Human Resource Management

Tenth Edition

The global context

for human resource
management

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 The global business environment
The world economy is undergoing a period of
uncertainty and unpredictability.

There are many reasons for this, and there are

important consequences for the management of
the HR function in organisations. Other well-
established trends in the business environment
are also tending to make HR work more
challenging.

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 Globalisation
The term has a variety of possible meanings:
– Internationalisation and an increase in cross-
border relations
– International economic integration
– Universalism and the dilution of national identity
– Americanisation and the spread of western
capitalism and liberalism
– A change in our perception of distance
– All of the above.
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 The causes of globalisation
• Technology
– The development of large commercial jet aircraft
to carry goods and people around the world at
high speed.
– Containerisation and the use of worldwide
standard-sized steel containers that can be shifted
easily.
• Government action
– Relaxation of foreign exchange controls.
– Deregulation and privatisation of markets.
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 The impact of globalisation on HRM
Increased competition results in the need for HR
to:
– run the function as efficiently as possible; often
using the shared-service model and HR
outsourcing;
– recruit, retain and motivate high performers;
– focus on the relational aspects of employment
rather than transactional ones;
– maintain high standards of quality and customer
service.

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Globalisation and industrial
restructuring

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 Labour market polarisation
The social effects of globalisation tend to
increase inequality and create the ‘hourglass’
labour market:
– Increasing numbers are employed in relatively
high paid, secure and managerial occupations.
– Jobs in manufacturing, clerical and administrative
roles are ‘exported’ to countries with cheaper
labour.
– Higher paid people purchase more local services,
but service sector generally is low paid.

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 Multinational corporations
Organisations which are based in a home country,
but which own assets overseas. Reasons for
multinational expansion include:
– facilitating growth and wealth-generating possibilities;
– taking advantage of cheaper or more productive
labour in other countries;
– reducing the risks associated with domestic business
cycles;
– responding to foreign competition at home;
– reducing costs by producing closer to customers or
suppliers;
– avoiding tariffs on the export or import of products.
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 Volatility and business
Competition and globalisation tend to create
market volatility, resulting in the need for almost
permanent organisational change. Today’s business
environment requires:
– Opportunistic approaches to business
– Maximum organisational agility
– Flexible working patterns
– Functional flexibility
– Faster and more frequent change, both structural and
cultural.

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 Volatility and HRM
• The volatility of the business environment impacts on
HRM.
• Effective change management requires the active
management of the people side of an organisation.
• Change often generates conflict.
• Good communication and employee involvement in
planning and decision making is essential to effective
change management.
• HR needs to develop expertise to facilitate change.
• HR also has to demonstrate how it adds value to the
organisation and justifies its own cost.

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 General discussion topics
1. Would it be either possible or desirable either to
reverse the globalisation process or to slow it down
considerably?
2. From a people management perspective who are the
biggest winners and who are the biggest losers from
globalisation?
3. Why are the developments discussed in this chapter
affecting some industries more profoundly than
others?

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Human Resource Management
Tenth Edition

HRM around the world

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 HRM and globalisation
‘It would be reasonable to assume that the
globalisation of so much economic activity and
the growth of multinational corporations would
mean that HRM practice would also be
thoroughly globalised.

In fact, as has been demonstrated by many

hundreds of comparative studies…this is not the
case at all’.

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 Comparative HRM
• The globalisation of business has affected
HRM practice.
• Many HR activities are standard wherever
organisations operate.
• There is some evidence for convergence of HR
practice around the world.
• However there are also some persistent
differences.

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 Global HRM: similarities
• Kaufman’s 2014 study shows a number of
similarities between HR managers’ experiences
worldwide, including:
– the growth of specialist HRM functions;
– increased prestige of the HR function within
organisations;
– increased focus on HR strategy and how it contributes
to organisational performance;
– more strategic thinking about HRM.
• But in most organisations HR is still essentially
administrative in nature.

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 Two types of convergence
Directional convergence Final convergence

The broad general A situation in which a

direction in which HRM broadly similar approach
practice is heading; for to HRM is found across
instance towards better national boundaries; for
communication with instance communicating
employees than with employees to the
previously. same extent everywhere.

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 Global HRM: differences
Key variables in HRM practice when comparing systems
– The extent to which trade unions play a role in decision
making.
– The extent to which a ‘rule of law’ applies throughout an
organisation.
– The level of sophistication in HR practices.
– The propensity of people to change employers for career
development.
– The extent to which labour law restricts management
action.
– The extent of long term HR planning.
– The level of individual employee involvement in decision
making.
– The extent to which decision making is evidence-based.
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 The American model
• Management generally adopts a ‘shareholder’
approach.
• HRM activities are central to an organisation’s ability to
survive.
• Selection, training and reward systems to attract and
keep talent are sophisticated.
• Poor performers are generally dismissed quickly.
• Trade unions have a peripheral role in organisations.
• Decision making is usually evidence-based.
• Standardisation and universally applied rules are the
norm.
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 The German model
• Management generally adopts a ‘stakeholder’
approach.
• Decisions tend to be focussed on long term results.
• Consensus is important and often formalised through
Works Councils.
• Individuals tend to stay with the same organisation.
• Internal labour markets are supported by training
systems.
• Managers face many legal restrictions in relation to
employment practice.
• Team based incentives and rewards are common.
• Pay differentials are relatively low.
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 The Japanese model
• There is a tradition of ‘life-time employment’.
• Internal labour markets are very strong.
• Consensus and long term planning is important.
• Workers are more flexible and move around the
organisation.
• Decision making is influenced by personal relationships
rather than universal rules.
• Unions are enterprise-based rather than industry-
based.
• Pay systems reward seniority and long service rather
than individual performance.

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 HRM in industrialising countries
• Globalisation is effecting a shift from
agricultural to industrial, urban and office-
based work.
• There is often a tendency towards
privatisation of state owned enterprises.
• Competition for skilled workers is increasing.
• Labour regulation is increasing.
• Multinational corporations often bring their
HR practices with them.
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 Explaining diversity: Hofstede
National culture is ‘the collective mental
programming which distinguishes one nation from
another’.
• Four original dimensions of difference:
– Individualism/collectivism
– Power distance
– Uncertainty avoidance
– Masculinity/femininity.
• Two new dimensions:
– Confucian dynamism
– Indulgence/restraint.
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 National organisational typology
Pyramid of people Well-oiled machine
Large power distance Small power distance
Strong uncertainty avoidance Strong uncertainty avoidance

e.g.: France, Japan e.g.: Germany, Switzerland

Village market Family

Small power distance Large power distance
Weak uncertainty avoidance Weak uncertainty avoidance

e.g.: Britain, United States e.g.: Hong Kong, India

Extract from table 3.1, page 53.

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 Cultural diversity and management
Hodgetts and Luthans used Hofstede’s dimensions
to identify key national characteristics that would
have an impact on management approaches:
• Centralisation of decision making
• Rewards and competition
• Attitudes to risk
• Formality and hierarchy
• Organisational loyalty
• Short- or long-term orientation.

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 Convergence or divergence?
Convergence Divergence

Globalisation leads to sharing Globalisation has initiated a

of ideas about how people are trend towards country-based
managed. industrial specialisation.

Multinational corporations Low-cost production, IT

will, over time, influence local specialisation or knowledge
practice creating greater work require different forms of
similarity. HRM.

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 General discussion topics
1. Why might it be important for managers in a nationally
based organisation that is about to expand
internationally to be aware of the different ways that
HRM is customarily carried out in different countries?
2. Some argue that the future will bring both increased
convergence and increased divergence internationally as
far as HRM practice is concerned. How is this possible?
3. To what extent do you find the models put forward by
Geert Hofstede either compelling or practically useful?

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Human Resource Management
Tenth Edition

Managing the international

workforce

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 Internationalisation and HRM
‘As globalisation has picked up its pace,
international HRM has become one of the most
widely researched and written about fields of
study. Numerous books and articles have been
published over the past twenty-five years
examining all aspects of practice in international
organisations, and debates are evolving about
what is happening, what should happen and
about the longer-term direction of travel’.
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 The challenges of IHRM
• IHRM involves working with an organisation
structure that is more complex.
• There are a greater number of more diverse
stakeholder groups to take account of.
• There is greater involvement in people’s
private/family lives because of the expatriation
element.
• Diversity is necessary in terms of management
style.
• There are greater numbers of external influences
and risks to understand and manage.
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Structuring international organisations
The design of structures and reporting lines in a
large international organisation can be highly
complex. Major alternative structures include:
• By product group
• By organisational function
• By geographical region
• Matrix structures.

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https://www.whatishumanresource.com/international-recruitment

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 The international organisation
Four main approaches to structuring the
management of a global business:
1. Ethnocentric approach
– Key overseas posts are filled from headquarters.
– Characteristic of businesses at the internationalisation
stage of expansion.
– staffing means to hire management that is of
same nationality of parent company
– Normally, higher-level foreign positions are filled
with expatriate employees from the parent
country.

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 The international organisation
1. Ethnocentric approach
The recruitment process in this method involves four stages:
1. Self-selection, creating a candidate pool, technical skills
assessment, and making a mutual decision. Self-selection
involves the decision by the employee about his future
course of action in the international arena.
2. Employee database is prepared according to the
manpower requirement of the company for international
operations.
3. Technical skills assessment Then the database is analysed
for choosing the best and most suitable persons for global
assignments
4. The best candidate is identified for foreign assignment
and sent abroad with his consent.
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 The international organisation
1. Ethnocentric approach
The ethnocentric approach places natives of the home
country of a business in key positions at home and abroad.
Example, the U.S. parent company places natives from the
United States in key positions in both the United States and
Mexico.

https://www.whatishumanresource.com/international-recruitment
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 The international organisation
Four main approaches to structuring the
management of a global business:
2. Polycentric approach
– Local managers fill key positions in their own
countries.
– They are familiar with local culture and systems.
– When a company adopts the strategy of limiting
recruitment to the nationals of the host country
(local people)
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 The international organisation
2. Polycentric approach
▪ The purpose of adopting this approach is to reduce the cost
of foreign operations gradually.
▪ The primary purpose of handing over the management to
the local people is to ensure that the company understands
the local market conditions, political scenario, cultural and
legal requirements better.
▪ The companies that adopt this method normally have a
localized HR department, which manages the human
resources of the company in that country.
▪ Many international companies operating their branches in
advanced countries like Britain and Japan predominantly
adopt this approach for recruiting executives lo manage the
branches."

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 The international organisation
2. Polycentric approach
• Example, the Australian parent company uses natives of
India to manage operations at the Indian subsidiary.
Natives of Australia manage the home office.

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 The international organisation
3. Geocentric approach
– The most appropriate person for a job is recruited
from anywhere in the group so that management
becomes internationalised.
– Suitable for mature and very large businesses with
great international experience.
– When a company adopts the strategy of recruiting
the most suitable persons for the positions
available in it, irrespective of their nationalities
https://www.whatishumanresource.com/international-recruitment

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 The international organisation
3. Geocentric approach
▪ For international recruitment, especially on foreign
soil, organizations generally use manpower agencies
or consultants with international connections and
repute to source candidates, in addition to the
conventional sources.
▪ For an effective utilization of the internal source of
recruitment, global companies need to develop an
internal database of employees and an effective
tracking system to identify the most suitable persons
for global postings.
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 The international organisation
3. Geocentric approach
• Example, the UK parent company uses natives of
many countries at company headquarters and at the
U.S. subsidiary.

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 The international organisation
4. Regio centric Approach
• is one of the methods of international recruitment
where the Multi-National Companies recruit the
most suitable employee for the job irrespective of
their Nationality.
• uses managers from various countries within the
geographic regions of business. Although the
managers operate relatively independently in the
region, they are not normally moved to the company
headquarters.
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 The international organisation
4. Regio centric Approach
• is adaptable to the company and product strategies.
When regional expertise is needed, natives of the
region are hired. If product knowledge is crucial,
then parent-country nationals, who have ready
access to corporate sources of information, can be
brought in.
• One shortcoming of the Regio centric approach is
that managers from the region may not understand
the view of the managers at headquarters. Also,
corporate headquarters may not employ enough
managers with international experience.
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 The international organisation
4. Regio centric Approach
• Example, the U.S. parent company uses natives of
the United States at company headquarters. Natives
of European countries are used to manage the Italian
subsidiary.

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 The international organisation
4. Inpatriation
– Recruitment is done globally, but recruits spend
time in the home country HQ before they go
abroad or back to their home country.
– Managers have both local knowledge and an
understanding of company values.

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 The international organisation
4. Inpatriation
– Recruitment is done globally, but recruits spend
time in the home country HQ before they go
abroad or back to their home country.
– Managers have both local knowledge and an
understanding of company values.
– Citizens of a foreign country, working in the home
country of the multinational employer
– Example: Citizen of India, who moves to US to
work for Microsoft.
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 The international organisation
4. Expatriation
• Are citizens of one country, who are working
in another country.

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 Coordination
• Conventional approaches to the coordination of
international business include:
• Japanese centralisation
– A strong HQ maintains control over all major decisions
and intervenes in local matters.
• American formalisation
– Power is vested in systems, policies and standards
rather than individual managers.
• European socialisation
– Highly skilled and trusted individuals are selected and
prepared to manage the subsidiaries.
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 Overseas employees
• Engineers
– staff who regularly spend short periods of a week or
two overseas often working on specific projects.
• Cosmopolitans
– A small elite group who are familiar with different
countries and travel regularly between locations.
• Occasional parachutists
– People who are normally based in one country but
visit other sites for a few days at a time.
• Expatriates
– Staff who normally work in one country, but who are
sent on secondment for a period of years before
returning to the original workplace.
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 Selection for expatriation
Important issues for matching people to jobs
overseas:
• Culture
– How different from home is the country?
• Economic development
– How well developed is the economy of the country?
• Geographical location
– How far away is it and how different is the climate,
language, etc. from the home country?
• The job
– What has to be done and what are the demands of
the job?
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 Repatriation
This key aspect of expatriate work can be neglected
by comparison with preparation. There are two
potential problem areas:
• What has been the nature of the overseas
experience?
– If this has been good, there may be little enthusiasm
to return.
– If poor, the return home may be an obsession.
• What is the career situation of the returning
expatriate?
– There may be a loss of status and autonomy and
limitations on further career progression.

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 Ethics and corporate social
responsibility
Questions relating to different norms regarding
HR issues such as:
• Bribery
• Child labour
• Women’s equality
• Selection on the basis of ethnicity or religion.

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 Pay and benefits
Questions arising from differences in living
standards including:
• Pay rates
• Working hours
• Working conditions
• Maternity and sick leave/pay
• Job security
• Health and safety.

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 Trade unions
Generally the approach to trade unions is
determined by the attitude of the MNC’s home
country.
– US-based corporations generally try to operate a
non-union model.
– Japanese companies often try to replicate the
single-union partnership model.
– Some operate a contingent or ‘think global, act
local’ approach.

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 Training and development
HRD interventions are of great significance for the
process of internationalisation, and must take
account of:
– Differences in learning style between countries.
– The language fluency of the trainers and the potential
need for interpreters.
– The need for trainers to operate abroad, possibly with
frequent changes of location.
– The need to manage cultural difference particularly
with regard to management development.
– The value of web-based tools such as virtual
classrooms, Skype and e-HR systems.
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 General discussion topics
1. Multinational companies tend to be unpopular with
social activists, who mount demonstrations against
their apparent greed and serious impact on some of
the societies in which they operate. What are the
arguments for and against this point of view?
2. Do you think international HRM is likely to get easier
or harder in the future? Justify your answer.
3. Why are global companies much more likely to take a
harmonised approach to trade union relations,
resisting decentralisation to different localities, than
they are in other areas of HR activity?

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