Ihrm 1

Chapter 1
Introduction: The enduring context of IHRM
Use with International Human Resource Management ISBN 1-84480013-X Published by Thomson Learning Peter Dowling and Denice Welch
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Chapter objectives
In this introductory chapter, we establish the scope 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.)
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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.
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Figure 1-1: Inter-relationships between approaches in the field
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Figure 2-1: A model of IHRM

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HR activities slide 1
Human resource planning Staffing Recruitment Selection Placement Training and development
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HR activities slide 2
Compensation (remuneration) and benefits Industrial relations
Figure 2-2: Stages of internationalization

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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
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Figure 1-3: International assignments create expatriates
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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
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Figure 1-4: Variables that moderate differences between domestic and international HRM
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The top ten multinationals

1. Rio Tinto (UK/Australia) 2. Thomson Corporation (Canada) 3. ABB (Switzerland) 4. Nestl (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
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Figure 1-5: Factors influencing the global work environment

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Forces for change

Global competition Growth in mergers, acquisitions and alliances Organization restructuring Advances in technology and telecommunication
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Impacts on multinational management

Need for flexibility Local responsiveness Knowledge sharing Transfer of competence
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Managerial responses
Developing a global mindset More weighting on informal control mechanisms Fostering horizontal communication Using cross-border and virtual teams Using international assignments
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Models of IHRM
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DEVELOPMENT OF HRM CONCEPT HRM CONCEPTS
US MODEL
THE UK MODEL THE JAPANESE MODEL HarvardDavid Guest John Storey Model
Matching Model
THE US MODEL 1. THE MATCHING MODEL: the human resource system and organisation structure should match with organisational strategy. 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.
2.
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 Fayols 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 Leads to conflict and confusion
Proliferation of Creates informational logjams communication channels Produce turf battles and loss of Overlapping accountability responsibilities Barriers of distance, Make it virtually impossible to language, time and resolve conflicts and clarify culture 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
Strategic Human Resource Management

If a global company is to function successfully, strategies at different levels need to inter-relate. An organizations [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.

A managerial process requiring human resource policies and practices to be linked with the strategic objectives of the organization.
Key questions
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?
Strategic Management
Strategy:
A specific pattern of decisions and actions undertaken by the upper echelon of the organization in order to accomplish performance goals.
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 Alignment

Market Strategy Example
HR Strategy Cost Leadership Product or Service Differentiation Nike Selection, development, retention and reward for creativity and innovation
Customer Intimate or Mass Customization
Talent Resource
Innovation Leader
Wal-Mart Short term performance measures, centralized
Amazon Technical Expertise is most critical talent
Talent Acquisition
Lowest cost that meets minimum requirements Productivity and efficiency Alignment
Creative and innovative
Performance Management Talent Engagement
Performancebased creativity Retain high impact at risk employees
External for new skills, retain technical employees Performancebased technical Retain high impact at risk employees
IBM Talent is the product; flawless execution; find and retain the :best value: employees Specific skills
3M Creativity and performance
Closely measure Retain high impact at risk employees Intensive for best employees Include incentives, best value
External for new ideas, retain high impact employees Performancebased innovation Retain high impact at risk employees
Training and development Total Rewards
Process Improvement Lag
Intensivecreativity Lead on innovative, creative
Intensive for technical employees Lead mkt. on tech, lag on others
Intensivecreativity Lead on innovative, creative
Factors influencing IHRM strategy

Corporate International Strategy Level of Development in Foreign Locations Diversity of product or service Organizational life cycle & experience
Copyright Resource Management ISBN 1-84480013-X Use with International Human1998 Prentice-Hall Inc. Published by Thomson Learning Peter Dowling and Denice Welch
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HR Strategy models
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 peoples 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 firms human assets.
Resource-based model
HR Strategy models
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.
Integrative model
Integrative model
Commitment HR strategy focuses on the internal development of employees 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.
Evaluating SHRM & HR Strategy Models

Limitations:
Focus on strategic decision-making Absence of internal strategies
Conceptualization of managerial control
Dimensions of SHRM
Important themes:
HR practices and performance
Re-engineering organizations and work Leadership Workplace learning Trade unions
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 Chan
71
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
Copyright 2003-2006, Chris Chan
72
Culture
Culture a communitys set of shared assumptions about how the world works and what ideals are worth striving for. Culture can greatly affect a countrys laws. Culture influences what people value, so it affects peoples 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.
Hofstedes 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
4. Masculinity/Femininity
Describes how cultures handle the fact that the future is unpredictable.
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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Chapter 1

Introduction: The enduring context of IHRM

Chapter objectives (cont.)

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

Figure 2-1: A model of IHRM

Figure 2-2: Stages of internationalization

Figure 1-3: International assignments create expatriates

Differences between domestic and international HRM

The top ten multinationals

Figure 1-5: Factors influencing the global work environment

Forces for change

Impacts on multinational management

DEVELOPMENT OF HRM CONCEPT HRM CONCEPTS

Figure 2-1: Management demands of international growth

The path to global status

Evolution path common but not normative

Figure 2-2: Stages of internationalization

Stages of internationalization: Exporting

Figure 2-3: Export department

PCNs may be selected, leading to some HR involvement

Figure 2-4: Sales subsidiary

Figure 2-5: International division

Global product/area division

Figure 2-6a: Global product division

Figure 2-6b: Global area division

Figure 2-7: The matrix

Problems with the Matrix

Beyond the matrix

Figure 2-8: The networked organization

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

Figure 2-10: Control mechanisms

Mode of operation and HRM

And/or cooperative modes (such as joint ventures)

Figure 2-11: Linking operation mode and HRM

Strategic Human Resource Management

Strategic Human Resource Management

The three traditional poles of a strategic plan

Environment as a mediating variable for human resource management strategies

Strategic Human Resource Management

Linking of HR policies and practices with the

Internationalization of the importance of HR on the

Integration of the workforce into the organization to

HR and Market Strategy Alignment

Wal-Mart Short term performance measures, centralized

Amazon Technical Expertise is most critical talent

Creative and innovative

Performance Management Talent Engagement

Performancebased creativity Retain high impact at risk employees

3M Creativity and performance

Training and development Total Rewards

Process Improvement Lag

Intensivecreativity Lead on innovative, creative

Intensive for technical employees Lead mkt. on tech, lag on others

Intensivecreativity Lead on innovative, creative

Factors influencing IHRM strategy

Evaluating SHRM & HR Strategy Models

Focus on strategic decision-making Absence of internal strategies

Conceptualization of managerial control

HR practices and performance

Re-engineering organizations and work Leadership Workplace learning Trade unions

Main challenges in IHRM

Main challenges in IHRM