Ihrm-staffing Approach
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INTERNATIONAL HUMAN RESOURCE MANAGEMENT Staffing Approach
June 11, 2008
1
HRM and the Organizational Context (1) HRM activities determine, and are also influenced by organizational considerations: • • • •
The organization’s level of internationalization Internationalization strategy in foreign markets Control and coordination requirements Strategic importance of foreign operations in relation to the organization’s overall profitability
June 11, 2008
2
HRM and the Organizational Context (2) Ideally, HRM considerations should play a key role in an organization’s decision to internationalize itself, rather than a marketdriven strategy, which is usually followed
HRM constraints and factors may have a significant impact on an organization’s internationalization strategy June 11, 2008
3
Managing and Staffing Approaches in the International Context (1) The HRM literature identifies the following four managing and staffing approaches, which are also indicative of top management attitude: •
Ethnocentric Approach – High level of control exerted by the parent organization / corporate headquarters over foreign subsidiaries. Key positions in the subsidiaries are managed by expatriates from the parent country (i.e. PCNs)
•
Polycentric Approach – Subsidiaries are treated as distinct national entities with a certain level of decision-making autonomy. They are usually managed by local nationals (i.e. HCNs). These are seldom promoted to positions at corporate headquarters and, likewise, PCNs are rarely transferred to foreign subsidiaries
June 11, 2008
4
Managing and Staffing Approaches in the International Context (2) • Geocentric Approach – Global perspective resulting in there being no discrimination of PCNs, HCNs and TCNs, who, depending on capability and performance, are given the opportunity to work in key positions anywhere (parent organization, subsidiaries) in the organization • Regiocentric Approach – Considered a precursory step in the direction of geocentricism. Managers may be transferred freely within a particular geographic region. These may enjoy a considerable level of autonomy in decision-making but are usually not transferred to the parent organization
June 11, 2008
5
Organizational Typologies (1) Bartlett and Ghoshal identify the following types of corporate organizational modals: • Multinational Modal – Characterized by decentralization of many of the organization’s key assets, responsibilities and decisions. Management regards overseas operations as a portfolio of independent businesses. For example, Siemens has many different lines of business around the world, but it is not really consolidated into one whole, and each country of operation is autonomous. Bayer, ADP and Levi also fit into this category June 11, 2008
6
Organizational Typologies (2) • Global Modal – It has a central hub where most of the strategic assets, resources and decisions are centralized. The management views overseas operations as a pipeline to a global marketplace. Examples include British Airlines, Deutsche Bank and NCR • International Modal - Sits midway between the decentralized and centralized models. Many of the key assets, responsibilities and decisions are decentralized, but controlled from headquarters. Management regards overseas operations as appendages to a central, domestic corporation. Johnson & Johnson fits this description June 11, 2008
7
Organizational Typologies (3) • Transnational Modal – It's a distributed network with distributed resources and capabilities. The management oversees a complex process of coordination and cooperation in an environment of shared decision-making. It has distributed control. This kind of corporation can have very small corporate headquarters Hewlett-Packard and Cendant are examples of transnational corporations
June 11, 2008
8
The Internationalization Process • Organizations have several options available for expanding their operations into foreign markets • The option pursued by the organization depends on a host of factors, for example, its size, available its resources (including human resources), strategy, confidence and environmental contingencies • Linked to the internationalization of organizations are the need for effective and efficient coordination and control mechanisms and, among other things, appropriate HRM policies June 11, 2008
9
HRM and „Soft“ Modes of Internationalization by Organizations (1) Typical „soft“ modes of internationalization include: Licensing – A business arrangement in which the manufacturer of a product (or a firm with proprietary rights over certain technology, trademarks, etc.) grants permission to some other group or individual to manufacture that product (or make use of that proprietary material) in return for specified royalties or other payment. Often does not involve a heavy committment of human resources Management Contracts – Involve the transfer of experienced managerial and technical staff to another organization for a fee and for a specified period of time. Management contracts usually involves training the organization‘s employees June 11, 2008
10
HRM and „Soft“ Modes of Internationalization by Organizations (2) Alliances – A collaboration between organizations under which their resources are pooled, exchanged or integrated for mutual benefit. The committment of human resources depends on the level of inter-organizational interaction
Projects and Joint Ventures – Potentially considerable challenges on the human resource management function due to the usually close and sustained interorganizational interaction which is necessary for such collaborative vventures, and the consequent varying management styles and philosophies, work ethics and cultures June 11, 2008
11
The HRM Function in the Context of Internationalization (Export) • By and large, little implications for HR policies for manufacturing organizations unless their export sales reach a “critical level” HCN Intermediary (local knowledge)
Export Manager (PCN)
Export Department
• Service-based industries would establish a branch office or go into a joint venture with a local partner as the nature of their business (i.e. provision of services) would necessitate this June 11, 2008
12
The HRM Function in the Export Context (1)
Managing Director Production Manager
Finance Manager
Marketing / Sales Manager Domestic Sales
June 11, 2008
HR Manager
Export Sales
13
The HRM Function in the Export Context (2) Managing Director Production Manager
Finance Manager
Export Manager
Exports
HR Manager Sales Subsidiary
PCNs HCNs
Firms would tend to replace sales agents and distributors in foreign markets with their own sales subsidiaries or branch offices for any several reasons: Problems with foreign agents and distributors, more confidence in self-handling international sales activities, the desire for more control and because of increasing importance which exporting activity has on the success of the organization June 11, 2008
14
HRM in the Context of Internationalization (Foreign Production) There may be several reasons for a firm desiring to establish production facilities overseas, for example: • • •
Cheaper production and transportation costs Host government investment incentives and import restrictions Maintaining markets
Means of establishing production facilities overseas include setting up a facility independently, entering into joint ventures or acquiring local companies. Usually, going international means creating an international division at corporate headquarters At this (initial) stage of internationalization, some organizations will usually make extensive use of PCNs, others will use HCNs to capitalize on local conditions or satisfy local regulations June 11, 2008
15
Challenge of Internationalization for Organizations: Centralization versus Decentralization Need for national responsiveness:
Need for more centralization:
Differences in market structures Distribution channels Customer needs Local culture Host Government pressures
Multinational Customers Global Competitors Economies of Scale Flow of Information
Pressure for Decentralization
June 11, 2008
Pressure for Centralization
16
The HRM Function in the Context of Internationalization (International Division) Managing Director
Production
Domestic Division (Product A)
Marketing
Domestic Division (Product B) Exporting Departing
Production June 11, 2008
Marketing
Finance
International Division
Subsidiary Country A Finance
Human Resources Staff selection Expatriates
Subsidiary Country B Human Resources 17
The HRM Function in the Context of Internationalization (Global Product Division) Chief Executive Officer
Production
Marketing
Product A
Product B Europe
Global Product Division
Product C Americas
Finance
Human Resources
Product D Asia-Pacific Pakistan Marketing
June 11, 2008
Human Resources 18
The HRM Function in the Context of Internationalization (Global Area Division) Chief Executive Officer Production
Marketing
Europe
Human Resources
Finance
Americas
AsiaPacific Pakistan
Marketing Product A June 11, 2008
Product B
Product C
Human Resources Product D 19
The HRM Function in the Context of Internationalization (Matrix) Chief Executive Officer Production
Marketing
Finance
Vice-President Global Products Europe
Human Resources
Vice-President International Americas
AsiaPacific
Product A Human Resources
Product B Pakistan June 11, 2008
20
The HRM Function in the Context of Internationalization (Network Structures) The Heterarchy – An organization has different “centers” in different locations, for example, R&D activities are concentrated in one center, training in another. It places considerable demands on the human resource function management (experienced personnel, incentive packages to motivate and control employee performance, promotion of awareness of common corporate goals)
The Transnational – Characterized by interdependence of
resources and responsibilities across subsidiaries and business units resulting in large flows of information, people, resources etc. Complex level of communication, cooperation and coordination required along with strong corporate identity and well-developed worldwide management perspective. Seeks to achieve global integration while retaining localized flexibility. Human resources need to be flexible, quickly transferable and think across national and subsidiary boundaries June 11, 2008
21
The HRM Function in the Context of Internationalization (A Complex Network Structure)
Center e.g. R&D Subsidiary
Subsidiary Corporate Headquarters
Center (e.g. Training)
Subsidiary
Subsidiary
June 11, 2008
22
Control Mechanisms in a Networked Organizational Environment Control Mechanisms
FORMAL Structure Reporting Systems Budgets Performance Targets
INFORMAL
Personal Relationships
Corporate Culture
In networked organizational environments, there is a tendency to rely more on Informal controls instead of formal controls that are usually prevalent in the hierarchichal-type environments June 11, 2008
23
Control and Coordination Issues for HRM in International Networked Organizational Environments In networked organizational environments, human resource management has a crucial role to play, for example through: • Contact facilitation for information and knowledge diffusion • Training and development for fostering informal communication channels and building a corporate culture • Assisting in creating personal networks amongst key staff persons • Staffing Decisions and Transfers June 11, 2008
24
The “ideal” Organizational Structure? There is no “ideal” structure for organizations which are internationalizing. The determination of organizational structure will depend on a plethora of factors and considerations, such as: • Size of the organization • Management traditions and policies • Circumstances prevailing in the host countries Some organizations have experimented with different organizational structures with a view to finding the appropriate structure best suiting their requirements June 11, 2008
25
June 11, 2008
1
HRM and the Organizational Context (1) HRM activities determine, and are also influenced by organizational considerations: • • • •
The organization’s level of internationalization Internationalization strategy in foreign markets Control and coordination requirements Strategic importance of foreign operations in relation to the organization’s overall profitability
June 11, 2008
2
HRM and the Organizational Context (2) Ideally, HRM considerations should play a key role in an organization’s decision to internationalize itself, rather than a marketdriven strategy, which is usually followed
HRM constraints and factors may have a significant impact on an organization’s internationalization strategy June 11, 2008
3
Managing and Staffing Approaches in the International Context (1) The HRM literature identifies the following four managing and staffing approaches, which are also indicative of top management attitude: •
Ethnocentric Approach – High level of control exerted by the parent organization / corporate headquarters over foreign subsidiaries. Key positions in the subsidiaries are managed by expatriates from the parent country (i.e. PCNs)
•
Polycentric Approach – Subsidiaries are treated as distinct national entities with a certain level of decision-making autonomy. They are usually managed by local nationals (i.e. HCNs). These are seldom promoted to positions at corporate headquarters and, likewise, PCNs are rarely transferred to foreign subsidiaries
June 11, 2008
4
Managing and Staffing Approaches in the International Context (2) • Geocentric Approach – Global perspective resulting in there being no discrimination of PCNs, HCNs and TCNs, who, depending on capability and performance, are given the opportunity to work in key positions anywhere (parent organization, subsidiaries) in the organization • Regiocentric Approach – Considered a precursory step in the direction of geocentricism. Managers may be transferred freely within a particular geographic region. These may enjoy a considerable level of autonomy in decision-making but are usually not transferred to the parent organization
June 11, 2008
5
Organizational Typologies (1) Bartlett and Ghoshal identify the following types of corporate organizational modals: • Multinational Modal – Characterized by decentralization of many of the organization’s key assets, responsibilities and decisions. Management regards overseas operations as a portfolio of independent businesses. For example, Siemens has many different lines of business around the world, but it is not really consolidated into one whole, and each country of operation is autonomous. Bayer, ADP and Levi also fit into this category June 11, 2008
6
Organizational Typologies (2) • Global Modal – It has a central hub where most of the strategic assets, resources and decisions are centralized. The management views overseas operations as a pipeline to a global marketplace. Examples include British Airlines, Deutsche Bank and NCR • International Modal - Sits midway between the decentralized and centralized models. Many of the key assets, responsibilities and decisions are decentralized, but controlled from headquarters. Management regards overseas operations as appendages to a central, domestic corporation. Johnson & Johnson fits this description June 11, 2008
7
Organizational Typologies (3) • Transnational Modal – It's a distributed network with distributed resources and capabilities. The management oversees a complex process of coordination and cooperation in an environment of shared decision-making. It has distributed control. This kind of corporation can have very small corporate headquarters Hewlett-Packard and Cendant are examples of transnational corporations
June 11, 2008
8
The Internationalization Process • Organizations have several options available for expanding their operations into foreign markets • The option pursued by the organization depends on a host of factors, for example, its size, available its resources (including human resources), strategy, confidence and environmental contingencies • Linked to the internationalization of organizations are the need for effective and efficient coordination and control mechanisms and, among other things, appropriate HRM policies June 11, 2008
9
HRM and „Soft“ Modes of Internationalization by Organizations (1) Typical „soft“ modes of internationalization include: Licensing – A business arrangement in which the manufacturer of a product (or a firm with proprietary rights over certain technology, trademarks, etc.) grants permission to some other group or individual to manufacture that product (or make use of that proprietary material) in return for specified royalties or other payment. Often does not involve a heavy committment of human resources Management Contracts – Involve the transfer of experienced managerial and technical staff to another organization for a fee and for a specified period of time. Management contracts usually involves training the organization‘s employees June 11, 2008
10
HRM and „Soft“ Modes of Internationalization by Organizations (2) Alliances – A collaboration between organizations under which their resources are pooled, exchanged or integrated for mutual benefit. The committment of human resources depends on the level of inter-organizational interaction
Projects and Joint Ventures – Potentially considerable challenges on the human resource management function due to the usually close and sustained interorganizational interaction which is necessary for such collaborative vventures, and the consequent varying management styles and philosophies, work ethics and cultures June 11, 2008
11
The HRM Function in the Context of Internationalization (Export) • By and large, little implications for HR policies for manufacturing organizations unless their export sales reach a “critical level” HCN Intermediary (local knowledge)
Export Manager (PCN)
Export Department
• Service-based industries would establish a branch office or go into a joint venture with a local partner as the nature of their business (i.e. provision of services) would necessitate this June 11, 2008
12
The HRM Function in the Export Context (1)
Managing Director Production Manager
Finance Manager
Marketing / Sales Manager Domestic Sales
June 11, 2008
HR Manager
Export Sales
13
The HRM Function in the Export Context (2) Managing Director Production Manager
Finance Manager
Export Manager
Exports
HR Manager Sales Subsidiary
PCNs HCNs
Firms would tend to replace sales agents and distributors in foreign markets with their own sales subsidiaries or branch offices for any several reasons: Problems with foreign agents and distributors, more confidence in self-handling international sales activities, the desire for more control and because of increasing importance which exporting activity has on the success of the organization June 11, 2008
14
HRM in the Context of Internationalization (Foreign Production) There may be several reasons for a firm desiring to establish production facilities overseas, for example: • • •
Cheaper production and transportation costs Host government investment incentives and import restrictions Maintaining markets
Means of establishing production facilities overseas include setting up a facility independently, entering into joint ventures or acquiring local companies. Usually, going international means creating an international division at corporate headquarters At this (initial) stage of internationalization, some organizations will usually make extensive use of PCNs, others will use HCNs to capitalize on local conditions or satisfy local regulations June 11, 2008
15
Challenge of Internationalization for Organizations: Centralization versus Decentralization Need for national responsiveness:
Need for more centralization:
Differences in market structures Distribution channels Customer needs Local culture Host Government pressures
Multinational Customers Global Competitors Economies of Scale Flow of Information
Pressure for Decentralization
June 11, 2008
Pressure for Centralization
16
The HRM Function in the Context of Internationalization (International Division) Managing Director
Production
Domestic Division (Product A)
Marketing
Domestic Division (Product B) Exporting Departing
Production June 11, 2008
Marketing
Finance
International Division
Subsidiary Country A Finance
Human Resources Staff selection Expatriates
Subsidiary Country B Human Resources 17
The HRM Function in the Context of Internationalization (Global Product Division) Chief Executive Officer
Production
Marketing
Product A
Product B Europe
Global Product Division
Product C Americas
Finance
Human Resources
Product D Asia-Pacific Pakistan Marketing
June 11, 2008
Human Resources 18
The HRM Function in the Context of Internationalization (Global Area Division) Chief Executive Officer Production
Marketing
Europe
Human Resources
Finance
Americas
AsiaPacific Pakistan
Marketing Product A June 11, 2008
Product B
Product C
Human Resources Product D 19
The HRM Function in the Context of Internationalization (Matrix) Chief Executive Officer Production
Marketing
Finance
Vice-President Global Products Europe
Human Resources
Vice-President International Americas
AsiaPacific
Product A Human Resources
Product B Pakistan June 11, 2008
20
The HRM Function in the Context of Internationalization (Network Structures) The Heterarchy – An organization has different “centers” in different locations, for example, R&D activities are concentrated in one center, training in another. It places considerable demands on the human resource function management (experienced personnel, incentive packages to motivate and control employee performance, promotion of awareness of common corporate goals)
The Transnational – Characterized by interdependence of
resources and responsibilities across subsidiaries and business units resulting in large flows of information, people, resources etc. Complex level of communication, cooperation and coordination required along with strong corporate identity and well-developed worldwide management perspective. Seeks to achieve global integration while retaining localized flexibility. Human resources need to be flexible, quickly transferable and think across national and subsidiary boundaries June 11, 2008
21
The HRM Function in the Context of Internationalization (A Complex Network Structure)
Center e.g. R&D Subsidiary
Subsidiary Corporate Headquarters
Center (e.g. Training)
Subsidiary
Subsidiary
June 11, 2008
22
Control Mechanisms in a Networked Organizational Environment Control Mechanisms
FORMAL Structure Reporting Systems Budgets Performance Targets
INFORMAL
Personal Relationships
Corporate Culture
In networked organizational environments, there is a tendency to rely more on Informal controls instead of formal controls that are usually prevalent in the hierarchichal-type environments June 11, 2008
23
Control and Coordination Issues for HRM in International Networked Organizational Environments In networked organizational environments, human resource management has a crucial role to play, for example through: • Contact facilitation for information and knowledge diffusion • Training and development for fostering informal communication channels and building a corporate culture • Assisting in creating personal networks amongst key staff persons • Staffing Decisions and Transfers June 11, 2008
24
The “ideal” Organizational Structure? There is no “ideal” structure for organizations which are internationalizing. The determination of organizational structure will depend on a plethora of factors and considerations, such as: • Size of the organization • Management traditions and policies • Circumstances prevailing in the host countries Some organizations have experimented with different organizational structures with a view to finding the appropriate structure best suiting their requirements June 11, 2008
25
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