STUDENT ZONE Chapter 3 International Human Resource Management John ratton CH!

"TER O#ER#IE$ Chapter 2 outlines some developments in global capitalism and how they plays out in terms of employment relations and international HRM in MNCs. We identify three alternative theories relating to the impact of global processes on domestic patterns of employment relations. The chapter then goes on to e amine the international aspects of recruitment and selection! training and learning! rewards performance appraisal management and the repatriation of e patriates. "iven that in Chapter # we discussed HRM emanated from the $%&! we have not included any further discussion of $% HRM in this chapter! the focus is on developments and analysis of HRM in 'urope and selected countries in &sia.
Chapter objectives

&fter studying this chapter! you should be able to( ' plain how developments in global capitalism affect corporate and HR strategies within multinational corporations )MNCs* +escribe the difference between strategic international human resource management )%,HRM* and international human resource management ),HRM* ' plain how %,HRM is lin-ed to different global business strategies .utline some -ey aspects and contemporary issues in ,HRM ' plain HRM trends in 'urope and selected countries in &sia Comment on whether globali/ation is driving processes of convergence or divergence in HRM policies and practices CH!"TER OUT%INE Intro&uction #001s! with the pace of globali/ation accelerating! national systems regulating the employment relationship appear to be pass2. The process of globali/ation 3 the integration of mar-ets! new mar-ets )e.g. China and ,ndia* increased foreign direct investment by MNCs! and cross3border integration of production and services. The proliferation of interest in both international HRM and comparative HRM springs directly from globali/ation and from strategic management theory. '

(lo)al capitalism ' plores the argument that there is nothing in the logic of profit3ma-ing corporations and capital accumulation to -eep the manufacture of steel! for e ample! in traditional local mar-ets )%heffield! the Ruhr or 4ennsylvania*! MNCs with distinctive competencies can potentially reali/e higher profits by applying those competencies in foreign mar-ets! where local competitors lac- similar competencies. Higher profits can be reali/ed through economies of scale! consistent with low3cost leadership. The logic of unfettered globali/ation means that labour3intensive value3added activities migrate from high3wage to low3wage countries. HRM in "ractice 3*' + 5For Chrysler, China offers both profit, peril this e ample illustrates one aspect of globali/ation! the relocation of 6obs from high3wage to low3wage economies "lobal corporations typically face tension from two types of business pressure( on the one hand demands for global cost reductions and integration! and! on the hand demands for differentiation and local responsiveness )see figure 7.#*. The duality of culture 8 its pervasiveness yet its uni9ueness 8 impacts on global business strategy. 4ressure to be locally responsive! including HR practices! arise from consumer tastes and preferences! differences in infrastructure and the national business system imposed by the host government. The integration8responsiveness grid )see figure 7.#* shows four typologies 8 global! multi3domestic! international! and trans3national 8 as solutions to the dual pressure for cost3efficiency and responsiveness. a* Global strategy 3 focus is on increasing profit margins through cost3efficiencies arising from economies of scale and economies of location )e.g. Te as ,nstruments*. b* Multi-domestic strategy 8 focus is on ma imi/ing local responsiveness )e.g.! ,TT*. c* International strategy 8 focus is on the global diffusion of the company:s distinctive competencies )e.g.! 4rocter ; "amble*. d) Trans-national strategy 8 the focus is on rationali/ing and integrating resources to achieve superior cost3efficiencies from economies of scale and economies of location! while at the same time! being sensitive and capable of responding to local needs! and by sharing -nowledge )e.g.$nilever*. The typologies depict a theoretical or <ideal type= of global strategy that MNCs strive for if they wish to attain superior performance outcomes. Managing the conflicting pressures for rationali/ation and integration )low3cost leadership* and local responsiveness )differentiation* sets the conte t for ,HRM. ,

International human resource management Three alternative theories on the impact of global processes on domestic employment relations( economic! institutionalist! and integrated. The economic globalization approach predicts that international mar-ets operate in accordance with universal principles and will result in a 5convergence: of national employment relations. The institutionalist approach contends that global forces are more fluid in their dynamics resulting into 5divergent: power struggles. The integrated approach suggests that both global economic trends and nationally based institutions are important in structuring national patterns of employment relations. Stu&- Tip This suggested activity draws attention to the significance of culture to international HRM! the interplay of local! regional! national and global mar-ets and cultures. +efinition( ,nternational HRM ),HRM* 3 HRM issues and problems arising from the internationali/ation of business! and the HRM strategies! policies and practices that global firms pursue in response to the internationali/ation process. Typically celebrates a Western management and hegemonic culture. +efinition( strategic ,HRM 3 HR policies and processes that result from the global competitive activities of MNCs and that e plicitly lin- international HR practices and processes with the worldwide strategic goals of those companies. ,ntegrative model of strategic ,HRM consists of five core parts( e ogenous factors! endogenous factors! %,HRM! pressures and goals of the MNC! and the corporate %,HRM orientation )see figure 7.2*. The central theoretical argument of the integrative model is that ,HRM should be e plicitly related to the MNC:s global business strategy and that its changing forms must be understood in relation to the strategic evolution of the MNC
The internationalization of the HRM cycle

We e tend the HRM cycle )see figure #.>* and add the dimension of cultural diversity to e plore the international aspects of recruitment and selection! rewards! training and development! and performance appraisal! as well as the issue of repatriation )see figure 7.7*. The central modus operandi of the global company is the creation and effective management of multicultural wor- teams that represent diversity in competencies! levels of e perience and cultural and language bac-grounds 3

Selection is important beyond simply staffing -ey technical or managerial positions. Managing international re ards re9uires that managers are familiar with the foreign country:s employment law! national employment system! e.g.! benefits! and currency fluctuations in particular host countries. International training and development will vary and ta-e one of three forms( centrali/ed! synergistic or local. ,rrespective of business strategy! training and development interventions in MNCs typically include cross3cultural training and competencies associated with global leadership. Table 7.# )4age ?0* summarises these interventions and their respective goals. %tudies suggest that performance appraisal is the favoured way to ensure that strategic employee competencies! employee behaviour and motivation are performed effectively in the host country. The comple ity of performance appraisal is illustrated by Hofstede:s )#0?1* model( who sets what performance criteria for an individualistic! tas-3oriented &nglo3%a on e patriate transferred to! for e ample! a more collectivist! and relationship3oriented subsidiary@ Traditional wor- on ,HRM focused on repatriation. 4roblem varies from individual to individual! but managers should be aware that a violation of the psychological contract may lead to a negative psychological reaction to repatriation. HRM in "ractice 3*3 + !"omen find o#erseas postings out of reach This e ample illustrates the notion of <glass border= 3 the irrational assumptions held by parent3country senior management about the suitability of female managers for overseas appointments. Comparati.e human resource management +efinition( comparative HRM 3 the systematic investigation of HRM practices in two or more countries to increase -nowledge and understanding that has analytic rather than descriptive implications. The five3step HRM cycle )see figure #.>* is used to e plore studies of cross3border HR practices in some selective 'uropean and &sian countries. &dditionally! we e amine trade union organi/ation! non3standard employment patterns and the role of the HRM function. 5What really constitutes 'urope@: We emphasi/e that no one can aspire to write a fully comprehensive account of HRM practices in regionali/ed! polyethnic 'urope.

The role of the human resource management function 3 the data on these shows significant variations between selected 'uropean countries )see table 7.2! page 07*. %election and e9ual opportunities3 the selection of people must match organi/ational needs and be within national institutional systems regulations. Managers need to be cogni/ance of the comple ities of intercultural phenomena and <ethnocentric traps=. '9ual opportunities apply to the e9ual treatment 3 gender! race! ethnicity! se ual orientation and disability. +ata on e9ual opportunities in recruitment and promotion )see table 7.7*. $e ards and trade unions % studies show the growth of fle ible reward systems across 'urope. Table 7.> indicates the diversity in trade union density in selected countries. The 5adaptAe port: debate 9uestions whether MNCs adapt their HR practices according to the situation found in the host country or whether they adhere to the HR practices they use in the parent country. MNCs are li-ely to ta-e advantage of wea- trade union rights in potential host countries to enhance cost efficiencies. Training and de#elopment - '$ considerable government intervention in T;+. Reflects a change in the role of government( from a policy of 5full employment: to a less challenging 5employability:. Fle&ibility and non-standard employment - research shows significant differences in the use of non3standard employment contracts defined as part3time! short3term and temporary agency wor-! and independent contracting. China - Boreign3owned enterprises )B.'s* and Chinese 5socialist capitalism: have provided a new conte t in which to manage the Chinese employment relationship. Crief review of whether Chinese HR practices 8 staffing! rewards 3 is becoming more 5Westerni/ed: given the logic of mar-et3driven capitalism. South 0orea - studies have identified high systemic rigidities and wea- individual3level motivational effects arising from traditional %outh Dorean employment practices )e.g. rewards in chaebols* are traditionally based upon seniority. 'vidence that the employment practices are changing. In&ia 1 the World Can- and the ,nternational Monetary Bund re9uired the ,ndian government to change from a regulated 5mi ed economy: to a 5free mar-et economy:. & comparative study of HRM practices in ,ndian public and private sector organi/ations show that HR practices in private and public sector organi/ations are more similar than different )see table 7.E*.

HRM in "ractice 3*/ + 3Indian act threatens outsourcing pro ess This report illustrates the globali/ation3effect on local culture! mores and regulatory practices in low3wage host countries see-ing western investment. Japan - #0?1s stereotypical model of Fapanese management attracted considerable attention. The <Fapani/ation= phenomenon centred on core elements( fle ibility! 9uality and minimum waste )see Chapter E*. 4opular view of Fapanese HR practices is simplistic. HRM in "ractice 3*2 + !C'(s harmonious-society plan) Fire *+,,,, staff This report provides evidence of how Fapanese employment practices have changed since the financial crisis of #00G. The con.ergence4&i.ergence &e)ate & common theme in the comparative HRM literature has been 5convergence: and 5divergence: in HR practices! resulting from globali/ation. The debate has a long antecedent in neoclassical economic theory. 'vidence of continued diversity in local or national patterns of economic activity and employment relations has contributed to the notion of 5varieties of capitalism:. & 5'uropean HRM model: is problematic. +espite economic pressures toward convergence! resilient differences in cultural and institutional conte ts produce divergent employment relationships. %tudies suggest divergence of HR practices in &sian economies )e.g. in China shifts from 5iron rice bowl: to 5mar-et3responsive: system* do not constitute convergence to an &nglocentric HRM ideal3type model. While changes in HR practices within a MNC are mediated by environmental changes and universal 5best practices:! the model draws attention to <gaps= between universalism versus national culture and HR practices )see figure 7.>*. The sheer variation of economies! national institutional profiles and cultures ma-es claims for convergence both simplistic and problematic.

ENGAGING IN CRITICAL THINKING RE LECTI!E "#E$TI%N&E$$A' "#E$TI%N

+iscuss how a national institutional system may influence a corporation:s decision to locate its profit3ma-ing operations and how that system may influence its HR practices.
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This 9uestion re9uires you to e amine strategic ,HRM within competing typologies of global business strategy. Hour essay should e plain Cartlett and "hoshal:s thesis that global corporations typically face tension from two types of business pressure( demands for global cost reductions and integration and demands for differentiation and local responsiveness. The integration8responsiveness grid provides an analytical frameworfor e amining a MNC:s decision to relocate! particularly in terms of differences in national business systems. ' amples include employment standards! trade union density! and health and safety regulations. Ioo- at Bigure 7.> and consider the merits of the convergenceAdivergence debate. Hou should also evaluate the argument that local rationalities! local culture! local ideologies and local HR challenge a universal vision of order! e9uilibrium and convergence. CH!"TER C!SE STUD67 8!E0I This case illustrates the business pressures global companies face( demands for cost reductions and integration and demands for differentiation and local responsiveness. The case is based upon Hill and Fones chapter! 5%trategy in the "lobal 'nvironment: and business reports on ,D'&. The global strategy adopted by ,D'& during its e pansion from %weden into North &merican faced problems because the company:s home products did not match the tastes and preferences of North &merican consumers. "o to ,-ea:s website and research employment relations in Canada. JHint( your research should reveal that Brench is the dominant language in KuebecL &lso! see table 7.> and figure 2.? and figure 7.2.