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Chapter 2 The Organizational Context

Chapter 2 - IHRM

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International human resources management

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Page 1: Chapter 2 - IHRM

Chapter 2

The Organizational Context

Page 2: Chapter 2 - IHRM

Demands on Management by International Growth

Page 3: Chapter 2 - IHRM

The Path to Global Status

As the nature and size of international activities change, organizational structures response, due to: The strain imposed by growth and geographical

spread The need for improved coordination and control

across business units The constraints imposed by host-government

regulations on ownership and equity The evolution path is common but the steps

are not normative

Page 4: Chapter 2 - IHRM

Stages of Internationalization

Born Global

Page 5: Chapter 2 - IHRM

Stages of Internationalization:

Exporting Typically the initial stage of international

operations Usually handled by an intermediary

(foreign agent or distributor) Role of the HR department is unclear at

this stage

Exporting Typically the initial stage of international

operations Usually handled by an intermediary

(foreign agent or distributor) Role of the HR department is unclear at

this stage

Page 6: Chapter 2 - IHRM

Export Department

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Sales Subsidiary

Replacing foreign agents/distributors with own sales subsidiaries or branch offices in the market countries

May be prompted by: Problems with foreign agents More confidence in international activities Desire for greater control Give greater support to exporting activities

PCNs may be selected, leading to some HR involvement

Replacing foreign agents/distributors with own sales subsidiaries or branch offices in the market countries

May be prompted by: Problems with foreign agents More confidence in international activities Desire for greater control Give greater support to exporting activities

PCNs may be selected, leading to some HR involvement

Page 8: Chapter 2 - IHRM

Sales Subsidiary

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International Division

Creation of a separate division in which all international activities are grouped

Resembles ‘miniature replica’ of domestic organization

Subsidiary managers report to head of international division

Objectives regarding foreign activities may determine approaches to staffing of key positions Expatriate management role of corporate HR

Creation of a separate division in which all international activities are grouped

Resembles ‘miniature replica’ of domestic organization

Subsidiary managers report to head of international division

Objectives regarding foreign activities may determine approaches to staffing of key positions Expatriate management role of corporate HR

Page 10: Chapter 2 - IHRM

International Division

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Global Product/Area Division

Strain of sheer size may prompt structural change to either of these global approaches

Choice typically influenced by: The extent to which key decisions are to be

made at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

Type or form of control exerted by parent over subsidiary

Strain of sheer size may prompt structural change to either of these global approaches

Choice typically influenced by: The extent to which key decisions are to be

made at the parent country headquarters or at the subsidiary units (centralization versus decentralization)

Type or form of control exerted by parent over subsidiary

Page 12: Chapter 2 - IHRM

Global Product Division

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Global Area Division

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The Matrix

An attempt to integrate operations across more than one dimension

Violates Fayol’s principle of unity of command

Considered to bring into the management system a philosophy of matching the structure to the decision-making process

An attempt to integrate operations across more than one dimension

Violates Fayol’s principle of unity of command

Considered to bring into the management system a philosophy of matching the structure to the decision-making process

Page 15: Chapter 2 - IHRM

The Matrix

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Problems with the Matrix

Dual reporting Proliferation of

communication channels

Overlapping responsibilities

Barriers of distance, language, time and culture

Dual reporting Proliferation of

communication channels

Overlapping responsibilities

Barriers of distance, language, time and culture

Tend to lead to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it virtually impossible to resolve conflicts and clarify confusion

Tend to lead to conflict and confusion

Creates informational logjams

Produce turf battles and loss of accountability

Make it virtually impossible to resolve conflicts and clarify confusion

Page 17: Chapter 2 - IHRM

Beyond the Matrix

Less hierarchical structural forms: Heterarchy Transnational (interdependence of responsibilities

and resources) Multinational as a network Networked firms

Delegation of decision-making authority Geographical dispersal of key functions Delayering organizational levels De-bureaucratization of formal procedure Differentiation of work, responsibility and authority

across subsidiaries

Less hierarchical structural forms: Heterarchy Transnational (interdependence of responsibilities

and resources) Multinational as a network Networked firms

Delegation of decision-making authority Geographical dispersal of key functions Delayering organizational levels De-bureaucratization of formal procedure Differentiation of work, responsibility and authority

across subsidiaries

Page 18: Chapter 2 - IHRM

The Networked Organization (N- Form)

Catalyst, knowledge protectorSatellite

OrganSatellite Organ

Page 19: Chapter 2 - IHRM

Different countries take different paths

US, European and Japanese Structural Changes

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Control Mechanisms

“Globalization brings considerable challenges which are often under-estimated….

Every morning when I wake I think about the challenges of coordinating our operations in many different countries”

Quote by Accor CEO

“Globalization brings considerable challenges which are often under-estimated….

Every morning when I wake I think about the challenges of coordinating our operations in many different countries”

Quote by Accor CEO

Page 21: Chapter 2 - IHRM

Control Mechanisms

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Mode of Operation and HRM

Not just subsidiary operations Firms may also adopt contractual modes

Licensing Franchising Management contracts Projects

And cooperative modes (such as joint ventures)

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Linking Operation Mode and HRM

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Interfirm Linkages

Alliances (strategic alliance, cooperative venture, collaborative venture or corporate linkage)

A form of business relationship that: Involves some measure on interfirm

integration Stops short of a full merger or acquisition

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HR Factors

HR issues and activities that affect the successful functioning of international joint ventures include: Assigning mangers to the joint venture Evaluating their performance Handling aspects pertaining to career path Compensation and benefits

Page 26: Chapter 2 - IHRM

Implications to IHRM

Stages of international development, organizational forms and mode of operation should not be taken as normative.

Research does suggest a pattern and a process of internationalization but firms do vary in how they adapt to international operations – we use nationality of the parent firm to demonstrate this.

Cont.

Stages of international development, organizational forms and mode of operation should not be taken as normative.

Research does suggest a pattern and a process of internationalization but firms do vary in how they adapt to international operations – we use nationality of the parent firm to demonstrate this.

Cont.

Page 27: Chapter 2 - IHRM

Implications to IHRM (cont.)

Through the approach taken in this chapter, we have been able to demonstrate that there is an interconnection between IHRM approaches and activities and the organizational context and that HR managers have a crucial role to play.

In order to perform this role better, it is important that HR managers understand the various international structural options – along with the control and coordination demands imposed by international growth.

Through the approach taken in this chapter, we have been able to demonstrate that there is an interconnection between IHRM approaches and activities and the organizational context and that HR managers have a crucial role to play.

In order to perform this role better, it is important that HR managers understand the various international structural options – along with the control and coordination demands imposed by international growth.