CHAPTER 2I HUI4AN RESOURCE MANAGEMENT 903 Case Office Equipment Company (OEC) director (a U. S. national) of the office Equipment Company (oEc) in Lima, Peru (see Map 2l . l), announced suddenly that he would leave within one month. The company had to find a replacement. OEC manufactures a wide variety of small office 1997, the managing ln equipment (such as copying machines, recording machines, mail scales, and paper shredders) in eight different countries and distributes and sells products worldwide. lt has no manufacturing facilities in Peru but has been selling and servicing there since the early 1970s.
OEC first tried selling in Peru through independent importers but quickly became convinced that in order to make sufficient sales it needed to have its own staffthere. Despite Peru's political turmoil, which at times has bordered on being a full-scale civil war, OEC'S operation there (with about 100 employees) has enjoyed good and improving sales and profitability. OEC is constructing its first factory in Peru that is scheduled to begin operations in early 1999. This factory will import components for personal computer printers and assemble them locally.
Peru offers an abundant supply of cheap labor, and the assembly oPeration will employ approximately 150 people. The government will allow up to I0 percent of the output to be sold locally. By assembling locally and then exporting, oEC expects to be able to ward off trade restrictions on the other office equipment it imports for sale within Peru. This plant! construction is being supervised by a U. S. rechnical ream, and a U. S. expatriate will be assigned to direct the production. This director will report directly to OEC's U. S. eadquarters on all production and quality-control matrers but will rePort to the managing director in Peru on all other matters, such as accounting, finance, and labor relations. OEC, by policy, will replace the exiting managing director with an internal candidate. The company employs a combination of home-, host-, and third-country nationals in top positions in foreign countries, and managers commonly rotate among foreign and U. S. locations. ln fact, it has been increasingly evident to OEC that international experience is an important factor in deciding who will be appointed to top corporate positions.
The sales and service facility in Peru reports to a Latin American regional office located in Coral Gables, Florida. A committee at this office, charged with selecting the new managing direc- tor, quickly narrowed its choice to five candidates. Tom A thirty-year OEC veteran, Zimmerman is well versed in all the technical and sales aspects required in the job. He has never worked abroad for OEC but has visited various of the company's foreign facilities as part of sales teams. He is consid- Zimmerman ered competent and will retire in about four and a half years.
Neither he nor his wife speaks Spanish. Their children are grown and living with their own children in the United States. Zimmerman currently is in charge of an operation that is aboutthe size of that in Peru after the new factory begins operating. However, Zimmerman's present position will become redundant because the operation he heads is being merged with another. Brett Harrison Harrison, 40, has spent fifteen years at OEC. Considered highly compehas tent and capable of moving into upper-level management within the next few years, he 904 PART 7 FUNCTIONAL I'. ANAGEI'1 ENT, OPERATIONS. AND CONCERNS PERU Population 22. 3 million Monetary unit New sol Major languages Span ish Quech ua Aymara Largest city Lima Major industrial areas Arequipa Chimbote Cuzco lquitos Lima Talara Map 2l. l Peru never been based abroad but has worked for the last three years in the Latin American regional office and frequently travels to Latin America. Both he and his wife speak Spanish adequately, and their two children, ages I 4 and I 5, are just beginning to study the His wife holds a responsible marketing position with a pharmaceuticals company.
Carolyn language. Moyer Moyer joined OEC twelve years ago after getting her MBA from a pres- tigious university. 4t37, she has already moved between staffand line positions of growing responsibility. For two years, she was second in command of a product group that was aboutthe size of the newly expanded one in Peru. Her performance in that. postwas considered excellent. Currently, she works on a planning staffteam. When she joined OEC, she indicated her interest in eventual international responsibilities because of her undergraduate major in international affairs.
She has recently expressed interest in international duties because of a belief it will help her advancement. She speaks Spanish well and is unmarried. Francisco Cabrera Cabrera, 35, currently is an assistant managing director in the larger Mexican operation, which produces and sells for the Mexican market. A Mexican cit- for OEC in Mexico for all his twelve years with the company. He holds an MBA from a Mexican university and is considered to be a likely candidate to head the Mexican operation when the present managing diiector retires in seven years. He is married with four children (ages 2 to 7) and speaks English adequately.
His wife does not work izen, he has worked outside the home or speak English. CHAPTER 2I HUMAN RESOURCE MANAGEMENT 905 Juan Moreno At27, Moreno is assistant to the present managing director in Peru. He has held that position since joining OEC upon his U. S. college graduation four years ago. Unmarried, he is considered competent, especially in employee relations, but lacking in experience. He had been successful in increasing OEC's sales, in part because he is well connected with local families who can afford to buy new office equipment for their businesses. Questions l.
Which candidate should ihe committee choose for the assignment, and whyl 2. What problems might each candidate encounter in the position? 3. 4. How might OEC go about minimizing the problems that each candidate would have in managing the Peruvian operations? Calculate an estimated compensation package for each candidate based on the following additional inf6rmation: Present annual salaries: Zimmerman, U5$70,000; Harrison, US$75,000; Moyer, US$65,000; Cabrera, M$ I 24,000; Moreno, 557,000 a Exchange rates: $ I: M$3. 1 (Mexican pesos);$ I: S 1. 9 (Peruvian new sols) o f income for a family of one, 40 percent for a family of two, 45 percent for a family of four, and 50 percent for a family of five or more: Washington, D. C. : 100; Lima : 86;Mexico City :77 U. S. Department, of State foreign-service premiums for Peru: hardship : l5 percent; danger: l5 percent U. S. Department of State cost-of-living index based on items covering 35 percent a a o Schooling allowance: age 6-12 : US$5000;age 3-18 : US$9000 Average tax rates: Mexico : 20 percenq United States : 25 percent; Peru : I Housing allowance (nontaxable): single : US$ 12,100;family : US$ 15,000 0 percent Chapter Notes l. The data for the case were taken from Edwin McDowell, "Making lt in America: The Foreign-Born Executive," New York Times, June I, 1980, Section 3, p. l+; Don Whitehead, The Dow Story (New York McGraw-Hill, I968); "Lundeen Urges More Aid for Universities," Chemrcal Marlceting Reporter, Yol. 224, No. 19, November 7, 1983, p. 3+;Paul L. Blocklyn, "Developing the lnternational Executive," Personnel, Vol. 66, March 1989, pp. September 14,1992, p. 5; "Popoffon Challenges for Dow and for the lndusvy|' Chemical Wee( May 18, 1994, pp. 26-28; and Susan J.
Sinsworth, "lssues Management ls Central to Frank Popoff's Globalization Strategy," Chemlcol Engineering News, Vol. 72, No. 21, May 23, 1994, pp. 25--29. 2. Gary R. Oddou and Mark E. Mendenhall, "Succession Planning for the 2 l st Cen- European Management lournol, Yol. I 4, No. 4, August 1996, pp. 365-373. 4. "Globesmanship," Across the Board, Yol. 27, Nos. l, 2, January-February 1990, p. 26, quoting Michael Angus. 5. Daniel Ondrack, "lnternational Transfers of Managers in North American and European MNEs," Journol of lnternailonol Business Studies, Vol. 16, No. 3, Fall 1985, pp. l-19;andJohn M.
Hannon, lngChung Huang, and Bih-Shiaw Jaw, "lnternational Human Resource Strategy and Its Determinants: The Case of Subsidiaries in Taiwan,"Journal of lnternotionol Business Studies, Vol. 26, No. 3, Third Quarter 1995, pp. 53 l-554. 4447; "Globesmanship," Across the Boor4 Vol. 27, Nos. l,2,January-February 1990, pp. 24-34;William Storck, "Dow Chemical Changes Executive Lineup," Chemical ond Engineering News, tury: How Well Are We Grooming Our Future Business Leadersl" Business Horizons, January-February I 99 I, pp. 26-34. 3. Gordon Petrash, "Dow's Journey to a Knowledge Value Management Culture,"