MPM722 - Human Resource

Management
TOPICS 10 and 11:

GLOBALISATION AND
INTERNATIONAL HRM;
IMPROVING HRM
Unit Chair: Dr John Molineux
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SESSION OVERVIEW

Globalisation

Evaluating
HRM Context

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International
HRM

Methods of
evaluating
HRM

International
employee
and work
types

Employee
engagement

Cultural
issues

Improving
HRM

SESSION OBJECTIVES
Discuss the impact of globalisation on HRM in MNEs
Define international HRM and outline the different
types of employees found in MNEs
Discuss cultural aspects of international HRM
Understand the issues related to measuring and
evaluating the HR function
Analyse strategic approaches to improve HR
effectiveness

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PHENOMENON OF GLOBALISATION
Increased volume and complexity of world trade and markets: the
growth of world trade is faster than the growth of global goods and
services
Global FDI inflows reached a historic high of nearly $2 trillion in
2007, dropped to $1.3 trillion in 2008, as a result of the financial
crisis, now up to over $1.5 trillion.
Today, there are some 82000 TNCs worldwide, with 810,000
foreign affiliates. These companies play a major and growing role
in the world economy
Exports by foreign affiliates of TNCs are estimated to account for
about a third of total world exports of goods and services, and the
number of people employed by them worldwide totalled about 77
million in 2008 more than double the total labour force of
Germany
(World Investment Report, 2009, 2014)
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PHENOMENON OF GLOBALISATION
CONT.
Half the employees of the Ford company outside the USA
Three quarters of the Phillips workforce outside the Netherlands
Half of Matsushita Electrics employees outside Japan
Over half of Ericssons staff outside Sweden
5 million Americans are employed by the affiliates of foreign firms
The US firms employ more than 6.5 million people in other countries:
3.5 million in Europe and 1.5 in Asia, 1.5 in Latin America

One out of six workers in the UK work for a Japanese company

On average in Australia, the largest business earn nearly a third of
their income overseas and have almost one third of their assets
outside Australia, for major mining and industrial companies, these
figures rise to in excess of 50% in the 2000s.
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IMPACTS OF GLOBALISATION ON
ORGANISATION - KEY TRENDS

The problem of hiring quality staff is one of the main

factors inhibiting the MNC expansion in APEC economies

Conflict between expatriates and their local workforces

was rated as the number one concern in relation to MNC
internationalisation

Many international organisations experience managerial

turnover rates between 30-40% p.a.

Job hopping is a major problem for companies operating

in Asia

The issues of higher expense of training v. cheap labour

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INTERNATIONAL HRM
International HRM: the management of people in an
international context. This definition of IHRM covers a wide
range of human resource issues facing MNEs in different parts
of their organisations. This definition also includes comparative
analyses of HRM in different countries.

Multi-National Enterprise: An enterprise that conducts

transactions in or between two countries, with a system of
decision-making that permits influence over resources and
capabilities, where the transactions are subject to influence by
factors external to the parent country of the enterprise. MNEs
may include for-profit and not-for-profit organisations, of any
size.
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FRAMEWORK FOR IHRM

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IMPACTS OF GLOBALISATION ON
HRM PRACTICES OF MNCS
Corporate Isomorphism
Influence of mother company
on international HRM
practices
Also called company of
origin effect
Basically, companies
develop and build their
distinctive HRM practices
and then transfer these to
foreign environments
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Cross-national Isomorphism
Influence of the mother
country
Also called country-of-origin
effect
Companies develop HR and
other management practices
that reflect their national
conditions and then transfer
these practices to foreign
environment

IMPACTS OF GLOBALISATION ON
HRM PRACTICES OF MNCS CONT.
Global Intercorporate
Isomorphism
Influence of other
multinational companies
(MNCs)
Also called MNC or global
effect
Companies learn and adopt
the best HRM practices
worldwide as a result of
diffusion of technology, free
transfer of capital
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Local Isomorphism

Influence of the host country

Also called national business

system effect

Companies' HRM practices

reflect institutional and
cultural conditions in the
place of local operation

FACTORS INVOLVED IN GLOBAL HR

Organizational
drivers

HR enablers

Efficiency
orientation
HR
affordability

HR processes

Organizational
outcomes

Evaluation /
contracting of
HR

Global
provision
Talent
management
Information
exchange
Core
business
process

Localization
of decisionmaking

Central HR
philosophy

E-enabled
HR
knowledge
transfer

Employee
branding (EVP)
International
assignments
and expats
Managing
international
workforce

Model of global HR (Brewster et al, 2005)

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Organizational
capability

IHRM STRATEGY
Ethnocentric - cross national/corporate isomorphism
The assumption that ones own cultural approach is superior to any
other.

Polycentric - local isomorphism

A staffing approach decentralises human resource management to
each national location, resulting in HCNs or locals occupying
management positions in the local units, while PCNs occupy
positions in corporate headquarters.

Regiocentric - local/corporate isomorphism

Developing regional staff for key positions anywhere in the region.

Geocentric - global incorporate isomorphism

Best people sought for key positions throughout organisation
regardless of country location.
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HRM ROLES IN INTERNATIONAL FIRMS

Building HRM - the builder
get basics right - vitally important HR tasks - such as attracting,
motivating and retaining people via HR planning, performance
management, coaching and training and competitive rewards
and social security system, etc.

Realigning HRM - the change partner

a change agent to facilitate change in order to achieve new
strategic goals and the implementation of strategy - including
necessary change of HRM foundations.

Steering via HRM - the navigator

enable the organisation to build future into the present.

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TYPES OF EMPLOYEES IN AN MNE

Parent-country nationals (PCNs) Employees who were born
and live in a parent country (home) country the country in which a
companys corporate headquarters is located.

Host-country nationals (HCNs) Employees born and raised in a

host country a country in which the MNE seeks to locate or has
already located a facility.

Third-country nationals (TCNs) Employees born in a country

other than a parent or host country.

Local-hire foreign managers (LHFMs) Self-initiated

expatriates who seek international careers by moving between countries
as part of their job search.

Expatriate An employee sent by his/her company in one country to

work in a different country.

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TYPES OF INTERNATIONAL WORK

Global team project
Bringing together employees from different locations
to complete a specific team project.

Short-term assignments
Sending employees on assignments, such as a
three-month assignment, to a foreign location.

Virtual assignment
Assignments requiring employees in different
locations
to use information technology to communicate on job
projects and tasks.
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TYPES OF INTERNATIONAL WORK

A Framework for relating global work experiences to careers

(Shaffer et al, 2012)
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ISSUES ON STRUCTURE HRM

IMPLICATIONS
Centralisation vs.
decentralisation
the extent to which key decisions
are made by parent headquarters
or by their subsidiaries

Bureaucratic vs. normative

control
the form of control exerted by the
parent over the subsidiary

Personalised vs.performance
control
Output vs. expatriate control think global, act local paradox
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Mode of operation:
Contractual mode

licensing
franchising
managing contracts
projects

Cooperative mode
joint ventures
strategic alliance

THE CULTURAL ENVIRONMENT

Culture
A distinct way of life, shared by members of a group or
society, with common values, attitudes and behaviours
that are transmitted over time in a gradual, yet dynamic,
process.

Culture shock
A phenomenon experienced by people who move
across cultures. They experience a shock reaction (or
psychological disorientation) when exposed to new
cultural experiences, because they misunderstand or
do not recognise important cues.
Harvard discussion on managing values across cultures:
http://www.youtube.com/watch?v=4DSV1NUGS3o&list=UUWo4IA01TXzBeGJJKWHOG9g&index=43&feature=plpp_video
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THE CULTURAL ENVIRONMENT

Hofstedes organisational
cultural dimensions:
Process-oriented vs
Results-oriented
Employee-oriented vs Joboriented
Parochial vs Professional
Open-system vs Closedsystem
Loose-control vs Tightcontrol
Pragmatic vs Normative
Source: http://www.geerthofstede.nl/
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Hofstedes national cultural

dimensions:
Individualism-collectivism
Uncertainty avoidance
Power distance (social
hierarchy)
Masculinity-femininity (taskperson)
Long-term orientation
Indulgence vs self-restraint

THE CULTURAL ENVIRONMENT

Assignment/expatriate
failure
The premature return of an
expatriate from an international
assignment or failure to meet the
key performance objectives of an
international assignment

Acculturation
An individuals adaptation to the
host environment
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EVALUATING HRM - CONTEXT

While HR managers have a need to demonstrate the
costs and benefits of the HR function, too few analyse
the return on the organisations HR expenditure.
The HR function must be measured in economic terms
and prove its worth by quantifying the value of its
activities.
HR professionals need to articulate how HR activities
align with the strategic priorities of the organisation.

Building HR metrics
measurement for human performance that enable effective
decisions to be made regarding the HR function and value creation
in organisations.
HR metrics at Google:
http://www.shrm.org/multimedia/video/vid_archive/Pages/110324_deegan3.aspx
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METHODS OF EVALUATING HR
Evaluating the HR
climate:
The quality of the HR climate can
be measured by examining:
employee turnover
absenteeism
health and safety records

The HR Scorecard:
A competitive edge is gained
by:
building and maintaining
talented people
developing supportive
strategies
enacting policies that retain
people

employee attitude surveys.

The HR Scorecard highlights:
cost control
value creation
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METHODS OF EVALUATING HR
Audit approach
Type of assessment of HR effectiveness that involves a review of
customer satisfaction or key indicators (e.g. turnover rate, average
days to fill a position) related to an HR activity (e.g. staffing).

Analytic approach
Type of assessment of HR effectiveness that involves determining
the impact of, or the financial costs and benefits of, a program or
practice.
Types of costbenefit analyses:
Human resource accounting
Utility analysis

Analytic tools include:

HR Activity Index
Balanced scorecard
Causal chain analysis (employee-customer-profit chain)
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METHODS OF EVALUATION - THE HR

AUDIT

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EVALUATING EMPLOYEE ENGAGEMENT

The connection that employees

have with a company and their
commitment to its success

Employees are engaged when they

think, feel and act positively towards
the company they work for:

Rational (Cognitive - Heads)

Emotional (Affective - Hearts)

Motivational (Behavioural Hands)

(Source: Towers Watson)

HR managers discuss engagement strategies:

http://www.hcamag.com/tv/road-to-retention-employee-engagement-strategies-that-work/1040/128277/
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IMPACT OF EMPLOYEE
ENGAGEMENT

Top factors in sustainable

engagement:
Involvement (77%)

Involving employees in decision

making
Encouraging innovative solutions
Trusting employees judgment
Efforts to get employee feedback

Leadership (69%)

Clear company values

Making decisions consistent with
company values
Operating with integrity in dealing
with employees
Fair decision making

Development (46%)

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Adequate job training

Have opportunity for personal
development and growth
Company retains top talent
Company develops people to full
potential

IMPROVING HRM
Categories of HR activities to review:
Transactional activities
The day-to-day transactions such as pay
administration, maintaining human resource
information systems and employee services.
Traditional activities
Include performance management, learning,
recruiting, selection, compensation and industrial
relations.
Transformational activities
Include knowledge management, management
development, cultural change, and strategic
redirection and renewal.
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IMPROVING HR EFFECTIVENESS
Through restructuring
The diagram on the next slide depicts how the structure for the
organisation of HR has changed to provide for transformational,
traditional and transactional activities.

Via outsourcing
An organisations use of an outside organisation for a broad set
of services to achieve efficiency and effectiveness.

Reengineering
Review and redesign of work processes to make them more
efficient and improve the quality of the end product or service.
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IMPROVING HR
EFFECTIVENESS

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OLD AND NEW STRUCTURES

FOR THE HR ORGANISATION

Source: Adapted from P. Wright, G. McMahan, S. Snell & B. Gerhart, Strategic HRM: Building Human Capital and
Organizational Capability, Technical report, Cornell University, Ithaca, NY, 1998.
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