HOW TO MANAGING FOR MANAGERS
The importance of the quality pf the workforce in global business cannot be overemphasized, regardless of the stage of globalization of the firm. As seen in Global Learning Experience global business systems are complex and dynamic and require competent people and the selection of appropriate management.
Early Stages Of Globalization
The marketing or sales manager of the firm typically is responsible for beginning export activities. As foreign sales increase, an export manager will be appointed and given the responsibility for developing and maintaining customers, interacting with the firm's intermediaries, and planning for overall market expansion. The export manager also must champion the international effort within the company because the general attitude among employees may be to view the domestic market s more important. An other critical function is the supervision of export transactions, particularly documentation. The requirements are quite different for international transactions than for domestic ones, and sales or profits may be lost if documentation is not properly handled. The first task of the new export manager, in fact is to hire a staff to handle paperwork that typically had previously been done by a facilitating agent, such as a freight forwarder.
The firm starting international operations will usually hire an export manager from outside rather than promote from within. The reason is that knowledge of the product or industry is less important than international experience. The cost of learning through experience to manger an export department is simply too great from the firm's standpoint.
The manger who is hired will have obtained experience through Foreign Service duty or with another corporation. In the early stages a highly entrepreneurial spirit with a heavy does of trader mentality is required. Even then management should not expect the new export department to earn a profit for the first year or so.
Advanced Stages Of Globalization
As the firm progresses from exporting to an international division to foreign direct involvement, manpower planning activities will initially focus on need vis -a- vis various markets and functions. Existing personnel can be assessed and plans made to recruit, select and train employees for positions that cannot be filled internally. The four major categories of overseas assignments are:
(1) CEO, to oversee and direct the entire operation:
(2) functional head to establish and maintain departments and ensure their proper performance:
(3) troubleshooters, who are used for their special expertise in analyzing, and thereby preventing or solving, particular problems: and
(4) white or blue collar workers46. International oil companies typically assign a great many employees overseas when the available pool is small such as in Saudi Arabia.
One of the major sources of competitive advantage of global corporations is their ability to attract talent around the world. These corporations need systematic management development systems, with the objective of creating and carefully allocating managements personnel. Global business in four general groups of managers have the task to further the company's global scale efficiency and competitiveness. Country managers have to be sensitive and responsive to local market needs and demands but, at the same time, be aware of global implications. Functional managers have to make sure that the corporation's capabilities in technical manufacturing marketing human resource, and financial expertise are linked and can benefit from each other. Corporate executives at headquarters have to manager interactions between these three groups of mangers as well as identify and develop the talent to fill these positions.
Global companies should show clear career paths for managers assigned overseas and develop the systems and the organization for promotion. This approach serves to eliminate many of the perceived problems and thus motivates managers to seek out foreign assignments. Foreign assignments can occur at various stages of the managers tenure. In the early stages, assignments may be short term, such as a membership in an international task farce or 6 to 12 months at headquarters in a staff function. Later an individual may serve as a business unit managers overseas. Many companies use cross postings to other countries or across product lines to further an individual acculturation to the corporation48. A period in a head office department or subsidiary will not only provide an understanding of different national cultures and attitudes but also improve an individual's know who and therefore establish unity and common sense of purpose necessary for the property implementation of global programs.
A firm's international compensation program has to be effective in:
(1) providing an incentive to leave the home country on a foreign assignment;
(2) maintaining a given standard of living;
(3) taking into consideration career and family needs; and
(4) facilitating reentry into the home country49. To achieve these objectives firms pay a high premium beyond base salaries to induce managers to accept overseas assignments.
The costs to the firm are 2 to 2.5 times the costs of maintaining a manger in a comparable position at home U.S. firms traditionally offer their employees more high value perks, such as bigger apartments50.
The compensation of the manager overseas can be divided into two general categories:
(1) base salary and salary related allowances and
(2) no salary related allowances.
Although incentives to leave home are justifiable in both categories, they create administrative complications for the personnel department in tying them to packages at home and elsewhere. As the number of transfers increases firms develop general policies for compensating the manager rather than negotiate individually on very aspect of the arrangement.
Base Salary And Salary Related Allowances
A manger's base salary depends on qualifications, responsibilities and duties just as it would for a domestic position. Furthermore , criteria applying to merit increases, promotions, and other increases are administered as they are domestically. Equity and comparability with domestic positions are important especially in ensuring that repatriation will not cause cuts in base pay51. For administrative and control purposes the compensation and benefits function in multinational corporations is most often centralized52.
The cost of living varies considerably around the world. The purpose of thecost of living allowance (COLA) is to enable the manager to maintain as closely as possible the same standard of living that he or she would have at home.
The foreign service premium is actually a bribe to encourage a manager to leave familiar conditions and adept to new surroundings. Although the methods of paying the premium vary as do its percentages most firms pay it as a percentage of the base salary, forward percentage is a sliding scale by amount 15 percent of the first $20,000, then 10 percent and sometimes a ceiling beyond which a premium is not paid. Another variation is by duration with the percentages decreasing with every year the manger spends abroad. Despite the controversial nature of foreign service premiums paid at some locations, they are a generally accepted competitive proactive. Global Learning Experience illustrates the various compensation adjustments necessary to relocate a U.S. executive to Tokyo.
The environments in which a manager will work and the family will live vary dramatically. To compensate for this type of expense and adjustment firms pay hardship allowances. These allowances are based on U.S. State Department Foreign Post Differentials. The higher allowances typically include a danger pay added to any hardship allowance53.
Housing costs and related expenses are typically the largest expenditure in the expatriate manager's budget. Firms usually provide a housing allowance commensurate with the manager's salary level and position. When the expatriate is the country manager for the firm the housing allowance will provide for suitable quarters in which to receive business associates. In most cases firms set a range within which the manager must find housing for common utilities, firms either provide an allowance or pay the costs outright.
One of the major determinates of the manager's lifestyle abroad is taxes. A. U. S. manager earning $10,000 in Canada would pay nearly $40,000 in taxes in excess of $10,000 more than in the United States. For this reason, 90 percent of U.S. multinational corporations have tax equalization plans. When a manager's overseas tax's are higher than at home the firm will make up the difference. However in countries with a lower rate of taxation the company simply keeps the difference. The firm rationalization is that it does not make any sense for the manager in Hong Kong to make more money than the guy who happened to land is Singapore54.
No salary Related Allowances
Other types of allowances are made available to ease the transition into the period of service abroad55. Typical allowances during the transition stage include:
(1) a relocation allowance to compensate for the additional expense of a move such as purchase of electric converters:
(2) a mobility allowance as an incentive to managers to go overseas usually paid in a lump sum and as a substitute for the foreign service premium;
(3) allowance related to housing such as home sale or rental protection, shipment and storage of household goods, or provision of household furnishings in overseas locations:
(4) automobile protection in terms of covering possible losses on the sale of a car or cars at transfer and having to buy overseas, usually at a higher cost:
(5) travel expenses using economy class transportation except for long flights and:
(6) temporary living expenses which may become substantial if housing is not immediately available as for the expatriate family that had to spend a year at a hotel in Beijing foe example.
Education for children is one of the major concerns of expatriate families. Free public schooling may not be available and the private alternatives expensive. In many cases children may have to go to school in a different country. Firms will typically reimburse for such expenses in the form of an education allowance. In the case of college education, firms reimburse for one round trip airfare every year leaving tuition expenses to the family.
Returning home may evoke mixed feelings on the part of the expatriate and the family. Their concerns are both professional and personal. Even in two years dramatic changes may have occurred not at home but also in the way the individual and the family perceive the foreign environment. At worst reverse culture shock may emerge.
The most important professional issue is finding a proper place in the corporate a research. See Global Learning Experience if no provisions have been made, a returning manager may be caught in a holding pattern for an intolerable length of time. For this reason Dow Chemical for provides each manager embarking on an overseas assignment with a letter that promises a job at least equal n responsibility upon return. Furthermore because of their isolation assignments abroad mean greater autonomy and authority than similar domestic positions. Both financially and psychologically, many expatriates find the overseas position difficult to give up. Many executive perks such as club membership will not be funded at home For financial reasons for many officers of the U.S. and Foreign Commercial Service dread a summons for a two year tour in the United States.
This alternative is not an attractive one for the company, which stand to lose valuable individuals who could become members of an international corp. of managers. Therefore planning for repatriation is necessary57. A four step process can be used terms of environmental constraints and corporate objectives making sure that the latter are realistically defined. The second stage is preparation of the individual for an overseas assignment, which should include a clear understanding of when and how repatriation takes place. During the actual tour the manager should be kept abreast of developments at headquarters especially in terms of career paths. Finally during the actual reentry, the manager should receive intensive organizational reorientation reasonable professional adjustment time and counseling for the entire family on matters of for finance. A program of this type allows the expatriate to feel a costs bond with headquarters regardless of geographical distance.
More by this Author
Financial management is a broad term that covers all business decisions regarding cash flows. These cash flows extend from the funding of the entire enterprise to the preservation of firm liquidity given the gaps in...
Domestic firms that specialize in performing global business services as commission representatives as distributors are known as export management companies (EMCs). Although few directories listing EMCs are available,...
Industrialization plays a vital role in the economic development of an underdeveloped country. The historical facts reveal that all the developed countries of the world broke the vicious circle of underdevelopment by...