1. International Human Resources Strategy
Lidija Dzanic
Tua Lindholm
Lea Wakolbinger
Mirjam Zerjav
VK Internationale Unternehmensführung
WS 2004/05

2. Agenda Business strategies Staffing approaches
Different types of managers
Expatriation vs. inpatriation
Case study
Conclusion

3. Introduction Nowadays globalization is more present
Requires globally competent managers
IHRM is becoming more important
IHRM is major determinant of success or failure in international business
Global integration is neccesary in HRM
Core competency – local adaptation

4. Business strategies (1)
Domestic
New products or services for the domestic market
Foreign markets and international managerial skills largely irrelevant

5. Business strategies (2)
International
Competition increases
Companies expand internationally
Hierarchical structure
Structural and cultural dominance
First home country managers abroad as expatriates

6. Business strategies (3)
Multinational
Least-cost and standardized products and services
Worldwide lines of business
Decisions made by people from a wider range of cultures
Values of the headquarter’s national culture dominate
Senior managers need to understand the world business environment

7. Business strategies (4)
Transnational
Global competition
Identical products are distributed worldwide
Research and development
Firms become less hierarchically structured
Transnational human resource strategies are being developed

8. Characteristics of effective IHRM
Transnational scope
Geographical context within which all major decision are made
Transnational representation
Multinational composition of the managers and executives
Transnational process
Firm’s ability to include representatives and ideas from many countries

9. Ethnocentric approach (1)
Parent country nationals (PCNs) take all key positions in a multinational company
In the early stages of internationalization
Reasons for pursuing this policy:
Lack of qualified host country nationals (HCNs)
Ability of the parent country nationals (PCNs) to coordinate subsidiary
Transferring Know-how

10. Ethnocentric approach (2)
Problems that may occur:
Adaptation of PCNs to a host country may take a long time
Promotion opportunities of local managers are limited
PCNs’ lack of sensitivity

11. Polycentric approach (1)
Companies following this staffing policy use HCNs in their subsidiaries and PCNs in corporate headquarters
Advantages:
No more language barriers and adjustment problems of expatriates
The employment of HCNs is less expensive
Morale and career opportunities of local stuff

12. Polycentric approach (2)
Disadvantages:
Weak links between the independent national units and headquarters
Lack of experience of both HCNs & PCNs is a liability in an increasingly competitive international environment

13. Geocentric approach (1)
Best people get key jobs, nationality is not important
Advantages:
A pool of senior international managers is developed
Tendency of national identification of managers with subsidiary units is reduced

14. Geocentric approach (2)
Disadvantages:
Immigration laws which require the employment of local nationals are used by many host countries
Difficult to implement because of increased training, compensation and relocation costs
Longer lead times and more centralized control of the staffing process are required

15. Regional approach
Staffing strategy with emphasis on different regional markets
Factors for staffing decisions:
Need of area expertise
Need of product expertise

16. Managerial mindset 4 typical mindsets Closely associated
From the least global to the most global mindset
Defender
Explorer
Controller
Integrator

17. Defender Internally focused Oriented to the domestic market
Satisfied with domestic operations
Uninterested in making foreign actions
Almost no international element
Foreign elements in domestic market are unwanted

18. Explorer Aware of business opportunities in foreign markets
Perceives foreign markets
as not dangerous
Treats international forays with
a lot of caution
Prefers strategies of exporting and franchising
Domestic business is larger than international, is predominant
Foreign operations are managed from the head office located in the home country

19. Controller More externally oriented than the explorer
Dominates in foreign markets with procedures which were successful in domestic market
Understands the nature of cultures
Important: controller’s head office spends time on controlling and less on coordinating
Approval and sanction needed from the head office

20. Integrator Global perspective Knowledge and skills
Understands, is aware, is competent
Able to manage differences between people, values and cultures
Coordinates more than controls
Critical function is creating mechanisms for knowledge flow and transferring it from one part of the global system to another

21. Good international manager
Ability to develop
Effective local strategies
Local government relations
Cultural leadership skills
Social networking skills
Teamwork skills
Good understanding of business environment
Insightful local social knowledge
(Harvey et al.)

22. Dimensions of IHRM Knowledge-based view of the firm (Harvey et al.)
Tangible vs. intangible dimensions of HRM
Development of a common knowledge basis (Grant)

23. Expatriation vs. inpatriation (1)
1) Harvey et al.
Decision factors
Value of tacit local knowledge
Cultural and economic distance
Equivocality of subsidiary goals

24. Expatriation vs. inpatriation (2)
2) Torbiörn
Decision factors
Openness of economic region
Political instability

25. Expatriation vs. inpatriation (3)
Low
Cultural Distance
High
High
Equi-vocality
Social Knowledge Low
Social Knowledge High
Low
Expatriate
Inpatriate
Inpatriate (P)
Expatriate (S)
High
Level of Economic Development
Low

26. Advantages of inpatriate use
Effective „boundary spanners“
Advice with HR practices
Satisfaction with HR strategy in foreign subsidiaries
More acceptance on return
(Harvey et al.)

27. Mergers and acquisitions
Double-staffing strategy
Inpatriates  communication
Expatriates  coordination
(Torbiörn)

28. Expatriation Overall increasing trend in expatriation (especially UK)
British view IHRM as essential contributor to strategic management
US: more inpatriation due to high expatriate failures
(Scullion)

29. Expatriate failure Direct and indirect costs Main reasons:
Inability of spouse to adjust
Poor performance
(Scullion)

30. Training, selection and repatriation
Selection: not only technical, but also personal skills (Scullion)
Cross-cultural training approach (Mendenhall and Oddou)
Information
Affection
Immersion
Effective repatriation programs (Scullion, Dessler)

31. Case study 319 000 employees 170 countries
advanced information technologies:
computer systems, software, storage systems, microelectronics

32. Beginning in 1888
Incorporated in 1911
1300 employees

33. 1914 Thomas J. Watson
Revenues doubled and business expanded
The base for the strong organizational culture today

34. Interview
Dr. Haberl, manager of Media Relations

35. Local workforce
Inpatriates not typical
Expatriation – not mainly knowledge transfer
Expatriation at IBM a part of a manager‘s career
No loss of control

36. Strong organizational culture
„myth of Watson“
Helpful in the long run
Social tacit knowledge
Explicit knowledge

37. Locals are no locals anymore after entering IBM
IBMer
Same rules all over the world

38. Training opportunities
Internal technological structure
Helping institutions
„Buddy-system“
Other training opportunities

39. Conclusions HR strategy must match with corporate strategy
Decision factors that matter in the context of the company’s IHRM strategy should be defined before entering emerging markets

40. THANK YOU FOR YOUR ATTENTION
THE END
THANK YOU FOR YOUR ATTENTION