1. Strategic International HRM (SIHRM)
MSc Management
LUBS 5240
Lecture 3
Strategic International HRM (SIHRM)

6. SIHRM Much early research on IHRM was at the operational and practical level and this still forms the core of many text books. Interest in Strategic International HRM (SIHRM) has grown and suggests that the strategic choices of international firms places limits on IHRM options. An argument is that the business strategy of international firms needs to be associated with particular policies and practices (Scullion and Linehan 2005 chapter 2). IHRM has been linked to Business Strategy and Product Life Cycle A contingency approach is usually followed, the fit of IHRM with the goals of the firm. The central issue for a MNC is perhaps not the best IHRM practice (best practice model) but the best way to connect business strategy, external environment and HRM practices.

7. SHRM ‘Academic SHRM represents a junction between the literatures on Strategic Management and HRM’   Note: In reality strategy is not an orderly, linear process. Strategic decision making is a political process models cannot accurately capture living processes. Also, within the HRM literature there has been confusion over a differentiation between HRM and Strategic HRM

8. Aim: To provide an understanding of the evolution, nature and practice of Strategic Human Resource Management (SHRM) and Strategic International HRM (SIHRM). Learning Objectives/Outcomes: By the end of the lecture, you should be able to: - Comprehend why the growth in interest in SHRM has occurred Understand the contextual factors surrounding the development of SHRM - Identify constituent elements of SHRM and SIHRM - Distinguish between alternative typologies of SHRM and SIHRM Understand the difficulties associated with a strategic approach to IHRM

9. Recap: Strategic Options for International Firms
Corporations that pursue a global strategy focus on increasing profit margins through cost efficiencies arising from economies of scale and economies of location.
Companies pursing a multi-domestic strategy design their operations to maximise local responsiveness
Corporations pursuing an international strategy create competitive advantage through a global diffusion of the company’s distinctive competencies
MNCs following a transnational strategy rationalise and integrate resources to achieve superior cost efficiencies, respond to local needs and share knowledge throughout their operations

10. Recap
Corporations that pursue a global strategy focus on increasing profit margins through cost efficiencies arising from economies of scale and economies of location.
Companies pursing a multi-domestic strategy design their operations to maximise local responsiveness
Corporations pursuing an international strategy create competitive advantage through a global diffusion of the company’s distinctive competencies
MNCs following a transnational strategy rationalise and integrate resources to achieve superior cost efficiencies, respond to local needs and share knowledge throughout their operations

12. Strategic Management: Context
What do you think are the key contextual
factors that frame
Strategic HRM?

13. Strategic Management: Context

14. PESTLE Analysis Political Economic Sociological Technological Legal
Environmental
Strategic Choice

15. Strategic Choice
Strategic Choice

16. Strategic Planning

17. Strategic Choice
‘This perspective involves defining strategy as a framework of critical choices about the ends and means of an organization (Child 1972; 1997). Choices are critical when they play a decisive role in the success or failure of the organization.
Besides ‘make-or-break’ decisions, choices are also critical when they account for significant variations in the performance of basically viable organizations ... Strategy exists even when
strategic planning does not ...
The extent of strategic choice is variable -
Environmental Variability; Locus and Quality of Leadership’
Boxall, P. and Haynes, P. (1997) ‘Strategy and Trade Union Effectiveness in a Neo-liberal Environment’, British Journal of Industrial Relations, 35(4) :567–591
Strategic Choice

18. Does the position~status of HRM seem reasonable?
Strategic Choice
Purcell (1989) suggests there are three levels of strategic choice:
Up-stream or first order corporate, strategic decisions rooted in long-term direction and shape of the organisation, corporate strategy e.g. which products, which markets?
2) Consequential, second order business strategy. The relationship and level of integration of business structure, units and activities.
3) Third order functional strategic decisions include HRM policy and practices i.e. the way people are managed.
HR strategy determined by decisions at all three levels and depends upon management ability and business environment
Does the position~status of HRM seem reasonable?
Strategic Choice

19. HRM - A Strategic approach …
SHRM:
All those activities affecting the behavior of individuals in their efforts to formulate and implement the strategic needs of the business. Schuler (1992)

20. Strategic HRM?
HRM contains within it the notion of strategic choice and integration – internally within the organisation and externally outside the organisation.
Within the HRM literature this has led to confusion over a differentiation between HRM and Strategic HRM (SHRM). (see Beardwell and Claydon 2007 chapter 1 )

21. HRM and SHRM
Simply because HRM might be strategic in terms of horizontal fit say compared to Personnel Management, it does not mean that HRM is necessarily strategic in terms of its vertical alignment with corporate strategy:
Within an organisation, a ‘pattern of planned HR activities’ might be the HRM strategy but this is might not be organisationally strategic.
(see Boxall and Purcell 2003)
Confusion over difference between HRM and SHRM. Some commentators see as the same. Confusion because implicit within much of the HRM literature is idea of ‘strategic intent’ not necessarily matched by strategic integration (Beardwell and Claydon 2007).

22. HRM - A Strategic Approach?

23. HRM - A Strategic Approach …
Senior management involvement
People as strategic resource for competitive advantage
Use of planning
Internal integration of employment practices
External integration of employment policies with business strategies
Proactive not reactive management

24. HRM - A Strategic approach …
Schuler and Jackson (2003) suggest a framework for understanding the connection between HR practice and business strategy through matching HR strategy based upon Porters framework of strategic types.
This connects competitive strategies, desired employee behaviour and specific HR practices and advocates that HR practices must reinforce the behavioural implications of Porter’s generic strategies.
(Schuler and Jackson 2003: chapter 3 and Schuler, R.S. and Jackson, S.E. (1987).‘Linking competitive strategies with human resource management practices’. The Academy of Management Executive. 1(3): )

25. HRM - A Strategic approach …

26. HRM - A Strategic approach …
Cost reduction strategy
Required behaviours include?
Quality Enhancement Strategy
Innovation Strategy
What do you think?

27. Cost reduction strategy
Required behaviours include:
tolerance of repetition in work activities and stability in the work environment
focus on the short term
comfort with working individually on narrowly defined tasks
prepared to prioritise speed and quantity over quality
focused on short-term results
comfort with low-risk activities.
Quality Enhancement Strategy
high focus on quality of product and services
concern with generating quality improvements
medium-term focus
moderate concern for quantity of output
tolerance of repetition and predictability
comfortable with risk-free environment
comfortable with a moderate degree of co-operative behaviour as well as working as an individual on specific tasks
high commitment to organisation’s goals and values.
Innovation Strategy
willingness and ability to think creatively, and to engage in work when the results are not immediate or obvious
focus on the long term (CIPD: B Lupton, Manchester Metropolitan Uni)

28. (Schuler et al 2001)

29. Models
We need mental roadmap to guide us through definitions, models and prescriptions. Models useful to allow comparing, contrasting, and following change and there are a number of models and sometimes-overlapping formulations of SHRM, treated slightly differently by different commentators.
Important to differentiate between descriptive research and normative theory.
Need mental roadmap to guide us through definitions, forms and prescriptions. Models useful to allow comparing, contrasting, and following change and there are a number of models and sometimes-overlapping formulations of SHRM, treated slightly differently by different commentators. Important to differentiate between descriptive research and normative theory.

30. Models
Three models present ideal type models of HR strategy (connection between corporate and HR strategy):
Control Based : Focus on monitoring and control of employees to maximise labour productivity
Resource Based: Identification, nurturing and utilisation of the distinctive competencies and skills of employees. Importance of learning culture and motivation (a large literature)
Integrative: Attempt to incorporate elements of both above models. Two dimensions; ‘acquisition and development’ that seeks to develop employees and engender trust and respect and ‘locus of control’ that focuses on compliance with standards, controlling outcomes.

31. Resource Based View of SHRM
Since 1990s SHRM literature influenced by Resource Based view of the firm. Organisations possess unique bundles of assets, including people. The ability of management to identify and utilise organisational assets is central to success (Sisson and Story 2000). Major shift in thinking. Focuses on internal resources of an organisation rather than external context.
People have unique potential to provide competitive advantage. Raises issues of consent and work based learning. Competitive advantage emanates from the use with which such assets are put - superior core competencies; copyable and non-copyable assets
Human Capital has the potential to provide a decisive asset through its - value, rarity, inimitability, non-substitutability and crucially capacity for development
Boxall and Purcell (2003) describe the resource-based view as exclusive best fit.
Raises the issues of control, consent and commitment

32. Resource Based View of SHRM
It should be recognized however that in order to succeed a firm does not necessarily need a uniquely endowed workforce to establish a distinctive competency if it has managerial capabilities and products that other firms do not possess. Resources are not ends in themselves. Firms reflect sectoral similarities as well as differentiation.
(Boxall and Purcell, 2011).
Firms also exist in an environmental and societal context – back to Harvard Michigan models?
Product markets and location can shape and constrain strategic options

33. Resource-based model

34. HRM – Best Practice and/or Best Fit?

35. BEST PRACTICE (Universalism) and/or BEST FIT (Contingency)?
From a general perspective, much debate in SHRM has focused on two normative models of how best to connect people management to business strategy –

36. Best Practice, (Universalist School of SHRM)
Idea of best practice or a universal prescription for HR practices perspective was identified in early US models of HRM (lecture 1). A number of nuances: universal set of HR practices; high commitment; high performance work systems/practices.
Disagreement as to what is the best set of HR practices.
What is argued is that firms will only see performance improvements if ‘they identify and implement best practice’ in for example selection, training, appraisal and pay (Boxall and Purcell 2003: 61).
Raises issues of top management commitment. Benchmarking, leading edge practices.
The above outlook might be contrasted with the ‘best fit’ perspective. Idea of best practice HRM was identified in early US models of HRM (lecture 1). A number of nuances: universal set of HR practices; high commitment; high performance work systems/practices. Disagreement as to what is the best set of HR practices.
For example a universal prescription for HR practices within. What is argued is that firms will only see performance improvements if ‘they identify and implement best practice’ in for example selection, training, appraisal and pay (Boxall and Purcell 2003: 61).

37. Pfeffer’s 7 Practices Employ- ment Security Selective Hiring
Self managed teams-
teamworking
Pay linked to company performance
Extensive Training
Limited status differentials
Sharing information
Pfeffer’s 7 Practices

38. SHRM Best Fit Life cycle models: start up; growth; maturity; decline
With each stage of development, different particular forms of HRM are necessary.
Strategic Behaviour - Miles and Snow (1984) describe three forms of strategic behaviour that require specific forms of HRM - defenders; prospectors; analysers
Competitive Advantage Models: Schuler and Jackson (1987) associate HR policies and practices with Porter’s (1985) typology of business strategies – cost leadership; differentiation; market focus.

39. How can/should MNCs make IHRM strategic?
Question:
How can/should MNCs make IHRM strategic?

40. Strategic International HRM (SIHRM)
Strategic IHRM is the process of explicitly using IHRM with the strategy of the global company.
External factors impact on internal/organisation factors, SHRM and MNC performance (Dowling et al 2013).
The CRANET study of European HRM practices on different national contexts is insightful as to the role of HRM (see page 18)
PESTLE Analysis is useful to describe external factors that MNCs operate in. .

41. SIHRM Scullion and Linehan (2005) chapter 2 (page 24) discuss three ‘classic’ models of SIHRM: Adler and Ghadar’s phases of internationalization The two logics of Evans and Lorange De Cieri and Dowling

42. SIHRM Models of IHRM See chapter 4 International HRM
SIHRM Models of IHRM See chapter 4 International HRM. Harzing and Pinnington 4th edition 2015 (handout)

43. HRM - A Strategic approach …in an international context

44. A Framework of Strategic HRM in MNCs
External Factors
PESTLE
Organisational links with other MNCs and national
Governments
Asymmetric events
Environmental Dynamics
HR Function
Global corporate HR role
HR practices
Crisis management and coordination
MNC Performance
Financial performance
Social performance
Enterprise resilience
Organisational Factors
MNC balance of global integration
and local responsiveness
MNC structure
Firm size and maturity
MNC strategy
Corporate governance
Headquarter national orientation
MNC culture
(Dowling et al 2013: 15)

45. A key strategic issues facing MNCs is the extent to which HR practices should or can be transferred to subsidiaries in other countries. The Resource Based Theory of the Firm suggests that all units should be constructed around the firm’s critical HRM competencies. Taylor et al (1996) suggest that the HR strategy of MNCs reflects three SIHRM orientations. These are:
Adaptive SIHRM orientation: HR practices reflect local condition. More differentiation less integration. Indigenous HR leaders
Exportive SIHRM orientation: Replicates parent country practices. Emphasises integration
Integrative SHIRM orientation: Transfers the best HR policies and practices from all subsidiaries. Reflects focus on global business strategy and MNC evolution
(Bratton and Gold 2012)
(Takeuchi, N. (2005). The Choice of Strategic International HRM Orientation by Japanese Firms: Examining the Effects of Affiliates’ Local Business Strategies, Research and Practice in Human Resource Management, 13(2), )
An adaptive SIHRM orientation is one where the HRM systems of affiliates reflect the local environment. Under the adaptive SIHRM orientation, a “MNC generally copies the HRM systems that are being used locally.” (Taylor, et al. 1996: 966). An exportive SIHRM orientation is one where wholesale transfer of the parent firm’s HRM system to its overseas affiliates is preferred. Under the exportive SIHRM orientation, MNCs replicate in its overseas affiliates the HRM policies and practices used by their parent company. An integrative SIHRM orientation is one where MNCs attempt to take ‘the best’ approaches and use them throughout the organisation in the creation of a worldwide system. Under the integrative SIHRM orientation, substantial global integration with an allowance for some local differentiation is pursued at the affiliate level. This orientation integrates characteristics of the parent company’s HRM system with those of its overseas affiliates.Exportive
integrative

46. Strategic International HRM
An influential early model for SIHRM was that of Schuler et al (1993: 717).
This was based on the ‘strategic components of MNE’s; inter-unit linkages, internal, operations … that reflect the single and multiple influence of the strategic components of MNE’s and several exogenous and endogenous factors’
Their intention was to provide a framework that supported academics and practitioners in understating SIHRM.
Schuler et al (ibid) assert that the challenges that face MCs are different from those faced by domestic firms particularly to HRM. They described their proposition as tentative and subject to revision and modification.

47. Strategic International HRM
Schuler et al’s (1993) model of SIHRM consisting of four components:
Exogenous factors: industry characteristics, technology, employment relations
Endogenous factors: internal organisational issues e.g. work design, control systems
SHIRM: local versus local, control, coordination, autonomy endogenous factors and the fit between exogenous and endogenous
Pressures and goals of the MNC: profitability, global transfer of innovation, cost reduction versus local responsiveness.
Bratton and Gold (2012) add a fifth factor, that of ‘the corporate SHIRM orientation’. This is the ‘general philosophy’ adopted by the MNCs leadership in designing its total IHRM system. .

48. (Schuler 2000: 252)

49. Strategic International HRM

50. Health Warning!! Appraisal of SHRM models:
SHRM based on a rationale perspective of management decision making
Contingency analysis ignores internal employee processes
Firms increasingly have multidimensional strategies – need cost leadership and differentiation also strategic alliances
Achieving external fit of business and HR strategy if involves downsizing and/or increased control can contradict goals of commitment and cooperation.

51. SIHRM and Culture
Work has a cultural dimension. Individual contracts USA, obligation and loyalty Japan. Differences between Asian, European and North American countries with respect to HRM. Hegemony of Anglo Saxon model of management and finance capital.
HRM laden with values. Seeing humans as a resource to further the executive ends of an organisation is concept contrary to many Eastern cultures. Instrumental versus humanist locus of values.
For transitional economies of E. Europe, China and postcolonial economies, Western models taken off shelf. If impose Western management culture in non-Western countries risk lack of commitment and motivation and alienation.
A key issue for HRM is how to fit core culture into national context – managing diversity

52. Concluding Thoughts:
Legge (2005 ; 160) ‘ evidence suggests that integration of strategy and HRM is at best a lengthy, complex and iterative process and at worse that there is little evidence to suggest that widespread integration is achieved, is the close matching of strategy and HRM policies desirable anyway?’
The idea of rational perspective to decision making excludes complexity, context and political contingency.
In a globalised economy, the idea of matching models and fit perhaps not appropriate when flexibility and necessity to learn faster than competitors might be key to success.
IHRM is complex, SIRM, more so.

53. Concluding Thoughts …
Simple SHRM model focuses on outcomes i.e. realization of profit not whole process of production and profit making – need to be more sensitive to process of organizational change and avoid being trapped in logic of rational choice.
Bratton and Gold (2012) describe a number of specific themes that emanate from the various models of SHRM and that HR specialists need to focus on. These are: the link between HR practices and performance; re –engineering of work organization and SHRM; leadership; workplace learning; trade unions and their role
For Sisson and Storey, (2000: 63) management itself can constitute a major barrier to change. Senior managers set a powerful role model for first line managers and their employees.

54. IHRM Cycle – future lectures