Marketing/human resource management
how do difference in International Human Resource Management Strategies affect the relative importance of each of the Human Resources Domains
How do difference in International Human Resource Management Strategies affect the relative importance of each of the Human Resources Domains ?
1. Country of Origin Effect on Strategy
One of the key challenges facing the MNCs is how to balance between the need for global integration and local adaptation. National origin of MNCs is seen as a major influence in determining this balance
There is empirical evidence that suggests that almost all MNCs have a trace of their country of origin within them. It could be subconscious choices which are influenced by the cultural and institutional characteristics of the country of origin of the MNC or it could be transferred through the people who work in the organization . U.S. multinationals have been typically contrasted with Japanese multinationals in respect of their styles of HRM employed in their subsidiaries. Japanese multinationals have the characteristic of being strong but with informal centralization and are highly reliant on establishing international networks. U.S. multinationals appear to have elaborate systems of control and standardized worldwide systems in place. Moreover, whether the country is high or low on cultural context will also determine the impact of their country of origin on the IHRM practices.
As stated before, “there is relatively little research on the internationalization of emerging economy firms either into other emerging economies or into developed economies”
Correspondingly within the MNCs from the emerging economies, organizational culture, decision making and control on subsidiaries can be noticeably different as compared to their counterparts in developed markets due to national culture and economic differences
2. Conceptual Framework
strategic international human resource management (SIHRM) that explicitly links HRM with the strategic management processes of the MNCs in emerging economies and emphasizes coordination or congruence among the various HRM practices. It focuses on SIHRM orientation, i.e., 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”
‘there is a growing consensus that a key differentiator between the corporate winners and losers in the 21st century will be the effectiveness of the human organization’ and it is particularly critical in the emerging markets (Strategic Direction, 2007). In the context of IHRM, Ngo, Turban, Lau and Liu (1998) found strong support for the hypothesis that country of origin influences the firm’s HRM practices. Taylor et al.’s (1996) model of IHRM considers that the transfer of HRM policies and practices ‘can go in any direction’, not just from home to host countries. Similarly, American and European HRM systems influence and are influenced by East Asian HRM systems (Chew & Zhu, 2002). Empirical studies on the diffusion of HRM practices by MNCs across their subsidiaries indicate that they predominantly adopt hybrid methods, combining both push force for control from headquarters and pull factors for conformity to host country, to suit the markets they are serving (Rose & Kumar, 2007). Global, national and internal pressures play a role in influencing HR strategic recipes and delivery mechanisms (Brewster, Sparrow, & Harris, 2005). Edwards & Rothbard (2000) contrast different approaches to the transfer of employment practices in MNCs and argue for an integrated approach that focuses on interrelationships between markets and institutions on the one hand and the material interests of actors on the other.
4.1. Influencing factors:
control and coordination mechanisms and diffusion of management practices in an MNC are subject to several external and internal influencing factors (see Figure 1). If the degree of integration between the headquarters and the subsidiary is high it requires higher levels of control and coordination. With regard to external influencing factors, the MNCs from emerging economies face a “double hurdle” of liability of foreignness and liability of country of origin with perceived poor global image of their home country. These constraints are further accentuated by liabilities of smallness and newness . As Guillen and Garcia–Canal (2009) note, they also need to deal with the liability and competitive disadvantage that stems from being latecomers lacking the resources and capabilities of established MNCs from the most advanced countries. Furthermore, the degree and level of integration between headquarters and subsidiaries will also influence the multinationals. Similarly, with regard to internal influencing factors, the strategic framework of the MNC, organizational culture, leadership, decision making and delegation of authority can be considerably different in MNCs from emerging economies than their counterparts in developed markets due to national cultural, economic and political differences .
Proposition1: MNCs from emerging economies adopt control and coordination mechanisms because of the double hurdle they face of ‘liability of foreignness’ and ‘liability of country of origin’.
Control of subsidiaries in developed markets:
MNCs exercise a degree of control over their subsidiaries to ensure their resources and efforts are directed towards attaining the main objectives of the MNC. Control refers to the processes by which an MNC ensures that their subsidiaries operate in a particular way as determined by the headquarters in order to achieve organizational goals . corporate control “comprises of all the mechanisms instituted to tie the operations and decisions within and across components into a larger whole and establish coherence of meaning and purpose within the larger enterprise” (p.190). We adopt the Harzing’s (1999) typology that suggests two dimensional classification between direct (personal & impersonal) and indirect (personal & impersonal) control. Complementary to the above typology is Taylor et al.’s (1996) classification of adaptive or polycentric approach vs. exportive or ethnocentric approach to management control of subsidiaries.
MNCs utilize the knowledge gained in operating in developed markets to transfer best practices across the entire organization. They are expected to adopt an “adaptive” or “polycentric” approach to management in developed country subsidiaries. In terms of HR strategy, this could mean low internal consistency with the rest of the firm and high external consistency with the external environment. Accordingly, HR practices may include hiring host country managers with local knowledge and transfer of practices “both” ways, depending on which is seen as working better.
Proposition 2: MNCs from emerging economies adopt a predominantly ‘adaptive’ or ‘polycentric’ approach to manage their subsidiaries in developed markets.
Control of subsidiaries in emerging markets:
MNCs from emerging economies entering other emerging markets may follow their counterparts in developed markets by adopting an ethnocentric approach. They attempt wholesale transfer of the parent firm’s HRM systems to their subsidiaries, especially with regard to their core competencies, to achieve high internal consistency. The other reason identified is the limited availability of management and technical skills in some countries. Some authors have noted that MNCs are more likely to adopt an adaptive or polycentric approach in developed countries than lesser-developed countries due to the greater availability of managerial skills in developed countries.
Proposition 3: MNCs from emerging economies adopt predominantly an ‘exportive’ or ‘ethnocentric’ approach to managing their subsidiaries in other emerging markets.
Organizational Structure & Systems:
At the apex of this organization lies the Leadership Council, consisting of around 45 top leaders from business and support functions. It is charged with the responsibility to formulate, implement and review strategic policies and priorities on a regular basis. At the heart of Alpha’s organizational structure lie the Customer Facing Units (CFUs), consisting of Vertical Business Units (VBUs) and Regional Business Units (RBUs). The CFUs are charged with the entire spectrum of customer relationship management and in the process are supported by Horizontal Competency Units (HCUs) that provide the backing of appropriate resources.
The approach to leadership at Alpha is exemplified by the motto “every Alphaite (employee) is a leader”. Alpha believes that it is in the ‘business of building and developing leaders faster than the competition’. Its organizational structure and systems are supposed to be underpinned by its philosophy of enabling leadership with its core concepts of ‘full life cycle business’ (FLCB) and ‘full life cycle leaders’ (FLCL). Alpha is said to espouse a philosophy of encouraging employees to “think like CEOs” whereby every employee is encouraged to consider himself/herself as the chief executive officer (CEO) of the particular task that they perform and the people whom it affects as their investors in the business.
The same performance metrics are supposed to be applied to every employee and position at every location. The metrics assess the performance of each employee on specified built measures, such as people, process and product against specific outcome measures, namely better, larger, faster, cheaper and steadier (repeatable). These metrics mirror the ones followed at its key U.S.-based client which is world renowned for its management systems. According to the Global Head of HR, ‘metrics are the most common communication tool at Alpha’. The company claims to take its metrics driven business approach beyond organizational boundaries by involving customers and suppliers as part of its “eco-system.”
as follows: Hypothesis la: Systems of High Performance Work Prac-tices will diminish employee turnover and increase pro-ductivity and corporate financial performance.
Hypothesis Ib: Employee turnover and productivity will mediate the relationship between systems of High Per-formance Work Practices and corporate financial per-formance.
Hypothesis 2: Complementarities or synergies among High Performance Work Practices will diminish em-ployee turnover and increase productivity and corporate financial performance.
Hypothesis 3: Alignment of a firm's system of High Per-formance Work Practices with its competitive strategy will diminish employee turnover and increase produc-tivity and corporate financial performance.
Factor Structure of High Performance Work Practicesa Questionnaire Item 1 2 Alpha Employee skills and organizational structures .67
What is the proportion of the workforce who are included in a formal information sharing program (e.g., a newsletter)? .54 .02
What is the proportion of the workforce whose job has been subjected to a formal job analysis? .53 .18
What proportion of nonentry level jobs have been filled from within in recent years? .52 -.36
What is the proportion of the workforce who are administered attitude surveys on a regular basis? .52 -.07
What is the proportion of the workforce who participate in Quality of Work Life (QWL) programs, Quality Circles (QC), and/or labor-management participation teams? .50 -.04
What is the proportion of the workforce who have access to company incentive plans, profit-sharing plans, and/or gain-sharing plans? .39 .17
What is the average number of hours of training received by a typical employee over the last 12 months? .37 -.07
What is the proportion of the workforce who have access to a formal grievance procedure and/or complaint resolution system? .36 .13
What proportion of the workforce is administered an employment test prior to hiring? .32 -.04 Employee motivation .66
What is the proportion of the workforce whose performance appraisals are used to determine their compensation? .17 .83
What proportion of the workforce receives formal performance appraisals? .29 .80
Which of the following promotion decision rules do you use most often? (a) merit or performance rating alone; (b) seniority only if merit is equal; (c) seniority among employees who meet a minimum merit requirement; (d) seniority.b -.07 .56
For the five positions that your firm hires most frequently, how many qualified applicants do you have per position (on average)? -.15 .27 Eigenvalue 2.19 1.76 Proportion of variance accounted for 16.80 13.60
Human Resources Domains
Four alternatives for a cross border strategy
• International Strategy: appropriate when there is little foreign business – knowledge
transfer from the center of headquarters. Coordination cost are low.
• Multinational Strategy: Affiliates are autonomous and local adapted. Cross-borderadvantages
of standardization and learning are low. Coordination-costs are lowest.
• Global Strategy: Advantages of standardization of policies and practices. Strong
centralism. Lack of local responsiveness causes disadvantages. National segmented
markets, cultures, policies set barriers. Coordination costs are high.
• Transnational Strate gy: uses advantages form globalization, localization and cross-borderlearning
simultaneously. Coordination cost are highest.
A transnational human resource strategy include (Welge/Holtbrügge
1998, Dowling/Welch/Schuler 1999):
• Vision and Guidelines: Mutual orientation. Reduce narrow-minded behavior. Mutual
understanding and acceptance leading to worldwide cooperation.
• Decision-making: International decision-making committees and communication between
the product, country, and function specialists in networks.
• Recruitment: Oriented and focused on qualification and no longer on country of origin.
Human resource development: through international networking and further educational
opportunities, overseas assignments. Personnel maintenance: handle flexibly.
• Cross-border career paths through internationally comparable policies for potential
opportunities and performance evaluation. A compensation policy that encourages
conformity to a common corporate objective.
The following examples and remarks form executives of leading companies offer inspiration
to reconsider the own route and to avoid possible stumbling blocks.
Thus, the regular examination of human resource policy is advisable (see Box below). This should
begin with the articulated core values of the corporate culture, then be identified as models, and
finally, be carried out as human resource policy. In this entire process it is vital not to lose sight of
those who make a difference: the employees.
Checklist for Examining Existing Human Resource policies
• Relevance: Are the policies relevant in the current business environment?
• Strategy: Are the policies connected to the company’s goals?
• Adaptability: Are the policies adaptable to changing circumstances?
• Applicability: Are the policies applicable across the company’s theater of operations?
• Familiarity: Are employees aware of the policies?
• Clarity: Are the policies easy to interpret and apply?
• Boundaries:Do the policies clarify the bounds of acceptable employee behavior?
• Commitment: Do employees support the policies?