Session 7. Session objectives. Strategic International HRM. Strategic international human resource management. Strategic International HRM (SIHRM):

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1 Session 7 Strategic international human resource management Session objectives Explain what strategic international human resource management (SIHRM) is and how it differs from domestic human resource management; Identify the three key approaches organisations may adopt when developing their international HRM strategies and practices; Identify factors that will influence the SIHRM approach an organisation adopts; Discuss the cross-cultural issues related to the HR function; Explain how the resource-based view of SIHRM creates a sustainable competitive advantage. Strategic International HRM Strategic International HRM (SIHRM): The set of distinctive activities, functions, and processes that are directed at attracting, developing, and maintaining MNCs human resources SIHRM = global strategic formulation + global strategic implementation Managing different cognitive, affective and behavioural strengths and weaknesses of workers in different locations

2 Approaches to SIHRM Globalised approach: The use of the parent company s HR strategy and practices globally (e.g., McDonalds) Localised approach: The development of HR strategy and practices to suit the local environment (e.g., Companies in the financial sector) Adaptation approach: The use of either a globalised HR strategy and localised practices, or a localised HR strategy and globalised practices (e.g., Ford and Toyota) Selecting the right approach Organisational orientation There are 4 orientations that are possible management strategies (see next slide) National culture The collective programming of the mind that distinguishes the members of one group or category of people from another (Hofstede, 2001) Country specific factors (e.g., economic system, government mandate, the regulatory/legal environment, political stability, labour groups) Organisational orientation Ethnocentric: When employees from company headquarters fill key managerial positions and power and decision making are centralised at the head office Polycentric: When local managers are used to fill key managerial positions Regiocentric: When organisations are broken into regions and host-country or third-country nationals are used to fill key managerial positions Geocentric: When the best person for the job, regardless of whether they are a home-country host-country or third-country national, is used to fill key managerial positions

3 Cross-cultural considerations Training and development: The educative and learning tool used to foster development of employees cognitive, affective and behavioural abilities for successful cross-cultural interactions in diverse countries (Morris & Robie, 2001). Performance appraisal: The dissimilar cultural orientations for motivations (e.g. West versus East: DeVoe & Iyenga, 2004) Remuneration: Cultural insensitivity in a remuneration or rewarding process may demotivate certain employees, which in turn reduces their behavioural and cognitive qualities. Managing International assignments Expatriation: The process of sending a homecountry national to a foreign country to work Often the choice for companies that adopt an ethnocentric approach. Repatriation: The process of acclimatising an expatriate to their home country and organisation Managing International assignments HR managers need to consider: Expatriate selection Pre-departure training and in-country adjustment Expatriate remuneration Expatriate performance management Supporting the expatriate assignment Career planning and repatriation

4 Warning signs of culture shock SIHRM: A source of sustainable competitive advantage The RBV of SIHRM: Heterogeneous human resources provide a competitive advantage When effectively managing diversity, obtain human capital that is valuable, rare, inimitable and non-substitutable SIHRM should be open to diversity and select employees with an understanding and respect for global values Contemporary SHRM Application Tool

5 Step 1 Analyse environmental factors Monitor/analyse data (past, present and future): Specialised in export since 1992, expanded export ( ), localising transplants since Excellent just-in-time delivery records Internal/organisational environment: High collectivist culture (high uncertainty avoidance) External environment: Car industry one of the main driving forces in globalisation Step 2 Detect potential problem or opportunity More efficient operation required to increase competitiveness in the international car market Greater establishment of a global business network required (e.g., developing cross-border buyer-supplier relationships) Step 3 Verify /falsify potential problem or opportunity Establish culturally diverse management teams to draw on diverse tacit knowledge and viewpoints to internationalise the business more effectively and efficiently

6 Step 4 Devise plan and success criteria Need to apply Porter s five forces continuously to analyse the state-of-the-art condition of the domestic and international market Reduce the bureaucratic structure by establishing a flatter structure, delegating authority to a heterogeneous top management team across countries Establish seven cultural/regional business clusters (e.g., North America, South America, Europe, Asia-Pacific, China, Middle East, Russia) Establish a culturally diverse top management planning and decision-making process (i.e., culturally diverse knowledge, values and viewpoints) Step 5 Implement the plan Establish a culturally diverse top management planning and decision-making team that will be responsible for specialised operations (e.g., R&D, marketing and market analysts, subcontractors, technicians, suppliers and vendors). Conduct quarterly meetings each year. Conduct regular joint value analysis based on Porter s five forces model through collaborative relationships amongst culturally diverse specialised teams. Conduct quarterly meetings each year. Step 6 Evaluate against success criteria Has the global business framework been established? Is it strategic or is it just functioning without direction? Has the productivity and profit margin of each domestic operation increased significantly over the past three years? Has there been growth in the diversity of customers (e.g. racial, economic status, age, religion)? Has the speed of the business globalisation increased?

7 Conclusion The global environment is inevitable HR managers must analyse how this affects an organisation s HR strategies Different management orientations and approaches to SIHRM Consider cultural differences in implementing HR practices and policies Globalisation has a human element Take care in how it affects the organisation s most valuable resources (i.e. its people)