Defining the Nature and
the Challenges of IHRM

Learning outcomes

To understand the nature and challenges of IHRM,

To get an overview of different models of HRM

Seminar tasks

Introductory exercise

Reading/activity for the week

·      Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 1

Recommended reading:

·      Noe, Raymond A., 2002, Hollenbeck, John R., Gerhart, Barry, Wright, Patrick M. Human Resource Management, 4^th edition, McGraw Hill, Chapter 1

Global Strategy and HRM

Learning outcomes

Understand the link between strategy and HRM.

Ability to link business strategy with relevant HRM practices and activities

Understanding the contribution of HRM to organisational performance.

To understand why the role of HRM is changing in the global context.

To consider different organisational options in organising the HR function

Seminar tasks

Exercise: Contemporary business news with its implications for IHRM.

Discussion on real life experience of business and HRM strategy integration.

Reading/activity for the week

·      Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 2

Recommended reading:

·      Noe, Raymond A., 2002, Hollenbeck, John R., Gerhart, Barry, Wright, Patrick M. Human Resource Management, 4^th edition, McGraw Hill, Chapter 2

Chapter 1. Defining the Nature and the Challenges of IHRM

• To know why international business evolved in the way it did, we need to understand how our predecessors resolved dilemmas such as exercising distant control before modern transport and communications developed.
• Industrialization drove both internationalization and the precursors to personnel management, both of which enjoyed a boom in the early decade of stimulating effect on personnel practices.
• With the emergence of the modern multinational in the expansion years after WW II. International personnel departments were set up to manage international assignments. Until the 90s, different aspects of expatriation[1] have remained the dominant focus.
• Increasing geographical spread allied to a growing product range led some multinationals to adopt the matrix solution[2], a big conceptual advance but ultimately unmanageable as a structural solution. Firms started to realize that HRM could help them combine local autonomy with a high degree of coordination.
• In most firms, the headquarters bureaucracies grew to cope with these increasingly complex problems of international coordination and control. With localization and time-based competition, these bureaucracies were restructured, accompanied by downsizing and delayering.
•  The emergence of the Japanese challenge represented a culture shock for western managers, leading to the realization that there were actually “two best ways” – and if there were two best ways, then there might be more.
• International firms have always muddled through dilemmas and contradictions, often in a pendulum fashion. These contradictions started to become apparent as firms were pushed to be simultaneously responsive to local needs and globally integrated. Such contradictions are the hallmark of the so-called “transnational organization”.
• All multinationals face transnational pressure but not with equal force – there is considerable discretion in the choice of strategy. We are seeing firms going beyond the transnational – today’s “front-back organization” that poses big challenges for coordination and contention management.
• As the resource-based perspective on strategy took hold, HRM came to me seen more and more as one of the keys to build sustainable competitive advantage.[3]
• What distinguishes international HRM is its interdisciplinary perspective.

Chapter 2. Global Strategy and HRM

• HRM contributes to organizational performance in three different ways
  • Through sound functional basics,
  • Through effective realignment when the external environment changes,
  • And by building an organizational context so that the organization can manage the dualistic forces that it confronts.
• The theoretical perspective behind the builder role is that of internal fit and consistency. The perspective behind the change partner role is that of external fit (associated with strategic HRM). The perspective behind the navigator role is that of duality or paradox theory.
• There are dangers of getting stuck in specific HR roles – mentioned above. Builders may become administrative custodians, losing the business credibility that is necessary to act as a change partner. Change partners may neglect the importance of internal consistency and solid foundations.
  • Single-employee consistency – reflecting whether employees experience different HR elements such as appraisal, promotion, and compensation as complementary or conflictual.
  • Consistency among employees – referring to whether employees in similar roles but working in different departments or units feel that they are treated fairly.
  • Temporal consistency or continuity over time – if practices and policies are constantly changing this drains away productive energy and leads to dysfunctional frustration.
• The universalist model of HRM, maintaining that certain practices are universally associated with high performance, is not realistic. However, there is evidence that companies who adopt certain configurations, such as that of “high commitment”[4] or “high performing” practices, have better financial returns.
• There are many potential influences on a firm’s approach to HRM as it expands internationally – the influences of the mother country, the company’s culture, the local country, and other multinational corporations. To maintain consistency, firms tend to adopt one of two polar strategies in HR, either global integration or local responsiveness. Transnational pressures, however, may threaten such strategies.
  • While internal consistency pushes toward a particular configuration of policies, work systems and practices, it is subject to the pushes and pulls of these four different forces.
    • Country-of-origin effect (cross-national isomorphism[5])
    • Company-of-origin effect (corporate isomorphism)
    • National business systems effect (local isomorphism)
    • Multinational corporation effect (global interoperate isomorphism)
• One of the ways in which HRM contributes to organizational performance is in helping the firm to adjust to environmental change and to implement new strategies. However, since change involves realignment or reconfiguration, this often takes much more time (continuity) than people expect.
• An important aspect of the realignment process open constructive debate on the nature of the problems or opportunities and the intended goals – a difficult task in many cultures.
• Organizational effectiveness is inherently paradoxical, requiring opposing capabilities. In the fast moving, complex, and competitive environments facing most international firms, the future has to be built into the present by managing the context.
  • The evolution of strategy in SHRM
    • The organization’s strategy – its objectives (ROI), the balance between short-term and long-term objectives, its basis for achieving competitive advantage (superior quality, customer service, technical innovation, low cost production).
    • The external institutional environment – the external social, political and legal norms and constraints
    • The workforce – the implications of demographics
    • The organization’s culture – i.e. whether work is viewed as instrumental or as fun
    • The technology and work organization – the skills required by the technology.
• Two dualities of particular concern to the transnational firm are
  • centralization versus decentralization (reflecting the global-local dilemma) (side 82-85) and
  • resource leverage versus resource development (often known also as exploitation versus exploration) (side 85 - 87).

• One of the underlying challenges of realignment is managing long-term change while facing short-term operational pressure. Integrating this duality into individual roles in the form of “split egg” – project role vs. operational role - (side 88-90) responsibilities is more effective than structures of line and staff responsibilities.
  • Gratton views realignment (or the creation of a living strategy, as she calls it) as a process that can be broken down into six steps

1. Building a guiding coalition
2. Imagine the future
3. Understanding the gab with current capabilities
4. Creating a map of the change system
5. Building commitment to change
6. Bridging into action

HRM Foundations (page 54)

Recruitment and Selection

• Manpower or HR planning
• Recruitment
• Equal opportunity management
• International transfers
• Termination and outplacement

Training and Development

• Job Training (on-the-job and off-the-job)
• Auditing performance and potential
• Leadership development
• Career Management
  • Career planning
  • Coaching and mentoring
  • Succession management

Performance management

• Managing employee motivation and commitment (incl. policies such as open door and attitude surveys)
• Job evaluation
• Goal, standards setting and budgeting
• Performance measuerement
• Appraisal
• Reward management
  • Compensation and benefits
  • Informal rewards

Matrix management

Matrix management is a type of management used by some organizations.

Under matrix management, all people who do one type of work are in a pool. For example, all engineers may be in one engineering department and report to an engineering manager. These same engineers may be assigned to different projects and report to a project manager while working on that project. Therefore, each engineer may have to work under several managers to get his or her job done.

Proponents suggest that there are two advantages to matrix management. First, it allows team members to share information more readily across task boundaries. Second, it allows for specialization that can increase depth of knowledge and allow professional development and career progression to be managed.

The disadvantage of matrix management is that employees can become confused due to conflicting loyalties. A properly managed cooperative environment, however, can neutralize these disadvantages. In order for the system to work, all parties must be willing to talk to each other to learn what their different objectives and goals are.

Matrix management can put some difficulty on the project managers because they must work closely with other managers and workers in order to complete the project. The functional managers may have different goals, objectives, and priorities than the project managers, and these would have to be addressed in order to get the job done.

One advantage of matrix management is that it is easier for a manager to loan an employee to another manager without making the change permanent. It is therefore easier to accomplish work objectives in an environment when task loads are shifting rapidly between departments.

The matrix

Most organizations fall somewhere between the fully functional and fully projectized organizational structure. These are matrix organizations. Three points along the organizational continuum have been defined. They are:

Weak/Functional Matrix – A project manager (often called a project administrator under this type of organization) with only limited authority is assigned to oversee the cross-functional aspects of the project. The functional managers maintain control over their resources and project areas.

This matrix still retains most of the problems associated with a functional organization. The project administrator’s role is to attempt to alleviate communication issues between functional managers and track overall project progress.

Balanced Functional Matrix – A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers.

Proponents of this structure believe it stri