1. Chapter Copyright© 2007 Thomson Learning All rights reserved 12 HRM in the Local Context: Knowing When and How to Adapt HRM in the Local Context: Knowing When and How to Adapt

2. Copyright© 2007 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© 2007 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© 2007 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© 2007 South-Western/Thomson Learning All rights reserved Key Questions Regarding Local Employees How can we identify talented local employees? How can we attract these employees to apply for jobs? Can we use our home country’s training methods with local employees? What types of appraisal methods are customary? How can we identify talented local employees? How can we attract these employees to apply for jobs? Can we use our home country’s training methods with local employees? What types of appraisal methods are customary?

6. Copyright© 2007 South-Western/Thomson Learning All rights reserved Key Questions Regarding Local Employees (cont.) What types of rewards do local people value? How can we retain and develop employees with a high potential as future managers? Do any local laws affect staffing, compensation, and training decisions? What types of rewards do local people value? How can we retain and develop employees with a high potential as future managers? Do any local laws affect staffing, compensation, and training decisions?

7. Copyright© 2007 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

8. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.1: How the National Context Leads to National Differences in Local HRM Practices

9. Copyright© 2007 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

10. Copyright© 2007 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

11. Copyright© 2007 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

12. Copyright© 2007 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

13. Copyright© 2007 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

14. Copyright© 2007 South-Western/Thomson Learning All rights reserved Recruitment The major steps in recruitment 1.Managers determine that jobs are available 2.Employers determine the types of people and skills that are necessary for the job 3.Employers generate a pool of applicants for the job The major steps in recruitment 1.Managers determine that jobs are available 2.Employers determine the types of people and skills that are necessary for the job 3.Employers generate a pool of applicants for the job

15. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.2: Steps in the Recruiting Process

16. Copyright© 2007 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

17. Copyright© 2007 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.

18. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.3: Most Effective Recruiting Sources for U.S. Companies

19. Copyright© 2007 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

20. Copyright© 2007 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

21. Copyright© 2007 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

22. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.4: Preferred Ways to Look for a New Job—Public vs. Private Agency

23. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.5: Preferred Ways to Look for a New Job

24. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.6: Preferred Ways to Look for a New Job

25. Copyright© 2007 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

26. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.7: Typical Steps in U.S. Personnel Selection

27. Copyright© 2007 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

28. Copyright© 2007 South-Western/Thomson Learning All rights reserved Selection Around the World A comparison of current selection practices in 13 countries - Common selection criterion A person’s ability to perform technical aspects of the job Personal interviews are the best screening tool to gauge a candidate’s social skills A comparison of current selection practices in 13 countries - Common selection criterion A person’s ability to perform technical aspects of the job Personal interviews are the best screening tool to gauge a candidate’s social skills

29. Copyright© 2007 South-Western/Thomson Learning All rights reserved Selection Around the World - Differences in selection Developed countries are more likely to view past work experience as the best way to infer evidence of technical skills Asian societies tend to prefer that candidates take actual employment tests to demonstrate technical skills - Differences in selection Developed countries are more likely to view past work experience as the best way to infer evidence of technical skills Asian societies tend to prefer that candidates take actual employment tests to demonstrate technical skills

30. Copyright© 2007 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

31. Copyright© 2007 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

32. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.8: The Various Models and Emphasis on Various Human Resources Issues Including Training

33. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.9: Training Systems around the World

34. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries

35. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries

36. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries

37. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries

38. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries

39. Copyright© 2007 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.

40. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.11: Skills Taught by U.S. Organization

41. Copyright© 2007 South-Western/Thomson Learning All rights reserved Training and Vocational Education 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

42. Copyright© 2007 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

43. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.12: The System of Vocational Education In Germany

44. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.13: Germany’s Apprenticeship Program under Pressure

45. Copyright© 2007 South-Western/Thomson Learning All rights reserved Management Development in the United States 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

46. Copyright© 2007 South-Western/Thomson Learning All rights reserved Management 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

47. Copyright© 2007 South-Western/Thomson Learning All rights reserved Management 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

48. Copyright© 2007 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

49. Copyright© 2007 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

50. Copyright© 2007 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

51. Copyright© 2007 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

52. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.14: Cross-National Differences in Purposes of Performance Appraisals

53. Copyright© 2007 South-Western/Thomson Learning All rights reserved Performance Appraisal Around the World Australia, Canada and the United States - Among the top five countries for all performance-appraisal purposes - Very high on individualism where there is heavy emphasis on the individual development of the employee - Performance appraisals are the most effective method to gauge how well an employee is doing and how that person’s performance can be improved Australia, Canada and the United States - Among the top five countries for all performance-appraisal purposes - Very high on individualism where there is heavy emphasis on the individual development of the employee - Performance appraisals are the most effective method to gauge how well an employee is doing and how that person’s performance can be improved

54. Copyright© 2007 South-Western/Thomson Learning All rights reserved Performance Appraisal Around the World Taiwan and Latin America - Figure prominently on the list - Possible explanations through the effects of social institutions such as the government and the trade agreements - Emulating Western-based systems through a desire to satisfy trade agreements and other competitiveness requirements Taiwan and Latin America - Figure prominently on the list - Possible explanations through the effects of social institutions such as the government and the trade agreements - Emulating Western-based systems through a desire to satisfy trade agreements and other competitiveness requirements

55. Copyright© 2007 South-Western/Thomson Learning All rights reserved Performance Appraisal Around the World Collectivist Societies (e.g., China, Japan, Korea, Indonesia) - Unlikely to be among the top five countries for each performance-appraisal purpose - Age and in-group memberships provide a large component of the psychological contract with the organization - Human resource decisions should take into account personal background characteristics more than achievement - Managers work indirectly to sanction poor performance - Often avoid direct performance appraisal feedback Collectivist Societies (e.g., China, Japan, Korea, Indonesia) - Unlikely to be among the top five countries for each performance-appraisal purpose - Age and in-group memberships provide a large component of the psychological contract with the organization - Human resource decisions should take into account personal background characteristics more than achievement - Managers work indirectly to sanction poor performance - Often avoid direct performance appraisal feedback

56. Copyright© 2007 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

57. Copyright© 2007 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

58. Copyright© 2007 South-Western/Thomson Learning All rights reserved Compensation Around the World Nine compensation practices - Pay incentives should be important - Pay should be contingent on group performance - Pay should be contingent on organizational performance - Incentives should be a significant amount of pay - Job performances should be the basis of pay raises - Benefits should be important - Benefits should be more generous - Pay should be based on long-term results - Using seniority as a determinant of pay decision Nine compensation practices - Pay incentives should be important - Pay should be contingent on group performance - Pay should be contingent on organizational performance - Incentives should be a significant amount of pay - Job performances should be the basis of pay raises - Benefits should be important - Benefits should be more generous - Pay should be based on long-term results - Using seniority as a determinant of pay decision

59. Copyright© 2007 South-Western/Thomson Learning All rights reserved Compensation Around the World Based on 10 countries (Australia, Canada, China, Indonesia, Japan, Korea, Latin America, Mexico, Taiwan, and the Unite States) - Managers of all countries and regions felt that it was necessary that all but one (seniority as a determinant of pay decisions) of the nine compensation practices be used more in the future Based on 10 countries (Australia, Canada, China, Indonesia, Japan, Korea, Latin America, Mexico, Taiwan, and the Unite States) - Managers of all countries and regions felt that it was necessary that all but one (seniority as a determinant of pay decisions) of the nine compensation practices be used more in the future

60. Copyright© 2007 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

61. Copyright© 2007 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

62. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.15: The Japanese Pay Raise Formula: Changing the Balance

63. Copyright© 2007 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

64. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.16: Labor Costs and Hours Worked Per Week in Selected Countries

65. Copyright© 2007 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

66. Copyright© 2007 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

67. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.17: Union Density in Selected Countries

68. Copyright© 2007 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

69. Copyright© 2007 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

70. Copyright© 2007 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

71. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.18: Popular Form of Unions in Selected Countries

72. Copyright© 2007 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

73. Copyright© 2007 South-Western/Thomson Learning All rights reserved Exhibit 12.19: Who Gets Along?

74. Copyright© 2007 South-Western/Thomson Learning All rights reserved Conclusion Chapter highlighted fundamental national differences in the various HRM functions Chapter discussed how national context affects HRM Chapter compared the U.S. with many other countries on recruitment, selection, training, performance appraisal and compensation Chapter also dealt with differences in labor relations Chapter highlighted fundamental national differences in the various HRM functions Chapter discussed how national context affects HRM Chapter compared the U.S. with many other countries on recruitment, selection, training, performance appraisal and compensation Chapter also dealt with differences in labor relations