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17-18. Strategic Issuesin

Global HRM

Debi S. Saini, Ph.D.Professor & ChairpersonHRM Area

Management Development InstituteMehrauli Road, Gurgaon-122001

Objectives of this Presentation are to Know: Globalization, new eco. Scene & IHRM issues

Bartlett & Ghoshals stages of Internationalization

Internl. HR strategies: Perlmutters staffing & GI v. LR

Expatriation: Success, failure & tools for adaptation

Global mindset & global leadership

Culture: Work of G. HofstedeF. Trompenaar

Exercise on Cross-cultural adaptation

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Globalization & Changed Pattern of Intl. Business

Changing economic dynamics: Top 500 global cos.--North America-based cos. reduced from 215 in 2001 to 144 in 2011--Asia-based cos. increased from 116 in 2001 to 188 in 2012 --European-based cos. increased from 158 to 160 in this period

Low trade barriers: GATT & WTO (working since 1995)

Reduced protectionism: higher efficiency

Emerging economies talk of the town

Globalization has led toMore Companies Building

Global Strategy:More MNCs

moving to emerging economies

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Conflicting Stakeholder Demands of MNEsConflicting Stakeholder Demands of MNEs

Consumer activists

Regulatory bodies

Political constituents

Investors

Global suppliers

Environmentalgroups

Employee unions

Community organizers

Emerging markets

Find Out Which Nationals are Employees as Parent, Host & ThirdCountry Nationals in the 3 companies & 5 Locations in the Figure below

Coca-Cola (Atlanta, Georgia)ExpatriatesPoliciesCultureStyleMultinational HQs

e.g Lenovo(Cleveland)Foreign-owned

subsidiary

ZodiStores Inc

(Chicago)

US DomesticFirm

HCNs

Coca-ColaSubsidiary

Lenovo(Beijing)

ExpatriatesPoliciesCultureStyle

PCNs

Inpatriates

TCNs(any other country

e.g. Mexico)

CitizensNative-bornForeign-born

Firm "Z"

Firm "Y1"

Country A (parent country e.g USA)

Country "B

e.g China

Country C

Poland (Warsaw)

Immigrants

Imm

igra

nts PCNs

Inpatriates

Find OutExpatriatesInpatriatesTCNsHCNsCitizens

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Various Nationals in International Operations

Parent-Country (or Home-) Nationals (PCNs)Citizens of the country where MNC has its HQ

Host-Country Nationals (HCNs)Citizens of the host country

Third-Country Nationals (TCN) Citizen of a 3rd country working in an MNC subsidiary

Comparing Domestic & Global HRM1. Taxation; Language, Expatriation, Repatriation

2. Different types of employees; countries of operation

3. Programs for different national group of employees

4. Consequences of failure more severe in GHRM

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Comparing Domestic & Global HRM contd

5. Terrorism is often a risk in global HRM

6. External factors impact HRM practices: Type of government

State of economy

Social & political factors

Types of Companiesthat Operate

Outside the Home Country

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Internationalization Strategy: Stages DOMESTIC

INTERNATIONAL

MULTINATIONAL

GLOBAL

Bartlett & Ghoshal, 1992

Focus on home market (Local mentality)

Focus on export (Domestic with foreign appendage)

Focus: standardization for world market (low cost/price)Focus: both local responsiveness & global integrn.TRANSNATIONAL

Born Global Company

Focus on coordination & adaptation as per local needs

Global Score of a Company%age of international sales

%age of employees outside the HQ country

No. of countries in which the co. operates

50 points for global mission statement

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International HR StrategiesH. Perlmutters (1995)

Approaches toManaging & Staffing

Subsidiaries

International HR Strategies Ethnocentric

Centralized HR Managed by Parent Country Nationals (PCNs) Pay linked: local market for employees; home country for PCNs

Polycentric Decentralized HR Managed by Home Country Nationals (HCNs) Pay based on local market

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International HR Strategies contd Geocentric

Global workforce deployed throughout the world Positions filled globally as per merit: HCNs, PCNs, TCNs, Compensation based on value-added

Regiocentric Choice of Ethnocentric or Polycentric within Region Regional coordination, communication & decision-making

Eth nocentric Attitude Polycentric A ttitude

Regiocentric A ttitude Geocen tric A ttitude

H Qs Orientation towa rd subsidiaries (source : adapta tion libre de He ena n D.A ., Per lmutter H.W. , Multinational Organiza tionD evelopment , Addison Wesley Publish ing , 1979)

Orientation

Towards

Subsidiaries

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Global Integrationand

Local Responsiveness?

This Dilemma is the Keyfocus issue in Company Products

as well as Global HRM

The Countervailing Pressures on MNCs

Why G. Integration?1. Operational Integrality2. Strategic Co-ordination3. Global Customers

Why L. Responsiveness?1. Market Demands 2. Legislative Demands3. Political Demands

Global Integration: Maintain standard of quality internationally, & economies of scale

Local Responsiveness (Differentiation) Be sensitive & adapt to local cultural environment

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Global Corporate Strategies

Need for National Responsiveness HighLow

Low

HighTransnatl. Strategy

Balances GE & LR

Combines standardization & customization for

product/advertising strategies

Globalization Strategy

Treats world as a single market Standardizes global

products/advertising strategiese.g.(Gillette razors)

Multi-domestic Strategy (MNC)

Handles markets independentlyfor each country

Adapts product/advertising tolocal tastes/needs (HLL)

Nee

d fo

r G

loba

l Int

egra

tion

Export StrategyDomestically focused

Exports a few domestically produced products to

selected countries

Global HRand

HR Strategy

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Key Strategic HR Concernsof Global Companies

Management of Global Strategic HR roles Facilitating Expatriation processes

Developing Global mindset & leadership capabilities Developing Global HR competencies

The HRM systems, policies, practices & issuesthat facilitate strategic business activities of MNEs in pursuit of their international concerns & goals (my own definition)

Early work focused on functions (transactional HR for expatriates)

Later work moves to strategic view[HQ-Subsidiary relations, global co. culture, global KM, global leadership]

Focus: Think Global, Act Local

Strategic International HRM?

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Management ofExpatriates:

A Key Function of IHRM

Expat preparation Why preparation? Why often no pre-departure training?Expatriates need the following kinds of training:

Understanding attitude formation & its context

Impact of cultural differences

Factual knowledge about target country

Language, adaptability & relations-bldg. skills

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Staffing Internationally

Five factors determine expatriate success

1. Job factors

2. Relational dimensions

3. Motivational state

4. Family situation

5. Language skills14-25

Why Do International Managers Fail?

Culture Shock

Cultural arrogance (Parochialism)

Cultural Insensitivity

The Key success factor: Cultural adaptability

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Expatriate Managers Main reasons for expatriate failure for U.S. MNEs are

the inability of the spouse to adapt to a foreign culture

the inability of the employee to adjust

other family-related reasons

the managers personal or emotional maturity

the inability to cope with larger overseas responsibilities

Expatriate Managers

For European firms, only one reason was found the inability of the managers spouse to adjust

For Japanese firms, the reasons for failure were:

the inability to cope with larger overseas responsibility difficulties with the new environment personal or emotional problems a lack of technical competence the inability of spouse to adjust

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Tools for Adaptation Cultural Awareness Programs

Management & Technical Trng.

Language Courses

Look-and-see trips

Practical assistance

Communication with returned or current expats

Organization of social events

Job for spouse

Global Mindset&

Global Leadership

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Saliency of Global Mindset for Doing Business

Global mindset envisages that people have a global as opposed to simply domesticperspectiveofmarkets, people & resources

Such cos. acclimatize well with other cultures

What is a Global Mindset?What is a Global Mindset?Open to Diversity

across cultures and Markets?

Knowledgeable about Diversityacross Cultures and Markets?

Able to Integrate Diversityacross Cultures & Markets

Global Mindset

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Guidelines for Developing a Global Mindset (Lisbeth, 2000)

1. Understand your own culture

2. Recruit staff with cross-cultural & language skills

3. Understand legal & social frameworks

4. Give opportunity for cross-cultural & language learning

Guidelines for Developing a Global Mindset (Lisbeth, 2000)

5. Identify differences within cultures

6. Promote cross-border mentoring

7. Emphasize long-term relationship building (CISCO study on competencies in 2020)

8. Develop cultural sensitivity; respect/love all culture: trng.

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What is Global LeadershipWhat is Global Leadership

Global leadership is the process of influencing individuals, groups, & organizations inside & outside the boundaries of the global org., representing diverse cultural/political/institutional systems

to contribute towards the achievement ofthe organizations goals.

Jack Welch on Future GEs CEOJack Welch on Future GEs CEO

The Jack Welch of the future cannot be me.I spent my entire career in the United States.The next head of General Electric will besomebody who spent time in Bombay, inHong Kong, in Buenos Aires. We have tosend our best and brightest overseas andmake sure they have the training that willallow them to be the global leaders who willmake GE flourish in the future.

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Leadership Capabilities for Global Business Success

Total Set Of

Global Leadership

CompetenciesGlobal LeadershipCapabilities 2/3

Business-SpecificLeadership

Capabilities 1/3

Why is global leadership important?

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Integrated world & globalizing markets

Business & institutions are going global

People & capital are globally mobile

Ideas & innovations are now globalized

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Slide 39

Who Who produces high quality global managersproduces high quality global managers??Prof. Prof. Moore at McGill Moore at McGill University, University, has identified 10 nations has identified 10 nations asasgenerating abovegenerating above--average cluster of superior global leaders:average cluster of superior global leaders:

Canada Sweden Switzerland Holland Belgium Denmark Singapore Australia Norway Finland

But most organizations are one-dimensional

and who have clear values andthe courage to do the right thing.

Companies appear to have the greatest supply of leaders who arestrategic, analytical, purposeful.

In shortest supply are leaders who have emotional intelligence and can develop talent,

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Slide 41

Expatriate Assignments: Key Tool to Global LeadershipExpatriate Assignments: Key Tool to Global LeadershipExpatriate Assignments: Key Tool to Global LeadershipExpatriate Assignments: Key Tool to Global Leadership

There are powerfulrewards for an internationalmanager on transfer overseas who chooses to get involvedin the local community. When such people approach thenew country with an open mind, learn the local language,and make friends with colleagues and neighbors, theygain access to a wealth of a new cultureUnfortunatelymy experience in Mexico indicates that many expatriatemanagers live in golden ghettos of ease with little genuinecontact with locals other than servants The lesson forglobal companies is to give each international manager alocal Mentor who will open doors to the community.Ultimately however, it is the responsibility of individualmanagers to open their mind, plunge into their localcommunities, and try to make them their own.

Gurcharan Das former head of Procter and Gamble India.

The Building Blocks of Global CompetencyThe Building Blocks of Global Competency

Global Knowledge

Attitudes & Orientations

Cognitive Complexity

Global Mindset

Interpersonal SkillsCreate &Build Trust

Threshold TraitsHardinessIntegrity Humility Inquisitiveness

Cosmopolitanism

System Skills

Build Community

MindfulCommunication

SpanBoundaries

Make EthicalDecisions

Teaming

Leading

Change &creativity

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Global HR Competencies Source: Lisbeth Claus, 1998.1. Knowledge of basic & strategic HR (Help develop HPWS)

2. Business savvy & serving the line

3. Cross-cultural awareness

4. Communication skills

5. Global leadership skills (including relationship-bldg skills)

6. Clarity about frame of reference

7. Personal attributes

Culture Seen Variously

Commonly held set of beliefs & values

as to how one is expected to behave

in a particular society (Anthropologist & Ethnographers)They also examine values/norms in society that lead to mores, codes, laws

[Norm: something customary, usual; More: moral attitude of a group]

Culture is the way people solve problems

Its also referred to as The Software of the Mind

Schein

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Nature of Culture Cultures impact is far reaching: Richly researched

Shapes behaviour of: Countriespeopleorganizations

Key Factors for implementing strategy in global business:Culturealignment of personal valuesglobal mindset

Importance of both: National & Corporate culture

The Iceberg Metaphor for Culture

Language

Attitudes

Values

BeliefsNorms

FoodCommunication Styles

Dress

Emic

Implicit

Etic

Explicit

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Cultural Environment Language

Communication styles Nonverbal

Direct vs. Indirect

Greeting: physical and verbal

Space Structural & interpersonal

Time orientation Punctuality

Monochronic vs. Polychronic

Religion

Respect/formality

Consensus seeking

Major Works onCulture:

Geert Hofstede: (4 +1 dimensions)Fons Trompenaars: (7 dimensions)

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Geert Hofstede on Culture

Hofsetede: Em. Professor at Maastricht University, Netherlands

Research: IBM WM: 1967 78 (12 yrs.) 100K+ Qnaaires in 50 + countries

Purpose: Understand cultural differences across nations

Asian countries: high power distance

Asia: Low on uncertainty avoidance (except Japan)

5 Cultural Dimensions of G. HofstedePower Distance Uncertainty

Avoidance

Individualism

Confucian Dynamism

Masculinity

The degree to which powerdifferences are accepted

Degree to which a society makes efforts to mitigate ambiguity of

situations & provides rules, procedures

M. values: toughness, achievement, performance, materialism, quantity, F. values: soft, yielding, intuitive, emotional

Long-term orientation: Respect for relationships, thrift, sense of shame (China, India/other Asian countries) West is short-term oriented (quick results, reputation, stability)

Loose ties, Self-interest, Initiative

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Can We See Their Impact on Mgt Practices?

1.Power distance: how is authority exercised?

2.Individualism: what type of reward/PA system?

3.Uncertainty avoidance: Supervision of what type?

4.Masculinity: what working relations are expected?

5.Confucianism (long-term orientation): Reward systemnegotn. style

Fons Trompenaars Research

His research conducted among Shell workers

Study conducted in late 1980s

Took 10 years: 50K mgrs. contacted50+ countries

Book: Riding the Waves of Culture: 7 value dimensions

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Trompenaars Value Dimensions

Individualism/Collectivism

Achievement/ascription

Sequential time/ Synchronous time

Universalism/ Particularism

Specific/Diffuse

Neutral/Affective

Inner direction/Outer direction

Seven Value Dimensions: What They Mean? Universalism-Particularism: U. focuses on rules/contracts--one right way;

P. Embraces many right ways, relationships & trust (based on situation)

Individualism-Collectivism: Individualism values personal freedom/rights Collectivism values: cooperation, harmonious relationships & social respons.

Neutral-Affective: N. Cultures are value neutralAffective cultures are responsive/passionate/ showing emotion at work

Specific-diffuse: Specific: Life is compartmentalized;Diffuse: Fuzzy rolesdistinctions that can overlape. g. painting boss house

Achievement-ascription: Ach. Status is based on merit & personal record; As.: Depends on who you are/connections

Sequential vs. Synchronous Time:Seq.: Doing one thing at a time: Such people strongly go as per plans Synch.: Such people do many things at a time; plans easily changed

Inner-Outer Directed: locus of control/influences located inside the person [Thinking & intuitive approaches seen as best way]Or it is located outside in the environment [Look for our info. & decisions in outside world]

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The Takeaway from this Session? Global org. undergo stages of internationalization (Bartlet & Ghoshals)

MNEs. adopt 4 major strategic approaches in staffing subsidiaries (Perlmutter)

SGHRM deals with: expatriation, staffing subsidiaries, GI v. LR &HR strategies, and developing global mindset & global leadership

Expatriation failure is a major issue in GHRM

Criticality of cultural understanding in global business

Hofstedes & Trompenaars value dimensions help adopt app. strategies

Critical to develop global mindsets & global leadership