chapter 11 international human resource management

8/8/2019 Chapter 11 International Human Resource Management

1/35

Use with International Human Resource Management ISBN 1-84480013-X

Published by Thomson Learning Peter Dowling and Denice Welch

11/1

Chapter 11

IHRM trends and future challenges


2/35


Published by Thomson Learning Peter Dowling and Denice Welch11/2

Chapter objectives

International business ethics and HRM.

Mode of operation and IHRM.

Ownership issues relating to IHRM requirements of

organizations other than the large multinational, such as:

small- and medium-sized firms (SMEs)

family-owned firms

non-government organizations (NGOs).

Theoretical developments and research issues in IHRM.

In this final chapter, we identify and comment on observed

trends and future directions regarding:


3/35


Published by Thomson Learning Peter Dowling and Denice Welch11/3

Introduction In this book, we have explored the international HRM issues

relating to managing people in a multinational context. To thatend, we have focused on the implications that the process ofinternationalization has for the activities and policies of HRM.

A major activity has been that of placement: who to place incharge of foreign operations and units to cater for themanagerial and technical demands of international businessgrowth. The chapters in Part II examined the various aspectsrelating to staff placement: managing and supportinginternational assignments. We also considered in the precedingchapters of Part III host-country issues, such asstandardization of work practices, processes and proceduresand the implications for human resource management.

(cont.)


4/35

Use with International Human Resource Management ISBN 1-84480013-XPublished by Thomson Learning Peter Dowling and Denice Welch

11/4

Introduction (cont.) In this way, we tried to counter the imbalance towards

expatriate issues, while recognizing the continued need tomanage effectively international assignments owing to theimportant strategic roles of expatriates and non-expatriates in

sustaining international operations. Throughout the precedingchapters, we also identified the HR implications of some ofthe managerial responses to the changing global workenvironment, particularly developing the required globalmindset to accompany global operations, the use of informalcontrol mechanisms, horizontal communication, cross-border

teams and international assignments.(cont.)


5/35


11/5

Introduction (cont.) We now turn our attention to developments that have not

previously been emphasized in the general IHRM literatureand the challenges that they present to IHRM: international

business ethics, mode of operation, SMEs and family-owned

firms and NGOs. The chapter concludes with a shortdiscussion of theoretical developments and research issues inthe field of IHRM.


6/35


11/6

International business ethics

and HRM When business is conducted across national and cultural

borders, the operationalization of an enterprises ethicsprogram takes on added layers of complexity. In particular,

questions about the existence of universal ethical standardsand global values are raised. This is especially problematicwhen multinationals operate in host countries that havedifferent standards of business practice, are economicallyimpoverished, whose legal infrastructure is inadequate, whosegovernments are corrupt and where human rights are

habitually violated. The question of ethical relativity arises notonly in the context of different home- and host-countryemployment practices but also in the central operations and

policies of multinationals.

(cont.)


7/35


11/7


and HRM (cont.) Ethical relativism or global values?

Global organizations face a challenge: should they apply their own

values everywhere they do business, irrespective of the cultural context

and standard of local practices? For the ethical relativist, there are no universal or international rights

and wrongs, it all depends on a particular cultures values and beliefs.

Unlike the relativist, the ethical absolutist(or imperialist) believes that

when in Rome, one should do what one would do at home, regardless

of what the Romans do. This view of ethics gives primacy to onesown cultural values.

(cont.)


8/35


11/8


and HRM (cont.) Ethical relativism or global values? (cont.)

The existence of universal ethical principles can also be seen in the

agreements that exist among nations who are signatories to the United

Nations Declaration of Human Rights and a number of international

accords such as the Guidelines for Multinational Enterprises adopted

by the Organization of Economic Cooperation and Development

(OECD) and the Caux Roundtable Principles of Business. Frederick

discusses the moral authority of transnational codes and suggests that

they indicate the emergence of a transcultural corporate ethic and

provide guidelines that have direct applicability to a number of thecentral operations and policies of multinationals including the HRM

activities of staffing, compensation, employee training and

occupational health and safety.

(cont.)


9/35


11/9


and HRM (cont.) Ethical relativism or global values? (cont.)

However, the claim that there are global values and universal principles

that should be followed in international business is not inconsistent

with the view that there are a wide range of situations where variationsin business practice are permissible. Donaldson and Dunfee refer to

moral free spacein a world of universal moral norms.


10/35


11/10


and HRM (cont.) Self-regulation initiatives: international corporate codes of

conduct

The need for international accords and corporate codes of conduct has

grown commensurately with the spread of international business.

Translating ethical principles and values into practice in the

international business domain, even allowing for some consensus

within the international community, is an enormous task in the absence

of a supranational legislative authority. A number of mechanisms to

facilitate the incorporation of ethical values into international businessbehavior have been suggested.

(cont.)


11/35


11/11



conduct (cont.)

One of the most interesting initiatives in international business self-

regulation is the Caux Roundtable Principles for Business Conduct

developed in 1994 by Japanese, European and North American

business leaders meeting in Caux, Switzerland. This was the first

international ethics code for business and aimed to set a global

benchmark against which individual firms could write their own codes

and measure the behavior of their executives. The Caux Principles aregrounded in two basic ethical ideals: kyosei and human dignity. The

preamble to the Caux Principles states that:

(cont.)


12/35


11/12



conduct (cont.)

The Japanese concept ofkyosei means living and working together for

the common good enabling cooperation and mutual prosperity to co-

exist with healthy and fair competition. Human dignity relates to the

sacredness or value of each person as an end, not simply as the means

to the fulfillment of others purposes or even majority prescription.

(cont.)


13/35


11/13



conduct (cont.)

The Caux Principles aim to operationalize the twin values of living and

working together and human dignity by promoting free trade,

environmental and cultural integrity and the prevention of bribery and

corruption. The general principles clarifying the spirit ofkyosei and

human dignity are presented in Section 2 of the document while the

specific stakeholder principles in Section 3 are concerned with their

practical application. The Principles have their origin in the Minnesotaprinciples developed by the Minnesota Center for Corporate

Responsibility in the USA. Following their adoption in 1994,

worldwide endorsements have been sought and given.

(cont.)


14/35


11/14



conduct (cont.)

In addressing the core human values of good citizenship, respect for

human dignity, respect for basic rights and justice and using them to

define ethical behavior, Johnson and Johnsons Credo meets the

standards of the Caux Principles, the UNs declaration of fundamental

human rights and the OECD Guidelines for Multinational Enterprises.

A common difficulty with codes of ethics is enforcement. The attitudes

of senior management play a crucial role in developing, implementingand sustaining high ethical standards. HR professionals can help

multinationals to institutionalize adherence to ethics codes through a

range of HR activities including training and the performancereward

system.


15/35


11/15


and HRM (cont.) Government regulation: new global developments on the

criminalization of bribery

Bribery and corruption top the list of the most frequent ethical

problems encountered by international managers. The World Bank

estimates that about US $80 billion annually goes to corrupt

government officials.

(cont.)


16/35


11/16


and HRM (cont.) Government regulation: new global developments on thecriminalization of bribery (cont.) Bribery involves the payment of agents to do things that are

inconsistent with the purpose of their position or office in order to gain

an unfair advantage. Bribery can be distinguished from so-called giftsand facilitating or grease payments. The latter are payments tomotivate agents to complete a task they would routinely do in thenormal course of their duties. While most people do not openlycondone bribery, many argue for a lenient approach based on the viewthat bribery is necessary to do business (the ethical relativistsargument). However, it is now generally agreed that bribery

undermines equity, efficiency and integrity in the public service,undercuts public confidence in markets and aid programs, adds to thecost of products and may affect the safety and economic well-being ofthe general public.

(cont.)


17/35


11/17



criminalization of bribery (cont.)

For these reasons, there has been an internationally wide movement to

criminalize the practice of bribery. In 1977, the USA enacted the

Foreign Corrupt Practices Act(FCPA) to prohibit US-based firms and

US nationals from making bribery payments to foreign government

officials. In addition, payments to agents violate the Act if it is known

that the agent will use those payments to bribe a government official.

The Act was amended in 1988 to permit facilitating payments butmandates record-keeping provisions to help ensure that illegal

payments are not disguised as entertainment or business expenses.

(cont.)


18/35


11/18



criminalization of bribery (cont.)

In the absence of adequate international self-regulation to control

bribery and corruption, the USA lobbied other nation states for almost

two decades to enact uniform domestic government regulation to

provide a level playing field. Finally, in December 1996, the UN

adopted the United Nations Declaration Against Corruption and

Bribery in International Commercial Transactions, which committed

UN members to criminalize bribery and deny tax deductibility forbribes.

(cont.)


19/35


11/19



criminalization of bribery (cont.) Given the seriousness of offences against the OECD Convention, it is

imperative that enterprises involved in global business take active stepsto manage their potential exposure. Also, although the OECD

Convention currently addresses the supply side of corruption in thepublic sector, it is likely that the ambit of the Convention will beexpanded to include bribery in the private sector in addition to thedemand side of bribery. HR professionals have an important role toplay in instituting a strategic plan for legal compliance and developingcorporate codes for voluntary compliance. They can provide training inunderstanding the difference between corrupt bribery payments, giftsand allowable facilitation payments and developing negotiation skillsto handle problem situations that may arise in sensitive geographicalregions and industries. They can also implement performancemanagement programs to support efforts to reduce corruption.

(cont.)


20/35


11/20

International business ethics and

HRM (cont.)

Table 11-1: World corruption index


21/35


11/21


and HRM (cont.) The emerging role of HR in operationalizing corporateethics programs Recently there has been discussion in the ethics literature about the HR

function taking on the role of ethical stewardship, with some writerssuggesting that HR has a special role to play in the formulation,

communication, monitoring and enforcement of an enterprises ethicsprogram. The US-based business ethics literature generally presents theview that the HR function along with finance and law is the appropriatelocus of responsibility for an enterprises ethics program.

Empirical studies have begun to investigate whether ethics initiativesand strategies for ethics management should be HR driven. The 2003

SHRM/ERC24 survey found that 71 per cent of HR professionals areinvolved in formulating ethics policies for their enterprises and 69 percent are a primary resource for their enterprises ethics initiative.However, the SHRM respondents did not regard ethics as the soleresponsibility of HR.

(cont.)


22/35


11/22


and HRM (cont.) The emerging role of HR in operationalizing corporate

ethics programs (cont.)

Taken together, these empirical findings recognize that HR is well

positioned to make an important contribution to creating, implementing

and sustaining ethical organizational behavior within a strategic HR

paradigm. HR professionals have specialized expertise in the areas of

organizational culture, communication, training, performance

management, leadership, motivation, group dynamics, organizational

structure and change management all of which are key factors for

integrating responsibility for ethics into all aspects of organizationallife. At the same time, the findings suggest that responsibility for

ethical leadership should cut across all functions and managerial levels,

including line and senior managers.


23/35


11/23


and HRM (cont.) hallenges for the HR function of the multinational firm

Although people involved in international business activities face many of the

same ethical issues as those in domestic business, the issues are made more

complex because of the different social, economic, political, cultural and legalenvironments in which multinationals operate. Consequently, multinationals

will need to develop self-regulatory practices via codes of ethics and

behavioral guidelines for expatriate, TCN and local HCN staff. Firms which

opt consciously or by default to leave ethical considerations up to the

individual not only contribute to the pressures of operating in a foreign

environment (and perhaps contribute to poor performance or early recall of the

expatriate), but also allow internal inconsistencies that affect total global

performance.

(cont.)


24/35


11/24


and HRM (cont.) hallenges for the HR function of the multinational firm (cont.) When recruiting and selecting expatriates, their ability to manage with integrity

could be a job-relevant criterion. The pre-departure training of expatriates andtheir orientation program should include an ethics component. This might

include formal studies in ethical theory and decision making as well asinteractive discussion and role playing around dilemmas which expatriates arelikely to encounter. In an effort to sensitize managers to cultural diversity and toaccept the point that home practices are not necessarily the best or onlypractices, there has been an emphasis in international business training onadapting to the way in which other cultures do business. Insufficient attention isgenerally given to when doing so results in unacceptable ethical compromises.In designing training programs to meet the challenges of multinational business,HR professionals must raise not only the issue of cultural relativities but also theextent to which moral imperatives transcend national and cultural boundaries.

(cont.)


25/35


11/25


and HRM (cont.) hallenges for the HR function of the multinational firm

(cont.)

It is also important for the HR department to monitor the social (ethical)

performance of its expatriate managers to ensure that as managers

become familiar with the customs and practices of competition in the

host country, they do not backslide into the rationalization that

everybody else does it.

The development of a truly international community is still in its infancy

and there is not yet agreement about what should constitute a global

ethic to resolve the conflicts which arise in such a community. However,there is an emerging consensus about core human values which underlie

cultural and national differences and the content of guidelines and codes

which help to operationalize the ethical responsibilities of

multinationals.


26/35


11/26

Mode of operation and HRM Emphasis on IJVs

Contractual modes such as such as licensing

and management contracts presentchallenges for IHRM that have yet to befully identified and explored

International projects often involve host-government agencies and present specificHR challenges


27/35


11/27

Ownership issues Small and medium-sized firms (SMEs)

International activities place stress on limited

resources especially staff

Key individuals often represent the SMEs

stock of international competence

Retaining key staff critical

Converting tacit knowledge into organizational

knowledge a challenge


28/35


11/28

Family-owned firms Not just a sub-set of SMEs

Management succession an issue presents

special HR planning concerns

The globalization of family-owned firms

has been a remote topic in international

business studies


29/35


11/29

Non-Government organizations As active internationally as For-Profit

Firms yet receive less attention

Reasonable to expect these organizationsshare similar management and HRconcerns

Often operate in high risk areas of theglobe

Broadening our focus of IHRM isimportant


30/35


11/30

Research issues The field of IHRM has been slow to

develop a rigorous body of theory

Regarded as a marginal area

International studies more expensive to fund

Major methodological problems

Defining culture and the emic-etic distinction Static group comparisons

Translation and stimulus equivalence


31/35


11/31

Theoretical developments Possible to identify two streams of inquiry

The micro-level

The macro level

Low response to surveys may be a factor of

Culture

Language used

Lack of use of teams of researchers


32/35


11/32

Figure 11-1: A model of strategic HRM in multinational enterprises


33/35


11/33

Chapter summary and concluding

remarks

International business ethics and HRM.

Modes of operation other than wholly owned subsidiaries, andthe IHRM activities that are required, such as training for

contractual and project operations.

(cont.)

Throughout this book, we have endeavored to highlight the

challenges faced by firms as they confront human resource

management concerns related to international business operations.

This chapter has been concerned with identified trends and future

challenges both managerial and academic that are likely to havean impact on IHRM, as a function and as a scientific field of study.

We specifically addressed:


34/35


11/34

Chapter summary (cont.) Ownership issues relating to SMEs, family-owned firms and

NGOs and the IHRM challenges specific to these organizations

as they grow internationally that have remained relatively

underidentified, despite their continuing importance ininternational business and global activities.

Research issues in IHRM studies, and theoretical developments

that are endeavoring to provide rigoros theories and frameworks

to assist in understanding the intricacies and inter-relationships

between the IHRM function and IHR activities, firminternationalization and strategic directions and goals.

(cont.)


35/35


11/35

Chapter summary (cont.)A consistent theme throughout this book has been the way in which

IHRM requires a broader perspective of what operating

internationally involves, and a clear recognition of the range of

issues pertaining to all categories of staff operating in differentfunctional, task and managerial capacities is essential. As Poole

stated in his editorial in the first issue of theInternational Journal of

Human Resource Managementin 1990, international human

resource management archetypically involves the world-wide

management of people in the multinational enterprise.

chapter 11 international human resource management

Documents