Strategic International Human Resource Management

Table of Contents

List of Figures

List of Abbreviations

Introduction

Definition: International Human Resource Management

Strategic International Human Resource Management in Multinationals

Contrasting Two Approaches of Strategic International Human Resource Management

Conclusion

Reference List

Appendix

List of Figures

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List of Abbreviations

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Introduction

Designate a person a loser and he will behave like one. But why is it, that some managers are not aware of the severe consequences treating their employees like that? Is it because of a deficit in managing people within an opposed cultural working environment or is it because of an inconvenient HRM strategy? Skinner, B. (1971) argued, that people are simply a product of the stimuli they get from the external world. Interestingly, negative reinforcement causes behavioral change in undesirable ways, whereas positive reinforcement causes rather intended change. General management is therefore not only accountable for defining such stimuli according the corporate strategy, but also its degree of involvement is a prerequisite for a successful HRM (Baron, J. & Kreps, D., 1999).

Definition: International Human Resource Management

What difference does it actually make to augment the word international to HRM? Needless to say, as corporations globalize, HRM activities like HR-planning, staffing, developing, and retaining employees goes far beyond a national scope. Thus, IHRM broadly covers all issues related to the management of people in an international context (Stahl, G. & Björkmann, I., 2007). Morgan (1986) developed a three-dimensional model of IHRM (Figure 1), which expose firstly the broad human resource activities of procurement, allocation and utilization, secondly the national or country categories involved in IHRM activities (host, home, other), and lastly three categories of employees of an international firm (HCNs, PCNs, TCNs). Morgan defines IHRM as the interplay among these three dimensions. Generally, IHRM involves the same activities as domestic HRM, for instance, procurement refers to HR planning and staffing; however, domestic HRM focuses only on activities within only one national boundary. Many firms underestimate the complexities involved in international operations, and there is some evidence to suggest that business failures internationally may often be due to poor management of HR (Desatnick, R. & Bennett, M., 1978).

Strategic International Human Resource Management in Multinationals

Alfred Chandler highlighted once, “structure follows strategy”. Hence, a holistic corporate strategy is not only based on a precise knowledge of internal and external factors or can be measured along financial and non-financial KPIs. In fact, a sustainable corporate strategy must be a reference point towards every part of the value chain. Thereby, the functional-level is typically concerned with maximizing efficiency; and particularly the HR- function addresses the question, ‘Are the current HRM policies sufficient enough to support the strategy?’ Schuler, R. & Jackson, S. (1987), took up Porter´s framework of competitive strategies in order to develop a model of its idea in SIHRM (Figure 2). Their model concludes that business performance will increase, if HR policies mutually reinforce the firm´s strategy. According to Dowling, P. & Welch, D. (2005), “MNEs operate in the context of worldwide conditions, including the external contexts of industry, nation, region and inter- organizational networks and alliances.” De Cieri and Dowling (1999) developed the model of strategic HRM in MNEs (Figure 3). The internal organizational factors are shown in order of most tangible to most intangible. Pointed out by Dowling, P. & Welch, D. (2005), “following developments in the literature, such as that of Taylor et al. (1996), (…), the model suggests that there are reciprocal relationships between organizational factors, SHRM and multinational concerns and goals.” For instance, HR activities such as expatriate management are influenced by both factors of procedures from in- and outside the company.

Contrasting Two Approaches of Strategic International Human Resource Management

“Any convergence will be balanced by divergence” (Harzing, A. & Ruysseveldt, J., 2004). Its sound so simple, however, since MNEs globalize and their structure change rapidly, managers should decide upon two major issues; firstly, to which extent key decisions have to be made at the parent-country HQ or at the subsidiary units and secondly, which type of management control system the parent could execute in the subsidiary unit. Thus, the main distinction is whether to standardize or customize SIHRM.

In case of standardizing SIHRM, the HQ decides upon HR policies and standards independently from their foreign subsidiaries. Forces towards standardization are mainly driven by the need for control and sustain of competitive advantage. Assuming that a generalized approach leads to conformity and unity among all employees, while neglecting

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