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Unit 13
Unit 13
Structure:
13.1 Introduction
Objectives
13.2 International Organisational Structures
Factors influencing organisation structure
Types of structures
13.3 Introduction to International Human Resource Management
Managing international human resource activity
Domestic versus international human resource management
Expatriate staff
13.4 Scope of International Human Resource Management
National differences in HRM practices
Strategies for international human resources management
International employee relations
Staffing policies in international business
13.5 Summary
13.6 Glossary
13.7 Terminal Questions
13.8 Answers
13.9 Caselet
13.1 Introduction
In the previous unit you learned about strategic management and the role of
strategy in firms success. You also learned about the strategic
management process. In this unit you will learn about the structure of MNCs
and various dimensions and strategies for international human resource
management.
As businesses metamorphoses into multinational companies and as the
world evolves into a global marketplace, international firms need to be
supported by adequate human resources. Human Resource Management
(HRM) practices are necessary in order to procure, allocate, and utilise
human resources particularly managerial manpower in an efficient manner.
While many aspects of traditional HRM policies and procedures are
applicable when a company operates abroad, the integration of the various
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Technology
Technology plays an important role in the designing of an organisation
structure. The application of technology at different levels like employee,
division and organisation determines the design of the structure. An
organisation may use the technology at different stages like stage of
procurement of inputs and raw material, production stage, and delivery
stage. The sophistication of technology determines the design of a modern
business organisation.
Irrespective of the organisational structure, every firm uses technology and
facilitates communication across job profiles in the organisational structure.
Every department of the organisation uses technology and a many of these
departments have technology experts among their employees. The
technology experts and the professionals working in this field must support
and connect every area of the organisation.
The integration of Information Technology (IT) facilitates communication
among employees. A conscious effort must be made to maintain
relationships with each group. IT representatives must provide updates to
the employees about their various products and applications. In return, the
employees must provide feedback on these products and application to the
IT department. These relationships within departments are often overlooked
and are lost due to immediate organisational design challenges. Hence,
relationships with all future participants must be maintained through well
planned communication.
Technology and the knowledge-based economy are not constrained by the
physical objects and materials of an organisation. Information is flexible and
can be structured and organised in a number of ways. For example,
videoconferencing and telecommuting allow members of project teams from
different departments to work together, regardless of their geographic
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From the figure you can see that each division directly deals with countries
A and B.
Regional structure In this structure, international operations are
organised by dividing the entire globe into different geographic regions.
Strategic decisions are made in the headquarters and the regional manager
is responsible for all operational issues within the region. Figure 13.3 depicts
the regional structure in an organisation.
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From the figure above, you can see that regional managers for Europe and
Asia Pacific regions report directly to the company headquarters while
taking charge of their respective countries.
Foreign subsidiary structure In this structure, each of the companys
foreign subsidiary reports directly to the headquarters. This structure
eliminates the necessity of a regional manager. Though strategic decisions
are taken at the headquarters, each subsidiary acts autonomously for their
local operations. Figure 13.4 depicts the foreign subsidiary structure in an
organisation.
From the figure you can see subsidiaries based in USA, UK, France, and
Japan report directly to the headquarters in India.
Product division structure International companies that have a
diversified product range across diversified markets can opt for product
based organisational structure. Global responsibility for a product or a group
of products is on separate operational divisions within the company. This
organisational structure, as depicted in figure 13.5, is followed most
commonly by multinational consumer goods companies.
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From the figure above, you can see that the product managers report
directly to the headquarters while they are responsible for all the operations
in their respective countries.
International matrix structure This structure is the most complex
organisational structure. This form of structure is suitable where several
functional divisions from across the globe performing related duties are
grouped together into an international product division. These product
divisions can then plan, design, develop, produce the products or services
required. The product divisions are dissolved or the teams are assigned to
some other division after the project is executed. Figure 13.6 gives you an
idea of the international matrix structure.
In the matrix structure, you can see that different product managers work
with different departments across the globe, breaking all the divisional
barriers.
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Expatriates are subject to tax at home and in the host country. Hence,
tax policies have to be devised in a way that they do not penalise the
employee for moving to another country.
The laws in the host country vary from those in the parent country. The
human resource department must be equipped to deal with all potential
issues and ensure that the newly relocated employees and their families
are able to function properly in the foreign country.
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Imposed management style that the host country employees are not
comfortable with and may find inappropriate.
Expatriate selection
Selection of expatriate employees is a highly specialised function in HRM.
The following factors are important while recruiting an expat employee:
Technical competency.
Interpersonal skills.
Ability to cope with the foreign environment.
Ability of the expatriates family to adjust to the foreign environment.
Figure 13.8 presents the different criteria for recruiting expatriate
employees. The HR team must consider the candidates personal
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After the HR team selects the right candidate, they provide proper support
and information to the employee and family for a smooth transition. This
step is critical to the success of employing the expatriate and in turn the
success of the international business unit. Before posting the newly
recruited employee to the international location, the company must do the
following:
Provide the employee and family with cultural and language orientation
with the intention of familiarising the new country to them.
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Expatriate failure
Globally, there has been a failure rate of more than 25 percent amongst
expat employees. Despite the training and efforts undertaken by the HRM,
the expats underperformance and failure has been a matter of concern for
the multinational companies. Most cases of expatriate failure have been due
to the following reasons:
Spouses inability to adjust.
Marital stress.
Employees inability to adjust.
Home sickness.
Hostility towards host nationals.
Loss of confidence.
Family tension and conflict.
Personal or emotional maturity.
Inability to cope with larger international responsibilities.
Difficulties with new environment.
Personal or emotional problems.
Lack of technical competence.
Self Assessment Questions 2
4. Planning, recruiting, and termination are some of the functions of the
______________ management.
5. The expats underperformance and failure is not a matter of concern for
the multinational companies. (True/False)
6. HRM activities need to be designed to utilise the employees potential
to the maximum. (True/False)
7. Which one of the following is not an important activity involved in HRM?
a. Human resource planning.
b. Recruitment and selection.
c. Remuneration.
d. Project planning.
Activity 1
Play the role of an international HR manager and devise a plan in 500
words to help with the transition of an expatriate employee and his family
to an Indian city.
Hint: Domestic versus international human resource management
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Degree of employee
management.
participation
in
decision-making
by
the
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Across various countries, the same jobs can vary with respect to motivation,
commitment, pay scale, skill set, and education. Other factors that
determine national differences are length of employment that has an effect
on the attitude of personnel towards the organisation, age and gender,
expectation regarding working hours, etc. The attitude of managers from
different countries also varies in many aspects. Some of these aspects
include the following:
Management style.
Values and ethics.
Approach to decision making.
Approach to problem solving.
Expectations with respect to remuneration.
Importance given to management models and techniques.
Attitude to risk.
13.4.2 Strategies for international human resources management
The success of a multinational company depends on the techniques and
strategy adopted to select, train, develop, manage, and motivate its
workforce. An organisation achieves its objectives only with competent
employees. The main reasons for organisations to formulate a human
resources strategy are as follows:
Capacity to innovate, add new business lines, and enter new markets
depends more on its employees than on capital investment.
Need for specialist skills, which are attained over time and experience,
to increase organisational complexity.
Employees have to be treated based on the specific labour laws that the
host countries follow.
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The internal factors that affect the international human resources strategies
are as follows:
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Polycentric approach
This approach requires host country nationals to manage subsidiaries. The
benefits of such a policy are that there are fewer possibilities of language
issues, expensive training periods, and cultural adjustment issues. The
disadvantage of this approach is that the local managers may find it hard to
bridge the gap between the subsidiary and the parent company. There may
also be language issues, loyalties to the host country that conflict with the
needs of the multinational organisation, and cultural differences between the
home country managers.
Region-centric approach
Managers from various countries in the region are employed within the
geographic region of a business. Although they operate with a certain
amount of independence, they are not moved to the home country. This is a
flexible approach and locals are hired when regional expertise is needed
whereas employees from the parent country are brought in if product
knowledge is required. The disadvantage of this approach is that managers
in the region may not understand those at the head office and adequate
number of managers with international experience cannot be hired. This
approach serves as a step towards a geocentric approach.
Geocentric approach
The best suited employees for vital positions are hired throughout the
company without taking into account the nationality of the employees. The
success of this approach is based on the following five assumptions:
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13.5 Summary
Let us summarise the points covered in this unit on international human
resource management:
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13.6 Glossary
Home country: The country where a companys headquarters is located.
Host country: A country other than the home country where a company
operates.
Remuneration: The total package, which includes salary, bonuses,
allowances, stock options and so on, that the employee receives from the
employer.
13.8 Answers
Self Assessment Questions 1
1. Organisational structure.
2. True.
3. c) International matrix structure.
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13.9 Caselet
IHRM at Unilever
Unilever PLC. is the worlds largest Fast Moving Consumer Goods
(FMCG) Company with a turnover of 39.8 billion and is the leader in
Home and Personal Care Products, Foods and Beverages. It employs
1,63,000 people in more than 100 countries worldwide. Unilevers
products are sold in over 170 countries around the world.
Their manufacturing facilities are spread across many countries and they
also export products to countries where they do not have manufacturing
operations. Currently, they have 264 manufacturing sites worldwide, all of
which strive for improved performance on safety, efficiency, quality and
environmental impacts working to global Unilever standards and
management systems.
Hindustan Unilever Limited (HUL), a subsidiary of Unilever PLC. is India's
largest FMCG company with around two thirds of the market share in its
sector. HUL has several manufacturing plants spread across the country.
The mission that inspires more than 15,000 employees, including over
1,400 managers of HUL group is to help people feel good, look good and
get more out of life with brands and services that are good for them and
good for others. It is a mission HUL shares with its parent company,
Unilever.
The fundamental principle determining the organisation structure is to
infuse speed and flexibility in decision-making and implementation with
empowered managers across the companys nationwide operations.
HUL is known for its capability to appeal to and darn the right employees.
Several Unilever India managers have taken senior level responsibilities
in Unilever's worldwide system. In 2008, over 80 HUL managers held top
positions in different Unilever companies or corporate functions.
The management realised that to be competitive, they had to re-structure
their hiring policies, and hence developed an international cadre of
managers. The management posted its employees to various parts of the
world after providing them intensive training on culture and countryspecific details. These managers are expected to work in any country
with the same amount of efficiency as they would in any other.
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Discussion questions
1. Suggest the most appropriate organisational structure for HUL.
(Hint: HUL has multiple global products and manufacturing plants
across the globe)
2. What makes HULs managers most sought after in Unilever?
(Hint: Refer HRP in section 13.2.1)
Source:http://www.unilever. com/ boutus/ introductiontounilever/
unileverataglance/?WT.LHNAV=Unilever_at_a_glance Retrieved on 8th
October 2010
http://www.hul.co.in/aboutus/introductiontohul/HULataglance/default.aspx
Retrieved on 8th October 2010
References:
Bhalla, V. K. & Shiva Ramu, S. (2008). International Business Environment and Management. Anmol Publications.
E-References: