1. The Challenges of International Human Resource Management
Chapter 1
The Challenges of International Human Resource Management
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

2. Global Challenges at ABB
What were the major challenges facing ABB?
Staying responsive to the local environments in which it was operating while also pursuing global efficiency
Control of foreign operations
Coordination among foreign units
Focus on short-term execution while developing capabilities for future competitiveness
Multinational firms have faced many of these challenges since their inception centuries ago!
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3. The Development of Multinational Firms
International business isn’t new
Trading organizations in medieval times
International trading companies from the 16th century (assyrians, Phoenicians, Greeks; Romans)
The English and Dutch East India Companies
Which people-related challenges did they face?
Above all, control of their foreign operations
Rules and procedures
Use of expatriates
Financial incentives
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4. The Early Trading Companies
Exchanged Merchandise and services across continents
Had geographical spread to rival Todays’s multinational firms,
Engaged services of experts with skills in
Trade negotiations
Foreign languages
Assessment of goods quality
Assessment of how they should be loaded.
Then, they had to develop control structures and systems to mintor the behavior of their scattered agents.
Distance makes control more difficult.
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5. The Impact of Industrialization
Originated in Britain in late 18th century,
Factory system had a dramatic impacts on IB and Mgmt. Operations
Its spread in Europe and USA provided growing markets for minerals, food stuffs, and need for global supply occured.
The rising need for Raw Materials fueled the growth of Multinational service companies (trading, shipping, banking;..)
British Banks established branches in Australia, Canada, W.India with a strategy known as FDI,
Due to difficulties of ınternational controlling; they used family members to manage their Int. Operations and Invesrments. (Siemens in St. Petersburg factory)
International spread of rail networks and streamships in 1850 and 60s brought new speed to international travel.
Invention of telegraph communication
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6. The Impact of Industrialization
Developments of transfer + communication + industrialization have impacts on the organizations of the firms.
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7. Developments after the Industrial Revolution
18th century: Industrial revolution
Mid-19th Century: Birth of multinational corporations with increasing cross-border manufacturing
Developments in transportation technology
Early developments in communication technology
New manufacturing techniques
The first peak of international business operations at the beginning of the 20th Century
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8. Then reshaped by new manufacturing techniques İncreased specialization
Division of labor
Changed in the composition of workforce ( skilled/unskilled)
Consequently; early factories experienced discipline and motivation problems.
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9. It took until 1992 for the world to become as global as in 1914!
Large Multinational Manufacturers in 1914
Company
Nationality
Product
# factories
abroad 1914
Location of foreign factories
Singer US
Sewing machines 5
UK, Canada, Germany, Russia
J & P Coats UK
Cotton thread 20
US, Canada, Russia, Austria-Hungary, Spain, Belgium, Italy, Switzerland, Portugal, Brazil, Japan
Nestlé
Swiss
Condensed milk/baby food 14
US, UK, Germany, Netherlands, Norway, Spain, Australia
Lever Brothers
Soap 33
US, Canada, Germany, Switzerland, Belgium, France, Japan, Australia, South Africa
St Gobain
French
Glass 8
Germany, Belgium, Netherlands, Italy, Spain, Austria-Hungary
Bayer
German
Chemicals 7
US, UK, France, Russia, Belgium
American Radiator
Radiators 6
Canada, UK, France, Germany, Italy, Austria-Hungary
Siemens
Electrical equipment 10
UK, France, Spain, Austria-Hungary, Russia
L.M. Ericsson
Swedish
Telephone equipment
US, UK, France, Austria-Hungary, Russia
Accumulatoren- Fabrik
Batteries
UK, Austria-Hungary, Spain, Russia, Poland, Romania, Sweden
Source: G. Jones, The Evolution of International Business (London: Routledge, 1996), p. 106.
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10. Golden Age Pre WWI
Growth of ınternational manufacturing sustained a flourishing
service sector (finance, insurance, transport)
Multinational activity became an important element in the world
Economy. It was ‘Golden Age’ for MNC with FDI of nearly 9% of
total world output.
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11. The Modern Multinational
Throughout the 1960s US ındustrial production productivity was the highest in the world, accounting for 40% of world manufacturing.
Accounted 70% of R&D in the OECD
Found faster ways to enter into new markets
through acquisitions
İnvestment in acquired subsidiaries (e.g. P&G)
Alternative strategy; join forces with local partners (xerox entered global
markets with JV)
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12. PLUS
The Marshall Plan: established to support the re-building of war battered Europe.
GATT : general Agreement of Tariffs and Trades
Treaty of Rome established the European community
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13. THEN İndustrial relations,
Staffing for International Growth
Following WWII- Firms had Personnel Departments with responsibility;
İndustrial relations,
Functional and operational espects of employment
Staffing subsidiaries abroad
Newly Cretaed ‘’International Personnel Units’’ focus on
* expatriation
* sending home country mngrs to foreign locations
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14. THEN
Some argued that;
People were resources rather than just costs
The term ‘Human Resource Management’ grew as much as anything out of the need to find home for these burgeoning initiatives.
Organising for International Growth
Problems of controlling and coordinationg at complex global organisations,
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15. Growth of Modern Multinationals
WW 1 – WW 2: Economic depression, protectionism, and wars led to significant drop in international business
What happened after 1945?
US expand abroad, first mostly greenfield operations, increasingly M&As and alliances
Gradually more competition from European and Japanese firms
Organizing for international growth
The matrix structure route
The headquarters coordination route
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16. Example of Functional Organisation
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17. Example of Product Organisation
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18. Example of Matrix Organisation
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19. The Evolution of HRM
People implications of the growth of the multinational
Expatriation
Find the right people to lead global operations
Increasing attention to HRM
The importance of FIT
Between strategy and HRM – The 7-S model
Culture, Organizational Mindset, and HRM
Cross-cultural differences (Hofstede)
The Japanese Challenge (Theory Z)
Ethnocentric, polycentric, and geocentric orientations (Perlmutter)
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20. The Importance of FIT Strategy Systems Structure Shared Values Skills
Staff
The McKinsey
7-S framework
Style
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21. http://www.mindtools.com/pages/article/newSTR_91.htm The McKinsey
7-S framework
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22. Control and Coordination
Control: Visible hierarchical processes & structures
Personal: Decision making and monitoring by HQ people
Formal: Standardized and formalized rules and processes
Output: Performance measurement
Normative: Specification, diffusion of shared values, beliefs, & norms
Coordination: Tools that facilitate alignment across different parts of the multinational
Structural tools, e.g. organizational structures (such as the matrix : dual reporting lines) and project teams
Social tools, e.g. social networks and shared values
Process tools, e.g. talent selection & development, and performance management processes
HRM is an integrated part of Control & Coordination
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23. Multinational Firms: Different Approaches
Multidomestic
Focus on local responsiveness
Decentralized decision making
Meganational
Focus on global efficiency
Tight central control
”International”
Focus on transfer of parent capabilities to foreign units
International coordination and possibilities for interunit learning
Transnational
Local responsiveness and global efficiency
Global knowledge sharing and innovation
How to manage the inherent contradictions and tensions in transnational organizations?
____________________________________
Source: Based on Bartlett and Ghoshal (1989)
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24. Paths to the Transnational
GLOBAL INTEGRATION
The Transnational
Organization
The Meganational
Organization
Foreign subsidiaries & Int’l Division
Export & sales offices
The Multidomestic
Organization
Home
market
The « International »
Organization T
LOCAL RESPONSIVENESS
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25. Capabilities and Knowledge as Sources of Competitiveness
Capability: Firm-specific bundling of technical systems, people skills, and shared values
Knowledge: The ability to create, transfer, and integrate knowledge
Explicit
Tacit
Resource-based perspective: Resources that are valuable, rare, difficult to imitate, and effectively exploited
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26. Friedman’s 10 Forces That Flattened the World
1 11/9/89
The collapse of the Berlin Wall marked the end of the Cold War, allowing countries from the other side of the Wall to join the world economy.
2 8/9/95
The Internet (symbolized by Netscape going public on August 9, 1995) has become accessible to everyone, enabling people to communicate digital information around the world.
3 Work-flow software
Machines interact and individuals from anywhere collaborate on the same digital content.
4 Open-sourcing
The ability of individuals (and communities) to collaborate on projects online—examples include open-source software, blogs, and Wikipedia.
5 Outsourcing
Parts of companies’ value chains are handled by other firms (often in lower cost countries) that can handle them more efficiently.
6 Offshoring
Firms relocate parts of their activities to lower cost locations to reduce costs.
7 Supply-chaining
Global streamlining and optimization of companies’ total supply chains.
8 Insourcing
Company employees perform services, e.g product repairs, for other firms.
9 In-forming
Rapid and wide search for information through Google and similar search engines.
10 The steroids
Personal digital devices, like mobile phones, personal assistants, and voice-over-Internet protocol (VoIP).
Source: T.L. Friedman, The World Is Flat: A Brief History of the Twenty-first Century, New York:
Farrar, Straus and Giroux, 2005.
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27. From Personnel Welfare to International HRM
Time Period
Development in International Business
People Management Theories
1870s
Early manufacturing FDI
Industrial Betterment
1910s
Golden age of international business
Scientific Management
1920s
International cartels
1930s
Multidivisional organizations
Human Relations
1950s
US companies expand abroad
1960s s
Focus in US on expatriation;
matrix structures and staff bureaucracies
Systems Thinking about organization;
1980s
US faces stronger competition from and Rationalization and consolidation
Strategic HRM;
Organization Culture
1990s
Globalization
Resource-Based View of the firm;
The Transnational concept
2000s
The growth of multinationals from emerging markets
Social Capital;
Tension, Paradox, and Duality
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28. Key People Issues Responding to cultural and institutional differences
Global integration and the use of expatriates
Enhancing global coordination
Structural solutions
Social capital, shared values, global mindset
Key HRM processes
Knowledge and Innovation
Managing change and growth
The roles of the HR function
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29. Outline of the book
The Challenges of International Human Resource Management
HRM in the International Firm: The Framework
Becoming Locally Responsive
Achieving Global Integration
Structuring Global Coordination
Building Social Architecture
Managing Global Talent: Recruitment, Selection, and Retention
Developing Global Leaders
Global Performance Management
Managing Knowledge and Innovation across Borders
Facilitating Change in Multinational Organizations
Managing Alliances and Joint Ventures
Forging Cross-Border Mergers and Acquisitions
Transforming the Global Human Resource Role
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