International human resources management (IHRM) is the process of selecting, training, developing, and compensating personnel in overseas positions. This paper will examine each of these activities in Japan. Before doing so, however, it is important to understand the general nature of this overall process, which begins with selecting and hiring. There are three basic sources of personnel talent that MNCs can tap for positions. One is home country nationals, who reside abroad but are citizens of the parent country of the multinational. These individuals are typically called expatriates.
An example is a U. S. manager assigned to head an R&D department in Tokyo for IBM Japan. A second is host country nationals, who are local people hired by the MNEs. An example is a British manager working for Ford Motor in London. The last is a third country national; who are citizens of countries other than one in which the MNC is headquartered or the one in which they are assigned to work by the multinational. An example is a French manager working for Mercedes-Benz in the United States. Staffing patterns may vary depending on the length of time that the MNE has been operating.
Many MNE will initially rely on home country managers to staff their overseas unites, gradually putting more host country nationals into management positions as the firm gains experience. Another approach is to use home country national in less developed countries and employ host country nationals in more developed regions. This pattern has been found fairly prevalent among U. S. and European MNEs. A third pattern is to put home country manager in charge of a new operation, but once the unit is up running, turn it over to a host country manager.
As the firm begins initial manufacture in that country, the use of expatriate managers and third country nationals begins to increase. As the company moves through the ensuing stages of internationalization, the nationality mix of the mangers in the overseas unit continues to change to meet the changing demands of the environment (Brandt, 1991, pp. 34-44)In some cases staffing decisions are handled uniformly. For example, most Japanese MNEs rely on home country managers to staff senior-level positions.
Similarly, some European MNEs assign home country managers to overseas unite for their entire career. U. S. MNEs typically view overseas assignments as temporary, and so it is more common to find many of these expatriates working under the supervision of host country managers. The size of the compensation package also plays an important role in personnel selection and placement. As the cost of sending people overseas has increased, there has been a trend toward using host country or third country nationals who know the local language and customs.
For example, in recent years many U. S. multinationals have hired English managers for the top positions at subsidiaries in former British colonies such as Jamaica, India, and Kenya (Hodgetts & Luthan, 1991, p. 231)The above factors influence IHRM strategies and help MNEs to integrate an international perspective into their human resource policies and practices. Profile of JapanJapan consists of four main islands (Hokkaido, Honshu, Shikoku, and Kyushu) and a number of smaller islands. The country is approximately the size of California, and over the last two decades it has become a major industrial power.
Today the Japanese yen is one of the strongest currencies in the world as the nation s massive international trade has helped it to maintain vigorous, sustained economic growth. Political and Legal SystemThe branches of the Japanese government are very similar to those in the United States: legislative, executive, and judicial. Legislative power is vested in the Diet, which consists of a popularly elected House of Representatives and House of Councilors. There are five major political parties.
The strongest of these is the Liberal-Democratic party, which is conservative and generally supported by the tow most powerful groups in the country: business and agriculture. Population and Social PatternsThere are approximately 125 million people in Japan. But because much of country is mountainous and unsuitable for living, the population is densely concentrated. Approximately 20 percent of the people live in or around Tokyo. The standard dialect of Japanese is understood throughout the country, even though there are some local differences.
English is the most frequently taught foreign language, and in business circles visitors can generally communicate in English, although involved negotiations typically require an interpreter. It is important to remember that Japan is a triad power. The country has experienced the fastest and longest period of sustained economic growth in world history over the past 30 years. Although the rate of growth began to slow in 1992 and 1993 and trade surpluses may soon start to decline, Japan s momentum will keep it going in to the twenty-first century.
Indeed, this century may be the pacific century, with other Asian nations following the Japanese model of rapid growth and development (Sanger, 1994, p. 29). Managing on-site operations requires attention to a number of importance areas. Primary among these are recruiting which is one of the first, and certainly the most difficult tasks for subsidiaries managing on-site operations in Japan is that of recruiting personnel. Unlike the United States where top managers are often recruited from other firms, in Japan it is difficult to get executives to change companies.
Japanese workers are closely aligned with their employers and take pride in their identity as company employees. One of the most effective strategies is first to recruit a top manager and other members of management team. They in turn will work to attract other managerial and key personnel. Commenting on the challenge of recruiting these people, two Japanese experts have noted: Hiring a good manager is not easy; it is an intricate and slow-moving process. It often takes six months to a year (or more) after initial agreement with an individual before he or she actually comes on board.
Hiring managers from large Japanese companies, especially when they are your customers, is a sensitive situation, far more so than in America. The hiring dance typically begins with one of your company s top executives meeting with the candidate s employer and even his family to request permission to negotiate with individual and to provide assurance of his future position, security, and opportunities. From there, several meetings must take place over a long period of time One of the prime sources of recruiting is college graduates. Every year recruiters from industries work feverishly to attract these individuals.
The problem for American (or foreign) MNCs is that most graduates of the first-tier universities such as Tokyo University, Kyoto University, and Waseda University prefer to work for Japanese companies. In order to recruit effectively in Japan, the foreign firm needs to gain acceptance in the academic community. College professors must be won over if a company is to be successful in generating interest among students. This process can take many years. Many firms are now supplementing their managerial and college recruiting strategies with compensation packages that are designed to attract working women.
Included in these packages are day-care centers for young children, 1-year leave policies for new parents, higher wages, and shorter working hours. U. S. firms have been doing so well in this area that Japanese companies have now begun to respond. With the growing labor shortage in Japan and the fact that by the early 1990s Japanese women were making less than 60 percent of their male counterparts, such competitive measures were predictable. The future will see even more vigorous recruiting competition between Japanese and locally based foreign subsidiaries (Rehfeld, 1990, vol. 68). Selection and Repatriation of Expatriates
Two of the major human resources management challenges facing MNEs are those of selecting qualified people for Japanese assignment and, in the case of home country nationals, then effectively repatriating them into work force upon their return. Each presents significant challenge. International screening criteria are those factors that are used to identify individuals regarded as most suitable for our Japanese assignment. Some MNEs use an executive list, others rely on only handful factors. There are a number of screening criteria that are commonly used in determining whom to send to Japan.
These criteria focus on both individual and family considerations. They are:- Adaptability: One screening criterion is an individual ability to adapt to culture change. Asia is a polyglot of nations and cultures, so it is difficult to generalize about its diverse peoples and their mindsets. For North Americans perched on the Pacific rim, Japan is the epitome of the Far East and its seeming enigmas. The Japanese may seem a paradox and source of both confusion and wonderment. Their feudal society lasted until the nineteenth century when Commodore Perry s voyage forced open Japan to the West.
Typically a series of changing images about the Japanese people and culture emerge, and can be grouped around stages. The first is pre-World War II, when the Japanese were admired for their ambitious effort to catch up to European and American industrialization. At this stage and the next, many viewed Japanese diplomatic endeavors as devious (Managing cultural differences, Harris & Moran). – Self-reliance: Managers who are posted to overseas assignment must be self-reliant and independent because they often have to make on-the-spot decisions without consulting the home office.
Age, experience, and education: MNEs often find that young mangers are eager for international assignments and want to learn more about other cultures. It is important to hire an expatriate who is welling and interested in learning about the Japanese culture. – Motivation and leadership: another selection criterion is the individual s desire to work in Japan and the person s potential commitment to the new job. Many people who are unhappy with their position at home will consider an overseas assignment, but this is not sufficient motivation.
Motivational factors include a desire for adventure, a pioneering spirit, a desire to increase one s chances for promotion, and the opportunity to improve one s economic status. – Repatriation of expatriates: For U. S. expatriates an overseas assignments is usually 2 to 3 years, although some companies are now encouraging their people to consider making the international arena a lifetime career choice. Repatriation is the process of returning home at the end of an overseas assignment. Training and DevelopmentTraining is the process of altering employee behavior and attitudes in a way that increases the probability of goal attainment.
Managerial development is the process by which managers obtain the necessary skills, experiences, and attitudes that they need to become or remain successful leaders. Training programs are designed to provide individuals who are going overseas with information and experience related to local customs, cultures, and workforce. Development is typically used to help managers improve their leadership skills, keep up-to-date on the latest management developments, increase their overall effectiveness and maintain high job satisfaction.
The following programs should be used to prepare expatriates for Japan:-Environmental briefings used to provide information about such things as geography, climate, housing and schools. -Culture orientation designed to familiarize the individual with culture institutions and value systems of the host country. -Cultural assimilators using programmed learning approaches designed to provide the participants with intercultural encounters. -Language training. It is important to teach expatriates the basic Japanese language as it could help achieving better relationships with Japanese who don t speak English.
CompensationIn recent years compensation has become a primary area of IHRM attention. On the one hand, multinationals want to hire the most competent people. On the other hand, they want to control costs and to increase profits. Sometimes these two objectives are not compatible; it can be expensive to relocate an executive overseas. A typical international compensation package includes base salary, benefits, and allowance. Additionally, most packages address the issue of tax protection and/or tax equalization. Base salary is the amount of cash compensation that an individual receives in the home country.
This salary is typically the benchmark against which bonuses and benefits are calculated. For example, the base salary of the typical upper-middle manager in the United States in 1991 was $125,000; in Japan it was $129,056. The salary is usually paid in either home currency, local currency, or a combination of the two. Benefits often make up a large portion of the compensation package. Additionally, there are a number of difficult issues which typically must be resolved. These include how to handle medical coverage, what to do about social security, and how to handle the retirement package.
Some of the specific issues that receive a great deal of attention include:- Whether or not to maintain expatriates in home country programs, particularly if the company does not receive tax deduction for it. – Whether companies have the option of enrolling expatriates in host country benefit programs and/or making up any difference in coverage. – Whether host country legislation regarding termination affects entitlements. – Whether expatriates should receive home country or host country social security benefitsMost U. S. MNEs include their expatriate manger in the company s benefit program and the cost is no more than it would be back home.
Allowances are another major portion of some expatriate compensation packages. One of the most common is the cost-of-living allowance, which is a payment to compensate for differences in expenditures between the home country and the foreign location. This allowance is designed to provide the employee with the same standard of living that he or she enjoyed in the home country. This allowance can cover a wide variety of areas, including relocation, housing, education, and hardship. In terms of compensation, the MNE s objective is to ensure that the expatriate does not have to pay any additional expenses as a result of living abroad.
MNEs should evaluate more carefully the cost of sending people Japan as well as to review the expense of maintaining executive talent in the international arenas (Tung, 1990, vol. 30)OverallSocial patterns are distinctly different from those in the West. Japan is a group-oriented society. Strong emphasis is given to harmony, orderliness, and the respect of others. Social ranking and the power of obligation are both extremely important. Japan has one of the highest per capita incomes in the world. The government plays a key role in keeping the economy strong.
Japanese market is a very attractive place for many American MNEs. In order for the MNE to enter and gain acceptance of Japanese, it has to do its homework. MNEs must understand Japanese culture and the political situation in Japan. Sending expatriate is not an easy task. MNE must make sure any personnel who is going to be sent to Japan has to be trained prior to leaving to work in Japan. Training and development programs are an important part of IHRM strategies, ranging from environmental briefings to language training.