1. Chapter Copyright© 2004 Thomson Learning All rights reserved 11 HRM in the Local Context: Knowing When and How to Adapt HRM in the Local Context: Knowing When and How to Adapt

2. Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives Understanding how the national context affects HRM practices Identify how recruitment and selection practices differ in various national contexts Identify possible host adaptations in recruitment and selection practices Understanding how the national context affects HRM practices Identify how recruitment and selection practices differ in various national contexts Identify possible host adaptations in recruitment and selection practices

3. Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives Identify how training and development techniques are used in different countries Identify sources of high-quality workers in different nations Understand how training must be adapted to host country workers Identify how performance evaluation and compensation practices differ in various national contexts Identify how training and development techniques are used in different countries Identify sources of high-quality workers in different nations Understand how training must be adapted to host country workers Identify how performance evaluation and compensation practices differ in various national contexts

4. Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives Identify possible host country adaptations in performance evaluation and compensation practices for a multinational company Understand how labor costs vary Have an appreciation of how the national context and historical conditions affect the relationship of management and labor Identify possible host country adaptations in performance evaluation and compensation practices for a multinational company Understand how labor costs vary Have an appreciation of how the national context and historical conditions affect the relationship of management and labor

5. Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? Because of the national context National culture and social institutions influence how managers make decisions regarding strategies Countries vary widely with regards to social institutions and national culture Multinationals must select and implement practices that meet national context Because of the national context National culture and social institutions influence how managers make decisions regarding strategies Countries vary widely with regards to social institutions and national culture Multinationals must select and implement practices that meet national context

6. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.1: How the National Context Leads to National Differences in Local HRM Practices

7. Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? Resource pool: all the human and physical resources available in a country Both from natural and induced factor conditions Include quality of labor, availability of scientific laboratories Resource pool: all the human and physical resources available in a country Both from natural and induced factor conditions Include quality of labor, availability of scientific laboratories

8. Copyright© 2005 South-Western/Thomson Learning All rights reserved Key Factors that Influence the Resource Pool The quality, quantity, and accessibility of raw material The quantity, quality, and cost of personnel available The scientific, technical, and market-related knowledge available to firms The quality, quantity, and accessibility of raw material The quantity, quality, and cost of personnel available The scientific, technical, and market-related knowledge available to firms

9. Copyright© 2005 South-Western/Thomson Learning All rights reserved Resource Pool The cost and amount of capital available to firms for operations and expansion The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation The cost and amount of capital available to firms for operations and expansion The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation

10. Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? Natural factor conditions: national resources that occur naturally E.g., abundant water supply Induced-factor conditions: national resources created by a nation E.g., superior educational system Natural factor conditions: national resources that occur naturally E.g., abundant water supply Induced-factor conditions: national resources created by a nation E.g., superior educational system

11. Copyright© 2005 South-Western/Thomson Learning All rights reserved Characteristics of the National Context That Affect HRM Education and training of the labor pool Laws and cultural expectations for selection practices Types of jobs favored by applicants Laws and cultural expectations regarding fair wages and promotion criteria Laws and traditions regarding labor practices Education and training of the labor pool Laws and cultural expectations for selection practices Types of jobs favored by applicants Laws and cultural expectations regarding fair wages and promotion criteria Laws and traditions regarding labor practices

12. Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Strategies Walk-ins or unsolicited applications Newspaper or Internet advertisement Company Web site job posting Internal job postings Public and private personnel agencies Placement services of educational institutions Current employee recommendations Walk-ins or unsolicited applications Newspaper or Internet advertisement Company Web site job posting Internal job postings Public and private personnel agencies Placement services of educational institutions Current employee recommendations

13. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.2: Steps in the Recruiting Process

14. Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment in the U.S. U.S. managers tend to see newspapers as one of the most effective recruitment methods. Fear that recruitment by personal contacts may result in bias against some groups. U.S. value open and public advertisements as a reflection of individualistic culture. U.S. managers tend to see newspapers as one of the most effective recruitment methods. Fear that recruitment by personal contacts may result in bias against some groups. U.S. value open and public advertisements as a reflection of individualistic culture.

15. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.3: Most Effective Recruiting Sources for U.S. Companies

16. Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment in Korea Backdoor recruitment: prospective employees are friends or relatives of those already employed Managers are recruited from prestigious universities Backdoor recruitment: prospective employees are friends or relatives of those already employed Managers are recruited from prestigious universities

17. Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Around the World Individuals around the world have preferred way to find jobs International Social Survey Program data was analyzed Looking for jobs through public vs. private agencies Individuals in former communist and socialist societies were more likely to rely on public agencies Individuals around the world have preferred way to find jobs International Social Survey Program data was analyzed Looking for jobs through public vs. private agencies Individuals in former communist and socialist societies were more likely to rely on public agencies

18. Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Around the World (cont.) Advertising in newspapers and responding to newspaper ads Both very public forms of recruitment Individualistic societies have higher preference for such forms Apply directly versus asking friends/relatives for job Individualistic and high femininity societies more likely to favor direct application Socialist societies rely on asking friends/relatives Advertising in newspapers and responding to newspaper ads Both very public forms of recruitment Individualistic societies have higher preference for such forms Apply directly versus asking friends/relatives for job Individualistic and high femininity societies more likely to favor direct application Socialist societies rely on asking friends/relatives

19. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.4: Preferred Ways to Look for a New Job—Public vs. Private Agency

20. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.5: Preferred Ways to Look for a New Job

21. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.6: Preferred Ways to Look for a New Job

22. Copyright© 2005 South-Western/Thomson Learning All rights reserved Selection in the U.S. Job qualifications Match skills and job requirements Individual achievements Prohibitions against nepotism—the hiring of relatives Forbidding managers to supervise family members Job qualifications Match skills and job requirements Individual achievements Prohibitions against nepotism—the hiring of relatives Forbidding managers to supervise family members

23. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.7: Typical Steps in U.S. Personnel Selection

24. Copyright© 2005 South-Western/Thomson Learning All rights reserved Selection in Collectivist Cultures Based on the in-group Preference for family Value potential trustworthiness, reliability, and loyalty over performance-related background High school and university ties substitute for family membership Based on the in-group Preference for family Value potential trustworthiness, reliability, and loyalty over performance-related background High school and university ties substitute for family membership

25. Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Recruitment and Selection Managers must follow local norms to get best workers Often a tradeoff between home practices and costs of following local traditions Managers must follow local norms to get best workers Often a tradeoff between home practices and costs of following local traditions

26. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development Need for training and development varies by country Differences in training and development due to Differences in educational systems Values regarding educational credentials Cultural values regarding other personnel practices Need for training and development varies by country Differences in training and development due to Differences in educational systems Values regarding educational credentials Cultural values regarding other personnel practices

27. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.8: Training Systems around the World

28. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries

29. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries

30. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries

31. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries

32. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries

33. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in the U.S. Companies with over 100 employees invest more than $60 billion in training costs. Management development and computer skills are the most popular. There is growing pressure for training as the U.S. shifts to the service sectors. Companies with over 100 employees invest more than $60 billion in training costs. Management development and computer skills are the most popular. There is growing pressure for training as the U.S. shifts to the service sectors.

34. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.10: Skills Taught by U.S. Organization

35. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Germany Two major forms of vocational education General and specialized vocational schools and professional and technical colleges Dual system: combination of in-house apprenticeship training with part-time vocational-school training, and leads to a skilled certificate Meister: a master technician Two major forms of vocational education General and specialized vocational schools and professional and technical colleges Dual system: combination of in-house apprenticeship training with part-time vocational-school training, and leads to a skilled certificate Meister: a master technician

36. Copyright© 2005 South-Western/Thomson Learning All rights reserved German Dual System Stems from collaboration among employers, unions, and the state Costs shared between companies and state Employers have obligation to release employees for training Stems from collaboration among employers, unions, and the state Costs shared between companies and state Employers have obligation to release employees for training

37. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.11: Skilled Worker Training in Germany

38. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.12: Germany’s Apprenticeship Program under Pressure

39. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in the U.S. Senior level managers often identify managerial potential Appraisals of managerial readiness based on Assessment centers Mentoring “Fast track” careers Remains the responsibility of the individual Senior level managers often identify managerial potential Appraisals of managerial readiness based on Assessment centers Mentoring “Fast track” careers Remains the responsibility of the individual

40. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Japan Permanent employment Recruitment directly from universities Join the company as a group Selected on personal qualities that fit the corporate culture Similar pay and promotion for first ten years—age seniority Informal recognition of those high performing managers Permanent employment Recruitment directly from universities Join the company as a group Selected on personal qualities that fit the corporate culture Similar pay and promotion for first ten years—age seniority Informal recognition of those high performing managers

41. Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Japan Shifting social institutions: pressures for change Asahi ties promotions to evaluations Matsushita uses merit pay for managers Honda is phasing out seniority Shifting social institutions: pressures for change Asahi ties promotions to evaluations Matsushita uses merit pay for managers Honda is phasing out seniority

42. Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Training and Development Examine feasibility of exporting training IHRM orientation affects training needs of local managers Locations advantages Examine feasibility of exporting training IHRM orientation affects training needs of local managers Locations advantages

43. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.13: Workers of the Future: Student Math and Science Scores from Selected Countries

44. Copyright© 2005 South-Western/Thomson Learning All rights reserved Performance Appraisal Identifying people to reward, promote, demote, develop and improve, retain, or fire Not everyone can climb the corporate ladder Need to assess how employees perform Identifying people to reward, promote, demote, develop and improve, retain, or fire Not everyone can climb the corporate ladder Need to assess how employees perform

45. Copyright© 2005 South-Western/Thomson Learning All rights reserved U.S. Performance Appraisal U.S. legal requirements regulate performance evaluation practices to ensure their fairness Performance evaluations must relate clearly to the job and performance Performance standards must be provided in writing Supervisors must be able to measure the behaviors they rate U.S. legal requirements regulate performance evaluation practices to ensure their fairness Performance evaluations must relate clearly to the job and performance Performance standards must be provided in writing Supervisors must be able to measure the behaviors they rate

46. Copyright© 2005 South-Western/Thomson Learning All rights reserved U.S. Performance Appraisal (cont.) Supervisors must be trained to use evaluation measures Supervisors and subordinates must discuss appraisals openly Appeals procedures must be in place Supervisors must be trained to use evaluation measures Supervisors and subordinates must discuss appraisals openly Appeals procedures must be in place

47. Copyright© 2005 South-Western/Thomson Learning All rights reserved Performance Appraisal in Collectivist Cultures Managers work indirectly to sanction poor performance Often avoid direct performance appraisal feedback Managers work indirectly to sanction poor performance Often avoid direct performance appraisal feedback

48. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.14: Cross-National Differences in Purposes of Performance Appraisals

49. Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation Wages and salaries, incentives such as bonuses, and benefits such as retirement contributions Wide variations on how to compensate workers Wages and salaries, incentives such as bonuses, and benefits such as retirement contributions Wide variations on how to compensate workers

50. Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation in the U.S. Wages and salaries differ based on two major factors External: include local and national wage rates, government legislation, and collective bargaining Internal: include the importance of the job to the organization, its ability to pay, and the employee’s relative worth to the business Wages and salaries differ based on two major factors External: include local and national wage rates, government legislation, and collective bargaining Internal: include the importance of the job to the organization, its ability to pay, and the employee’s relative worth to the business

51. Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation: Japan Traditional approach Base salaries on positions Skill and educational requirements Age Marital status and family size may count Bonus system: employees often receive up to 30% of their base salary during traditional gift-giving seasons Traditional approach Base salaries on positions Skill and educational requirements Age Marital status and family size may count Bonus system: employees often receive up to 30% of their base salary during traditional gift-giving seasons

52. Copyright© 2005 South-Western/Thomson Learning All rights reserved New Merit (Japanese style) Can affect pay raises to a greater degree than traditional position/seniority system Nenpo system: based on yearly performance evaluations that emphasize goals Although goals are not always the same as in Western companies Stresses attitudes as much as performance Can affect pay raises to a greater degree than traditional position/seniority system Nenpo system: based on yearly performance evaluations that emphasize goals Although goals are not always the same as in Western companies Stresses attitudes as much as performance

53. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.15: The Japanese Pay Raise Formula: Changing the Balance

54. Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Performance Evaluation and Compensation Match HRM orientation Seek location advantages in wages Match HRM orientation Seek location advantages in wages

55. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.17: Labor Costs and Hours Worked Per Week in Selected Countries

56. Copyright© 2005 South-Western/Thomson Learning All rights reserved A Comparative View of Labor Relations Patterns of labor relations depend on: Historical factors Ideology reasons Management views of unions Patterns of labor relations depend on: Historical factors Ideology reasons Management views of unions

57. Copyright© 2005 South-Western/Thomson Learning All rights reserved Union-Membership Density Proportion of workers in a country who belong to unions Germany: estimated 40% belonged to trade unions U.S.: 14.2% of nonagricultural workforce Denmark: over 80% unionized Great Britain: approximate 50% unionized Proportion of workers in a country who belong to unions Germany: estimated 40% belonged to trade unions U.S.: 14.2% of nonagricultural workforce Denmark: over 80% unionized Great Britain: approximate 50% unionized

58. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.18: Union Density in Selected Countries

59. Copyright© 2005 South-Western/Thomson Learning All rights reserved Historical and Institutional Differences: Germany Germany Formalized, legalistic, and low-conflict bargaining between unions and large corporations French Militant/strong ideologies U.S. “Bread and butter” issues: wages, benefits, and working conditions Germany Formalized, legalistic, and low-conflict bargaining between unions and large corporations French Militant/strong ideologies U.S. “Bread and butter” issues: wages, benefits, and working conditions

60. Copyright© 2005 South-Western/Thomson Learning All rights reserved Union Structures Enterprise union: represents all people in one organization, regardless of occupation or location Craft union: represents people from one occupational group, such as plumbers Industrial union: represents all people in a particular industry, regardless of occupational type Enterprise union: represents all people in one organization, regardless of occupation or location Craft union: represents people from one occupational group, such as plumbers Industrial union: represents all people in a particular industry, regardless of occupational type

61. Copyright© 2005 South-Western/Thomson Learning All rights reserved Union Structures (cont.) Local union: represents one occupational group in one company Ideological union: represents all types of workers based on some particular ideology or religious orientation White collar or professional union: represents particular occupational group, similar to craft union Local union: represents one occupational group in one company Ideological union: represents all types of workers based on some particular ideology or religious orientation White collar or professional union: represents particular occupational group, similar to craft union

62. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.19: Popular Form of Unions in Selected Countries

63. Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: The Search for Harmony Must deal with local labor practices A factor in location choice Must deal with local labor practices A factor in location choice

64. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.21: Who Gets Along?