challenges and approaches to ihrm

Week 2: Challenges and Approaches to IHRM

(CMSE11179)

International & Comparative HRMInternational & Comparative HRM 2

Week 2 Lecture Plan

•The Globalisation/Internationalisation of Business

- Definitions & Drivers- Rise of the MNE

•Challenges for International HRM

•Approaches to IHRM- Global v Local- Operational v Strategic

•Case Studies- Wood Mackenzie- Lincoln Electric- Peter Hanson

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What is Globalisation?

Globalisation

“The increase of trade around the world, especially by large companies producing and trading goods in many different countries’’.

“The process of international integration arising from the interchange of world views, products, ideas and other aspects of culture”.

“The process by which the world is becoming increasingly interconnected as a result of massively increased trade and cultural exchange.”...“The biggest companies are no longer national firms but multinational corporations with subsidiaries in many countries”.

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What is Internationalisation?

Internationalisation

“To make international, in scope or character”.

“To change the way a country, organisation or industry is run”.

“To bring under international control”.

Let’s “go international”!

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Drivers of Internationalisation

Brewster, Harris and Sparrow (2002)

• Maximising Shareholder Value

• Building Global Presence

• Forging Strategic Partnerships

• Creating Core Business Processes

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Drivers of Internationalisation

Scullion & Paauwe (2004)

•Push and Pull Factors

• Economies of scale• Spreading of financial risk esp. investment costs• Shareholder demand for sustainable growth• Access to resources

• Growth in consumer demand in developing countries• Liberalisation of Markets• Government incentives

•Increasing importance of international business(es) to national and global economies

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Rise of the MNE

Schuler, Budhwar and Florkowski (2002)

..‘’any enterprise that carries out transactions in or between two sovereign entities, operating under a system of decision making that permits influence over resources and capabilities, where the transactions are subject to influence by factors exogenous to the home country environment of the enterprise’.

Important Note: The predominance of businesses are Small to Medium-sized Enterprises (SMEs), and these account for the majority of trade.

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19/01/201519/01/2015 International & Comparative HRMInternational & Comparative HRM 8

Video: Mundo Sem Fronteiras

• Cable & Wireless

• What is an MNE?

• Why firms become MNEs

• Management/HR approaches adopted by MNEs


What is IHRM?

Schuler, Budhwar and Florkowski (2002)

‘’International human resource management (IHRM) is about the world-wide management of human resources’’.

‘’The purpose of IHRM is to enable the firm, the multinational enterprise (MNE), to be successful globally. This entails being: (a) competitive throughout the world; (b) efficient; (c) locally responsive; (d) flexible and adaptable within the shortest of time periods; and (e) capable of transferring knowledge and learning across their globally dispersed units’’.

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Challenges for IHRM

Sparrow et al. (2004)

•Need to get the basic HRM foundations in place

•Confront contradiction inherent in being:

• Both global and local

• Exploiting existing strengths/advantages

• Exploring new paths

•Have to steer through constant changes

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Challenges for IHRM

• Extent to which local adaptation of HRM policies and practices is needed [Week 2] e.g.

• Employment Terms & Conditions• Recruitment practices• Compensation and Benefits Programmes• Employee Consultation• Health & Welbeing• Handbooks

• Definition and propagation of organisational culture incl. management and leadership style [Week 3]

• Nature and mechanisms of control, decision-making and communication across dispersed units [Week 3]

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Challenges for IHRM

•Enable the attraction, acquisition and development of a dispersed talent pool in line with (and in anticipation of) business requirements [Week 4]

•How best to structure the organisation to meet the goals of the enterprise, be efficient and maximise capabilities

•Supporting the growth of the business, organically or via M&A activity and the use of Ex-pats to facilitate this [Week 5 & 7]

•Maximising organisational capabilities and individual potential to drive business performance [Week 8 & 9]

•Determine the degree to which HR activities are handled in-house versus outsourced [Week 10]

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Approaches to IHRM

Perlmutter (1969); Dowling & Welch (2004)

•Ethnocentric

•Polycentric

•Geocentric

•Regiocentric

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Ethnocentric Approach

Advantages:

•Strong organisational control and coordination

•Propagation of standards, consistency

•International experience for talented managers

•HQ people best to do the job

Disadvantages:

•Restricted opportunities for local staff

•Over-reliance on Ex-pats – cost & sustainability

•Culturally insensitive HQ style may be implemented

•Stretched lines of communication, decision-making

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Emphasising that HR systems at the headquarters are the best and that they should be implemented in all subsidiaries


Polycentric Approach

Advantages:

•Language and other barriers eliminated

•Lower costs (e.g. focus on locally sourced talent)

•Continuous improvement as locals are retained longer

•Government policy might force adherence

Disadvantages:

•Control and coordination issues, complex

•Difficult to create ‘one team’ culture

•Limited opportunities for HQ people

•Re-creation of the wheel – not cost effective

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Usefulness of the host country systems, and autonomy to each subsidiary is allowed with close support from headquarters


Geocentric Approach

Advantages:

•Develops international team and culture

•Policies and practices developed as ‘best of breed’

•Agnostic to place of origination - Minimises HQ

dominance

•Economies of scale achievable

Disadvantages:

•In practice, not easy to achieve

•Unclear/complex control and decision-making

•Reliance on key staff movement - Expensive training and relocation

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Aims to adopt best practice HR systems from anywhere in the world


Regiocentric Approach

Advantages:

•More sensitive to ‘local’ conditions

•A step towards (or away from) a geocentric approach

•Speeds up decision-making – reduced time lag from HQ

•Some economies of scale

Disadvantages:

•“Federalism” at a regional level

•Some regions e.g. APAC are too large/diverse to consider homogeneous

•Career barriers at cross-regional level

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Similar to geocentric approach but with a region-restricted focus


Global v Local…or Both?

Benefits of Global/Regional

Integration

Benefits of Local Approach and Autonomy

Cost•Scale advantages•Specialisation•Bargaining powerMarketing•Branding•Distribution networksPooling of innovationResources integration Cross- SubsidisationStandardisation

Responsiveness•Speed•Adaptation•FlexibilityCustomer focusAccess to local resourcesLocal citizenshipGlobal variation

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Hamlet’s Question?

“To be, or not to be, that is the question - …”

•Or Rather: To locally adapt or not adapt HRM

• What to respect? (adapt to)• What to ignore? (standardise)• What to reinvent? (finding a‘third’solution)

•Answering this question requires perspective and understanding of a variety of factors: Cultural, Institutional, Corporate, Local Unit, Custom & Practice and/or Statutory

•To determine WHAT is an effective and appropriate approach to HRM - likely to be a blend

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Three Faces of HRM

Activity Focus ofAttention

Theoretical

Perspective

Role

Building HRM

Foundations - getting basics in place

InternalCoherence

FIT (Internal)

The Builder

Realigning HRM

Adjusting to environment change; strategy implementation; reconfiguring

ChangeFIT

(External as well

Internal)

The Change Partner

Steering via

HRM

Organisationalcapability Development; managing context

Constructive tensionBetweenopposites

Duality/Paradox

The Navigato

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Evans et al. (2002) Evans et al. (2002)


Building: Focus on Foundations

• HRM foundations - getting core policies and practices right, keeping things simple:

• Recruitment and Selection• Training and Development• Performance Management• Labour and Industrial Relations (if applicable)

• Business strategy taken as is, and HR practices are devised to underpin and support this

• Emphasis on the importance of consistency, quality and efficacy - Internal Fit

• Universalist v Relativist v ‘High Performance Work System (HPWS)’

• Risk of HR becoming a custodian

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Re-aligning: Focus on Strategic Change

• More externally oriented

• Supporting the delivery of the business’ strategy as it evolves to meet the needs of the future

• Responding to external factors e.g. competitive landscape, customer needs, technological change, change in demographics

• Problems can come if HR practices stay rooted in the past

• However, need to balance realignment for the future whilst managing the needs of the present

• Evolution towards Strategic HRM

• Realignment takes time - Gratton’s ‘living strategy’

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Steering: Focus on Dualities

• Reflects the often paradoxical nature of organisational effectiveness

• Maximising assets for TODAY v developing for TOMORROW (acute in a knowledge intensive business) e.g. Subject Specialist v Generalist v Manager

• Following the Business Plan v Opportunism

• Competition v Partnership (JVs and such like)

• Cost Conscious v Investment

• Loose v Tight Control

• Speed v Quality

• Care to minimise zigzag - Have faith in fundamental practices19/01/201519/01/2015


Multiple HRM Roles

Day To Day Operational Focus

Future/Strategic Focus

Processes People

Management of Infrastructureof Personnel Basics

Management of EmployeeContribution

Management of Strategic Human Resources

Issues

Management of Change and Transformation

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Ulrich (1997)


Case Studies

• Wood Mackenzie

• Peter Hanson

• Lincoln Electric

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Wood Mackenzie HRM Development

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Wood Mackenzie HRM Development

• Phase 1: UK centric - Getting the basics in place

• Phase 2: Start of overseas expansion - Ethnocentricity/Managed remotely from UK

• Phase 3: Development of overseas HR capability (US then APAC) – Largely based on UK policies and practices

• Phase 4: Localisation begins – hires, greater development of local practices as appropriate

----------• Balance of global (e.g. leadership norms, corporate values,

core policies and practices, organisational structure) and local

• Determined to maintain ‘one team’ approach with strong, global organisational culture

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Lincoln Electric Case

•Critically assess Lincoln Electric’s early attempts to grow its business overseas

•How would you characterise these attempts from a academic standpoint?

•Having initiated a second attempt at expansion in Asia, what guidance would you give the Management Team in China?

•What general lessons does this case-study teach us?

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Peter Hanson Case

• What were the strategic rationales for the establishment of the Product Development Centre in Shanghai, China?

• Evaluate the approach to managing people in the Product Development Centre. What should Peter Hanson have done differently? Why?

• What should he do now? Why?

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References

• Evans, P., Pucik. V. and Bjorkman, I. (2011) The Global Challenge: Frameworks for International Human Resource Management. New York: McGraw Hill. Chapter 2: Three Faces of HRM in International Firm.

• Perlmutter, H. V. (1969) The Tortuous Evolution of the Multinational Corporation. Columbia Journal of World Business, 4 (1), 9-18.

• Schuler, R. S., Budhwar, P. and Florkowski, G. W. (2002) International Human Resource Management: Review and Critique. International Journal of Management Reviews, 4 (1), 41-70.

• Scullion, H. and Paauwe, P. (2004) International HRM: Recent Developments in Theory and Empirical Research. In Harzing, A-W. and Ruysseveldt, J.V. (Eds.) International Human Resource Management. London: Sage, 65-88.

• Sparrow, P.R., Brewster, C. and Harris, H. (2004) Globalizing Human Resource Management. London: Routledge.

• Ulrich, D. (1997) The Human Resource Champions. Harvard Business School Press.

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challenges and approaches to ihrm

Documents

international hrm approaches

international control

mne challenges

mne schuler

ihrm cmse11179

multinational enterprise

purpose of ihrm

resources growth