ihr impact of cutlutre on globalization
TRANSCRIPT
International human ressource management
Self reflexion essay
Ismael Le Carvennec
07/03/2012
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Table of content
INTRODUCTION:.....................................................................................................................................3
Part 1- Globalization and impacts on MNC.............................................................................................4
A- Globalisation and MNC...............................................................................................................4
1- Universalism and convergence...............................................................................................4
2- 3 level of lectures :.................................................................................................................5
B- Impact of MNC on the international environment.....................................................................6
1- Supranational level of economic organization will come to dominate national and regional system?..........................................................................................................................................6
2- National differences:..............................................................................................................7
Part 2 : International issues and IHR cultural practices..........................................................................8
A- IHR challenges............................................................................................................................8
1- Merger and acquisitions.........................................................................................................8
2- Emerging economy and knowledge transfer..........................................................................9
B- IRHM cultural impact on MNC..................................................................................................10
1- Standardized process, adaptive process, or hybridization....................................................10
2- Case Example: Swedco, International pay and reward.........................................................10
C- Limits of the IRHM practices on MNC.......................................................................................11
1- Cultural differences:.............................................................................................................11
2- Embeddedness of strategy:..................................................................................................12
Conclusion:...........................................................................................................................................14
Bibliography.........................................................................................................................................15
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INTRODUCTION:
The subject of this essay is to show how the Human resources cultures impact the
international environment. This essay covers several themes such as: globalization, MNC,
new challenges, IRHM.
Since decades the world is becoming more and more global, the national economies are
nowadays interdependent to each others. Technological innovations and deregulation
increased global relationships of culture, people and economic activity. In this essay we will
mainly be focused on the business view and in particularly to multinational companies. MNC
are the scale of activity for international Human resource management but we will not avoid
the stakeholders of cross-national companies (institutions, governments…).
Human resource is referred to the management of the organization within a company. HR is
responsible to develop, attract and retain human resource, but due to globalization it’s also to
support companies in cases of consolidation (mergers and acquisitions), knowledge
transaction, expatriation, diversity and so on…
MNC management operates with only a partial knowledge of different business system and
national environment. The role of HR is to implement an appropriate alignment of these
systems. What is the cultural impact of International Human resource on multi-national
companies?
In the first part I will expose the overall situation of international human resource. The main
theme which will be used is globalization. After covering the main concept of globalization,
we stress how HRM activity needs to be understood and how they are related to the
globalization. Then we will expose the concept of internalization of the companies (MNC),
and to which degree they are important in the international environment.
In the second part we will illustrate the IRHM practices trough actual challenges and issues.
Then we will propose different strategy to adapt in a international environment. We will show
the limits of the cultural influence of HR in MNC. Finally we will propose several
recommendations to know how to act in a global scale for MNC.
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Part 1- Globalization and impacts on MNC
A- Globalisation and MNC
1- Universalism and convergence
The globalization is a fashionable term that emerged in the 1990s in response to rapid changes
in structures of the world and in particular after the fall of the Berlin wall. There are not one
cogent theory of globalisation but several with different point of views. One of the main
author of globalisation defined it as “a set of processes which embody transformations in the
spatial organisation of social relations – understood in terms of extensiveness, intensity,
speed and impact – which create intercontinental and inter-regional networks of action and
the exercise of power”1.
We can regroup several keys features2 such as:
- Growth of supra-territorial relations/space among people. People are more interconnected, it
means that we are able to communicate when we want with who we want. Language played
an important role in the diffusion of knowledge indeed one language is talking by everybody.
- Reduction of distance, due to technological innovation distance are shorter, it’s now easier
to travel and faster.
-Time-space compression, according to the reduction of distance, it seems obvious that the
perceptions of time are slightly reduced. Moreover technologies allowed us to work faster (i.e.
internet)
- Economic integration, countries engaged a process of free trade, open market and tax
cuttings.
- Political integration, political convergence (liberalism, European union), international
institution (WTO, IMF, UNO)
-Cultural homogenization-Americanization, globalization is unifying cultures all around the
world. The American influence is the one which spreading its culture the most.
Trough all this feature, the globalization can be seen as a worldwide convergence of political,
cultural and economical activity. Since the 80’s countries are converging to one unique
model of society highly influence by USA and Western Europe, this model include, liberal
and democratic society, free Capitalism, deregulation and privatisation.
1 Held et al,” Global Transformations”2 Tommy Edwards ; Chris Rees, « International human ressource management »
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Thank to this model most of Multinational companies have been develop since the 80’s.
2- 3 level of lectures :
Because of the Globalization, companies have been able to growth outside their country or
region. A new kind of company emerged, the multinational company. We can identify 4
level of development.
1st level: Global. The international regulations cuts taxes, FDI increased a lot, technologies
allowed interconnections. For 2016 Boeing is planning to becoming a global company, they
decide to re-think their strategy. Boeing said that they wanted to be less US-focused and
develop the company worldwide3. Many of companies which are becoming global are
detached to their home national business? For a lot of authors such as Legrain (2002) global
company are still deeply influenced by their home national business system.
2nd level: Regionalism effect. The dominants patterns of trade in FDI are coming from 3
regions, Europe, North America and East Asia. The main example of regional effect can be
illustrate trough the European Union.
3th level: National effect. The national effect is due to the fundamental differences between
governmental institution and business system in an area. It exists, for example, fundamental
difference in terms of workforce organization in close countries such as France, UK and
Germany. These cultural and institutional differences conduct to have national system of
business culture.
4th level: Organizational effect. As people work together to accomplish goals, groups
develop into organizations. As goals become more specific and longer-term, and work more
specialized, organizations become both more formal and institutionalized. Organizations tend
to take on a life of their own and widely held beliefs, values, and practices develop,
differentiating one organization from another and often affecting the organization's success or
failure.
3 The impact of internationalization on organizational culture a comparative study of international US and German companies
der Universität St.Gallen, Prof. Dr. Winfried Ruigrok und Prof. Dr. Martin Hilb
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An organizational culture is defined as the shared assumptions, values, and beliefs that guide
the actions of its members. Organizational culture tends to be shaped by the founders' values,
the industry and business environment, the national culture, and the senior leaders' vision and
behavior. There are many dimensions or characteristics of organizational culture that have
been defined.
B-Impact of MNC on the international environment
1- Supranational level of economic organization will come to dominate national and regional system?
The growth of cross border co-ordination and control of economic activities by firms and the
competition between each other on a worldwide scale has led to suggestions that a new kind
of international system of economic organization is becoming established. As we see before
the organization level posses its owned cultures and values. The actual system controls by
multinational firms that have considerable autonomy from national and regional level. For
instance multinational are highly standardize and globally integrated across borders. The
contingent factors of a company level are not simply to do with formal structures but also
included power relations between actors at different levels within MNC’s.
Therefore, the organization is crucial in mediating the influence that arise from the global,
regional and national level. As we see with the European union, the law and regulation have
been unified, in order to permit companies to be present on a large scope. This idea of a
supranational power hold by MNC’s can be referred to universalism and convergence.
MNC’s are not just influencing national level but international and regulation functions too,
such as WTO and thank to powerful lobbyists representing them.
As we see before a national area is formed by institutions and culture. We view MNC as an
operating within a “transnational social space”4. Responding to the process of globalization
and regionalization and exerting a degree of influence over the nature of national level
institutions and cultures.
2- National differences:
4 Morgan et al, 2001,2003
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The idea of a global system where countries are all converging has been criticise, “majors
societal system can be discerned, pattern and convergence are therefore limited” 5.
Even if globalization is converging countries in a unique model, there are some others
divergences in a national level. The way to control economy, doing business or to behave in a
country can be really different. These differences are due to two different theories:
-Cultural approach, according to Hofstede theory, cultures can be similar or completely
different. The way of doing business is a result of this culture and a company which is
organizing it workforce, without taking it into account, can met some difficulties.
-Institutional approach, even if a lot of institutions are global now, nations are still controlling
the most of their institutions. For example, the system of taxes can change or the political
systems are different...
The strong connection between corporate culture and society is due to the fact that companies
are in constant contact with their social environment, e.g. with customers, co-workers,
suppliers, competitors or public officials. A new employee brings elements of his former
employers value system with him into his new organization. This has a direct and significant
influence on the corporate culture. Thus, how a corporate culture develops is dependent on
society. A society allows for a certain variation of corporate cultures, as long as their
company-specific elements align themselves with the societies basic values. Consequently,
the "culture-free theory", which postulates the independence of corporate culture from
society, is invalid.
Interdependencies:
Globalisation is more complex than just one ”global village”6, a country or a national
company interact with others levels such as regional and organizational. According to the
contingency theory, companies are influence by:
- Internal factors, their own organizational culture
- External factors, national, regional and global systems.
For example a German MNC will interact firstly with the European Union countries and share
some values and behaviours which are different out of Europe.
5 Huntingdon (2002)6 Quote : Marshall Macluhan
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Part 2 : International issues and IHR cultural practices
A- IHR challenges
1- Merger and acquisitions
As we see in the first part, the business system tends to becoming more and more global. The
globalization stress MNC and some new challenges and issues appeared. Due to the
internationalization of the company we can notice the development of merger and acquisition
on a large scale. This case is particularly interesting from the cultural point of view. Indeed
most of the time the M&A proceed from a strategic and financial advantages, the cultural
views are not required. Nevertheless the most of failed M&A are coming from their inability
to integrate each other in a same organization. The main reason can be business system across
countries and their inabilities to share a common identity and a common organization. Most
of the time reasons are due to cultural differences. In this case International Human resources
must support the management of change. HRM and employee relations in mergers and
acquisitions are critical because of employee resistance and support for the new
organizational entity
Factors that influence employees attitudes include :
- Cultural factors, key positions being filled by managers from different cultural backgrounds
- Style of leadership.
- Similarities and differences between management styles the different values within the
organization
- Willingness from employees to integrated the new parents company, managers from parent
companies tend to protect the interests of their own company
Possible solutions
-Hiring HRM managers external to the two companies
-Equity issues when dealing with managers from different background
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Example: Daimler/Chrysler merger.
The Daimler Chrysler merger proved to be a costly mistake for both the companies. Daimler
was driven to despair, and to a loss, by its merger with Chrysler. Last year, the merged group
reported a loss of 12 million Euros.
Analysts felt that though strategically, the merger made good business sense. But contrasting
cultures and management styles hindered the realization of the synergies. Daimler-Benz
attempted to run Chrysler USA operations in the same way as it would run its German
operations. Daimler-Benz was characterized by methodical decision-making. On the other
hand, the US based Chrysler encouraged creativity. While Chrysler represented American
adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more
traditional respect for hierarchy and centralized decision-making.
2- Emerging economy and knowledge transfer
The way of considering HR policy in emerging countries is quiet different to those practicing
in emerging countries. First of all the business system in emerging countries is different in
terms of labor system, organization and cultures.
In order to get an efficient business system, company are processing to expatriation, indeed
the knowledge and the know –how is not necessarily present in such countries. In a new
environment, expatriate can face to a cultural clash in terms of organizational systems ,
behaviors and cultures. The only one solution is to develop program improving cultural
awareness, and IQ intelligence.
The challenge who face expatriate is to be able to manage teams and business activities in a
new environment.
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B- IRHM cultural impact on MNC
1- Standardized process, adaptive process, or hybridization7
Cross national companies can use different approach in order to impact culturally their
organizations. First of all, the standardized approach which considers that due to the
globalization management concepts must be "culture neutral" and immune to societal
influence. In this case we will implement standardized process no matter the cultural
differences. The cultural impact of HR is in this case strong and don’t take into account the
external factors.
The second theory, based on the contingency theory is referred to assert that the success of a
given concept is dependent on the society in which it was developed. In other words, adapt
locally the HR tools and practices in order to be adapt to the behaviors and the cultures.
The hybridization seems to be the most appropriate strategy to operate on a MNC. I could be
define as “think globally, act locally”, this means that the characteristics of two cultures can
differ from each other as long as they have a similar effect on the behavior of their respective
populations. When this is the case, similar corporate cultures can develop in different societies
and go on to form the basis for the successful application of homogeneous work methods.
2- Case Example: Swedco, International pay and reward8
The actual trend for MNC, such as Swedco (a Swedish company), is to standardize their pay
system. The approach to HR at Swedco was “typically Swedish”, democratic approach for
decision making, coaching, facilitators... UK managers noted that the company encourage a
open talks. in fact the management was really close to the Swedish management. The pay
system has been standardized in order to be focused on the performance and the result. This
system is definitely close to Anglo-Saxon practices.
In this example we can see how home culture still influence the MNC, Swedish management
is still the main way of manage people in this company. Considering the strong institutional
presence and the state policy regarding works laws Swedco has been able to innovate
7 8 Tommy Edwards ; Chris Rees, « International human ressource management »
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according an Anglo-Saxon influence. This aspect characterised the globalization process and
the influence of the national cultures and systems.
C- Limits of the IRHM practices on MNC
1- Cultural differences:
As we see in the first part, we can distinguish several level of action. The national level as we
know can be influenced by organization national differences are still important Cultural
difference affect MNC’s organization in many way and are widely seen as central to
International resource management. They influences attitudes in a international negotiations,
create assumption, how to shape the organization, according to cultural specificities. Which
leverages of performance? Motivation? and so on... The problem is to define national culture
in order to implement efficient HR policies. To do this we can use several tools such has the
hofstede analysis :
Power distance index (PDI): “Power distance is the extent to which the less powerful
members of organizations and institutions (like the family) accept and expect that power is
distributed unequally.”
Individualism vs. collectivism: “The degree to which individuals are integrated into groups”.
In individualistic societies, the stress is put on personal achievements and individual rights. In
contrast, in collectivist societies, individuals act predominantly as members of a life-long and
cohesive group or organization.
Uncertainty avoidance index : “a society's tolerance for uncertainty and ambiguity”. It
reflects the extent to which members of a society attempt to cope with anxiety by minimizing
uncertainty. People in cultures with high uncertainty avoidance tend to be more emotional.
Masculinity vs. femininity: “The distribution of emotional roles between the genders”.
Masculine cultures’ values are competitiveness, assertiveness, materialism, ambition and
power, whereas feminine cultures place more value on relationships and quality of life.
Long term orientation vs. short term orientation: it describes societies’ time horizon. Long
term oriented societies attach more importance to the future.
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Each country have cultural difference, for example,
- Performance related pay more common in the US than in continental European
countries or Japan
- Recruitment-short term in the US-long term in continental European countries or
Japan
- US HRM practices tend to reflect a short term, individualistic, national business
culture
- Japanese HRM more collectivist, consensus based than American or continental
European practices
- French companies highly ethnocentric, learning language is essential.
Origins of companies are very important and enable MNC to take into account these cultural
differences in order to adapt its own organizational culture and values. Not taking into
account these cultural differences can bring conflict in a organization. Moreover the MNC is
bringing not only its values and its organizational culture but its national culture too.
MNC implementation = National culture + organizational culture + Local culture
2- Embeddedness of strategy9:
The embeddedness is the notion that firm’s strategy is strongly embedded in its particular
economy and cultural context. An organization is captive of its past, coming from some
internal factors of the organization, such as the role of the founders and leaders and the
influence of the History of the firm. However, the systemic perspective demands a much
fuller appreciation of the way a multinational country of origin is important in shaping the
way its operates at the international level, this approach is quite clear that there is much more
than a national influence than a sub culture. The role of the family can be crucial factor in
creative variations between countries in the ways that firms operate. For instance, the
importance of the family unit in Taiwan creates entrepreneurial small and medium-sized
firms. In France, the high power distance show how state, elitist educational institutions,
financial and industrial enterprises have long been closely interlinked.
Most of the company concentrate their key activities in their home countries, which is
influenced a lot the frame of the organization. Some business practices are linked to cultural
9 Tommy Edwards ; Chris Rees, « International human ressource management »
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aspect such has the model of flat organization in some Nordic company due to a low power
distance. Most of MNC are still influenced by their home country and they influenced
themselves their own organization everywhere in the world.
The impact of International Human Resources on the cultural aspect are limited first because
of the national differences, business system are different, institution are not working in the
same level.
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Conclusion:
This essay tried to show how globalization is a complex process which includes a large
international environment. In this environment companies changed, they became more
international and cross national. We can define MNC as a large player of the globalization,
their role can influence the states and region, they have a direct influence on the unification of
the business systems and regulations. Nevertheless nations still possess strong tools which
allowed them to control institutions and to get specific business systems. Moreover, nations
possess their own cultures and are quite different from a country to others.
A society has a significant impact on the corporate cultures residing in it. With this in mind,
the effectiveness of management concepts should always be discussed within the context of
the culture in which they were developed. Successfully transferring these concepts to
companies in other societies is possible, but not easy: for just as a society can produce various
corporate cultures, a corporate culture can contain elements of various societies.
This context imposes some challenges to MNC and in particularly in terms of human
resources. In a globalization area, companies tend to merger each other, implant new
subsidiaries everywhere in the world and have to face to organizational, cultural issues.
In examining the intercultural transferability of management and IRHM concepts, the
"globalization" and "contingency" theories offer themselves for consideration. Supporters of
the globalization theory consider management concepts to be "culture neutral" and immune to
societal influence. In contrast, supporters of the contingency theory assert that the success of a
given concept is dependent on the society in which it was developed.
The dogmatic stance taken by each side renders both theories questionable. The
"hybridization" should serve to balance them out. It states that the intercultural transferability
of management concepts and IRHM can be successful if the societies of the affected countries
are functionally equivalent but not necessarily identical.
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Bibliography
Articles :
“Intercultural transfer “ Frankfurter Allgemeine Zeitung, May 26, 1999, page 66
Books :
CARR Stuart C.“Globalization and Culture at Work : Exploring their Combined Glocality”
Plunkett, Warren R., and Charles R. Greer. Supervision: Diversity and Teams in the Workplace. 9th ed. Upper Saddle River, NJ: Prentice Hall, 1999.
Tommy Edwards ; Chris Rees, « International human resource management », ed Prentice Hall
Ronald Bogaschewsky, Roland Rollberg « Prozeborientiertes Management », Ed Broché - mars 1998
Internet :
http://geert-hofstede.com/
http://www.ajol.info/index.php/kjbm/article/viewFile/43822/27340
www.strathmore.edu/.../strategic- human - resource .pdf
www.thomaslfriedman.com/.../the- world -is- flat
http://www.jackson.com.np/documents/MBA6/InternationalHRMReviewandCritique.pdf
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