International human ressource management

Self reflexion essay

Ismael Le Carvennec

07/03/2012

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Table of content

INTRODUCTION:.....................................................................................................................................3

Part 1- Globalization and impacts on MNC.............................................................................................4

A- Globalisation and MNC...............................................................................................................4

1- Universalism and convergence...............................................................................................4

2- 3 level of lectures :.................................................................................................................5

B- Impact of MNC on the international environment.....................................................................6

1- Supranational level of economic organization will come to dominate national and regional system?..........................................................................................................................................6

2- National differences:..............................................................................................................7

Part 2 : International issues and IHR cultural practices..........................................................................8

A- IHR challenges............................................................................................................................8

1- Merger and acquisitions.........................................................................................................8

2- Emerging economy and knowledge transfer..........................................................................9

B- IRHM cultural impact on MNC..................................................................................................10

1- Standardized process, adaptive process, or hybridization....................................................10

2- Case Example: Swedco, International pay and reward.........................................................10

C- Limits of the IRHM practices on MNC.......................................................................................11

1- Cultural differences:.............................................................................................................11

2- Embeddedness of strategy:..................................................................................................12

Conclusion:...........................................................................................................................................14

Bibliography.........................................................................................................................................15

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INTRODUCTION:

The subject of this essay is to show how the Human resources cultures impact the

international environment. This essay covers several themes such as: globalization, MNC,

new challenges, IRHM.

Since decades the world is becoming more and more global, the national economies are

nowadays interdependent to each others. Technological innovations and deregulation

increased global relationships of culture, people and economic activity. In this essay we will

mainly be focused on the business view and in particularly to multinational companies. MNC

are the scale of activity for international Human resource management but we will not avoid

the stakeholders of cross-national companies (institutions, governments…).

Human resource is referred to the management of the organization within a company. HR is

responsible to develop, attract and retain human resource, but due to globalization it’s also to

support companies in cases of consolidation (mergers and acquisitions), knowledge

transaction, expatriation, diversity and so on…

MNC management operates with only a partial knowledge of different business system and

national environment. The role of HR is to implement an appropriate alignment of these

systems. What is the cultural impact of International Human resource on multi-national

companies?

In the first part I will expose the overall situation of international human resource. The main

theme which will be used is globalization. After covering the main concept of globalization,

we stress how HRM activity needs to be understood and how they are related to the

globalization. Then we will expose the concept of internalization of the companies (MNC),

and to which degree they are important in the international environment.

In the second part we will illustrate the IRHM practices trough actual challenges and issues.

Then we will propose different strategy to adapt in a international environment. We will show

the limits of the cultural influence of HR in MNC. Finally we will propose several

recommendations to know how to act in a global scale for MNC.

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Part 1- Globalization and impacts on MNC

A- Globalisation and MNC

1- Universalism and convergence

The globalization is a fashionable term that emerged in the 1990s in response to rapid changes

in structures of the world and in particular after the fall of the Berlin wall. There are not one

cogent theory of globalisation but several with different point of views. One of the main

author of globalisation defined it as “a set of processes which embody transformations in the

spatial organisation of social relations – understood in terms of extensiveness, intensity,

speed and impact – which create intercontinental and inter-regional networks of action and

the exercise of power”1.

We can regroup several keys features2 such as:

- Growth of supra-territorial relations/space among people. People are more interconnected, it

means that we are able to communicate when we want with who we want. Language played

an important role in the diffusion of knowledge indeed one language is talking by everybody.

- Reduction of distance, due to technological innovation distance are shorter, it’s now easier

to travel and faster.

-Time-space compression, according to the reduction of distance, it seems obvious that the

perceptions of time are slightly reduced. Moreover technologies allowed us to work faster (i.e.

internet)

- Economic integration, countries engaged a process of free trade, open market and tax

cuttings.

- Political integration, political convergence (liberalism, European union), international

institution (WTO, IMF, UNO)

-Cultural homogenization-Americanization, globalization is unifying cultures all around the

world. The American influence is the one which spreading its culture the most.

Trough all this feature, the globalization can be seen as a worldwide convergence of political,

cultural and economical activity. Since the 80’s countries are converging to one unique

model of society highly influence by USA and Western Europe, this model include, liberal

and democratic society, free Capitalism, deregulation and privatisation.

1 Held et al,” Global Transformations”2 Tommy Edwards ; Chris Rees, « International human ressource management »

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Thank to this model most of Multinational companies have been develop since the 80’s.

2- 3 level of lectures :

Because of the Globalization, companies have been able to growth outside their country or

region. A new kind of company emerged, the multinational company. We can identify 4

level of development.

1st level: Global. The international regulations cuts taxes, FDI increased a lot, technologies

allowed interconnections. For 2016 Boeing is planning to becoming a global company, they

decide to re-think their strategy. Boeing said that they wanted to be less US-focused and

develop the company worldwide3. Many of companies which are becoming global are

detached to their home national business? For a lot of authors such as Legrain (2002) global

company are still deeply influenced by their home national business system.

2nd level: Regionalism effect. The dominants patterns of trade in FDI are coming from 3

regions, Europe, North America and East Asia. The main example of regional effect can be

illustrate trough the European Union.

3th level: National effect. The national effect is due to the fundamental differences between

governmental institution and business system in an area. It exists, for example, fundamental

difference in terms of workforce organization in close countries such as France, UK and

Germany. These cultural and institutional differences conduct to have national system of

business culture.

4th level: Organizational effect. As people work together to accomplish goals, groups

develop into organizations. As goals become more specific and longer-term, and work more

specialized, organizations become both more formal and institutionalized. Organizations tend

to take on a life of their own and widely held beliefs, values, and practices develop,

differentiating one organization from another and often affecting the organization's success or

failure.

3 The impact of internationalization on organizational culture a comparative study of international US and German companies

der Universität St.Gallen, Prof. Dr. Winfried Ruigrok und Prof. Dr. Martin Hilb

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An organizational culture is defined as the shared assumptions, values, and beliefs that guide

the actions of its members. Organizational culture tends to be shaped by the founders' values,

the industry and business environment, the national culture, and the senior leaders' vision and

behavior. There are many dimensions or characteristics of organizational culture that have

been defined.

B-Impact of MNC on the international environment

1- Supranational level of economic organization will come to dominate national and regional system?

The growth of cross border co-ordination and control of economic activities by firms and the

competition between each other on a worldwide scale has led to suggestions that a new kind

of international system of economic organization is becoming established. As we see before

the organization level posses its owned cultures and values. The actual system controls by

multinational firms that have considerable autonomy from national and regional level. For

instance multinational are highly standardize and globally integrated across borders. The

contingent factors of a company level are not simply to do with formal structures but also

included power relations between actors at different levels within MNC’s.

Therefore, the organization is crucial in mediating the influence that arise from the global,

regional and national level. As we see with the European union, the law and regulation have

been unified, in order to permit companies to be present on a large scope. This idea of a

supranational power hold by MNC’s can be referred to universalism and convergence.

MNC’s are not just influencing national level but international and regulation functions too,

such as WTO and thank to powerful lobbyists representing them.

As we see before a national area is formed by institutions and culture. We view MNC as an

operating within a “transnational social space”4. Responding to the process of globalization

and regionalization and exerting a degree of influence over the nature of national level

institutions and cultures.

2- National differences:

4 Morgan et al, 2001,2003

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The idea of a global system where countries are all converging has been criticise, “majors

societal system can be discerned, pattern and convergence are therefore limited” 5.

Even if globalization is converging countries in a unique model, there are some others

divergences in a national level. The way to control economy, doing business or to behave in a

country can be really different. These differences are due to two different theories:

-Cultural approach, according to Hofstede theory, cultures can be similar or completely

different. The way of doing business is a result of this culture and a company which is

organizing it workforce, without taking it into account, can met some difficulties.

-Institutional approach, even if a lot of institutions are global now, nations are still controlling

the most of their institutions. For example, the system of taxes can change or the political

systems are different...

The strong connection between corporate culture and society is due to the fact that companies

are in constant contact with their social environment, e.g. with customers, co-workers,

suppliers, competitors or public officials. A new employee brings elements of his former

employers value system with him into his new organization. This has a direct and significant

influence on the corporate culture. Thus, how a corporate culture develops is dependent on

society. A society allows for a certain variation of corporate cultures, as long as their

company-specific elements align themselves with the societies basic values. Consequently,

the "culture-free theory", which postulates the independence of corporate culture from

society, is invalid.

Interdependencies:

Globalisation is more complex than just one ”global village”6, a country or a national

company interact with others levels such as regional and organizational. According to the

contingency theory, companies are influence by:

- Internal factors, their own organizational culture

- External factors, national, regional and global systems.

For example a German MNC will interact firstly with the European Union countries and share

some values and behaviours which are different out of Europe.

5 Huntingdon (2002)6 Quote : Marshall Macluhan

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Part 2 : International issues and IHR cultural practices

A- IHR challenges

1- Merger and acquisitions

As we see in the first part, the business system tends to becoming more and more global. The

globalization stress MNC and some new challenges and issues appeared. Due to the

internationalization of the company we can notice the development of merger and acquisition

on a large scale. This case is particularly interesting from the cultural point of view. Indeed

most of the time the M&A proceed from a strategic and financial advantages, the cultural

views are not required. Nevertheless the most of failed M&A are coming from their inability

to integrate each other in a same organization. The main reason can be business system across

countries and their inabilities to share a common identity and a common organization. Most

of the time reasons are due to cultural differences. In this case International Human resources

must support the management of change. HRM and employee relations in mergers and

acquisitions are critical because of employee resistance and support for the new

organizational entity

Factors that influence employees attitudes include :

- Cultural factors, key positions being filled by managers from different cultural backgrounds

- Style of leadership.

- Similarities and differences between management styles the different values within the

organization

- Willingness from employees to integrated the new parents company, managers from parent

companies tend to protect the interests of their own company

Possible solutions

-Hiring HRM managers external to the two companies

-Equity issues when dealing with managers from different background

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Example: Daimler/Chrysler merger.

The Daimler Chrysler merger proved to be a costly mistake for both the companies. Daimler

was driven to despair, and to a loss, by its merger with Chrysler. Last year, the merged group

reported a loss of 12 million Euros.

Analysts felt that though strategically, the merger made good business sense. But contrasting

cultures and management styles hindered the realization of the synergies. Daimler-Benz

attempted to run Chrysler USA operations in the same way as it would run its German

operations. Daimler-Benz was characterized by methodical decision-making. On the other

hand, the US based Chrysler encouraged creativity. While Chrysler represented American

adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more

traditional respect for hierarchy and centralized decision-making.

2- Emerging economy and knowledge transfer

The way of considering HR policy in emerging countries is quiet different to those practicing

in emerging countries. First of all the business system in emerging countries is different in

terms of labor system, organization and cultures.

In order to get an efficient business system, company are processing to expatriation, indeed

the knowledge and the know –how is not necessarily present in such countries. In a new

environment, expatriate can face to a cultural clash in terms of organizational systems ,

behaviors and cultures. The only one solution is to develop program improving cultural

awareness, and IQ intelligence.

The challenge who face expatriate is to be able to manage teams and business activities in a

new environment.

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B- IRHM cultural impact on MNC

1- Standardized process, adaptive process, or hybridization7

Cross national companies can use different approach in order to impact culturally their

organizations. First of all, the standardized approach which considers that due to the

globalization management concepts must be "culture neutral" and immune to societal

influence. In this case we will implement standardized process no matter the cultural

differences. The cultural impact of HR is in this case strong and don’t take into account the

external factors.

The second theory, based on the contingency theory is referred to assert that the success of a

given concept is dependent on the society in which it was developed. In other words, adapt

locally the HR tools and practices in order to be adapt to the behaviors and the cultures.

The hybridization seems to be the most appropriate strategy to operate on a MNC. I could be

define as “think globally, act locally”, this means that the characteristics of two cultures can

differ from each other as long as they have a similar effect on the behavior of their respective

populations. When this is the case, similar corporate cultures can develop in different societies

and go on to form the basis for the successful application of homogeneous work methods.

2- Case Example: Swedco, International pay and reward8

The actual trend for MNC, such as Swedco (a Swedish company), is to standardize their pay

system. The approach to HR at Swedco was “typically Swedish”, democratic approach for

decision making, coaching, facilitators... UK managers noted that the company encourage a

open talks. in fact the management was really close to the Swedish management. The pay

system has been standardized in order to be focused on the performance and the result. This

system is definitely close to Anglo-Saxon practices.

In this example we can see how home culture still influence the MNC, Swedish management

is still the main way of manage people in this company. Considering the strong institutional

presence and the state policy regarding works laws Swedco has been able to innovate

7 8 Tommy Edwards ; Chris Rees, « International human ressource management »

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according an Anglo-Saxon influence. This aspect characterised the globalization process and

the influence of the national cultures and systems.

C- Limits of the IRHM practices on MNC

1- Cultural differences:

As we see in the first part, we can distinguish several level of action. The national level as we

know can be influenced by organization national differences are still important Cultural

difference affect MNC’s organization in many way and are widely seen as central to

International resource management. They influences attitudes in a international negotiations,

create assumption, how to shape the organization, according to cultural specificities. Which

leverages of performance? Motivation? and so on... The problem is to define national culture

in order to implement efficient HR policies. To do this we can use several tools such has the

hofstede analysis :

Power distance index (PDI): “Power distance is the extent to which the less powerful

members of organizations and institutions (like the family) accept and expect that power is

distributed unequally.”

Individualism vs. collectivism: “The degree to which individuals are integrated into groups”.

In individualistic societies, the stress is put on personal achievements and individual rights. In

contrast, in collectivist societies, individuals act predominantly as members of a life-long and

cohesive group or organization.

Uncertainty avoidance index : “a society's tolerance for uncertainty and ambiguity”. It

reflects the extent to which members of a society attempt to cope with anxiety by minimizing

uncertainty. People in cultures with high uncertainty avoidance tend to be more emotional.

Masculinity vs. femininity: “The distribution of emotional roles between the genders”.

Masculine cultures’ values are competitiveness, assertiveness, materialism, ambition and

power, whereas feminine cultures place more value on relationships and quality of life.

Long term orientation vs. short term orientation: it describes societies’ time horizon. Long

term oriented societies attach more importance to the future.

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Each country have cultural difference, for example,

- Performance related pay more common in the US than in continental European

countries or Japan

- Recruitment-short term in the US-long term in continental European countries or

Japan

- US HRM practices tend to reflect a short term, individualistic, national business

culture

- Japanese HRM more collectivist, consensus based than American or continental

European practices

- French companies highly ethnocentric, learning language is essential.

Origins of companies are very important and enable MNC to take into account these cultural

differences in order to adapt its own organizational culture and values. Not taking into

account these cultural differences can bring conflict in a organization. Moreover the MNC is

bringing not only its values and its organizational culture but its national culture too.

MNC implementation = National culture + organizational culture + Local culture

2- Embeddedness of strategy9:

The embeddedness is the notion that firm’s strategy is strongly embedded in its particular

economy and cultural context. An organization is captive of its past, coming from some

internal factors of the organization, such as the role of the founders and leaders and the

influence of the History of the firm. However, the systemic perspective demands a much

fuller appreciation of the way a multinational country of origin is important in shaping the

way its operates at the international level, this approach is quite clear that there is much more

than a national influence than a sub culture. The role of the family can be crucial factor in

creative variations between countries in the ways that firms operate. For instance, the

importance of the family unit in Taiwan creates entrepreneurial small and medium-sized

firms. In France, the high power distance show how state, elitist educational institutions,

financial and industrial enterprises have long been closely interlinked.

Most of the company concentrate their key activities in their home countries, which is

influenced a lot the frame of the organization. Some business practices are linked to cultural

9 Tommy Edwards ; Chris Rees, « International human ressource management »

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aspect such has the model of flat organization in some Nordic company due to a low power

distance. Most of MNC are still influenced by their home country and they influenced

themselves their own organization everywhere in the world.

The impact of International Human Resources on the cultural aspect are limited first because

of the national differences, business system are different, institution are not working in the

same level.

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Conclusion:

This essay tried to show how globalization is a complex process which includes a large

international environment. In this environment companies changed, they became more

international and cross national. We can define MNC as a large player of the globalization,

their role can influence the states and region, they have a direct influence on the unification of

the business systems and regulations. Nevertheless nations still possess strong tools which

allowed them to control institutions and to get specific business systems. Moreover, nations

possess their own cultures and are quite different from a country to others.

A society has a significant impact on the corporate cultures residing in it. With this in mind,

the effectiveness of management concepts should always be discussed within the context of

the culture in which they were developed. Successfully transferring these concepts to

companies in other societies is possible, but not easy: for just as a society can produce various

corporate cultures, a corporate culture can contain elements of various societies.

This context imposes some challenges to MNC and in particularly in terms of human

resources. In a globalization area, companies tend to merger each other, implant new

subsidiaries everywhere in the world and have to face to organizational, cultural issues.

In examining the intercultural transferability of management and IRHM concepts, the

"globalization" and "contingency" theories offer themselves for consideration. Supporters of

the globalization theory consider management concepts to be "culture neutral" and immune to

societal influence. In contrast, supporters of the contingency theory assert that the success of a

given concept is dependent on the society in which it was developed.

The dogmatic stance taken by each side renders both theories questionable. The

"hybridization" should serve to balance them out. It states that the intercultural transferability

of management concepts and IRHM can be successful if the societies of the affected countries

are functionally equivalent but not necessarily identical.

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Bibliography

Articles :

“Intercultural transfer “ Frankfurter Allgemeine Zeitung, May 26, 1999, page 66

Books :

CARR Stuart C.“Globalization and Culture at Work : Exploring their Combined Glocality”

Plunkett, Warren R., and Charles R. Greer. Supervision: Diversity and Teams in the Workplace. 9th ed. Upper Saddle River, NJ: Prentice Hall, 1999.

Tommy Edwards ; Chris Rees, « International human resource management », ed Prentice Hall

Ronald Bogaschewsky, Roland Rollberg « Prozeborientiertes Management », Ed Broché - mars 1998

Internet :

http://geert-hofstede.com/

http://www.ajol.info/index.php/kjbm/article/viewFile/43822/27340

www.strathmore.edu/.../strategic- human - resource .pdf

www.thomaslfriedman.com/.../the- world -is- flat

http://www.jackson.com.np/documents/MBA6/InternationalHRMReviewandCritique.pdf

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