1. Global International HRM
Strategic Global HRM and
Decision Making
Dr Diana Sharpe

2. Learning outcomes
Identify the main activities involved in Human Resource Management (HRM)
Address the nature of International HRM and Comparative HRM
Identify strategic options in organising globally.
Identify challenges faced in the transfer of management practices across contexts and theoretical/ conceptual tools for analysis

3. International HRM
A relatively new and rapidly changing area of specialist and generalist practice.
Origins traced back to the growth of international business and the informal and formal approaches of multinationals to managing people
As a growing academic subject it has links with international business, economics, strategy, political science and other areas.

4. The scope of HRM Organisation Resourcing Performance Development
Employee relations
Pay
(After Torrington, Hall and Taylor, 2002)

5. Organisation Organisation structure Centralisation/de-centralisation
Planning the design of jobs
Communication within the organisation

6. Resourcing Responding to the labour market Planning the use of people
Recruitment
Selection
Legislative framework
Ending the contract

7. Performance Organisational performance
Managing the performance of individuals and teams
Appraisal
Getting the most from a diverse workforce

8. Development
Developing core organisational competences and individual competences
Individual and organisational learning
Management development
Career development

9. Employee Relations Negotiation and consultation with trade unions
Handling employee grievances and managing the disciplinary process
Health, safety and welfare and other employment legislation

10. Pay
Basic pay
Other benefits (eg holidays, special allowances, subsidised canteen, company car)
Pay related to performance
Pensions (deferred pay)

11. The challenge
How to manage all these processes in order to create the desired outputs of effective, successful, winning organisations, and motivated staff.
Different regions of the world have approached this in different ways.

12. Personnel Management
Begins from a way of viewing the world that sees that the interests of different groups (owners, managers, employees, trade unions) may be different.
This is seen as inevitable and healthy and that the challenge is to manage these different interests.
This is called a PLURALIST way of looking at the world.

13. This leads to.... Encouragement of trade unions
Strong legislation to protect employees from exploitation
An emphasis on fair treatment
A commitment to establishing clear rules and procedures for dealing with employment issues
Personnel managers attempting to take a neutral role

14. Human Resource Management
Begins from a way of viewing the world that sees everybody in an organisation as sharing the same objectives and interests (business success).
Differences between people are explained by personality clashes or poor communication, rather than differences of interest.
This is called a UNITARY way of looking at the world

15. This leads to.....
More emphasis on linking people management approaches to the needs of the business than on fairness or protection
Resistance to trade unions
Impatience with rules and procedures and a preference for flexibility
HR managers clearly part of management

16. What do you think?
1. Think of an employer you know. Do they take a PM or HRM approach?
2. What are the advantages of an HRM approach to employers?
3. What are the advantages of a PM approach to employees?
4. How can these different 'models' of managing people be used to explain the way HRM has developed in different parts of the world?

17. The trend towards globalisation
By 2001 world trade was 20 times as high as it was in 1950
World production was 7 times as high as it was in 1950
(Harzing and Ruysseveldt, 2004: 10)
According to 2003 figures there were 65,000 transnational corporations with 850,000 subsidiaries, employing 54 million people compared with 24m in 1990 (Dowling and Welch, 2004: ix)

18. Some drivers towards globalisation
Global communication (transport and internet) easier and cheaper
Increased global competition (pressure to produce more cheaply and to innovate)
International mergers and acquisitions
Some barriers to international trade have been removed (eg WTO, EU, ASEAN, NAFTA)

19. Factors which help a nation compete
These are the attributes of a country, eg land, capital, labour, location, infrastructure
In terms of labour: cheap labour, skilled workers, highly trained PhDs, knowledge resources, investment in training and education
(After Porter (1998) The Competitive Advantage of Nations )

20. Going international…..
When firms go international it may be to seek new markets in other countries, or to manufacture their products there, or both.
They will then need to know about the country environment (eg labour laws, labour market, approach to managing people)

21. So, what is global HRM?
Managing people in organisations which operate outside domestic boundaries
Comparative HRM – comparing systems, HR arrangements in different countries
Managing an international workforce within a domestic situation (eg migrant workers)
Managing people in a domestic situation which takes account of international influences (eg international labour law, needs of international customers, international trends about management)

22. The challenge of working in global HRM
Managers working in an international environment are more subject to the impact of multi-country, regional and global change and dynamism than managers in a single country.
This applies to HR managers also. Choices in this context become more complex.

23. Levels of analysis in IHRM
Organisational influences
Regional influences
National influences
Global influences

24. The benefits of cross-national study
Is a 'single' model of management transferable across national and regional systems or do management styles and structures need to be adapted to local cultural and institutional configurations ?
How much are existing HRM approaches that are based on Western ways of thinking relevant and applicable to other parts of the world?
Is HRM Converging or Diverging across contexts?
Is there one 'model' of best practice?

25. Questions raised for the international HRM manager
How does the local country/ regional environments and institutional structures influence the ways that HRM can be conducted ? employment laws, trade unions, labour markets, employee expectations
What are the influences of cultural differences on the ways we can manage HRM in different parts of a multinational?
How will we choose whether to send expatriates or use local employees in subsidiaries?
How do we manage knowledge across geographical and cultural distances?

26. Challenges in global HRM strategy
How do we manage diversity and social responsibility in a global context?
How do we select and develop people to work internationally?
How do we manage career paths for international employees?

27. Working relations for the global HR manager
Headquarters, regional and subsidiary line managers
Headquarters and subsidiary employees
National, International and regional trade union bodies
National, International and regional legislative bodies.
Local and regional communities/ stakeholders.

28. Matching Model (Tichey et al 1982) Harvard Model (Beer et al 1984)
Models of HRM and IHRM
Matching Model (Tichey et al 1982)
Harvard Model (Beer et al 1984)
Contextual Model (Hendry and Pettigrew 1990)
5 P Model (Schuler 1992)
European Model (Brewster 1995)

30. Investigating the HR Environment

31. Challenges of global expansion
Managers need to know about the new environment and how it compares with the home environment
Examine why countries are similar and different, look for theoretical frameworks which explain similarities and differences

32. What is a comparative study?
Two or more countries
Systematic method of investigation
Uses a framework to categorise findings
Compares and contrasts findings
Applies theory to explain differences/similarities

33. It informs management
The information can inform a decision to expand overseas or not
If there are many similarities between two countries, similar management approaches can be used
If there are more differences, a choice between changing/adapting or enforcing the home approach will be needed
Learning about innovative approaches may lead to trying these out in the home country

34. Convergence
Versus
Divergence

35. Arguments for convergence
Technological development leads to similar management methods
The global trend to the free market and associated competition is driving an individualised, de-regulated American style of HRM
All firms will be more effective if they adopt ‘best practice’ HRM
International labour standards are needed to protect workers from exploitation

36. Arguments for divergence/diversity
Social systems (eg education, welfare arrangements, family structures) are inter-related and deeply embedded within countries
National cultures change very slowly over time
Firms will be more successful if they ‘fit’ HR practice to their environmental context
Competitive advantage is better achieved by differentiated practice than conformity
'Best Practice' argues for uniformity in ways of working across a multinational whilst arguments for 'Best Fit' stress the importance of fitting practice to the local context.

37. What should we compare? The role of the State
Porter’s factor conditions ( eg. education, training, skills infrastructure and government investment/ role) factors
Social factors
Labour market

38. Theoretical frameworks for looking at the institutional context Varieties of Capitalism Hall and Soskice (2001)
National arrangements impact on business, work and employment.
The way firms develop their core competencies is influenced by national social arrangements in areas including:
industrial relations/ pay setting
vocational training and education
corporate governance - funding from long termist
(banks) or short termist (equity market) providers
inter-firm relations/ relations with suppliers
intra-firm relations- strategies of co-operation inside the firm- worker participation eg. in work organisation decisions/ teamworking

39. Varieties of capitalism
No one single universal form of 'capitalism'
There are 'varieties of capitalism' (Dicken 2007:11)
Stresses influence of contextual factors particularly institutions on shaping business systems (embeddedness of firms in wider context)
Hall and Soskice (2001)
Liberal market economies - US, Britain, Australia, Canada, New Zealand, Ireland ( short term finance, deregulated markets, state remains passive)
Co-ordinated Market Economies- Germany, Japan, Netherlands, Sweden, Finland, Austria ( long term finance, co-operative industrial relations, high levels of vocational training)

40. Thompson and McHugh (2009)
National systems and MNC's as having a complex and interdependent relationship with each other.
In the competitive struggles forces of divergence and convergence are in continual tension.
Within structural contraints firms have some room for strategic choices/ they can also shape their environments in some situations.
Firms may have discretionary powers in setting some common HR policies across multinationals but in other areas eg. Industrial Relations - local institutional frameworks significantly constrain choices.

41. Hybridization of HR systems
The international encounter between business systems can be seen to lead to the hybridization of HR outcomes. (see eg. Edwards and Rees chapter 4)

42. Readings Brewster Chapters 4, 5, Harzington and Pinnington Chapter 3
Edwards and Rees, chapters 3 and 4
Hollinshead Chapter 2

43. Supporting Reading
Harzing, A, and Pinnington A.H. (2011) International Human Resource Management Chapter 5
Brewster, C., Sparrow, P. and Vernon G. (2010) International Human Resource Management Chapter 1
Hollinshead,G. (2010) International and Comparative Human Resource Management. Chapter 1
Lucas, R., Mathieson, H. and Lupton, B. (2007) Human Resource management in an International Context, McGraw-Hill, Chapter 3
Porter, M (1998) The Competitive Advantage of Nations, Palgrave
Edwards, T. and Rees C. (2006) International Human Resource Management, FT;Prentice Hall,

45. Strategic Options in IHRM HRM INTEGRATION AND DIFFUSION
HRM IN INTERNATIONAL MERGERS, ACQUISITIONS AND ALLIANCES
Dr Diana Sharpe

46. Learning Outcomes
Distinguish between comparative HRM and International HRM
Evaluate alternative strategic options
Look at recent research and practice in the transfer of employment practices across borders

47. Comparative HRM V International HRM
Comparative HRM - understanding in what ways and why HRM differs across countries (e.g. institutional structure, corporate strategies)
International HRM – how multinational organisations manage their geographical dispersed workforce to leverage their HR resources for local and global competitive advantage

48. International HRM
"The set of distinct activities, functions and processes that are directed at attracting developing and maintaining a MNCs human resources.
..The various HR systems used to manage people in the MNC, both at home and abroad". (Taylor et al 1996)

49. Competitive Advantage
What is meant by the term competitive advantage ?
How can organisations gain competitive advantage?

50. Business Strategies and HR
Generic Strategies to gain competitive advantage
Differentiation
Cost leader
Focus
(Porter 1980)

51. Business Strategies and HR
(Schuler et al 1987)
Innovation
Quality Enhancement
Cost Reduction

52. Business Strategies and IHRM
Identify the employee behaviours and HR management approaches that would best support:
a) A cost reduction strategy
b) A quality enhancement strategy

53. Strategy Development Directions
Source: Adapted from H. Ansoff, Corporate Strategy, Penguin, 1988, Chapter 6.

54. Why develop abroad?
Resources
Markets
Efficiencies

55. Strategic Methods Internal development/organic growth
Merger/acquisition/ Joint Ventures
Strategic alliance

56. Strategic Choice
A simple model of strategic choice for multinationals:
multi- domestic strategy
- national subsidiaries still given a great deal of autonomy to respond to local needs and norms
global strategy
- strategy and policies are determined globally, integrated across the world

57. Options for International Expansion
High
Global strategy with largely
the same product or service
everywhere
Multinational strategy combining
large-scale activity with
local variations
Benefits of global-scale opportunities
International strategy exporting
from home base
Multi-domestic focused mainly
on meeting local demand
Low
Low
High
Need for National Responsiveness

58. Categories of Employees in an International Firm
Host country nationals (HCNs)
Parent country nationals (PCNs)
Third country nationals (TCNS)

59. Perlmutter's Mindsets: (1979) Ethnocentric Polycentric Regiocentric
Organising Globally A Theoretical Framework (see Hollinshead 2010 p. 54)
Perlmutter's Mindsets: (1979)
Ethnocentric
Polycentric
Regiocentric
Geocentric

60. Ethnocentric Strategic Characteristics Focus on home country values
Key positions filled by parent company national (i.e. expatriates)
Gives 'parent' high degree of control

61. Ethnocentric HR Policies
Recruitment and Selection - Staffing procedures controlled from the centre
Remuneration systems are set up from the centre
Professional development retained within country of origin
Little/no requirement seen for language or cross cultural training
Basic training provided at operating sites
One-way lines of communication
Subsidiaries largely managed and controlled by expatriates or former HQ staff.

62. Ethnocentric Advantages? Disadvantages? Strategic Concerns:
MNC not taking the benefits of local knowledge or adapting to local environment.
Local managers and workers feel limited influence/ promotion prospects

63. Polycentric Focus on host country values
Key positions filled by local employees
(Host Country Nationals)
Parent company less interested in controlling and homogenising the organisational culture
Each overseas subsidiary regarded as autonomous business unit

64. Polycentric HR Policies
Recruitment and selection – emphasis on recruiting local staff for senior positions in the host country.
Remuneration – local market rates highly significant with emphasis on pay/salary determined at domestic level
Training needs established and provided for at domestic level
Some requirement for language training for expats and knowledge of local culture as parent/ local managers are interacting
Less reliance on expatriation
Need to socialize local managers into corporate values

65. Polycentric Strategic Concerns:
Not fully adaptive to local environment as areas of strategic control retained by parent
Not fully gaining advantages of strategic integration across the MNC as a whole

66. Regiocentric Focus on regional values
Organisation structure along regional lines
Key employees/ managers move around within regions

67. Geocentric
"Multinational companies may increasingly operate as seamless global organisations, with teams of workers based all over the world, passing projects backward and forwards via the internet…" (Economist 29 Jan 2000)
Focus on global values and ways of operating
Global values not nationally specific – transcend national boundaries
Select from all over the globe for key roles eg. senior positions- best person for job ( this could include the selection of third country nationals for key roles ( ie. a person from neither the home or host country)

68. Geocentric
Recruitment and selection – an integrated approach ignoring demarcation, especially at managerial level
Remuneration – possible conflicts in attempting to balance fair internal relativities on an international basis, with responsiveness to market rates at all levels
Training and development – considerable demand for language and cultural sensitivity.
Multi-directional communication and mobility of managers/staff. Virtual teams working a cross subsidiaries. Establishment of global centres of excellence. Corporate values shared throughout the organisation.
Strategic challenge is to achieve balance of integration and differentiation.

69. Considerations in choosing an international HR strategy
Select overall strategy (Porter, Ansoff)
Consider benefits of global opportunities versus need for national responsiveness
Consider the degree of cultural similarity/difference
Consider opportunities and threats in the political/legal systems, the economy and the labour market
Select an ethnocentric, polycentric, geocentric or regiocentric strategy - make sure there is a 'fit' between your marketing/positioning strategy and your HR strategy

70. HRM Integrating mechanisms (Edwards and Rees 2011 chapter 6
Research indicates MNCs use multiple mechanisms that compliment each other.
Country of origin may influence the choice of integrating mechanisms
Centrally determined HRM practices tend to be management development/ expatriate management
Locally determined tend to be recruitment of non managerial personnel, training and employment law
Can consider 'transfer' of HRM practices as a process influenced by national institutional structures and the power and influence of different groups within the MNC.
Issue of control of resources by different groups ( see for example Belanger 1999 on MNC's as 'loosely coupled political systems' .

71. Edwards and Rees (2011) Chapter 8
The extent and form of integration between firms in cross-border mergers and acquisitions will be influenced by the national business system of the dominant firm but constrained by the features of the local firms national business system.
Also a strategic process involving parent and host country negotiations and political processes of influence.
Constrained and enabled by internal/ external stakeholders.

72. Pressures for Convergence or Divergence
Role of multi-national
Country alliances/blocs
Divergence
Labour market considerations
National culture

73. Harzing (2011) Chapter 4 HRM IN CROSS BORDER MERGERS AND ACQUISITIONS
M&A's as strategy for growth and diversification.
Failures are often due to socio-cultural- political challenges of integrating/ reconciling different cultures/ HR systems/ managerial viewpoints.
Survey of 200 CEO's of European firms in 1996 ranked the ability to integrate culturally as more important than financial or strategic factors.
Examples of challenge faced by Daimler (German) Chrysler (USA), Honda (Japan) Rover (UK), BMW ( Germany) Rover (UK)

74. Human resource management aspects of M&A management are therefore key.
'Integration' suggests activities to bind two firms together. In true 'integration' companies may look to share and leverage capabilities and take features of both corporate cultures and ways of working.
In contrast 'assimilation' involves the acquired company being influenced to adopt the practices/ culture of the purchaser

75. Harzing Chapter 7 Multinationals and the Host Country Environment
Need to understand local labour market environment- factors that might influence the skills/ expectations or employees/ legislation.
Brownfield site ( purchase of existing company)= more pressure to accommodate to local custom and practice.
Greenfield site (new company established) = how much strategic choice is there in establishing employment practices?
Critical reflection on how some MNC's have set up enclaves ( export processing zones) that are permitted to operate outside normal government regulations , powerful MNC's may lobby for change in government regulations. High levels of FDI may influence local practices and expectations ( case of Telford UK) -

76. Harzing and Pinnington (2011) The Transfer of Employment Practices across Borders Chapter 8
'Problematic nature' of transferring employment practices that are 'embedded' in distinct national contexts
So why not take a highly 'decentralised' approach allowing subsidiaries to shape their own systems? ie. Polycentric style
(Perlmutter 1969)
Attractiveness of transfer arguments:
1. MARKET based argument- transfer of practices as enhancing efficiency/ best practice/ transfer competencies ( but critiqued for downplaying tensions)
2. CULTURAL Approach- need to adapt practices to local cultural conditions ( eg. Hofstede framework/ Trompenaar)
3. INSTITUTIONAL approach- Recognise contexts/ institutions shaping expectations and practices

77. Debate The four influences framework (Harzing 2011 p. 273)
Country of origin effect
Dominance effect (influence of specific business systems/ economies/ power of organisations to influence ideas, systems)
Integrating efforts by international firms
Host Country Effects
= while multinationals may seek to transfer practices across contexts the outcomes may be the result of a process of negotiation/ 'hybrid systems'

78. 'Country of origin effect'- research indicates that even the largest MNC's retain strong roots (embedded) in their home countries. eg. dominance of Parent country nationals in senior positions.
Hall and Soskice (2001) 'Institutional configurations' in the country of origin influence the style the firms adopt in managing its international workforce.
'Host country effect'- the transfer of practices entails the crossing of 'institutional divides'- it is inherently a political process.

79. Reflection: Multinationals-Employment and Ethical Concerns
Power and significance of MNC's as global economic actors
Raises concern over corporate social responsibility
Reflect on implications for firms in managing human resources / wages/ working conditions/ training and development/ careers/ managing diversity/ industrial relations/
Consider roles/ influences of international codes of conduct (voluntary)
Consider responsibility of parent company for practices in host country subsidiaries or subcontracted firms.
(see Hollinshead 2010 p.57)

80. Seminar activities
Group discussion on article 'Internationalization and HRM Strategies' Thite et al 2012
Global HRM in emerging/ rapidly developing economies under researched. eg. Cases of China and India
How do home (push) v host (push) forces from institutional context influence strategies and practices at subsidiary level of MNC's from emerging economies?

81. Diffusion of management practices in MNC's subject to external and internal factors - Discuss ( see. p. 253)
Control of subsidiaries - Consider Harzing typology Direct v Indirect control
Taylor Adaptive/ Polycentric v exportive/ ethnocentric control of subsidiaries
What approach are emerging market MNC's proposed to take? ( p.254)

82. Country of origin effect on strategy?
How to balance need for global integration v local adaptation?
National origin of MNC as a major influence in determining this balance.
eg. Harzing and Sorge ( 2003) 'although multinationals are highly internationalised their organisational co-ordination and control practices at the international level tend to be explained by their country of origin'.

83. Whilst Japanese and Korean MNC's often internationalised through greenfield sites China AND India MNC's often expand through acquisitions.
SIHRM orientation- 'the general philosophy or approach taken by top management of the MNC in the design of its overall IHRM system particularly the HRM systems to be used in its overseas affiliates. p.23

84. Brewster, C. Sparrow P. and Vernon G
Brewster, C. Sparrow P. and Vernon G. (2010) International Human Resource Management
Harzing,A. and Pinnington, A.H. (2011)International Human Resource Management.

85. Readings Thite, M., Wilkinson A., and Shah, D.
(2012) Internationalisation and HRM Strategies across Subsidiaries in Multinational Corporations from Emerging Economies. A Conceptual Framework. Journal of World Business, Volume 47, 2, pp
McKenna, S., Richardson J., Singh P. and Xu Juan Juan. (2010) Negotiating, accepting and resisting HRM: a Chinese case study: The International Journal of Human Resource Management, Volume 21, 6, pp