ihrm_1[1]

Use with International Human Resource Management ISBN 1-84480013-X

Published by Thomson Learning © Peter Dowling and Denice Welch 1/1

Chapter 1Introduction:

The enduring context of IHRM



Chapter objectives

In this introductory chapter, we establish thescope of the textbook. We:• define key terms in international human

resource management (IHRM)• outline the differences between domestic

and international human resource management and the variables that moderate these differences(cont.)



Chapter objectives (cont.)

• discuss trends and challenges in the global work environment and the enduring context in which IHRM functions and activities are conducted – including the way in which forces for change affect the operations of the internationalizing firm and have consequences for the management of people in the multinational context.



Figure 1-1: Inter-relationships between approaches in the field



Figure 2-1: A model of IHRM



HR activities slide 1

• Human resource planning• Staffing

–Recruitment–Selection–Placement

• Training and development



HR activities slide 2

• Compensation (remuneration) and benefits

• Industrial relations

Figure 2-2: Stages of internationalization



What is an expatriate?

• An employee who is working and temporarily residing in a foreign country

• Some firms prefer to use the term ‘international assignees’

• Expatriates are PCNs from the parent country operations, TCNs transferred to either HQ or another subsidiary, and HCNs transferred into the parent country



Figure 1-3: International assignments create expatriates



Differences between domestic and international HRM

• More HR activities• The need for a broader perspective• More involvement in employees’ personal

lives• Changes in emphasis as the workforce mix

of expatriates and locals varies• Risk exposure• Broader external influences



Figure 1-4: Variables that moderate differences between domestic and international HRM



The ‘top ten’ multinationals

1. Rio Tinto (UK/Australia)

2. Thomson Corporation (Canada)

3. ABB (Switzerland)4. Nestlé (Switzerland)5. British American

Tobacco (UK)

6. Electrolux (Sweden)

7. Interbrew (Belgium)

8. Anglo American (UK)

9. AstraZeneca (UK)

10. Philips Electronics (The Netherlands)

UNCTAD Index of Transnationality



Figure 1-5: Factors influencing the global work environment



Forces for change

• Global competition

• Growth in mergers, acquisitions and alliances

• Organization restructuring

• Advances in technology and telecommunication



Impacts on multinational management

• Need for flexibility

• Local responsiveness

• Knowledge sharing

• Transfer of competence



Managerial responses

• Developing a global ‘mindset’

• More weighting on informal control mechanisms

• Fostering horizontal communication

• Using cross-border and virtual teams

• Using international assignments


Published by Thomson Learning © Peter Dowling and Denice Welch

Models of IHRM

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DEVELOPMENT OF HRM CONCEPT

HRM CONCEPTS

US MODEL THE UK MODEL THE JAPANESE MODEL

Matching Model

Harvard Model

David Guest John Storey



THE US MODEL

1. THE MATCHING MODEL: the human resource system and organisation structure should match with organisational strategy.

2. THE HARVARD MODEL:• HRM is based on central philosophy and strategic

vision• HRM involves all management decisions and action

that affect the nature of the relationship between the organisation and its employees.

• A longer term perspective in managing people and consideration of people as potential assets rather than variable costs.

• Mutual interests.



Harvard Model

• The Harvard approach recognizes an element of mutuality in all businesses, a concept with parallels in Japanese people management, as we observed earlier. Employees are significant stakeholders in an organization. They have their own needs and concerns along with other groups such as shareholders and customers.'

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Harvard Model

• The Harvard Map or model outlines four HR policy areas:

1. Human resource flows - recruitment, selection, placement, promotion, appraisal and assessment, promotion, termination, etc. 2. Reward systems - pay systems, motivation, etc. 3 .Employee influence - delegated levels of authority, responsibility, power 4 .Work systems - definition/design of work and alignment of people.

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THE CRITICISMS

MATCHING MODEL: The concept of FIT has been criticised on a number of fronts:

• A number of writers have commented that business strategy dictates HR strategy. Business strategy is formulated in a rational way, by the top down approach.

• A perfect match between business strategy and Hr strategy might not be to the advantage of the organisation as a whole.

• It ignores the complex nature of human beings and the possibility that workers and their unions might influence strategic planning.



Contextual Model

Hendry , Hendry and Pettigrew proposed this model .

It is based on the premise that organizations can follow a number of pathways in order to achieve the same results.

This is because of the existence of a number of linkages between external environment and internal organizational context

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5P MODEL

Philosophies

Policies

Programmes

Processes

Practices

The model shows strong interrelatedness of these activities and explains the significance



European Model

It is based on the argument that European organizations are constrained at both International and National Level culture and legislation.



Internationalization

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Figure 2-1: Management demands of international growth



The path to global status

• Causes structural responses, due to:– Strain imposed by growth and geographical

spread– Need for improved coordination and control

across business units– The constraints imposed by host-government

regulations on ownership and equity

• Evolution path common but not normative



Figure 2-2: Stages of internationalization



Stages of internationalization: Exporting

• Typically the initial stage of international operations– Usually handled by an intermediary (foreign

agent or distributor)– Role of HR department unclear at this stage



Figure 2-3: Export department



Sales subsidiary

• Replacing foreign agents/distributors with own through sales or branch offices/subsidiaries

• May be prompted by:– Problems with foreign agents– More confidence in international activities– Desire for greater control– Give greater support to exporting activities

• PCNs may be selected, leading to some HR involvement



Figure 2-4: Sales subsidiary



International division

• Creation of a separate division in which all international activities are grouped

• Resembles ‘miniature replica’ of domestic organization

• Subsidiary managers report to head of international division

• Objectives regarding foreign activities may determine approach to staffing of key positions– Expatriate management role of corporate HR



Figure 2-5: International division



Global product/area division

• Strain of sheer size may prompt structural change to either of these global approaches

• Choice typically influenced by: – The extent to which key decisions are to be

made at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

– Type or form of control exerted by parent over subsidiary



Figure 2-6a: Global product division Figure 2-6b: Global area division



The matrix

• An attempt to integrate operations across more than one dimension

• Violates Fayol’s principle of unity of command

• Considered to bring into the management system a philosophy of matching the structure to the decision-making process



Figure 2-7: The matrix



Problems with the Matrix Bartlett and Ghoshal

• Dual reporting

• Proliferation of communication channels

• Overlapping responsibilities

• Barriers of distance, language, time and culture

Leads to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it virtually impossible to resolve conflicts and clarify confusion



Beyond the matrix

• Less hierarchical structural forms– Heterarchy– Transnational– Networked firm



Figure 2-8: The networked organization



Figure 2-9: US, European and Japanese structural changes



Control mechanisms

“Globalization brings considerable challenges which are often under-estimated….

Every morning when I wake I think about the challenges of coordinating our operations in many different countries”

Quote by Accor CEO



Figure 2-10: Control mechanisms



Mode of operation and HRM

• Not just subsidiary operations• Firms may also adopt contractual modes

– Licensing– Franchising– Management contracts– Projects

• And/or cooperative modes (such as joint ventures)



Figure 2-11: Linking operation mode and HRM



Interfirm linkages

• Alliance (strategic alliance, cooperative venture, collaborative venture or corporate linkage)

• A form of business relationship that:– Involves some measure on interfirm integration– Stops short of a full merger or acquisition



HR factors

• HR issues and activities that affect the successful functioning of international joint ventures include:– Assigning mangers to the joint venture– Evaluating their performance– Handling aspects pertaining to career path – Compensation benefits



‘If a global company is to function successfully, strategies at different levels need to inter-relate.’

‘An organization’s [HRM] policies and practices must fit with its strategy in its competitive environment and with

the immediate business conditions that it faces.’

‘The [HR-business strategy] alignment cannot necessarily be characterized in the logical and sequential way

suggested by some writers; rather, the design of an HR system is a complex and iterative process.’

Strategic Human Resource Management



A managerial process requiring human resource policies and practices to be linked with the strategic objectives of the organization.




What determines how HR strategy is formulated?

Does HR strategy really matter?

How do corporate decisions impact on HRM?

How does HRM impact on the ‘bottom line’?

Key questions



Strategy:

A specific pattern of decisions and actions undertaken by the upper

echelon of the organization in order to accomplish performance goals.

Strategic Management



Strategic Management:

A continuous activity that requires a constant adjustment of three major

interdependent poles:the values of senior management,

the environment,the resources available.



The three traditional poles of a strategic plan



Environment as a mediating variable for human resource management strategies



Integration of business strategy and HR strategy:

• Linking of HR policies and practices with the strategic management process of the organization

• Internationalization of the importance of HR on the part of line managers

• Integration of the workforce into the organization to foster commitment




HR and Market Strategy AlignmentMarket Strategy

Cost Leadership

Product or Service Differentiation

Customer Intimate or Mass Customization

Talent Resource

Innovation Leader

Example Wal-Mart Nike Amazon IBM 3M

HR Strategy

Short term performance measures, centralized

Selection, development, retention and reward for creativity and innovation

Technical Expertise is most critical talent

Talent is the product; flawless execution; find and retain the :best value: employees

Creativity and performance

Talent Acquisition

Lowest cost that meets minimum requirements

Creative and innovative

External for new skills, retain technical employees

Specific skills

External for new ideas, retain high impact employees

Performance Management

Productivity and efficiency

Performance-based - creativity

Performance-based - technical

Closely measure

Performance-based - innovation

Talent Engagement

Alignment Retain high impact at risk employees

Retain high impact at risk employees



Training and development

Process Improvement

Intensive- creativity

Intensive for technical employees

Intensive for best employees

Intensive- creativity

Total Rewards

Lag Lead on innovative, creative

Lead mkt. on tech, lag on others

Include incentives, best value

Lead on innovative, creative


Published by Thomson Learning © Peter Dowling and Denice Welch 10-6Copyright 1998 Prentice-Hall Inc.

Factors influencing IHRM strategy

• Corporate International Strategy

• Level of Development in Foreign Locations

• Diversity of product or service

• Organizational life cycle & experience



HR Strategies:

The patterns of decisions regarding HR policies and practices used by management to design, work and select, train and develop, appraise, motivate and control workers.

HR Strategy models



Resource-based model:

The sum of people’s knowledge and expertise, and social relationships, has the potential to create competitive advantage.

Exploits the distinctive competencies of a work organization (its resources and capabilities).

Leadership capabilities are critical to harnessing the firm’s human assets.

HR Strategy models



Resource-based model



Integrative model:

Integrates management control model with reward-effort exchange.

Characterizes two main dimensions of HR strategy: acquisition & development, locus of

control.

Four dominant types of HR strategy: commitment, collaborative, paternalistic,

traditional.

HR Strategy models



Integrative model



Commitment HR strategy focuses on the internal development of employee’s competencies and outcome control.

Traditional HR strategy focuses on the external recruitment of competencies or process-based controls.

Collaborative HR strategy subcontracts work to external independent experts giving autonomy and evaluating performance on end results.

Paternalistic HR strategy offers learning opportunities and internal promotion as trade for compliance with process-based control mechanisms.

Integrative model



Limitations:

• Focus on strategic decision-making

• Absence of internal strategies

• Conceptualization of managerial control

Evaluating SHRM &HR Strategy Models



Important themes:

• HR practices and performance

• Re-engineering organizations and work

• Leadership

• Workplace learning

• Trade unions

Dimensions of SHRM



Copyright 2003-2006, Chris Chan71

Main challenges in IHRM• High failure rates of expatriation and repatriation• Deployment – getting the right mix of skills in the

organization regardless of geographical location• Knowledge and innovation dissemination – managing

critical knowledge and speed of information flow• Talent identification and development – identify

capable people who are able to function effectively• Barriers to women in IHRM• International ethics• Language (e.g. spoken, written, body)



Copyright 2003-2006, Chris Chan72

Main challenges in IHRM

• Different labor laws• Different political climate• Different stage(s) of technological advancement• Different values and attitudes e.g. time,

achievement, risk taking• Roles of religion e.g. sacred objects, prayer,

taboos, holidays, etc• Educational level attained• Social organizations e.g. social institutions,

authority structures, interest groups, status systems



Culture

• Culture – a community’s set of shared assumptions about how the world works and what ideals are worth striving for.

• Culture can greatly affect a country’s laws.

• Culture influences what people value, so it affects people’s economic systems and efforts to invest in education.

• Culture often determines the effectiveness of various HRM practices.



Culture (continued)

• Cultural characteristics influence the ways members of an organization behave toward one another as well as their attitudes toward various HRM practices.

• Cultures strongly influence the appropriateness of HRM practices.

• Cultural differences can affect how people communicate and how they coordinate their activities.



Hofstede’s Five Dimensions of Culture

1. Individualism/Collectivism Describes the strength of the relation between an individual and other individuals in the society.

2. Power Distance Concerns the way the culture deals with unequal distribution of power and defines the amount of inequality that is normal.

3. Uncertainty Avoidance Describes how cultures handle the fact that the future is unpredictable.

4. Masculinity/Femininity The emphasis a culture places on practices or qualities that have traditionally been considered masculine or feminine.

5. Long-term/Short-term Orientation

Suggests whether the focus of cultural values is on the future (long term) or the past and present (short term).



In Taiwan, a country that is high in collectivism, coworkers consider themselves more as group members instead of individuals.



Culture (continued)

• Organizations must prepare managers to recognize and handle cultural differences.– Recruit managers with knowledge of other cultures– Provide training

• For expatriate assignments, organizations may need to conduct an extensive selection process to identify individuals who can adapt to new environments.

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