshore employees,whether they are outsourced or actually employed by the MNC. To help buildcompany quality image and brand loyalty with customers, which might appearcompromised by low-cost offshore arrangements, many organizations are increas-ingly hesitant to disclose their ties to offshore workers. For example, although inthe past we have inquired at the end of a successful call center service interac-tion about the workplace country location of the service employee and learnedthat he or she was in India or the Philippines, we recently received the followingofficial response to the same inquiry from an employee working at a call centerfor a large financial services firm: “I’m very sorry, but for security purposes weare not allowed to disclose that information.”

Despite lacking direct control and the presence of distinct, formal organiza-tional boundaries, many organizations still deem the outsourced employees whodesign and manufacture their company products and provide company servicesas worthy of their ongoing consideration, retaining various practices and proce-dures in the outsourcing agreement to ensure the high quality of employee per-formance. For example, this consideration is at the root of intensive trainingprovided for internationally sourced call center workers on American culture,slang, and communication styles. And Japanese auto manufacturers, with theirconcern for consistent high quality, have long provided quality-improvementtraining for the employees of their outsourced U.S. auto parts suppliers—notsimply assuming that the outsourced organization will take care of this impor-tant area of employee management.91

As the opening case of this chapter illustrated, organizations can also suffersignificant costs in image and public relations—both at home and abroad—whenthey outsource employment services and, with this cost-savings strategy, alsodivorce a sense of social responsibility to the outsourced employees, who never-theless are still associated with the company’s product. Levi Strauss & Co., longnoted for being an employer of choice and having a strong commitment to socialresponsibility, appears to have a strong sense of their global employees—bothinternal and external—worthy of their HR planning and consideration. In 1991,Levi Strauss made basic worker rights a public priority by becoming the firstmultinational company to establish a comprehensive code of conduct, known as“Terms of Engagement,” designed to serve as a guide in the selection of coun-tries and foreign business partners (that is, contractors and subcontractors whomanufacture or finish Levi products and suppliers who provide the material) thatfollows workplace standards and business practices consistent with the company’semployee treatment values and policies. A team of internal inspectors auditsfacilities for compliance with the Terms of Engagement both before and afterLevi Strauss enters into a business relationship. Their inspectors currently moni-tor compliance at approximately 600 cutting, sewing, and finishing contractorsin more than sixty countries.92

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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132 CHAPTER 5

HR PLANNING FOR THE LONG-TERM

Besides regularly scanning the environment for threats and opportunities in the ex-ternal labor supply related to meeting immediate and short-term work demand forcarrying out MNC objectives, HR planning should also study external trends andconditions pertinent to the firm’s long-term survival and competitiveness. In addi-tion, MNCs should look internally for the long term to consider the MNC’s organiza-tional culture and core capabilities that it desires to build across its global workforcein the coming years as well as plan for the future managers and leaders who willsuccessfully direct the MNC.

GLOBAL WORKFORCE PROFESSIONAL PROFILE 5.1

CHRISTOPHER NORTH: LINKING SUCCESSFUL HR PLANNINGWITH SOCIAL RESPONSIBILITY AND HUMAN DEVELOPMENT

“We have a very significant interest in the immediate and long-term needs of the greater communityhere in Tijuana, as well as larger Mexico,” says Christopher North, vice president and generalmanager of Aerodesign de Mexico, part of C&D Zodiac, Inc., of the United States and Zodiac, S.A.,of France. Aerodesign’s 430 employees in its two buildings in Tijuana, near the California, U.S.–Mexico border, design and manufacture commercial aircraft interiors (such as seats, overhead bins,and lavatories) for major aircraft manufacturers such as Airbus and Boeing. North’s personalcommitment to the local community is evidenced by the non-profit organization founded by him andhis wife, Julianne, known as Build a Miracle, which builds homes and provides educational opportunityin impoverished areas of Tijuana. North adds, “And our interest in the community is further reflectedat Aerodesign in programs focused on employee education and training and in creative benefitsprograms such as housing subsidies.”

North’s interests in social issues in Mexico go back more than twenty years when he was anundergraduate at Loyola Marymount University in Los Angeles, where he and his wife started astudent service group organizing monthly trips to orphanages and communities in northern Mexico.Part of that effort included raising over $100,000 to purchase land and build a trade school at a boy’shome in Tecate, Mexico, which they ran hands-on after graduating and during the first six months oftheir marriage. From this experience, North saw firsthand a need to make up for the country’seducational system that, due to extreme poverty and administrative obstacles, was failing to prepareyouths for a future competitive labor market. After the completion of his MBA at UCLA, in 1991, Northfounded Aerodesign along with the owners of industry leader C&D Aerospace. North translated theneeds he had perceived in the non-profit sector into HR policies, such as the following:

• Educational expense reimbursement program for school-aged children of employees• Technical training and English language instruction• An on-site adult education school offering primary and secondary education to employees• Up to US$2,000 in building materials or cash as a home-down-payment subsidy

“We never say no to anyone asking to take an English or technical course,” says North. However,this commitment to education and skill development, for both employees and their family members,is not without significant benefit to the company. North adds, “With greater competence in English,

(continued)

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 133

COUNTRY LABOR FORECASTING

Environmental scanning should consider such longer-range factors as national birth-rate statistics, health conditions and mortality, the nature and quality of educationalsystems within a country, and changing demographic trends in workforce participationto gain a clearer picture of the nature of the global labor force available for supplyinglong-term future work demand (that is, for the next five or ten years).93 For example,several developed countries in Europe and Asia are reporting a significant decrease inbirth rate, presenting a challenging economic future with a larger percentage of olderworkers and retirees and fewer younger workers, placing increasing demands on health

Profile 5.1 (continued)

our Mexican managers don’t have to depend on me and other bilingual executives as they interactwith English-speaking customers and suppliers.” This development is especially important at Aerodesignbecause the company has no foreign-born employees besides North himself. “World Class Quality,Mexican Pride” adorns the wall above the main production area and embodies, among other things,the idea that at Aerodesign, there is no limit to how high local talent can rise. North further claims thata focus on training and the resultant ability of the company to support fully integrated finished productmanufacturing with engineering support has insulated the company against competition from otherlow-cost labor regions such as the Far East. Productivity and experience become more important thanthe impulse to move abroad in search of labor for under a dollar per hour.

The result of proactive HR policies such as those at Aerodesign in the long term is a strongerMexican labor force; in the short term the company enjoys increased workforce commitment and loyalty,directly translating into productivity and employee retention. In fact, at Aerodesign turnover averagesless than 12 percent annually, while maquiladora facilities commonly experience turnover above 100percent per year. North has developed a strategy for dealing with both turnover and lack of formaleducation: “One key to manufacturing success in Mexico, whether the issue is high turnover, the lackof experienced personnel, or both, is the identification and development of a core team, an A-list ofindividuals at all levels that can successfully move from one project or department to another and infusethe organization’s unique culture, competency, and spirit into new programs. Within this group, futureleaders and managers are groomed—there are success stories that motivate others to excel.”

Low turnover increases the reliability and certainty of a capable workforce that is available to meetwork demand—critical to effective human resource planning and achievement of business objectives.Besides education, provision of building materials, and down-payment assistance, North has initiatedother practices to build employee loyalty and retention, such as a subsidized lunch program andpayment of the employee portion of the social security tax. All of these benefits are provided by thecompany under programs that are income tax free to the employees. “While many companies providea lunch program or transportation subsidies, very few are aware of the existence of our other benefitsprograms, which by being tax free to the employees, increase their take-home pay and leverage ourpayroll expenditure to its maximum potential.” A final benefit of creating a desirable place to work isthe decrease in recruitment costs as internal employee referrals become the primary means of findingnew employees. According to North, because turnover has so many causes, there is no singleremedy, and only a multifaceted approach to the creation of a desirable workplace will minimize itsimpact. He does make it a point to debunk one myth about turnover in the border region. Northexplains, “One of the common misconceptions is that employees who come from the south to workhere only do so for a brief stay until they can find a way to get across the U.S. border. This is simplynot the case. The majority who come here to work for our company and other maquiladoras are muchmore likely to stay here or return to the south than to cross the border.”

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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134 CHAPTER 5

care and retirement benefits.94 In particular, Russia’s demographic profile has severalserious implications for the country’s economic future pertinent to HR planning. Ac-cording to one study, in the absence of large-scale immigration, Russia with its lowbirth rate will not have the labor resources to sustain high economic growth rates. Inaddition, poor health conditions and mortality will affect the quality of the workforceand make it all the more difficult to sustain the productivity improvements needed fordesired growth in support of continued economic transition.95 Related to national edu-cation trends, it has been reported that the United Kingdom is among the lowest inparticipation rate in advanced secondary education in countries of the European Unionand lags considerably behind Germany, France, and the Netherlands in the extent ofpost-school training that young people receive while same-aged cohorts pursue highereducation.96 Pertinent to MNCs in their long-range planning for international worksourcing, this information suggests that in the years ahead the labor market in theUnited Kingdom might have less of a local labor force capability for meeting the workdemand of high-tech and knowledge-based jobs.

HR PLANNING FOR GLOBAL CAPABILITY

Global HR planning should keep in mind what it wants to become in the long runrelated to organization capability—including shared organizational core competen-cies and culture and workforce alignment or shared mind-set—and plan its HR ac-tivities and policies accordingly.97 For example, Royal Dutch/Shell desired to developa “multicultural multinational” organization, where the senior management team atits London headquarters would become more globally competent in its long-rangeand top-level decision making. Therefore, to achieve this strategic objective it usedglobal HR planning to develop specific policies and practices in internationalworkforce staffing and development that resulted in thirty-eight countries being rep-resented among its London senior management team.98

International firms large and small also should carefully plan their selection, train-ing, performance management, and remuneration practices to support the acquisi-tion of common core priorities and competencies that promote alignment andcoordination across national boundaries.99 This increased alignment and coordina-tion in turn can contribute to faster, consistent, high-quality responsiveness to cus-tomer needs around the globe. For example, the great global success of McDonald’shas been based largely on the company’s ability to quickly transfer to foreign entre-preneurs the overall capability of managing the entire complex McDonald’s busi-ness system in a consistent manner, yet with sensitivity to local market conditions.In addition, the development of an MNC culture characterized by common values,beliefs, priorities, and identification with the company also creates a deep and en-during structural mechanism within the MNC to informally teach, influence, andreinforce desirable behavior throughout the MNC.

Companies that have as a major strategic objective to develop greater company-wideglobal leadership capability have been encouraged to increase, through global HR plan-ning, their number of young managers involved in extended foreign assignment experi-ences (including inpatriation). Here the expatriate is sent abroad more for the purpose of

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 135

individual professional development (and collectively over time, organizational devel-opment) than for accomplishing more traditional business goals abroad.100 Furthermore,an expatriate assignment should be considered as only a part of the employee’s experi-ence with the organization; longer-range HR planning should consider expatriate return(repatriation), placement, and ongoing career development. In fact, some companies havecreated positions in charge of global talent management, where a professional or team isresponsible for setting up systems to identify potential leaders, track careers company-wide, provide and structure a variety of international experiences, and monitor assign-ment performance for future planning.101 Some MNCs also actively promote internalMNC sharing and dissemination of new knowledge and experience gained from foreignassignments for enhancing global orientation, alignment, and leadership capability.102

GLOBAL SUCCESSION PLANNING

Global succession planning concerns the selection of talented employees to replacesenior managers who leave the MNC because of retirement, reassignment, or forother reasons. Effective succession planning emphasizes minimizing disruption andconfusion arising from such leadership changes, with a view to implementing com-pany strategy and achieving organizational goals in a smooth and continuous man-ner. There is strong evidence that companies with a predetermined, formal successionplan for their senior managerial assignments, including two levels below the top,enjoy a higher return on investment than those without such a plan.103

Building on their long-range HR planning for developing desired capability and glo-bal leadership talent throughout the organization, MNCs should engage in careful glo-bal succession planning to reduce chance and uncertainty and ensure the availability ofsenior executive leadership talent for future company guidance. In some companies,succession planning is integrated into a twice-yearly people-review process. Global suc-cession planning first involves making a projection of future needs for senior managerswithin the firm. Then there is a careful selection from pools of promising managercandidates throughout the MNC to find those best suited to fill higher-level manage-ment positions. Finally, a flexible plan is formulated to ensure that these potential suc-cessors develop the core competencies needed to advance the strategic interests of theorganization. To further develop this plan, management and human resources shouldwork collaboratively with the identified, interested high-potential individuals to designsix-month, one-year, and three-year development activities—with regular opportunitiesfor feedback and reassessment—involving such activities as formal training, interna-tional virtual teams, short-term foreign assignments, and extended foreign assignments.104

SUMMARY

Global HR planning provides a vital link between MNC strategy and the implemen-tation of strategy through the human factor. Global HR planning should scan theenvironment for both immediate and longer-term threats and opportunities as theyinfluence the supply of labor and human talent to meet immediate and anticipatedlong-term work demand. This critical function also should carefully examine appro-

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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136 CHAPTER 5

priate approaches for organizing and designing work and working arrangements tomeet company objectives as well as carefully consider sources of talent—both inter-nal and external—for filling work demand. Finally, HR planning should look inter-nally to design and coordinate various HR activities that build long-range capabilityto ensure MNC survival and competitiveness.

QUESTIONS FOR OPENING SCENARIO ANALYSIS

1. What changes in global work supply have taken place that contributed to thesituation of Gap and its global workforce?

2. What are possible forces that might contribute to an MNC’s lack of a senseof responsibility toward workers in different parts of the world who produceits products or deliver its services? In fact, what external forces can eveninterfere with this sense of responsibility?

3. Is this opening scenario dealing only with a global phenomenon? Can youthink of local work outsourcing arrangements where there is a clear gap be-tween the nature of treatment and benefits of an organization’s regular em-ployees and outsourced or contracted workers who also supply labor to meetthe organization’s work demand?

CASE 5.1. HR PLANNING FOR EXECUTIVE-LEVEL GENDER DIVERSITY

It isn’t easy for a woman to gain top-level positions in large MNCs, even in our “modern”age. This added difficulty for women reaching the executive suite should be a majorconcern for human resource planning, which aims at providing a capable workforce tomeet future work challenges and demands. Gender-based obstacles end up greatly limit-ing the talent pool for the company’s future leadership and leads to less insightful execu-tive teams that lack a diversity of perspectives and experiences that match a more evenlygendered, lower-level employee and customer profile. It is especially hard for women toget to the top in a firm that is in a masculine line of business, but Fran Keeth is a majorexception. Fran holds both global and regional positions with Shell. At the global levelshe is executive vice president chemicals and at the regional level she is president andCEO of Shell Chemical LP, the U.S. arm of Shell Chemicals Ltd., based in London. Franis the first woman to hold such lofty leadership in the chemicals industry.

Fran earned a bachelor’s degree in accounting and then went on for an MBA anda law degree, all from the University of Houston in Texas. She started her career inHouston in 1970, at Shell Oil Company, a subsidiary of a Royal Dutch/Shell, whereshe worked first as a secretary and studied at the same time. Fran held many differentpositions in Shell Oil Company. She worked in the finance and tax departments withincreasing responsibility, and in 1991, she became a general manager of ProductFinance. After twenty-two years with the company, in 1992, she was brought toLondon as a deputy controller, area coordinator for the East Australasia regions, andoil products finance manager. She left Shell in 1996, and worked for Mobil as theirworldwide controller. But one year later she returned to Shell and started to work in

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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GLOBAL HUMAN RESOURCE PLANNING 137

Shell Chemicals as global executive vice president of finance and business systems.This position led her to the position of president and CEO of Shell Chemicals in2001, and finally to executive vice president chemicals in 2005.

Her resume seems to be quite usual, but Fran has said the fact that she is a womanmade it more difficult for her to advance in the company. She experienced the uniquesocial challenges of being a woman, such as being told to leave the conference roomduring a planning meeting, because the matter was “discussed only with managers,”the speaker assuming that as a woman she could not possibly be a manager. Fran saysthat one reason for women having difficulties is that it is often assumed that women arenot interested in international assignments and that they would not like to travel be-cause of their family. She believes that this reluctance on a woman’s part can be thecase in some situations, but it should not be an automatic assumption. A distinct advan-tage for Fran was her career path that was almost completely in finance, which is seenmore as a core function of the whole business rather than more support and secondaryfunctions of sales and marketing where women often reside and remain.

One of Fran’s main objectives now is to make it easier for women to develop theircareers and to gain more responsibilities in her company. By 2008, the companyaims to have 25 percent of its executive positions held by women. In 2001, the figurefor women in such positions in Shell Chemicals was 11 percent. She also has createdworkshops for managers to gain a better understanding of the stereotypes that arecommon when it comes to women in higher positions. The result she hopes to see isa change in the traditional way of thinking. “The new career-advancement systemwill be no less based on merit than it had been when a man was in charge,” Fran says.Instead, she predicts that Shell will have a broader talent pool and an environmentwhere women will have better chances to succeed. She adds, “They will be able toput more energy into their work; they won’t have to spend their time trying to fit in.”

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. Why would you say an MNC in its HR planning should be interested ingaining a greater representation of women employees across its various em-ployee levels, including the top leadership ranks?

2. What are particular obstacles that women might face in gaining higher posi-tions of responsibility in their organizations? Would you consider some in-dustries and specialties less conducive to increased women leadership?

3. What would you recommend for Fran Keeth to assist her in HR planning toachieve greater women representation among top management?

CASE 5.2. A GOOGLE™ SEARCH—FOR TALENT

As a leader in innovation, Google also is breaking tradition in its strategies for ensur-ing the availability of top human talent to meet work demand. On a sunny spring dayin Bangalore, India’s info-tech hub, a group of engineers and math majors, all intheir twenties, hunch over terminals at an Internet café. This event is the Google

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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138 CHAPTER 5

India Code Jam, a contest to find the most brilliant coder in South and SoutheastAsia. Participants are competing in writing some difficult code for a first prize ofUS$6,900 and a coveted job offer from Google, Inc., to work at one of its R&Dcenters. The contestants begin at 10:30 A.M., emerging exhausted three hours later.“It’s been incredibly difficult and awesome,” says Nitin Gupta, a computer scienceundergrad at the Indian Institute of Technology at Bombay.

Google has staged Code Jams in the United States, but this is its first such event inAsia, and there is an incredibly large response. Some 14,000 hopeful aspirants regis-tered from all over South and Southeast Asia for the first round in February. The topfifty from that event were selected for the finals in Bangalore: thirty-nine from India,eight from Singapore, and three from Indonesia. “It’s a dog-eat-dog world,” says Rob-ert Hughes, president of TopCoder, Inc., the Connecticut testing company that runs theCode Jams for Google. “Wherever the best talent is, Google wants them.” With thishighly publicized event, Google now has a new pool of Asian talent to choose from.According to Krishna Bharat, head of Google’s India R&D center, all the finalists willbe offered jobs—and Google needs them for its new but understaffed Indian center.

Google has faced a difficult staffing challenge due to fierce talent recruitment inIT, where engineering students are assured a job a year before they graduate. Addingto this challenge is Google’s exacting hiring standards that surpass most other em-ployers’. But the Code Jam serves as a useful shortcut through its usual staffingprocess, where applicants usually go through seven stages that can last months andat the end are likely to get rejected due to Google’s extremely high standards. ButGoogle has found that much of this screen is done through the Code Jam approach,resulting in a final pool of viable candidates.

QUESTIONS FOR CASE ANALYSIS AND DISCUSSION

1. How does the Code Jam method improve on more traditional HR planning ap-proaches to ensure timely availability of appropriate talent to meet work demand?

2. How is Google’s Code Jam effort consistent with an overall geocentric orregiocentric staffing approach?

3. Besides the rapid generation of viable candidates, what are other possible benefitsto Google of this highly publicized Code Jam event in South and Southeast Asia?

Source: Adapted from J. Puliyenthuruthel, “How Google Searches—For Talent.” Business Week, 11April 2005, 52.

RECOMMENDED WEBSITE RESOURCES

Human Resource Planning Society (www.hrps.org). A global association and network of senior humanresource executives, consultants, and university faculty and researchers.

Hewitt Associates (http://www.hewitt.com). A global human resources outsourcing and consulting firmdelivering a complete range of integrated services to help companies manage their total HR andemployee costs, enhance HR services, and improve their workforces.

RHR International (www.rhrinternational.com). Provides information and consulting services relatedto succession planning, high-potential employee development, and overall talent management.

Vance, Charles M., and Yongsun Paik. Managing a Global Workforce : Challenges and Opportunities in International Human Resource Management, M. E. Sharpe Incorporated, 2006. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/wilmcoll-ebooks/detail.action?docID=302465.Created from wilmcoll-ebooks on 2022-03-26 22:21:13.

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