Human resource management in a global economy

Human Resource Management in a Global Economy

Major challenges related to a strategic approach to expatriate management

Economic liberalization sets off many global organizations to expand their business operations along with demonstrating their reputation globally. This is seen as globalization process a worldwide integration strategy where the purpose involves at producing relatively standardized products with global appeals. This is also seen as rationalizing operations throughout the world. In achieving this goal, organizations require to send their designate representatives for overseas assignments in order to maintain the standards of their products or services abroad (Hafitah & Ismail, 2007).

With the changing scenario in global working opportunities global relocation prograrnmes are beginning to become a major recruitment and rewarding tool used by human resource professionals. Yen (2006, p.1) observes that to succeed in any global relocation programme, employees professional and personal needs must be first fulfilled. The human resource manager must find out the overall effect of the programme to the organization. Selection of the most suitable candidates for international assignments is also considered. This is done in the most cost effective way as possible by analyzing the financial feasibility of the programme.

The function of strategic planning is providing the firms and agencies with sense of guidance. This is done by clearing up their mission, goals and objectives (Thompkins, 2002, p. 97). The objective of any manager should be to link the strategic objectives to expeditiously position the human resources to attain the stated mission. Thompkins argues that the functioning management approach should ensure accountability at all times (2002, p. 98). This can be illustrated by the daily observation of statistics that each employee turns in. The organization can use this information to follow the performance of its employees and to see if they are actually working toward achieving the desired results. Thompkins adds that workers usually skew goal statements and choice of production measures towards those results that are easiest to achieve. This is done regardless of whether the employees enhance organization achievement (2002, p. 100). It is important to regularly monitor performance to ensure the activities of employees and their results are connected to the strategies laid down by the management. This is a beneficial initiative for human resource managers.

Human resource professionals are learning that attracting top global talent is not only dependent on good salary offered by the organization. According to Furness (2006), companies are required to offer competitive positions as well as the destination. She argues that emphasis should be put on providing local orientation programmes, cross-cultural training and spouses networking.

Compensation is also critical. The employee needs to live and eat and support himself comfortably. The perception is always that as an employee working abroad it means getting a huge salary package. The reality is that these decisions are currently about which location to live in and its cost and the welfare of the spouse and children.

The human resource managers involved with employee relocation are faced with common challenges. They must first give an attractive outcome for both the assigned employee and the organization. In this, proper planning is required by the manager prior to the programme implementation. The biggest challenge for human resource professionals is that they require international experience. They have to take the cost associated with training and updating themselves.

Participating in decision making and getting his contribution heard and put into consideration is also a challenge for many human resource professionals. Overcoming the risks involved in relocating a person also poses a threat to the professionals. These risks go beyond policy terms and conditions and affect the assignee and the organization as well. They include migration, taxation, payroll and local employment conditions (Yen 2006, p. 2).

There are also disadvantages associated with home and host country payroll approaches. For instance for home payments the whole expatriate compensation is paid in home country currency. The problem is that the employee will convert a part into the host local currency. This will be done regularly to meet living expenses in the host country. This results in variations in local currency when converting the same amount on a monthly basis. With the host payments approach, the company pays the whole salary in host currency. The demerit is that the rate of exchange changes will directly affect the conversion of the savings portion of the home currency (Gibson & Traber, 2010).

Proper planning should be put in place to avoid last minute decision. Cittadini (2006) insists that this will avoid situations where the managers are advised a moment before the departure or even after the departure of the employees. Her advices that educating the business about the risks associated with inadequate training is vital and should be done. She also highlights on human resource involvement in decision making. The need for relocation support is indispensable. Human resource managers should look into the emotional well being of the employee. This includes the welfare of the spouse, which many professional neglect (Yen 2006, p.3)

According to Alexander (2006), initial sourcing of proper candidates who can adapt to the new environment faster is difficult. Getting an individual who can relocate smoothly into the new country and reside there is a challenge for many professionals. There is also a continous demand for mobility and managing it properly is a challenge. There is a drawback while securing high calibre individuals with the required strength and quality. More challenges occur when there is need to deliver then to their destination and to have them settle down on time.

Another issue that challenges the managers is gender in expatriation. According to besides understanding the cultural differences, the managers should be aware of the differences in gender as well. In society dominated by me, women expatriates may face cultural differences, which could affect their performance in international assignments. In order for these expatriates to overcome the challenges they encounter. Managers should first understand the differences in cross-cultural settings. They should then apply it within the role of an expatriate and the organizational structure. This may assist them in better adjustments for the expatriates and help them gain better acceptance by the local employees.

Mobility barriers are an important issue for organizations. Retention is also another important issue impacting on the organization. Companies sometimes place too much emphasis on financial revenues and outcomes. Employees working abroad are far more long-term orientated. They need to be able to support their families but they don't place much emphasis on a monolithic remuneration package as a requirement for wanting an international career. Human resource managers face this misunderstanding and it affects their decisions.

Human resource managers fail to understand the importance of emotional intelligence and to apply it in expatriate management. Experts have concluded that emotional intelligence is a tool that maximizes the success of expatriate management. Emotional Intelligence (EI) is the capacity of accrediting our own feelings and those of others. It entails actuating ourselves, managing emotions well in ourselves and in our relationships. (Goleman, 2005).

If applied appropriately, emotional intelligence can provide the basis for successful international assignments. It will most definitely lead to success in international management regardless of the origin of the manager and the local country involved. Employees and their families can use their emotional intelligence abilities to overcome potential difficulties. This calls for the expatriate awareness in applying empathy, flexibility, and other emotional intelligence-based competences. When confronted with fears of failure. Emotional intelligence plays a vital part (Musten, RaudDeniss & Titarenko, 2005)

Emotional intelligence training program for expatriates should be carried out. This should be initiated by the human resource managers and should include cross-cultural training programs. In the purpose of improving success and avoiding failure the training programs should help expatriates to manage change both personal and professional. It also aids in managing cultural differences and management of their professional responsibilities. The adjustment of the family members has significant influence on performance of the expatriate. It is important therefore that the family of the expatriate is trained to act as a mutually supportive team (Tahvanainen, 2008)

Measuring the return on investment of expatriate assignments

There is no formal or informal definition of return on investment as far as many managers of international companies are concerned. However, the return on investment of expatriate assignments is defined as an estimation in which the financial and non-financial benefits of the company are compared with the financial and non-financial costs accrued in international assignments. Research indicates that many companies have never given it a thought despite the pressure to justify their continued international assignments. Most managers emphasize on value rather than cost and they remain clear for their reasons to invest in expatriates (McNulty, Y, Cieri, H and Hutchings, K, 2007, p.8)

In measuring the return on investment of an expatriate assignment, the human resource manager is first supposed to explain the importance of the investment to the rest of the business. The manager must also demonstrate the cost associated with the assignment and the benefits that will be achieved. The human resource managers are encouraged to prepare costs projections to ensure that they fully comprehend the cost of the assignment in advance. In the cost projection, the manager must include the estimates for the compensation policy, the benefits, allowances and both host and home tax (Yen 2006, p. 3). According to Furness (2006), the business case is built from internal information and this is done by looking at both the success and failures. He further warns that the failure of an assignment is very expensive to the company.

The aims of the international assignment must be taken into account. These may include development of a new business, market strengthening and skills advancement into the industry. In all the cases, an individual of high calibre is assigned the duty. The human resource manager must ensure that the right person is assigned the duty. It is important to that it is the responsibility of both the assignee and the organization to ensure that the return on investment is realized (Ernst & Young, 2006).

For organizations that plan to grow on a global scale and gain experience in the international business arena, expatriate assignments are a necessary investment in a strategic goal for long-term basis. Expatriate assignments are expensive investments. International assignments cost three to five times as those allocated in the mother country. If currency exchange rates become unfavorable, they become even more expensive. Even when expatriate programs are considered priceless it is important that companies should attempt to justify the return they get on those expensive investments (Krell 2005, p.1).

The obstacle in estimation of return on investment is that tracking costs can be difficult. Returns calculated can also lack precision. A survey carried out by Cendant Mobility in 2004 showed that only 14% of 146 human resource managers indicated that their company measures the return on investment of expatriate assignments. There is great variation on what it means to measure the return on investment of an international assignment. There is no definite formula, though that doesn't mean that return on investment measurements cannot be performed (Johnson, 2005)

On basic terms, return on investment is found by subtracting the costs from benefits. It means that return on investment equals what is left over after the costs of a project have been subtracted from the benefits that the project delivers. When measuring the return on investment of expatriate assignments first, estimate all the costs. If a company can track all the costs associated with the expatriate assignment, then it will be possible to estimate the return on investment. Experts have admitted that it is difficult and tricky to calculate all the expatriate costs. The costs of international assignments can very controversial and can be sophisticated to determine (Krell 2005, p.2).

Causes of expatriate failures are due to their inability to adapt to at least two cultures while on assignment. This includes the working environment of the international organization and the international community in the host country. The expatriate may not practice effective leadership and networking skills leading to failure in the assignment.

Few companies measure the expatriate performance. This is due to the scarcity of research examining the forecasters of job performance while employed in a different work culture. Failure is described as damage to relationships with international clients resulting in loss of market share that initially existed. Early return of expatriates from an international assignment is also seen as failure.

Another reason why there is lack of information on success and failure rates among expatriates is that a large number of multi-national organizations do not supervise the costs of expatriate performance. The few companies who measure the cost focus on pre-assignment costs and operational costs of the assignment. They do not measure the costs associated with repatriation (Minter RL, 2008, p.40)