International Human Resources

Strategy

Lidija DzanicTua Lindholm

Lea WakolbingerMirjam Zerjav

VK Internationale Unternehmensführung WS 2004/05

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Agenda

Business strategies Staffing approaches Different types of managers Expatriation vs. inpatriation Case study Conclusion

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Introduction

Nowadays globalization is more present Requires globally competent managers IHRM is becoming more important IHRM is major determinant of success or

failure in international business Global integration is neccesary in HRM Core competency – local adaptation

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Business strategies (1)

Domestic

New products or services for the domestic market

Foreign markets and international managerial skills largely irrelevant

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Business strategies (2)

International

Competition increases Companies expand internationally Hierarchical structure Structural and cultural dominance First home country managers abroad as

expatriates

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Business strategies (3)

Multinational

Least-cost and standardized products and services

Worldwide lines of business Decisions made by people from a wider range

of cultures Values of the headquarter’s national culture

dominate Senior managers need to understand the world

business environment

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Business strategies (4)

Transnational

Global competition Identical products are distributed worldwide Research and development Firms become less hierarchically structured Transnational human resource strategies are

being developed

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Characteristics of effective IHRM

Transnational scope Geographical context within which all major

decision are made Transnational representation

Multinational composition of the managers and executives

Transnational process Firm’s ability to include representatives and

ideas from many countries

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Ethnocentric approach (1) Parent country nationals (PCNs) take all key

positions in a multinational company In the early stages of internationalization

Reasons for pursuing this policy: Lack of qualified host country nationals

(HCNs) Ability of the parent country nationals

(PCNs) to coordinate subsidiary Transferring Know-how

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Ethnocentric approach (2)

Problems that may occur: Adaptation of PCNs to a host country may

take a long time Promotion opportunities of local managers

are limited PCNs’ lack of sensitivity

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Polycentric approach (1)

Companies following this staffing policy use HCNs in their subsidiaries and PCNs in corporate headquarters

Advantages: No more language barriers and adjustment

problems of expatriates The employment of HCNs is less expensive Morale and career opportunities of local

stuff

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Polycentric approach (2)

Disadvantages: Weak links between the independent

national units and headquarters Lack of experience of both HCNs & PCNs is a

liability in an increasingly competitive international environment

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Geocentric approach (1)

Best people get key jobs, nationality is not important

Advantages: A pool of senior international managers is

developed Tendency of national identification of

managers with subsidiary units is reduced

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Geocentric approach (2)

Disadvantages: Immigration laws which require the

employment of local nationals are used by many host countries

Difficult to implement because of increased training, compensation and relocation costs

Longer lead times and more centralized control of the staffing process are required

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Regional approach

Staffing strategy with emphasis on different regional markets

Factors for staffing decisions: Need of area expertise Need of product expertise

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Managerial mindset

4 typical mindsets Closely associated From the least global to the most global

mindset Defender Explorer Controller Integrator

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Defender

Internally focused Oriented to the domestic market Satisfied with domestic operations Uninterested in making foreign actions Almost no international element Foreign elements in domestic market are

unwanted

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Explorer

Aware of business opportunities in foreign markets

Perceives foreign markets as not dangerous

Treats international forays with a lot of caution

Prefers strategies of exporting and franchising

Domestic business is larger than international, is predominant

Foreign operations are managed from the head office located in the home country

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Controller

More externally oriented than the explorer Dominates in foreign markets with

procedures which were successful in domestic market

Understands the nature of cultures Important: controller’s head office spends

time on controlling and less on coordinating Approval and sanction needed from the head

office

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Integrator

Global perspective Knowledge and skills Understands, is aware, is competent Able to manage differences

between people, values and cultures Coordinates more than controls Critical function is creating mechanisms for

knowledge flow and transferring it from one part of the global system to another

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Good international managerAbility to develop

Effective local strategies Local government relations Cultural leadership skills Social networking skills Teamwork skills Good understanding of business environment Insightful local social knowledge

(Harvey et al.)

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Dimensions of IHRM

Knowledge-based view of the firm (Harvey et al.)

Tangible vs. intangible dimensions of HRM

Development of a common knowledge basis (Grant)

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Expatriation vs. inpatriation (1)1) Harvey et al.

Decision factors

Value of tacit local knowledge

Cultural and economic distance

Equivocality of subsidiary goals

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Expatriation vs. inpatriation (2)2) Torbiörn

Decision factors

Openness of economic region

Political instability

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Expatriation vs. inpatriation (3)

Equi-vocality

Social Knowledge

Low

Social Knowledge

High

Social Knowledge

Low

Social Knowledge

High

Low Expatriate Inpatriate Inpatriate (P)Expatriate

(S)

Inpatriate (P)Expatriate (S)

High Expatriate Inpatriate Inpatriate (P)Expatriate

(S)

Inpatriate

Low Expatriate Inpatriate Inpatriate Inpatriate

High Inpatriate Inpatriate Inpatriate Inpatriate

Cultural Distance

Low High

Level of

Econ

om

ic

Develo

pm

en

t Low

Hig

h

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Advantages of inpatriate use Effective „boundary spanners“

Advice with HR practices

Satisfaction with HR strategy in foreign subsidiaries

More acceptance on return

(Harvey et al.)

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Mergers and acquisitions

Double-staffing strategy

Inpatriates communication

Expatriates coordination

(Torbiörn)

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Expatriation

Overall increasing trend in expatriation (especially UK)

British view IHRM as essential contributor to strategic management

US: more inpatriation due to high expatriate failures

(Scullion)

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Expatriate failure

Direct and indirect costs

Main reasons: Inability of spouse to adjust Poor performance

(Scullion)

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Training, selection and repatriation

Selection: not only technical, but also personal skills (Scullion)

Cross-cultural training approach (Mendenhall and Oddou) Information Affection Immersion

Effective repatriation programs (Scullion, Dessler)

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Case study

319 000 employees 170 countries

advanced information technologies:computer systems, software, storage systems, microelectronics

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Beginning in 1888

Incorporated in 1911 1300 employees

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1914 Thomas J. Watson Revenues doubled and business expanded

The base for the strong organizational culture today

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Interview

Dr. Haberl, manager of Media Relations

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Local workforce Inpatriates not typical Expatriation – not mainly knowledge

transfer Expatriation at IBM a part of a

manager‘s career No loss of control

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Strong organizational culture „myth of Watson“

Helpful in the long run Social tacit knowledge Explicit knowledge

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Locals are no locals anymore after entering IBM IBMer

Same rules all over the world

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Training opportunities Internal technological structure

Helping institutions „Buddy-system“ Other training opportunities

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Conclusions

HR strategy must match with corporate strategy

Decision factors that matter in the context of the company’s IHRM strategy should be defined before entering emerging markets

THE END

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