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Chapter 1

Introduction: The enduring context of IHRM

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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

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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.
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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.
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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
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European Model
It is based on the argument that European organizations are constrained at both International and National Level culture and legislation.

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Internationalization

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Figure 2-1: Management demands of international growth

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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


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Figure 2-2: Stages of internationalization


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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

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Figure 2-3: Export department

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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


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Figure 2-4: Sales subsidiary

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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
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Figure 2-5: International division


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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
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Figure 2-6a: Global product division

Figure 2-6b: Global area division

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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
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Figure 2-7: The matrix


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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
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Beyond the matrix


Less hierarchical structural forms
Heterarchy Transnational Networked firm

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Figure 2-8: The networked organization


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


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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
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Figure 2-10: Control mechanisms

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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)


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Figure 2-11: Linking operation mode and HRM


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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

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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

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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.

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Strategic Human Resource Management


A managerial process requiring human resource policies and practices to be linked with the strategic objectives of the organization.

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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?

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Strategic Management

Strategy:

A specific pattern of decisions and actions undertaken by the upper echelon of the organization in order to accomplish performance goals.

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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.

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The three traditional poles of a strategic plan

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Environment as a mediating variable for human resource management strategies

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Strategic Human Resource Management


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
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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

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Factors influencing IHRM strategy


Corporate International Strategy Level of Development in Foreign Locations Diversity of product or service Organizational life cycle & experience

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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.

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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.
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Resource-based model

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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.
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Integrative model

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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.
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Evaluating SHRM & HR Strategy Models


Limitations:

Focus on strategic decision-making Absence of internal strategies

Conceptualization of managerial control

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Dimensions of SHRM
Important themes:

HR practices and performance

Re-engineering organizations and work Leadership Workplace learning Trade unions

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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

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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
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Copyright 2003-2006, Chris Chan

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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.
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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.
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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).

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In Taiwan, a country that is high in collectivism, coworkers consider themselves more as group members instead of individuals.
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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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