1. HRM in the Host Country Context
Chapter 8
HRM in the Host Country Context
IBUS 618 Dr. Yang

2. Chapter Objectives
Discussion of international HRM issues generally tends to be biased in the direction of expatriate management, particularly that of parent-country nationals, partly owing to their strategic importance. In this chapter, we attempt to redress the balance by examining IHRM issues in subsidiary operations.
To balance the need for consistency and the need for adaptation
(Cont.)
IBUS 618 Dr. Yang

3. Chapter Objectives (cont.)
We cover the following aspects:
Factors that influence standardization and adaptation of work practices and the role of HR, including
Host-country culture and workplace environment
Mode of operation
Firm size, maturity and international experience, and
Subsidiary mandate.
Retaining, developing, and retrenching local staff
HR implications of language standardization: HCN selection, training and promotion on the basis of language skills.
Monitoring HR practices used by foreign subcontractors.
IBUS 618 Dr. Yang

4. Subsidiary Issues Approach to subsidiary management is a function of:
The nature of the relationship between the units and ‘parent’, e.g.
Long- or short-term
The role of the subsidiary in the broader context
The level of equity involved, e.g.
Mode of operation
Factors within host-country environments that facilitate or constrain the transfer of global management practices and business processes, e.g.
Government regulations
Social norms
IBUS 618 Dr. Yang

5. Three Cultures Interact to Influence Standardization and Adaptation
National culture of the parent company
National culture of the subsidiary unit
Corporate culture as a potential unifier
Standardization can be achieved through
Staffing procedure and standards
Training and development programs
Staff rotation
Rewards and promotion
Corporate code of conduct
IBUS 618 Dr. Yang

6. Standardization of Work Practices
Depends on
Receptivity of local workforce to adhere to corporate norms of behavior
Effectiveness of expatriates as agents of socialization
Whether localization is timely (not just prompted by cost considerations)
Appropriateness to the local environment
IBUS 618 Dr. Yang

7. Factors Influencing Standardization
Host-country culture and workplace environment
Mode of operation involved
Size and maturity of the firm
Relative importance of the subsidiary
IBUS 618 Dr. Yang

8. Host-country Culture Work behavior is culturally determined
Contained in role definition and expectations
Whether corporate culture would supersede or supplant other ‘cultures’ is a subject of much debate
Often, what is meant by corporate culture translates into universal work practices – standardization of work practices
Common practices rather than common values
IBUS 618 Dr. Yang

9. The Linkage between Culture and Behavior
IBUS 618 Dr. Yang

10. Mode of Operation
Choice of mode of operation is important in determining standardization of work practices.
Ownership and control are important factors:
Acquisition may constrain ability to transfer technical knowledge, management know-how, systems, and HR practices
Wholly owned subsidiaries provide greater opportunities for transferring work practices than in IJV
Management contracts provide skills, expertise and training to HCNs, without carrying equity or risks associated with FDI, and may have HC government support.
IBUS 618 Dr. Yang

11. Factors Influencing Standardization of Work Practices
IBUS 618 Dr. Yang

12. Work Standardization
The size of the firm, maturity, and international experience are important firm level factors.
Motorola in China is a case in point:
Large size
Wealth of international experience
Centralized IHR programs
Management could draw on these aspects when entering China
IBUS 618 Dr. Yang

13. Subsidiary Mandate
The position a subsidiary holds within the global ‘family’ is an important aspect when discussing the transfer of work practices.
GE’s Center of Excellence in Hungary
Transferring knowledge and competence is difficult as subsidiary initiatives are often not seen as relevant due to “corporate immune system”.
Subsidiaries’ roles and positions alter over time.
Staff movements can assist:
Face-to-face communication helps build trust and networks
Project teams as a control and socializing mechanism
IBUS 618 Dr. Yang

14. Global or Local Work Practices?
Not a case of “either-or”, but more of a constraint for both.
While the recruiting practices used in different countries are inching toward global convergence, national cultures continue to affect the hiring practices.
The best IHRM practices ought to be the ones best adapted to cultural and national differences.
More western HR practices being introduced to China
Japanese firms such as Nissan and Honda train HCNs in US, UK and other European subsidiaries.
Movements in France against capitalist cultural invasion.
IBUS 618 Dr. Yang

15. Retaining Local Staff The paradox – “the expense of cheap labor”
Poaching of key subsidiary staff
Access to skilled labor as important as unit cost – such as corporate outsourcing
Attraction of India and China for the IT industries
The amount and quality of training is an important consideration
Technical
Language
Decision-making
Management
IBUS 618 Dr. Yang

16. Developing Staff Investing in human capital
Providing training and career development can assist in retaining good local staff
Improved benefits, work and living conditions, and fair management practices are important factors:
A fair environment and good management practices play an important role in countries such as China
Job-hopping behavior in Singapore, Russia, and China
IBUS 618 Dr. Yang

17. Retrenching Staff The reverse of the employment ‘coin’
Strategic decisions regarding foreign operations have HR implications, including retrenchment
Not confined to subsidiary operations but may affect home base – e.g., transferring call centres from UK and US to India
Labor law may constrain retrenchment, e.g.
India
Germany
IBUS 618 Dr. Yang

18. Language Standardization
Adopting a common corporate language puts pressure on employees to become competent in the corporate language
Assists informal communication and network building
Affects
Promotion
Ability to attend corporate programs and meetings
Availability for international assignments
IBUS 618 Dr. Yang

19. HR Implications of Language Standardization
IBUS 618 Dr. Yang

20. Shadow Structure of KONE Based on Language
IBUS 618 Dr. Yang

21. Monitoring Host Country Subcontractors
Outsourcing activities to host-country subcontracting firms requires some monitoring of HR practices
Further contracting is likely to occur.
Vocal groups have accused multinationals of condoning work practices that would not be permitted in their home countries, regarding:
Child labor
Minimum pay
Work hours
Work conditions and safety
Environmental issues
IBUS 618 Dr. Yang

22. HR’s Role Drawing up and reviewing code of conduct
Conducting a cost-benefit analysis to justify an expatriate as a monitor
Championing local operators as monitors
Being a member of the team who conducts periodic “checking” visits
Overseeing external monitors and auditors where used
Checking that rewards and performance systems take into consideration compliance to code of conduct
Being knowledgeable about and sensitive to local law and regulations
IBUS 618 Dr. Yang

23. Chapter Summary
This chapter has focused on issues relating to HRM and work practices in the host-country context. We chose four main areas to examine:
The standardization versus adaptation debate as it relates to subsidiary operations. We identified four inter-related factors that influence the multinational’s ability to impose or transfer its preferred work and HR practices:
The host-country culture and workplace environment. We looked at the interplay between values, attitudes and work behavior and the role of corporate culture in assisting work outcomes.
(cont.)
IBUS 618 Dr. Yang

24. Chapter Summary (cont.)
Mode of operation. Managerial discretion to introduce its own practices is higher in wholly owned subsidiary operations than in IJVs. Acquisitions may be constrained by the inherited workforce. We also looked at management contracts as a mode of operation that may influence standardization of work practices in foreign operations.
Firm size, maturity and level of international experience. Firms such as Motorola can draw upon experience and resources to an extent not possible for smaller and less-experienced international players.
Subsidiary mandate. The position of the subsidiary in the intra-organizational network and level of interdependence between units for resources can assist in the transfer of ‘best practice’.
(cont.)
IBUS 618 Dr. Yang

25. Chapter Summary (cont.)
Retaining, developing and retrenching local staff, aspects such as:
The paradox of cheap labor
Skill level of the local workforce and training
Poaching of staff and job-hopping.
Our examples are drawn from Chinese and Indian situations, but these issues are not confined to these two countries.
We have also looked at the impact of strategic decisions on subsidiary operations – such as plant closures and rationalization – that result in employee retrenchments at the subsidiary and in the home-country operations.
(cont.)
IBUS 618 Dr. Yang

26. Chapter Summary (cont.)
The HR implications of language standardization. The decision to use a corporate language – usually English – has implications for subsidiary staff in areas such as:
Selection for positions
Attendance at company training programs, and
Promotion
(cont.)
IBUS 618 Dr. Yang

27. Chapter Summary (cont.)
Monitoring the HR practices used by international subcontractors:
This discussion opened up a somewhat contentious issue for multinationals, regarding fair labor and code of conduct.
Multinationals are expected to monitor the work practices employed by international subcontractors.
Mechanisms used to monitor adherence by these firms to multinationals’ code of conduct include using internal agents, such as expatriates or visits by headquarters or regional staff, external agents such as local buyers and auditors.
IBUS 618 Dr. Yang