Chapter Nine

IHRM In The Host-Country Context

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Chapter Learning Objectives

After reading this chapter, you should be able to: discuss the most important drivers shaping the interplay between global standardization and the localization of human resource practices in multinational context including:
standardization drivers such as MNE strategy and structure, maturity and age, and corporate culture localization drivers such as the host country s cultural and institutional environment, the mode of operation and the subsidiary role
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Chapter Learning Objectives

outline measures which support the development of a balance of globalization and the localization of HRM discuss the global code of conduct as a device for controlling employee behaviour worldwide explain the strategic importance of offshoring
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Terms
offshoring global mindset performance culture national business system reverse diffusion BPO guanxi
country-of-origin effect host-country effect home-country effect

Culture constructs:
power distance uncertainty avoidance human orientation collectivism I and II assertiveness gender egalitarianism future orientation performance orientation
global standardization local responsiveness

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OpeningVignette
Four Seasons: Beyond National Borders balancing global integration and local responsiveness requires an understanding of the importance of the various facets of the host country context sensitivity and adaptation to the various host country requirements and customs regarding employment, such as hiring, reward and promotion practices, and respect for local cultural and institutional traditions
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Standardization and Localization of HRM Practices

Managing people the most culture-bound resource in an international context high level of complexity because of the diverse cultural environment
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Standardization and Localization of HRM Practices

The challenge of MNEs is to create a system that operates effectively in multiple countries by exploiting local differences and interdependencies and at the same time sustaining global consistency.

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Global Standardization
reaching consistency, transparency and an alignment of a geographically fragmented workforce around common principles and objectives. use of common management practices is intended to foster a feeling of equal treatment and clear expectations
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Local Responsiveness

respecting local cultural values, traditions, legislation or other institutional constraints such as government policy and / or education systems regarding HRM and work practices

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Balancing the Standardization and Localization of MNE HRM (Figure 9.1)

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Factors Driving Standardization

organizational strategy and structures organizational culture firm size and stage of maturity (degree of international experience)
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Factors Driving Localization

cultural environment institutional environment firm size maturity mode of operation subsidiary role

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Culture Construct Definitions and Sample Questionnaire Items (Table 9.1)

Cultural construct definitions Power distance: The degree to which members of a collective expect power to be distributed equally. Uncertainty avoidance: The extent to which a society, organization, or group relies on social norms, rules and procedures to alleviate unpredictability of future events. Humane orientation: The degree to which a collective encourages and individuals for being fair, altruistic, generous, caring and kind to others. Collectivism I (institutional collectivism): The degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action. Specific questionnaire item Followers are (should be) expected to obey their leaders without question. Most people lead (should lead) highly structured lives with few unexpected events.

People are generally (should be generally) very tolerant of mistakes.

Leaders encourage (should encourage) group loyalty even if individual goals suffer.

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Culture Construct Definitions and Sample Questionnaire Items (Table 9.1)

Cultural construct definitions Collectivism II (in-group collectivism): The degree to which individuals express pride, loyalty and cohesiveness in their organizations and families. Assertiveness: The degree to which individuals are assertive, confrontational and aggressive in their relationship with others. Gender egalitarianism: The degree to which a collective minimizes gender inequality. Future orientation: The extent to which individuals engage in future-oriented behaviors such as delaying gratification, planning and investing in the future. Performance orientation: The degree to which a collective encourages and rewards group members for performance improvement and excellence. Specific questionnaire item Employees feel (should feel) great loyalty toward this organization. People are (should be) generally dominant in their relationships with each other. Boys are encouraged (should be encouraged) more than girls to attain a higher education. More people live (should live) for the present rather than for the future. Students are encouraged (should be encouraged) to strive for continuously improved performance.

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The Institutional Environment

education system industrial relations system

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Education System

spread and reputation of such a training system recruitment process and the selection criteria reflect the importance of qualifications

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Employment Legislation
minimum conditions human rights labour relations pay equity
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Country-of-Origin Effect

MNEs are shaped by institutions existing in their country of origin, and attempt to introduce these parent-country-based HRM practices in their foreign subsidiaries

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Host-Country Effect

extent to which HRM practices in subsidiaries are impacted by the host country context

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Home-Country Effect

extent to which MNEs try to transfer HRM activities shaped by their home-country environment to foreign locations.

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Reverse Diffusion

transfer of practices from foreign locations to the headquarters

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Institutional Effects On MNEs

(Figure 9.2)

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Impact of the Cultural & Institutional Context on HRM Practices

(IHRM Notebook 9.3)

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Impact of the Cultural & Institutional Context on HRM Practices

(IHRM Notebook 9.3)

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Mode of Operation Abroad

ownership control

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Gupta and Govindarajan s Four Generic Subsidiary Roles (Table 9.2)

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Subsidiary Roles
Global Innovators provide significant knowledge for other units (the IHRM policies and practices are transferred to the MNE affiliates) Integrated Players create and receive knowledge (the IHRM practices and policies of the MNE and subsidiary are similar, characterized by global standardization and localization)
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Subsidiary Roles
Implementers rely on knowledge from the parent or peer subsidiaries and create a relatively small amount of knowledge themselves (IHRM policies and practices are mainly made in the parent company and implemented at the local level) Local Innovators engage in the creation of relevant country/regionspecific knowledge and have complete local responsibility ( the HRM policies and practices are localized)
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Transfer of Knowledge
sticky nature of knowledge corporate immune system

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Creating the HRM Balance between Standardization and Localization

Transfer of knowledge is dependent on the competence of the management style and practices requires building personal relationships and trust through face to face interactions and meetings between managers and subsidiaries.
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HRM Roles With Global Code of Conduct

1. drawing up and reviewing codes of conduct 2. conducting a cost benefit analysis to oversee compliance of employees and relevant alliance partners 3. championing the need to train employees and alliance partners in elements of the code of conduct 4. checking that performance and rewards systems take into consideration compliance to codes of conduct
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Outsourcing

transferring some of a company s recurring interval activities and decision rights to outside providers, as set in a contract

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Target Countries For Future Foreign Business Operations (Figure 9.3)

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HRM Roles With Off Shoring

1. consultation with unions/employee representatives 2. manpower planning, considering the scope for employee redeployment 3. contributing to the internal communication strategy 4. identifying training needs 5. designing new jobs which stem from off shoring operations 6. highlighting potential risks, such as the implications of employment regulation both in the home country and in foreign locations.
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Where Talent is Scarce

(Table 9.3)

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