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IBUS 618 Dr. Yang 2
Chapter Objectives
Discussion of international HRM issues generally tends to be biased in the direction of expatriate management, particularly that of parent-country nationals, partly owing to their strategic importance. In this chapter, we attempt to redress the balance by examining IHRM issues in subsidiary operations.
To balance the need for consistency and the need for adaptation
(Cont.)
Discussion of international HRM issues generally tends to be biased in the direction of expatriate management, particularly that of parent-country nationals, partly owing to their strategic importance. In this chapter, we attempt to redress the balance by examining IHRM issues in subsidiary operations.
To balance the need for consistency and the need for adaptation
(Cont.)
IBUS 618 Dr. Yang 3
Chapter Objectives (cont.)
We cover the following aspects: Factors that influence standardization and adaptation of
work practices and the role of HR, including Host-country culture and workplace environment Mode of operation Firm size, maturity and international experience, and Subsidiary mandate.
Retaining, developing, and retrenching local staff HR implications of language standardization: HCN
selection, training and promotion on the basis of language skills.
Monitoring HR practices used by foreign subcontractors.
We cover the following aspects: Factors that influence standardization and adaptation of
work practices and the role of HR, including Host-country culture and workplace environment Mode of operation Firm size, maturity and international experience, and Subsidiary mandate.
Retaining, developing, and retrenching local staff HR implications of language standardization: HCN
selection, training and promotion on the basis of language skills.
Monitoring HR practices used by foreign subcontractors.
IBUS 618 Dr. Yang 4
Subsidiary Issues
Approach to subsidiary management is a function of: The nature of the relationship between the units and
‘parent’, e.g. Long- or short-term The role of the subsidiary in the broader context
The level of equity involved, e.g. Mode of operation
Factors within host-country environments that facilitate or constrain the transfer of global management practices and business processes, e.g.
Government regulations Social norms
IBUS 618 Dr. Yang 5
Three Cultures Interact to Influence Standardization and Adaptation National culture of the parent company National culture of the subsidiary unit Corporate culture as a potential unifier Standardization can be achieved through
Staffing procedure and standards Training and development programs Staff rotation Rewards and promotion Corporate code of conduct
IBUS 618 Dr. Yang 6
Standardization of Work Practices Depends on
Receptivity of local workforce to adhere to corporate norms of behavior
Effectiveness of expatriates as agents of socialization
Whether localization is timely (not just prompted by cost considerations)
Appropriateness to the local environment
IBUS 618 Dr. Yang 7
Factors Influencing Standardization
Host-country culture and workplace environment
Mode of operation involved Size and maturity of the firm Relative importance of the subsidiary
IBUS 618 Dr. Yang 8
Host-country Culture
Work behavior is culturally determined Contained in role definition and expectations
Whether corporate culture would supersede or supplant other ‘cultures’ is a subject of much debate
Often, what is meant by corporate culture translates into universal work practices – standardization of work practices Common practices rather than common
values
IBUS 618 Dr. Yang 10
Mode of Operation Choice of mode of operation is important in
determining standardization of work practices. Ownership and control are important factors:
Acquisition may constrain ability to transfer technical knowledge, management know-how, systems, and HR practices
Wholly owned subsidiaries provide greater opportunities for transferring work practices than in IJV
Management contracts provide skills, expertise and training to HCNs, without carrying equity or risks associated with FDI, and may have HC government support.
IBUS 618 Dr. Yang 12
Work Standardization
The size of the firm, maturity, and international experience are important firm level factors.
Motorola in China is a case in point: Large size Wealth of international experience Centralized IHR programs Management could draw on these aspects
when entering China
IBUS 618 Dr. Yang 13
Subsidiary Mandate
The position a subsidiary holds within the global ‘family’ is an important aspect when discussing the transfer of work practices. GE’s Center of Excellence in Hungary
Transferring knowledge and competence is difficult as subsidiary initiatives are often not seen as relevant due to “corporate immune system”. Subsidiaries’ roles and positions alter over time.
Staff movements can assist: Face-to-face communication helps build trust and networks Project teams as a control and socializing mechanism
IBUS 618 Dr. Yang 14
Global or Local Work Practices? Not a case of “either-or”, but more of a constraint
for both. While the recruiting practices used in different
countries are inching toward global convergence, national cultures continue to affect the hiring practices.
The best IHRM practices ought to be the ones best adapted to cultural and national differences. More western HR practices being introduced to China Japanese firms such as Nissan and Honda train HCNs in
US, UK and other European subsidiaries. Movements in France against capitalist cultural invasion.
IBUS 618 Dr. Yang 15
Retaining Local Staff The paradox – “the expense of cheap labor” Poaching of key subsidiary staff Access to skilled labor as important as unit cost –
such as corporate outsourcing Attraction of India and China for the IT industries
The amount and quality of training is an important consideration Technical Language Decision-making Management
IBUS 618 Dr. Yang 16
Developing Staff Investing in human capital Providing training and career development
can assist in retaining good local staff Improved benefits, work and living conditions,
and fair management practices are important factors: A fair environment and good management
practices play an important role in countries such as China
Job-hopping behavior in Singapore, Russia, and China
IBUS 618 Dr. Yang 17
Retrenching Staff
The reverse of the employment ‘coin’ Strategic decisions regarding foreign operations
have HR implications, including retrenchment Not confined to subsidiary operations but may
affect home base – e.g., transferring call centres from UK and US to India
Labor law may constrain retrenchment, e.g. India Germany
IBUS 618 Dr. Yang 18
Language Standardization
Adopting a common corporate language puts pressure on employees to become competent in the corporate language
Assists informal communication and network building
Affects Promotion Ability to attend corporate programs and
meetings Availability for international assignments
IBUS 618 Dr. Yang 21
Monitoring Host Country Subcontractors Outsourcing activities to host-country
subcontracting firms requires some monitoring of HR practices
Further contracting is likely to occur. Vocal groups have accused multinationals of
condoning work practices that would not be permitted in their home countries, regarding: Child labor Minimum pay Work hours Work conditions and safety Environmental issues
IBUS 618 Dr. Yang 22
HR’s Role Drawing up and reviewing code of conduct Conducting a cost-benefit analysis to justify an
expatriate as a monitor Championing local operators as monitors Being a member of the team who conducts periodic
“checking” visits Overseeing external monitors and auditors where used Checking that rewards and performance systems take
into consideration compliance to code of conduct Being knowledgeable about and sensitive to local law
and regulations
IBUS 618 Dr. Yang 23
Chapter Summary
This chapter has focused on issues relating to HRM and work practices in the host-country context. We chose four main areas to examine:
The standardization versus adaptation debate as it relates to subsidiary operations. We identified four inter-related factors that influence the multinational’s ability to impose or transfer its preferred work and HR practices: The host-country culture and workplace
environment. We looked at the interplay between values, attitudes and work behavior and the role of corporate culture in assisting work outcomes.(cont.)
The standardization versus adaptation debate as it relates to subsidiary operations. We identified four inter-related factors that influence the multinational’s ability to impose or transfer its preferred work and HR practices: The host-country culture and workplace
environment. We looked at the interplay between values, attitudes and work behavior and the role of corporate culture in assisting work outcomes.(cont.)
IBUS 618 Dr. Yang 24
Chapter Summary (cont.)
Mode of operation. Managerial discretion to introduce its own practices is higher in wholly owned subsidiary operations than in IJVs. Acquisitions may be constrained by the inherited workforce. We also looked at management contracts as a mode of operation that may influence standardization of work practices in foreign operations.
Firm size, maturity and level of international experience. Firms such as Motorola can draw upon experience and resources to an extent not possible for smaller and less-experienced international players.
Subsidiary mandate. The position of the subsidiary in the intra-organizational network and level of interdependence between units for resources can assist in the transfer of ‘best practice’.
(cont.)
Mode of operation. Managerial discretion to introduce its own practices is higher in wholly owned subsidiary operations than in IJVs. Acquisitions may be constrained by the inherited workforce. We also looked at management contracts as a mode of operation that may influence standardization of work practices in foreign operations.
Firm size, maturity and level of international experience. Firms such as Motorola can draw upon experience and resources to an extent not possible for smaller and less-experienced international players.
Subsidiary mandate. The position of the subsidiary in the intra-organizational network and level of interdependence between units for resources can assist in the transfer of ‘best practice’.
(cont.)
IBUS 618 Dr. Yang 25
Chapter Summary (cont.)
Retaining, developing and retrenching local staff, aspects such as:
The paradox of cheap labor Skill level of the local workforce and training Poaching of staff and job-hopping. Our examples are drawn from Chinese and Indian
situations, but these issues are not confined to these two countries.
We have also looked at the impact of strategic decisions on subsidiary operations – such as plant closures and rationalization – that result in employee retrenchments at the subsidiary and in the home-country operations.
(cont.)
Retaining, developing and retrenching local staff, aspects such as:
The paradox of cheap labor Skill level of the local workforce and training Poaching of staff and job-hopping. Our examples are drawn from Chinese and Indian
situations, but these issues are not confined to these two countries.
We have also looked at the impact of strategic decisions on subsidiary operations – such as plant closures and rationalization – that result in employee retrenchments at the subsidiary and in the home-country operations.
(cont.)
IBUS 618 Dr. Yang 26
Chapter Summary (cont.)
The HR implications of language standardization. The decision to use a corporate language – usually English – has implications for subsidiary staff in areas such as:
Selection for positions Attendance at company training programs, and Promotion
(cont.)
IBUS 618 Dr. Yang 27
Monitoring the HR practices used by international subcontractors: This discussion opened up a somewhat contentious
issue for multinationals, regarding fair labor and code of conduct.
Multinationals are expected to monitor the work practices employed by international subcontractors.
Mechanisms used to monitor adherence by these firms to multinationals’ code of conduct include using internal agents, such as expatriates or visits by headquarters or regional staff, external agents such as local buyers and auditors.
Monitoring the HR practices used by international subcontractors: This discussion opened up a somewhat contentious
issue for multinationals, regarding fair labor and code of conduct.
Multinationals are expected to monitor the work practices employed by international subcontractors.
Mechanisms used to monitor adherence by these firms to multinationals’ code of conduct include using internal agents, such as expatriates or visits by headquarters or regional staff, external agents such as local buyers and auditors.
Chapter Summary (cont.)