Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.1 Defining the terms Comparative HRM: examines how and why HR policy and practice differ across countries. Main analytical focus: institutional influences on organisational decision-making. Typical questions: –To what extent are HR policies developed in one country appropriate in other countries? –Are policies in different countries becoming more similar (convergence) or remaining different (divergence)?

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.2 Defining the terms International HRM: understanding how MNCs manage their international workforces in order to gain competitive advantage. Main focus: organisational strategy and structure, relationship with market competition. Typical questions: –What is the best way of organising the international HR function? –What role can expatriate managers play in achieving strategic integration and control within MNCs?

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.3 Cross-national differences: Theories National Business Systems (NBS) (Whitley) – Economic, political and social characteristics of individual market economies shaped by a social system, leading to distinctive NBS Industrial Orders (Lane) – orientations of NBS’s affected by the extent of non-market institutions within the national economy. Systems with more non-market institutions tend to be more production, rather than finance, dominated, and more long-termist Coordinated Market Economies (CMEs) vs Liberal Market Economies (LMEs) (Hall and Soskice) – –CMEs (e.g. Japan, Germany) – more non-market institutions, tendency towards incremental innovation –LMEs (e.g. USA, UK) – based on ‘free market’, tendency towards rapid change, radical innovation. –Both types of economy can be competitive, but react in different ways to similar events (airlines example)

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.4 Empirical differences between NBSs USA Coordination by market mechanisms Organisational capabilities developed by professional management Short-term focus on shareholder value Liberal market economy UK Market relations dominant Finance-dominated system Low level of institutional regulation often prevents effective implementation of corporate strategies Liberal market economy

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.5 Empirical differences between NBSs Germany Active institutional regulation by state constrains short-termism Productivist system Collectivist system Incremental innovation, competitive advantage in manufacturing Coordinated market economy Japan High level of inter-firm cooperation and other non-market mechanisms Active state role in finance provision Collective system, firm-based industrial relations Long-term orientation Coordinated market economy

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.6 Comparative HRM Reasons for cross-national difference: financial system labour market system and regulation industrial relations system education and training system welfare state

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.7 National HR Systems USA market based regulation, lack of institutional ‘constraints’ on HR policy low level of collective bargaining, many firms ideologically opposed to trade unions centralised, formalised management systems history of Taylorism reactions to global competition: employee involvement, renegotiation/imposition of new forms of work organisation short-termist nature of financial system makes moves towards ‘best practice’ HRM difficult

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.8 National HR Systems Germany co-determination (works councils) sectoral collective bargaining reduces firm-level autonomy, creates uniformity in some practices across firms vocational training system with inputs from employers, state and trade unions constraints on moves towards ‘American’ forms of HRM ‘pluralist HRM’: argument that constraints on firms encourage moves towards best practice system under some pressure as a result of globalisation and reunification

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT 15.9 National HR Systems United Kingdom voluntarism history of low-trust industrial relations deregulation and individualisation of the employment relationship lack of coordination of system inhibits moves to ‘best practice’ HRM reliance on numerical forms of flexibility Japan seniority-based wages ‘lifetime’ employment financial system aimed at long-term growth long-term, commitment-based approach to HRM for core workers in large firms

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT International HRM Definition The set of distinct activities, functions and processes that are directed at attracting, developing and maintaining an MNC’s human resources. It is thus the aggregate of the various HRM systems used to manage people in the MNC, both at home and overseas. Taylor et al., 1996

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT Models of International HRM Schuler, Dowling and De Cieri (1993) – Integrative framework of international HRM –identifies 3 groups of variables that impact on the nature of strategic IHRM: strategic MNE components, exogenous factors, endogenous factors –strengths: comprehensive –weaknesses: descriptive, emphasis on management employees Taylor, Beechler and Napier (1996) typology –identifies 3 types of strategic IHRM forms: exportive, integrative and adaptive –draws heavily on resource-based theory of the firm –strengths: recognises variable role of employees in providing critical resources –weaknesses: unclear what practices are diffused and how

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT Models of International HRM Perlmutter (1969) – Mindsets –identifies 4 mindsets: ethnocentric, polycentric, geocentric and regiocentric –strengths: recognises the role of individual cognition in shaping organisational practice –weaknesses: fails to specify, or predict, how and why organisational actors may shift their mindsets Adler and Ghadar (1990) – organisational change model –identifies how changes in product life cycles impacts on the demands of international and local managers –strengths: emphasis on the cultural context and its implications for international training –weaknesses: overemphasis on expatriate manager

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT Expatriates Reasons organisations use expatriates: –to fill positions –provide management development opportunities –to enable organisational change The transfer cycle –selection and recruitment –relocation –adjustment –repatriation

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT HRM in MNCs Need to draw together the institutional and strategic perspective on IHRM together Four Forces Model - Edwards and Ferner (2000) -home country effects -dominance effects -pressures for international integration -host country effects

Human Resource Management, 4th Edition © Pearson Education Limited 2004 OHT Convergence–Divergence Debate Convergence –globalisation is creating similar pressures and diffusing similar technology encouraging convergence –as American HRM is argued to be the dominant and most advanced/efficient then it follows MNCs will converge on this Divergence –varieties of capitalism argument suggest different national business systems more appropriate than others demanding diversity in HRM practice Conclusion –on-going debate –need to refine the terms convergence and divergence more precisely –likely we are seeing strong and weak convergence and divergence across different HRM practices