international human resource management sample content

International Human Resource Management

Ann Rennie and Rita McGee

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Published by the Chartered Institute of Personnel and Development, 151 The Broadway, London SW19 1JQ

First published 2012

CIPD 2012

The right of the CIPD to be identified as author of this Work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988

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ISBN-13 978 1 84398 306 4

The views expressed in this publication are the authors own and may not necessarily reflect those of the CIPD. The CIPD has made every effort to trace and acknowledge copyright holders. If any source has been overlooked, CIPD Enterprises

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Chartered Institute of Personnel and Development151 The Broadway, London SW19 1JQ

Tel: 020 8612 6200Email: [email protected] Website: www.cipd.co.uk

Incorporated by Royal Charter Registered charity No. 1079797

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ContentsIntroduction viThe authors xivReferences xvFurther reading xix

Section 1: Setting the strategic context: structure, roles and culture 1

Section 1.1: Making the link between global strategy and an international HR framework 3Tool 1 Some contextual theory for adding support to strategic

business cases around internationalisation 3Tool 2 PESTLE analysis worldwide 12Tool 3 PESTLE analysis examples of country-specific analyses 19Tool 4 Linking global variables to roles for international HR

professionals 34Tool 5 Linking roles to the required competencies for HR

professionals 40Section 1.2: International HR structures and capabilities 47

Tool 6 How international is your HR function? 47Tool 7 International HR policies and practices: to centralise or

decentralise? 56Tool 8 Structure and locations for HR teams 64

Section 1.3: International employee relations 69Tool 9 Gathering the necessary information for managing

international employee relations 71Section 1.4: Global HR data provision and international e-HR systems 78

Tool 10 What data is required for managing HR on a more international basis? 79

Tool 11 How can transactional e-HR be best enabled on an international basis? 85

Section 1.5: Dealing with cultural differences internationally 91Tool 12 Framing the cultural dimensions of IHRM 92Tool 13 Culture quiz 102Tool 14 Taking account of different business norms and protocols 111

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Section 2: International talent management 115Section 2.1: Planning for global talent management 115

Tool 15 Moving towards a global planning model for talent management 115

Tool 16 Different models for staffing an MNC 123Tool 17 A comprehensive guide to managing employees on a

global basis 129Section 2.2: International employees 140

Tool 18 Select for success; prevent failure 141Section 2.3: Recruiting locally employed staff 149

Tool 19 Gathering the data 149Tool 20 Attracting local talent 165

Section 3: International compensation and benefits 173Section 3.1: The psychological contract 175

Tool 21 Making the link between the psychological contract and total reward 175

Section 3.2: Expatriates 183Tool 22 Rewarding expatriate staff what strategy to

adopt? 183Tool 23 Putting together an expatriate total reward package 189

Section 3.3: Locally employed staff and other categories 196Tool 24 Total reward structures for locally recruited staff 196Tool 25 A checklist of factors to be aware of for compensating

local recruits 202Tool 26 Dealing with non-typical groups of employees 208

Section 4: International talent development 225Section 4.1: Defining and planning for talent 226

Tool 27 Defining talent for development purposes 226 27.1 Defining talent 228 27.2 Different types of career ladders 231Tool 28 Competencies friend or foe? 241Tool 29 The development plan 247Tool 30 Roles in development 257

Section 4.2: Induction/on-boarding 261Tool 31 Inducting expatriates 262Tool 32 Inducting local recruits 274

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Section 4.3: Learning for locally recruited employees 278Tool 33 Key elements 278

Section 4.4: Succession planning in an international context 285Tool 34 International succession planning 286

Section 4.5: International performance management 303Tool 35 Adapting a performance management system to translate

internationally 303Tool 36 The performance management case study 310

Section 4.6: Repatriation 313Tool 37 Supporting successful repatriation 313

Section 5: Managing for special situations 319Section 5.1: HR policies and practices for managing mergers and acquisitions 320

Tool 38 Harmonising HR and reward systems values and fairness 321

Section 5.2: Risks and crises: how to pre-empt and manage 331Tool 39 Preparing for risks: terrorism, kidnapping and other

security issues 334Tool 40 Designing an evacuation plan 343Tool 41 Relocation of an organisation in a crisis 348Tool 42 Managing corruption: designing policies and practices to

address it at an individual level 355

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IntroductionThis is the first international HRM (IHRM) toolkit published by the CIPD. This toolkit focuses on the core aspects of HRM we consider essential for all international practitioners.

We start by exploring the strategic context in Section 1. We look at structure roles and culture. In Section 2 we consider international talent management and provide an array of tools to both drive strategy and overcome the challenges of talent management on a global basis. Section 3 covers tools and techniques for rewarding an international workforce. Section 4 continues with the theme of talent management but here we focus on international talent development. Finally, in Section 5, we cover the management of special situations including tackling crises and managing a variety of risky situations.

Picture this scenario:

You are a senior HR business partner in an organisation based in the UK. It has just completed acquiring companies in Asia and the USA. You have been informed you are to be promoted to the newly established position of Group HR Director. Your initial reaction is one of excitement, but also concern that, although you are studying for the CIPDs IHRM qualifications, you have had no practical experience in dealing with IHRM issues. Furthermore, you have travelled abroad extensively but have never visited the countries where the new subsidiaries are based. You need to learn fast, but do not know where to start. You know you do not have time to read much and need to get going quickly in a more practical way so as to establish your priorities and plans for moving forward. You need some ideas and a few quick wins to get things moving.

This Toolkit is targeted at people who, like the HR manager above, are currently in HR roles in their own country and moving or contemplating a move into more of an international role. It is also useful for those already in an IHRM role, as it will help them increase their capability and range of tools and techniques to use in an international setting. Finally, it will be useful for HR consultants working in this area. It doesnt seek to replace existing textbooks or the CIPDs course on Introduction to International HRM, but rather, it complements these through providing a whole range of practical, down-to-earth tools and techniques. Not only will it assist international HR professionals to

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do their jobs well, it will ultimately help them to provide greater impact on the business than they might otherwise.

Since IHRM is so complex and vast a subject, this Toolkit could easily run to thousands of pages. Also, since this is a Toolkit, rather than a textbook, we have tried to use a variety of different tools, to appeal to different types of audiences and participants. We could have used many more examples and cases studies, but are conscious that these can date quickly. So we have restricted ourselves to those examples which illus-trate best practice and help you to construct the most relevant, practical and useful policies and practices. In many cases, we refer you to other sources of information for greater in-depth reading if you need to gather more data and examples of what best practice organisations are doing.

Finally, in order for you to understand the background to our conclusions or recom-mended tools we have included some of the IHRM theory. Not all readers will warm to the theoretical data but it is there to help explain the rationale for some tools. The tools do, however, stand alone and can be used without a need to refer to the theory. In some cases there are multiple theories but we have selected one or two examples which we feel best help to support particular ways of doing things.

A rapidly globalising world

In these days of increasing globalisation and easier mobility and communications between countries, workers are as likely to be located in Beijing, or Chennai, as they are in the UK. Think about making a phone call to enquire about a banking product, going online to chat to an expert about a problem you have with your computer, or trading on eBay, to name a few common scenarios.

International HR management1 refers to an extension of HR that relates to having people working overseas. These can be either expatriate staff, those who are recruited from or work within their own home countries (locally recruited staff), or even third-country nationals (individuals from neither the parent nor home country, but rather a third country. The kinds of organisations in which this is the case can range from those with a small office or subsidiary based abroad, to major multinational corpo-rations, international public-sector organisations, or international NGOs (charities) with sites all over the world. It can also encompass an organisation working in a joint partnership with another organisation overseas. Alternatively it could be a home-based organisation with overseas offices or a company with selected departments which are offshore.

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Any of these models makes it more likely that an HR professional is going to have to consider how he or she can best provide policies, practices and services to a diverse set of employees located in potentially very different locations and operating environ-ments. What works well in the home country may be a disaster in another for all kinds of reasons, as will be outlined later on. Without a deep knowledge of what is appropriate in one environment versus another, it is easy to make some fundamental errors of judgement and poor decisions around people management.

The differences between IHRM and HRM involve:

being unpredictable and influenced more by external factors

requiring more functions

having continuously changing perspectives

requiring more intervention in employees personal lives

being more risky.

What do we mean by international?

Throughout the Toolkit we have used the term international HRM to refer to any HR professional who is working in an organisation which operates in more than one country. However, when we refer to different types of organisations this definition does not work so well, and we debated which definitions to use to explain the different international structures within which an IHRM professional may be working. We have included below our own definitions and these are used throughout the Toolkit. We recognise that some organisations will be a hybrid of the types listed here.

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Type Explanation Examples

National with overseas subsidiaries

Some of you will be working for companies which have ambitions to open overseas subsidiaries.

Topshop is a good example of an organisation which is UK-based but which has successfully opened an operation in the USA. It has plans to expand its international agenda, which will change its status to that of a multinational corporation.

International organisations This Toolkit is called International HRM and that is the term we use when referring to HR professionals working across borders. However, in our opinion, technically an international organisation is one which is either owned by several governments (intergovernmental organisations) or include global non-profit organisations (international non-governmental organisations). The term international organisation has now fallen into everyday management use and is applied to all kinds of organisations. However, we are keeping to its original definition to distinguish such organisations from multinational corporations and enterprises.

NATO, the International Olympic Committee and the World Bank are examples of truly international organisations.

The World Bank is made up of 123 countries, which are represented on its board. (Some board members represent more than one country.)

NATO is an organisation whose membership consists of 28 countries.

The UN organisations are also included in this category.

Charities such as Medicins Sans Frontiers and Oxfam are examples of the subcategory international non-governmental organisations.

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Type Explanation Examples

Multinational corporations (MNCs) or enterprises (MNEs)

An organisation which operates in multiple countries and which derives at least 25% of its income from countries overseas. Normally the company or organisation has a home nation and has developed business overseas as it has grown, becoming more dependent on income from overseas companies.

Most MNCs are either American, European or Japanese. Leading MNCs include Nike, AOL, Toyota, Coca-Cola, Honda, Toshiba and WalMart.

MNCs and MNEs do not all look the same and they are often very different in terms of their underpinning strategy. They have a choice about whether they will operate as a global entity, which normally means that business strategy and policies are deter-mined globally and are integrated across the worldwide organisation. Alternatively they could adopt a multi-domestic strategy which allows greater autonomy to respond to local needs or culture. These are based on Porters original definitions of different types of organisations (see Tool 6 for more detail about these). Finally, a third kind of organisation is that of a transnational organisation. This is really a hybrid of Porters two types, comprising a set of independent organisations, operating independently but bound together by a common ideology and/or cross-promotion and subsidisation.

In this Toolkit we will look at both international organisations and MNCs as defined above. Case studies have been taken from the World Bank and international organisa-tions as defined by the OECD. There are also examples of MNCs and MNEs which work to a global or multi-domestic strategy.

Identify which type is dominant in your organisation and use this definition as you work through the tools, so that you can choose those tools which lend themselves more directly to your own kind of organisation.

Regardless of the type of organisation, policies, practices and HR systems must be compatible and effective across the world, and need to balance the needs, wants and desires of all the various groups of employees, whilst remaining cost-effective. Achieving the correct balance between having an integrated set of HR policies and practices while remaining sufficiently flexible to allow for differences

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in diverse business and cultural settings, is a major challenge for the global HR practitioner.

Initial scenario

To get started, lets paint a scenario that allows for an initial introduction to the topic of IHRM. This can be used as a case study if you want to develop some initial thinking in a team about what IHRM might entail. It will be used later (Tool 18) in more depth as a case study in how to handle expatriate recruitment and again (Tool 39) as an example of planning around security issues.

Case study to introduce the concepts of IHRM

An employee is being groomed for a future position at an executive level within a multinational organisation in the petrochemical industry. She has performed a variety of roles within the company, all of which were located in her home country, and in non-technical areas. The organisations policy is for each individual on its fast track to occupy at least one position overseas, running a subsidiary or overseas office.

The individual was offered a position in a predominantly Arabic-speaking and Muslim North African country. It was a relatively new location for the organisation. It had opened an office there because oil had recently been discovered offshore and there was a great opportunity to drill for oil and share in the proceeds with the government.

The employee had not been briefed in any way about the country, its security concerns or politics, only about the exciting oil partnership deal. She had decided that as it was located close to Europe, she could fly back to her home country fairly easily if required. With a husband willing to take a leave of absence, and her young children prepared, she was all set.

A few weeks before starting her new assignment, she travelled to the country in question. Her first meeting was with the US ambassador (there was no UK embassy in the country), who warned her that her forthcoming appointment was already widely known about, and not just in a positive way. She was already apparently on the radar of Al-Qaeda, which was known to be operating within

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the country. Whats more, her place of residence was right next to the TV station, which had been taken over recently during a coup dtat.

To make matters worse, on meeting with the newly appointed oil minister, he announced that the formula for the royalties split was being amended, so that her organisation would receive less than what had been agreed upon initially, so it seemed she would face a tough challenge in dealing with the government.

The employee met with a couple of locally recruited staff to get acquainted with them in advance of her assignment. The employees turned out to be contractors, and all appeared to be relatives of government ministers, their appointments ratified by the government. None spoke English and no one had any expertise in the oil industry.

Finally, the employee discovered that there were no schools which provided schooling in English or even French. Arabic was the national language. With small children, she had assumed there would be plenty of English-speaking nannies and teachers. As for her husband, who had planned to take leave of absence from his job, it transpired that the government was not granting entry visas for anyone other than direct employees working for organisations that had contracted with the government.

What was the employee to do?

What should the employee have done differently? What should HR have done? What policies, steps, and practices should it have had in place to inform, educate and assist the employee before accepting the position? In your view, was this right kind of appointment for her? If not, why not? If yes, what kind of ongoing support and practices could the parent organisation have put in place to assist the employee and make the assignment a success?

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Suggestions for a deeper discussion

1 Consider your organisations career development policies. What are the gaps when it comes to incorporating international assignments? (Section 3)

2 What kinds of data, information and briefing systems are available for such assignments? How best could they be delivered and by whom? (Sections 1 and 5)

3 Think about your organisations family and diversity policies. How relevant are they for those employees located abroad? Do they need to be adapted? (Section 2)

4 Do you have a mentoring programme in place that could be used to good effect in this situation? (Section 2)

5 How is knowledge management handled? How can the lessons learned from this (extremely difficult) assignment be used to inform others in similar situations? (Section 1)

6 How can you best reward individuals for accepting international assignments? (Section 3)

7 Does your organisation have a talent management policy? If so, does it extend to recruitment of local staff? How is such recruitment carried out? What development would have helped? (Sections 2 and 4)

8 How are your organisations ethics policies set up? How does it deal with issues of corruption, nepotism with regard to employees, contractors and partners or clients? (Section 5)

9 Does your organisation have any policies around security and crisis management? What are the gaps? (Section 5)

10 Does your organisation have any policies on repatriation? (Section 4)11 Does your organisation have any policies around dealing with different

stakeholders, including governments and local contacts? (Section 5)

Each of these different areas will be covered in detail in the tools contained within the five sections that follow.

Note

1 Technically speaking, one can differentiate global HRM from international HRM in the following ways, as defined by Brewster et al (2004):

Global HRM: managing HR activities through the application of global rule sets. International HRM: managing an international mobile workforce. For this Toolkit, we are including both concepts to provide a more comprehensive

set of tools and ideas.

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The authorsAnn Rennie FCIPD, FRSA, MCIB, BSc (Hons)Anns background lies in IHRM in senior line positions within the international organi-sation, banking and NGO sectors. She has extensive experience in implementing and advising on international HR and change programmes, as well as in global capacity-building and talent management in both developed and developing countries, most notably for international organisations, UN agencies and public sector organisations in Asia.

She was most recently the Director for Human Resources Operations for the World Bank, covering 160 countries, and based in Washington, DC. She also held a number of non-executive director positions worldwide, including for the Department for International Development, the Association for Human Resource Management in International Organizations, The Princes Trust, Thamesmead Town, Reed Executive and a large US-based credit union. Additionally, Ann held senior HR roles for NatWest Bank and the International Monetary Fund.

Ann is a qualified leadership coach.

Rita McGee FCIPDRita McGee specialises in the strategic development of HR functions. Previously HR Director of the Pepe Group, she has also worked for Kingfisher and BTR (currently known as Invensys). She works as a consultant, trainer, facilitator and executive coach. She has designed and delivered training in talent management to major international organisations. She has consulted in the UK and internationally on the development of business and HR strategy including talent management and succession planning.

She runs public courses for the CIPD as well as other organisations. She has worked in Europe, Asia, the USA and Africa.

Rita is a Chartered Fellow of the CIPD.

www.rmgconsulting.com

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Further readingBEGLEY, T. and BOYD, D. (2000) Articulating Corporate Values through Human Resource Policies, Business Horizons, JulyAugust, 812.

BRAITHWAITE, J. and DRAHOS, P. (2000) Global Business Regulation. Cambridge: Cambridge University Press.

BREWSTER, C., HARRIS, H. and SPARROW, P. (2004) Globalising HR. Executive briefing. London: Chartered Institute of Personnel and Development.

FARNDALE, E. and PAAUWE, J. (2005) The Role of Corporate HR Functions in MNCs: The Interplay Between Corporate, Regional/National and Plant Level. Ithaca, NY: Cornell University ILR School.

KELLEY, C. and MEYERS, J. (1992) Cross-Cultural Adaptability Inventory (CCAI). Minneapolis, MN: National Computer Systems.

RALSTON, D.A., HOLT, D.A., TERPSTRA, R.H. and YU, K.C. (2008) The Impact of National Culture and Economic Ideology on Managerial Work Values: A study of the United States, Russia, Japan and China, Journal of International Business Studies, Vol. 39, No. 1, pp 826.

RIDLEY, T. (2011) Evacuations: Evacuation Planning for International and Transnational Crisis [Kindle edition].

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT. (2007) World Investment Report. New York and Geneva: United Nations.

WARD, C. and KENNEDY, A. (1999) The Measurement of Sociocultural Adaptation, International Journal of Intercultural Relations, Vol. 23, No. 4, pp 659677.

WISMAR, M., PALM, W., FIGUERAS, J., ERNST, K. and VAN GINNEKEN, E. (eds) (2011) Cross-border Health Care in the European Union, European Observatory on Health Systems and Policies: http://www.euro.who.int/__data/assets/pdf_file/0004/135994/e94875.pdf

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ture, ro

les an

d C

ultu

reSection 1

Setting the strategic context: structure, roles and culture

Introduction

Consider the following scenario:

You are an HR director of a small niche hotel chain, catering to wealthy tourists, which is wholly British-owned and located in the UK and Ireland. Despite the recent economic downturn, the business is still moderately successful. Your boss, the CEO, is keen to expand on this success, but the UK market is already saturated. He spots an opportunity to buy a small niche hotel chain in Mexico. It is currently a great oppor-tunity, he says, as it is virtually being given away because of all the criminal activities and violence there! He has been advised by the Mexican owner that the hotels are located in sites away from all the troubles, and that tourists, especially from the USA, are still visiting in quite large numbers.

You immediately have a number of questions and concerns. You are tempted to respond based on your gut feel. You start saying, Yes, but... and think of all the immediate issues your organisation is likely to face, such as how to manage and recruit from within Mexico, language concerns, security, local health and safety issues and so on. Your boss frowns, explaining what a good move this is and how the timing is just right. You realise you need to take a more positive approach, and decide you need to arm yourself with appropriate facts and have some thought-out strategic options to present to your CEO. You recognise that it is the job of HR to develop an understanding of relevant factors pertaining to expansion abroad, since a lack of knowledge can result in inappropriate policies and practices, with consequences for the organisation ranging from embarrassing to potentially outright disastrous!

Certainly, gut feel is important, but for an international HR manager or director, or indeed anyone who has been tasked with people management support responsibilities, there needs to be more than this. You need to be informed and well prepared to a) help the organisation to make its business strategy and goals a success, and b) have the necessary people-related tools, procedures and practices to help it happen smoothly, cost-effectively and efficiently. In addition, and as this case clearly illustrates, you will want to arm yourself quickly with enough knowledge and data about all aspects of

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settIng

the stra

tegIC

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2

the country to be able to add value to the original business decision, rather than just reacting, ideally before it is actually signed and sealed!

This section comprises tools to help you do just that. Firstly, we start with a basic exercise which is aimed at the more academically inclined, giving you some frame-works to use when making arguments and proposals that support (or show why they dont support) the business strategy.

We then go on to techniques that help make the links between a global business strategy and an international HR strategy, covering ways to collect and sort data, and then developing the necessary HR policies and procedures required. This includes whether they are more likely to be effective as global policies or whether, in certain cases, it would be better to work on a targeted and more local basis, country by country.

We then suggest ways of making links between HR policies and practices to required roles and competencies for HR professionals working in an IHRM environment, before addressing potential ways of organising and locating such HR teams.

International employee relations form a key component of IHRM and pose all kinds of issues for a globalising organisation, and we suggest sources of information and likely issues you need to be on top of. We then consider how data and e-HR systems can support international operations.

Lastly, we look at the all-important subject of culture. Economists and experienced HR practitioners working in international domains generally agree that culture and the management of cultural differences are the most important factors in managing international operations. Many an organisation has failed on the basis of miscalcula-tions about cultural norms and ways of working and living. We offer some tips and techniques for exploring and capitalising on these differences in a global setting.

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3Co

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ases

Section 1.1Making the link between global

strategy and an international HR framework

Tool 1Some contextual theory for adding support to strategic business cases around internationalisationFacilitators notes

Overview

This Toolkit is a practical aid, not a textbook. However, we recognise that we are catering for all kinds of organisations, big and small, who are moving into, or already operating in, an international business environment. This Tool is aimed primarily at some larger organisations. However, even if this is your first venture into international territory, and you work for a small organisation without a dedicated HR function, you may still find this useful background reading. It helps to explain the rationale for making particular strategic choices, and provides a backdrop for a deeper and more informed IHRM and policy framework. We will refer back to the content in this Tool from time to time, where it helps to illustrate or back up a point in later Tools.

Aim of the Tool

This Tool will help you to think about your global business strategy. As busy interna-tional HR practitioners, it is easy to become almost totally reactive to events as they

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4MakIng the lInk betw

een global strategy and an InternatIonal hr fraMew

ork

unfold. And it is true that tactical decisions are generally going to be more prevalent than with domestic HRM. However, it helps to step back and think about what you are doing from a more strategic perspective from time to time especially when your organisation is starting up or acquiring a new business abroad for the first time.

We offer a few concepts that can be used to initiate some strategic thinking about what kind of organisation you work for and why its operating (or considering operating) more on an international basis. This will help form a platform for developing your IHRM strategy and plans.

Materials needed

The PowerPoint presentation below.

Procedure

Either on your own, or with groups of HR staff and, preferably, employees from other parts of the organisation, go through the PowerPoint slides, one by one. Each concept is followed by a second slide which asks the audience to define where they see your organisation or where it fits.

Evaluating its use

This exercise was used at a board meeting by one of the authors when her own organisation was considering expanding abroad. The meeting was attended by the chairman, CEO, and the finance, operations and legal directors. It led to very lively debate about the whys and raison dtre of the organisation which showed that these really needed clarification before any potentially false starts in foreign expansion happened! In particular, it resulted in a sounder strategic decision around the development of operations abroad, based on logic and strategy, and not simply feel.

So, if this Tool helps to elicit greater debate and greater clarity about the following then it will have served its purpose!

1 What kind of organisation you are.2 What your organisations motivations are for becoming more international.

This will then allow you, as an international HR director, manager or consultant, to start to pull together the HR plan which will best help support the business plan.

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5This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright CIPD. Please use or

adapt this document in line with our terms of use: http://www.cipd.co.uk/Bookstore/onlineresources/termsofuse.

Co

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The Tool

Strategic business constructs for suppor1ng interna1onalisa1on

Adding value to your business strategy

Construct 1 What are your drivers for becoming more

interna1onal?

Maximising shareholder value Forging strategic partnerships Crea1ng core business processes Building global presence (from the CIPDs publica7on Globalising HR: Execu7ve

brieng (2004))

Achieving a global humanitarian mission

(added by author)

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MakIng the lInk betw


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Construct 1 What are your drivers for becoming more

interna1onal?

Which one(s) dene your own organisa1on?

Construct 2 Divergence versus convergence

CONVERGENCE the coming together of a set of HR management policies and prac1ces around a Western (capitalis1c) model.

DIVERGENCE the separa1on of HR policies and prac1ces according to country or dierences in culture.

(These come from early economic theory, which describes how, in a globalising world, country economies gain advantage by becoming either more similar to, or more dierent from, each other. )

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How do you decide whether your organisa1on is more convergent or divergent in its strategy?

CONVERGENT more likely if it: has strong organisa1onal culture which gives it

compe11ve advantage worldwide (eg Apple, Starbucks, BP), and

wants to build a global presence, and is bound by regional regula1ons and restric1ons (eg those

organisa1ons opera1ng in the EU) more likely to need a common set of policies (including HR).

More likely to have a set of standard opera1ng and employment policies.


How do you decide whether your organisa1on is more convergent or divergent in its strategy?

DIVERGENT more likely if there are strong dierences in: labour markets, cultures, economic and legal variables.

Examples include car manufacturing and appliance businesses which build for dierent tastes, and dierent prac1cali1es eg sizes of houses, price of petrol versus diesel, environmental legisla1on.

Even global organisa1ons such as Walmart and McDonalds have had to adapt somewhat to local markets and bend their own policies to suit.

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Is your organisa1on more likely to follow a convergent or divergent route?

This will determine how localised your HR policies and prac1ces are likely to have to be.

Construct 3 Hofstedes power ra1o

Hofstede was a Dutch researcher who gathered data from 100,000 IBM employees worldwide.

He wanted to see if there were cultural dierences worldwide.

He found ve.

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Individualist/collec1vist the extent to which people are expected to look a]er themselves as opposed to being part of a larger group (USA and Australia have a more individualis1c culture, South Africa less so).

High/low uncertainty the extent to which people are comfortable with ambiguity and instability. Eg Greece has strong bureaucracies; various Caribbean countries have a more laid-back approach.

Masculine/feminine this refers to being tough versus caring. Eg Japan is in the rst category, where material rewards are important, whereas Sweden, where policies around childcare, family leave and other caring factors are seen as important, is in the second.


Low versus high power distance this refers to how hierarchical structures are, and more autocra1c leadership. India has high power distance rela1onships amongst business and society; Israel has ader structures and more democra1c management.

Short-term versus long-term approach a focus on the past and present, including the preserva1on of face and tradi1on, versus a focus on the future through persistence, thri] and investment (added at a later date).

(Hofstede 2001)

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10

This document can be downloaded as a Word document from http://www.cipd.co.uk/tsm, copyright CIPD. Please use or




ork


How does your own culture t in?

Construct 4 Culture and ideology

(Based on Ralston et al (2008))

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Construct 4 Culture and ideology

Where are you on this grid? (Hint: USA lies in top le]-hand box, China in bodom right-hand box; Russia in the bodom le]-hand box, and Japan in the top right-hand box.)

What might this mean when doing business in other countries?

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Tool 2PESTLE analysis worldwideFacilitators notes

Overview

PESTLE stands for political, economic, social or socio-cultural, technological, legal and environmental. Other variations are STEEP, PEST or STEEPLE, all of which are acronyms for methods by which to analyse a current and future state of an organisation.

This is a useful exercise to carry out with a group of individuals who may be new to an international setting, and it works best with a mixture of employees from both the home country and other countries in which your organisation operates. In this way, the locally recruited staff can start immediately to add value with regards to knowledge management transfer. It is most useful in the situation of a recent acquisition or takeover of a foreign player.

Aim of the Tool

To provide a model and a checklist to help you explore trends and changes that could occur in your industry on a global basis and to start to think about the implications for your overall international HR strategy and framework. The framework is what will provide initial guidance for defining the appropriate policies and procedures for your particular organisation.

Materials needed

Have the team members prepare for this exercise by gathering as much background information and data about changes that may be occurring in your sector or industry worldwide. This could be gained from industry reports, the CIPDs change agenda, government or industry forecasts, websites and news articles and from your organisations global business plans, objectives and strategy.

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Procedure

World events and changes happen all the time. It is also wise to consider worst-case scenarios, however unlikely they may seem many organisations have suffered setbacks, or even foundered, because they didnt consider such events (eg the BP oil disaster in the Gulf of Mexico, the effect of the volcanic ash from the Icelandic volcano on the airline industry, or the earthquake followed by a tsunami in Japan and its effect on TEPCOs nuclear power stations and the countrys nuclear power strategy).

Evaluating its use

After going through this exercise, were you able to foresee changes that could occur and establish the relevant international HR framework for appropriate policies and practices for your organisation?

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The ToolPESTLE factor Implications for your organisations

international HR strategy and policy framework

Political (trends, possible changes and events at global, regional, national, local and community level):

Government stability

Turmoil in Arab nations, and demands for more democratic rights

Rise of kidnapping and piracy

Fluctuating level of availability of grants and funding changes

Governments policies and attitudes

Stability and terms of governments

Wars, civil wars and other types of strife

Terrorism

Lobbying groups

Relationships and geopolitical tensions between countries

Has implications for establishing organisations or offices or doing business with organisations in risky countries (especially for attracting employees, compensation, security policies)

Grants and funding initiatives can assist in establishment of businesses in some locations, including incentives for hiring of nationals. Sometimes these are used to stimulate an economy during a recession

Governments come and go and can have a direct effect on organisations based abroad in terms of changing policies, attitudes towards foreign organisations, etc

Economic (trends and economic factors in global, regional, national and local economies):

Interest rates (high or low?)

Currency exchange rates, and uses of different currencies (which ones are and might be affected in the future? Eg the euro is an example of a currency under pressure)

Inflation (home and abroad)

Cost of raw materials (eg crude oil and its impact on transportation costs)

Rapid growth and stronger demand in emerging markets than developed ones

Recessions and slow recoveries in developed nations

Consumer confidence

Trade tariffs and restrictions

Unemployment (home and abroad)

Turbulence in economies with associated negative effects on exchange rates or inflation can be an issue for compensation for either expatriate employees and/or locally recruited employees

Recessions have implications for lay-offs and downsizing, plus drive for more cost-efficient HR solutions

Reduced value of company may have implications for resourcing levels

Fiscal implications such as tax, exchange rates and price of goods on cost of living

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PESTLE factor Implications for your organisations international HR strategy and policy framework

Global stock market issues

US fiscal deficit and its impact on other countries

Failing countries within the EU and sovereign default in weak economies

Correlations between geographical distance and sizes of economies with level of trade (gravity theories of economists, eg Leamer and Levinsohn, demonstrating that the closer the country and larger the economy, the greater the trade opportunity). An example might be the USA and Canada

Available funding or grants for particular initiatives (eg greener energy)

Companies headquartered in developing markets like India, China, Brazil and South Africa, to name a few, are expanding, along with multinationals from more established markets

Taxation issues (home and abroad)

Immigration/emigration and population shifts

Rising cost of public services in situations of growing populations or aging communities

Social/socio-cultural (trends, changes or developments in demographics, culture and expectations):

Aging populations and living longer

Retirement ages rising in OECD countries in UK this will rise to 68 by 2044; France is 67 (men) and 62 (women); USA is 66

Changing balance in demographics make-up

Generational differences in attitudes and behaviour, such as Generations X, Y and Z

Demographic shifts will result in an increasing number of workers being sought from developing countries to replace the aging workforce in North America and Europe (McKinsey predicts that by the year 2040, the largest working-age population in the world will reside in Africa.)

Implications for pension administration of changing retirement ages

Religious differences needs to be factored in to some policies

Security policies

Family policies

Recruitment and remuneration of employees and contractors in economies that are becoming wealthier

Healthcare plans

Increased expectations of employees on the types of benefits they wish to have

Attitudes towards work influence employment decisions

Corruption issues policies for handling

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In the West, because of the withdrawal of retirement age and diminution of pensions, several generations are likely to be at the same workplace at the same time

Spread of Islam

Killing of Osama Bin Laden and other terrorist leaders repercussions for religious extremism

Interest in working remotely is increasing

Women having children later in developed economies

One-parent families and marital breakdown

Employees working longer viz increased or abandoned compulsory age for retirement

Increased wealth and disposable incomes of populations in developing or previously developing economies eg India, China, Brazil not just developed countries. Emerging markets will grow more than developed ones

Gaps between rich and poor accelerating (eg in India, there are over 150,000 millionaires, and yet many millions of poor)

Healthcare costs and expectations

Increase in viruses and illnesses that are no longer resistant to drugs; pandemics

Consumer attitudes, fashions and demands for types of goods

Media influences and ethics concerns

Attitudes towards work, including desire to work

Qualifications eg more university education in some countries

Values around corruption, nepotism, etc

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Technological (developments in computer-related hardware, software and social networking):

Technological or scientific breakthroughs

Rise of social networking

More extensive spread of Wi-Fi

Increase in data-sharing capabilities and central files management (the paperless office)

Increase in hacking incidents, identification theft and theft of online information implications for IT security

Spread of mobile phones (even faster in developing countries than in developed countries)

Expansion and improvement of software for meetings management such as Skype and video conferencing

Acceleration in applications which use micro-technology

Innovations

Research grants

Data leaks (eg Wikileaks)

Ability to work remotely is increasing

Implications for hiring workers remotely

Implications for managing communications, data and meetings across international boundaries

Management of stress as technology can mean being available at all times, and also working across time zones can be an issue

Data security and levels of access; back-up centres

Software and hardware compatibility issues across boundaries

Data access restrictions and regulations in some countries

Change management due to adoption of new technology

Legal (potential changes to legislation with impacts on resources, taxation, immigration, etc):

Increased employee protection

Immigration laws tightening

Discrimination legislation

International legal frameworks (eg WTO, ILO, EU) and regulatory bodies

Industry-specific regulations

Different laws around work permits and visas

Legal aspects around mobility within countries

Tightening of immigration legislation may have an impact on a companys ability to hire workers, or fines from audits of illegals

Increasing regulation in the West tempting more companies to locate work in developing countries

Employer and consumer brand implications

Local discrimination legislation may require more care in hiring and termination of particular types of workers

Increasingly stringent health and safety legislation may have an impact on costs and therefore location of employees, and training

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Regulations around foreign-owned organisations abroad

Regulations around hiring local workers

Local legal systems may have impact on employees that are sudden, unwelcome or unexpected eg visa restrictions, vetoes on driving, drinking, anti-gay legislation, etc

International legislative areas and agreements may place additional restrictions on HR-related areas such as employment restrictions

Environmental (natural disasters and climatic trends, social and legal movements):

Climate change

Natural disasters such as hurricanes, earthquakes, tornadoes, tsunamis

Fair trade

Carbon offsetting

Disposal of waste

Ethical concerns

Greater emphasis on resource productivity and conservation

More clean technology industries

More environmental regulation

Disaster planning policies to include both data and business continuity and employee safety and contingency planning

Travel policies

Repatriation and evacuation policies

Corporate social responsibility policies and practices

Note

1 For a more detailed description of PESTLE, see the CIPDs Factsheet.

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Tool 3 PESTLE analysis examples of country-specific analysesFacilitators notes

Overview

The international HR professional needs not only to understand the implications for their work of worldwide trends and changes, but to also have a deep knowledge and understanding of the particular contexts in which their organisation operates. Those at senior levels of HR must have a good grasp of the country-level factors that have or may have an impact on business. Equally, its important that your local staff understand the issues that shape the parent organisation, headquarters and the other countries in which your organisation operates.

Like the previous Tool, this is a useful exercise to carry out with a group of individuals who may be new to an international setting, though it definitely works best with groups that specifically include employees from the countries around which this exercise is based. Its even better still if the exercise is run in country and not at headquarters, since the non-locals will get to experience at least some of the factors for themselves first-hand!

Note that this Tool also works well when used across a product line which may be dispersed across several different countries.

Aim of the Tool

To provide a model and a checklist to help you explore trends and changes that could occur in a country or countries in which your organisation operates, so that the impli-cations for your organisations international HR strategy can be developed in more detail. In this way, it can help with the next step in developing a plan around which to divide up HR policies and practices into ones that are global versus ones that are more local or specific to individual countries. (See convergence versus divergence in Tool 1.)

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This version of the PESTLE analysis goes into more depth in terms of:

1 the likelihood of occurrence2 the likely impact of the change, trend or factor3 the timing of each factor4 compatibility with existing HR policies and practices5 priority for or emphasis on HR policy or practice amendments and adaptations.

Materials needed

Have the team members prepare for this exercise by gathering background infor-mation and data about changes that may be occurring in the country in question. If this exercise includes employees from the particular countries concerned, brief them beforehand to think about and gather as much information as they can around the six components of PESTLE.

Procedure

Decide on a country to analyse. Complete the appropriate factors under each of the PESTLE headings. Score each of them according to the five criteria. Those factors that score the highest are those which are likely to have the maximum implications for your HR policies and practices.

Examples from India and from the USA are given below. If analysing either of these countries, you can use the templates below and add to them. For the sake of illustration a worked example is given for the Social section, for a make-believe organisation.

Evaluating its use

The usefulness of the Tool lies in the outputs from the last four columns and the resulting ability to help set the framework for establishing an international HR strategy or framework. To be really useful, it needs to be revisited often to check that your organisations HR framework is based on solid foundations it is easy to overlook changes and to continue to operate as is, with some likely surprises further down the line because of mismatches between the realities of today and of the possible future scenarios (what ifs).

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The

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PE

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fac

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for

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d of

(r

e)oc

cure

nce

or

incr

ease

(hig

h (3

), m

ediu

m

(2),

low

(1)

)

Impa

ct

(+ (

3),

(1

) or

ne

utra

l (2

))

Tim

ing

(now

(2)

, fu

ture

(1

))

Com

pati

bilit

y w

ith

exis

ting

int

erna

tion

al H

R

polic

ies

and

prac

tice

s

(hig

h (1

), m

ediu

m (

2),

low

(3)

)

Impl

icat

ions

fo

r yo

ur

orga

nisa

tion

s

glob

al H

R

stra

tegy

Soc

ial:

a

vast

and

gro

win

g po

pula

tion

(2nd

larg

est

in th

e w

orld

)

the

larg

est p

erce

ntag

e of

you

ng p

eopl

e in

the

wor

ld (o

ver 5

0 pe

r cen

t bel

ow 2

5 as

at 2

011)

En

glish

spo

ken

wid

ely

ac

cele

ratio

n in

the

num

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of e

duca

ted

wom

en

incr

ease

in n

umbe

rs o

f uns

kille

d ex

patr

iate

In

dian

wor

kers

in th

e M

iddl

e Ea

st r

esul

ting

in fa

milie

s w

hich

are

bet

ter

off

lifes

tyle

s ar

e be

com

ing

mor

e W

este

rnise

d

70 p

er c

ent o

f fam

ilies

live

and

will

cont

inue

to

live

in u

rban

are

as, l

eadi

ng to

gre

ater

co

smop

olita

nism

ex

plos

ion

in th

e us

e of

cel

l pho

nes

H

ofst

edes

Pow

er D

istan

ce r

atio

is a

roun

d 77

per

cen

t, w

hich

is h

ighe

r th

an th

e w

orld

wid

e av

erag

e

mea

ning

a h

igh

leve

l of

ineq

ualit

y of

pow

er a

nd w

ealth

in s

ocie

ty

disc

rimin

atio

n ba

sed

on th

e ca

ste

sys

tem

is

now

ille

gal,

but c

ontin

ues

to e

xist

in r

ealit

y

non-

beef

-eat

ers

(Hin

dus)

and

non

-por

k-ea

ters

(M

uslim

s)

has

a la

rge

mov

ie in

dust

ry

CD30006.indb 23 21/12/2011 13:32

24





ork PE

ST

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fac

tor

for

Indi

aL

ikel

ihoo

d of

(r

e)oc

cure

nce

or

incr

ease

(hig

h (3

), m

ediu

m

(2),

low

(1)

)

Impa

ct

(+ (

3),

(1

) or

ne

utra

l (2

))

Tim

ing

(now

(2)

, fu

ture

(1

))

Com

pati

bilit

y w

ith

exis

ting

int

erna

tion

al H

R

polic

ies

and

prac

tice

s

(hig

h (1

), m

ediu

m (

2),

low

(3)

)

Impl

icat

ions

fo

r yo

ur

orga

nisa

tion

s

glob

al H

R

stra

tegy

Tech

nolo

gica

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m

any

wel

l-tra

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Indi

an IT

eng

inee

rs a

nd IT

ex

pert

s, es

peci

ally

in s

oftw

are

deve

lopm

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and

BPO

sa

larie

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r IT

exp

erts

risi

ng d

ue to

sho

rtag

e of

tal

ent

off

er o

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cons

ultin

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rvic

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broa

d (e

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ta C

onsu

lting

)

ba

ndw

idth

is n

ow in

crea

sing

sig

nific

ant r

ecei

ver

of o

utso

urce

d U

K an

d U

S IT

jobs

Leg

al:

m

uch

red

tape

for

new

and

exi

stin

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reig

n or

gani

satio

ns

ol

d-fa

shio

ned

lega

l em

ploy

men

t fra

mew

ork

te

nds

to le

ad to

ove

rsta

ffing

in la

rge

publ

ic-s

ecto

r In

dian

bur

eauc

raci

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bs

are

prot

ecte

d

CD30006.indb 24 21/12/2011 13:32

pestle an

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25



PE

ST

LE

fac

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h (3

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utra

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Com

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tion

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R

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prac

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(hig

h (1

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ediu

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(3)

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Impl

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fo

r yo

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orga

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glob

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Env

iron

men

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gr

owth

in p

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ill br

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even

gre

ater

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viro

nmen

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egra

datio

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essu

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sour

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ality

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ents

to

wat

er q

ualit

y

CD30006.indb 25 21/12/2011 13:32

26





ork Belo

w is

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ampl

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r so

cio-

cultu

ral f

acto

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r a

fast

-food

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anisa

tion

whi

ch is

pot

entia

lly lo

okin

g to

exp

and

into

Indi

a.

Man

y of

thes

e fa

ctor

s w

ould

hav

e be

en o

nes

that

McD

onal

ds

had

to c

onte

nd w

ith, f

or in

stan

ce, w

hen

it so

ught

to e

nter

the

Indi

an

mar

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its

first

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taur

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as o

pene

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ere

in 1

996.

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ST

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a

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aura

ntL

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or

incr

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(hig

h (3

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ium

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w (

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Impa

ct (

+ (3

),

(1)

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neut

ral (

2))

Tim

ing

(now

(2)

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ture

(1

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Com

pati

bilit

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ith

exis

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inte

rnat

iona

l HR

po

licie

s an

d pr

acti

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(hig

h (1

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ediu

m (

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(3)

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Impl

icat

ions

fo

r yo

ur

orga

nisa

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s

glob

al H

R

stra

tegy

Soc

ial:

A v

ast a

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row

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popu

latio

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rges

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the

wor

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33

21

Larg

e po

pula

tion

from

whi

ch to

re

crui

t

The

larg

est p

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ntag

e of

you

ng p

eopl

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th

e w

orld

(ov

er 5

0 pe

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nt b

elow

25

as a

t 20

11)

32

21

Engl

ish s

poke

n w

idel

y3

22

1La

ngua

ge

trai

ning

for

som

e an

d id

iom

s tr

aini

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for

othe

rs

Incr

ease

in n

umbe

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f uns

kille

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patr

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In

dian

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in th

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iddl

e Ea

st

32

(mig

ht n

ot

wish

to w

ork

for

the

wag

es

of a

low

-pai

d fa

st-fo

od

chai

n)

22

May

not

be

an a

ttra

ctiv

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opos

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sa

lary

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for

som

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CD30006.indb 26 21/12/2011 13:32

pestle an

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27



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Indi

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h (3

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w (

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Impa

ct (

+ (3

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(1)

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neut

ral (

2))

Tim

ing

(now

(2)

, fu

ture

(1

))

Com

pati

bilit

y w

ith

exis

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inte

rnat

iona

l HR

po

licie

s an

d pr

acti

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(hig

h (1

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ediu

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2),

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(3)

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Impl

icat

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fo

r yo

ur

orga

nisa

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R

stra

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Acc

eler

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num

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of e

duca

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wom

en3

2 (m

ight

ha

ve b

ette

r op

port

uniti

es

else

whe

re)

13

Impl

icat

ions

ar

ound

wor

king

ha

rder

to

attr

act w

omen

(p

erha

ps

targ

et fe

mal

e st

uden

ts?)

Life

styl

es a

re b

ecom

ing

mor

e W

este

rnise

d3

22

1C

ache

and

br

and

imag

e m

ay b

e a

plus

if w

e ca

n w

in

them

aw

ay fr

om

McD

onal

ds!

Will

likel

y ha

ve

to W

este

rnise

H

R p

olic

ies

70 p

er c

ent o

f fam

ilies

live

and

will

cont

inue

to

live

in u

rban

are

as, l

eadi

ng to

gre

ater

co

smop

olita

nism

23

21

Goo

d ca

tchm

ent a

reas

fo

r po

tent

ial

recr

uits

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