INTERNATIONAL LEADERSHIP AND

HRM

Session 2 : The Organisational Context

(Internationalising)

In this section, we will cover the following areas:

Structural responses to international growth.
Control and co-ordination mechanisms.
Modes of operation utilised in global markets.
The impact of implemented organisational practices on
the human resource management function.

Why internationalise?
There are a number of reasons why organisations would wish to internationalise.
1.Ghauri (2000) claims that organisation want to emulate their competitors so as not to lose competitive
advantage.
2.There is a desire to access international markets (e.g. due to limited domestic markets which is especially
important for products with short lifecycles -Hollywood films).
3.There can be production advantages offered in other countries, for example,
a. Cheaper labour: UK call centres are located in Asia
b. Dyson: Malaysia the hourly rate is one third of the UK -similar savings on office rental
c. Increasing use of Far Eastern suppliers, wishing to enter new markets
4. Availability of greater pool of skilled labour
a. India have highly qualified IT workers (used by IBM and Google).
b. Opportunities in developing markets
c. China there is a growing demand for cars (Volkswagen).
5.Financial inducements - there can be direct financial assistance and favourable tax rates, for example,
Hyundai into Slovakia
6.Overcome Host Country protectionism
a. Trade barriers, tariffs, quotas and/or specific rules and regulations necessitate establishing production
facilities in a foreign country
b. Toyota and Nissan in UK.
C. Strategic imperative

Management demands of
international growth

Why globally standardise HRM?

To achieve consistency, transparency and alignment of a geographically
fragmented workforce around common principles and objectives.
Why locally responsive HRM?
To respect local cultural values, traditions, legislation, government policies and
education systems, regarding HRM and work practices.

Balancing the standardisation and localisation of

HRM in MNEs
Factors driving standardisation
MNEs that standardise:

pursue multinational or transnational corporate strategies

supported by corresponding organisational structures that are

reinforced by a shared worldwide corporate culture

Factors driving localisation

Cultural environment
-

more social context : more complete balance of extrinsic and intrinsic rewards

more individual or fast changing personal and social contexts : more extrinsic
rewards

Institutional environment (country-of-origin host country)

Mode of operation abroad

Subsidiary role: e.g., global innovator, integrated player, implementer

Examples of impact of the cultural and institutional

context on HRM practices

The path to global status

This causes structural responses, due to the:
strain imposed by growth and geographical spread
need for improved coordination and control across
business units
constraints imposed by host-government regulations on
ownership and equity

Stages of internationalisation

Stages of Internationalisation:
Exporting

Typically, the initial stage of international operations is usually handled by an intermediary

(foreign agent or distributor) and the role of the HR department is unclear at this stage. The
standard initial stage of the international process for manufacturing firms is exporting. The role
of the HR function in the exporting process is illustrated in the figure 'Export Department'. In
this process as depicted by the red line, the role of the HR function can often be unclear and at
times, the HR professional may be confused or unaware of their responsibilities.

Sales Subsidiary
Replacing foreign agents/distributors with a
company's own through sales or branch
offices/subsidiaries may be prompted by:
Problems with foreign agents.
More confidence in international activities.
Desire for greater control.
The need to give greater support to exporting
activities.
However, PCNs may be selected, leading to
some HR involvement.
This figure below shows a potential change in
HR practice where dedicated HR staff may
become involved in the international
operations.

International Division

The Matrix

Problems with the Matrix (Bartlett and Ghoshal)

Dual reporting

Leads to conflict and confusion

Proliferation of communication channels

Creates informational logjams

Overlapping responsibilities

Produces turf battles and loss of accountability

Barriers of distance, language, time and

Make it virtually impossible to resolve conflicts and

culture

clarify confusion

HRs place in structural forms

There are three ways HR develops with international
growth:
1. Centralised HR firms
large and well-resourced: typically product-based or
matrix structures
2. Decentralised HR firms
small group, mostly for senior management at
corporate headquarters : mostly product- or regionalbased structures
3. Transition HR firms

Different countries, different paths

European MNEs: mother-daughter global with
product/area divisions or matrix structure
Swedish MNEs: Tend to adopt mixture of motherdaughter and product divisions
Nordic MNEs: may prefer matrix structure
United States MNEs: limited success with matrix
Japanese MNEs: similar to US, but evolve more slowly,
possibly not changing structure
Chinese & Indian MNEs : limited information on these
to date

Impact on HR Role
There has been minimal direct investigation as to how HR development responds to structural
changes due to international growth.
Scullion and Starkey (2000) examined 30 UK firms, and discovered :
Centralised HR companies
Large, well resourced HR departments; key role to establish and maintain control over worldwide top management positions e.g.
divisional and subsidiary managers. Purpose: so strategic management under Central control.
Companies operated in product-based or mixed structures

Decentralised HR companies
Devolved HR responsibilities to small group consistent with decentralised approach to other functions;

Companies tended to operate within product or regional based structures

Transition companies
Medium sized corporate HR departments
Staffed by relatively small group
Operate in a decentralised, product based structure

Varied roles of HR within 3 groups impacts upon activities:

Training & development
Appraisals
Ability of Corporate HR to plan for staff movements throughout worldwide operations.

Control Mechanisms

Mode of Operation and HRM

Licensing
Franchising
Management Contracts
Projects and/or
co-operative modes (such as
joint ventures).

Formation of an international equity

joint venture
International Joint Ventures (IJV) challenges include
HR must manage relations at the interfaces
between IJV and parent companies, as different
rules can create critical dualities
HR must develop appropriate HRM practices
and strategies for the IJV itself i.e. HR must recruit,
develop, motivate, retain human resources at IJV
level

The formation processes of Mergers

and Acquisitions and HR challenges