IBS

NEW DELHI, March 26 — Under pressure from shareholders, Citigroup is planning to shed thousands of jobs and sharpen its focus on its operations outside North America.

The colossal bank will get most of its growth from its international operations, chief executive Charles O. Prince told thousands of employees in India today, as he wrapped up a tour of Asia.

Mr. Prince’s stop in India comes just weeks before Citigroup will announce a broad restructuring plan that could involve the elimination or relocation of as many as 15,000 high-cost jobs from areas including New York, London and Hong Kong, several executives briefed on the matter say. The net job loss could be 10,000 to 12,000, some through attrition.

Citi’s consumer operations will be hardest hit, with front line and back office operations affected, they say. The corporate and investment banking businesses may be hard hit, with several thousand jobs lost, they say.

Managers in these units have been asked to review highly paid employees and look for places to cut fat, particularly just below managing director level.

The job cuts are part of a company-wide review sparked by the chief operating officer Robert Druskin, who two months ago decided to examine expenses and operations across the entire bank. A press release about the restructuring is due out in mid-April, executives say.

Citigroup, like other global banks, has been expanding its outsourcing in India beyond consumer services like bill payment, to include highly skilled areas like research, investment banking and credit analysis of non-Indian companies and deals.

Citigroup has over 600 such employees in India, and it is growing that number gradually.

With the restructuring, some jobs may also be moving to less expensive cities in the United States, like Buffalo, New York, Warren, New Jersey and the suburbs of Cincinnati, Ohio.

Citigroup, which employs more than 325,000 globally, is expected to save $1 billion in costs with the coming cuts.

Citigroup already has about 22,000 employees in India, making it one of the largest foreign banks there. Mr. Prince said today that India had been the single biggest driver of growth for Citigroup’s international operations. Managers in India were not asked to review their operations for possible cuts.

Mr. Prince spoke about the bank’s international growth to over 3,000 employees in India today, in a live town hall meeting in Mumbai and through conference calls with 30 other Indian cities. Mr. Prince and his wife Margaret Wolff are hosting a dinner today in Delhi for several hundred government officials and business executives.

Citigroup has been under pressure to cut costs and grow profits, after being dogged with problems from regulatory lapses to increased competition. Several analysts have suggested that the colossal bank is worth more in parts than together.

Mr. Prince seemed to refute that idea today, when he reiterated his “One Citi” mantra, telling employees that the bank should greet clients with one face.

International operations are already a big portion of Citigroup’s business: the bank’s international revenues in the fourth quarter of 2006 were $9.98 billion, or just over 40 percent of total revenues. International net income was $2.04 billion, just under 40 percent of the total.

International consumer operations brought in $4.95 billion in revenues in the fourth quarter of 2006, versus $7.96 billion from United States consumer operations.

However, in corporate and investment banking international operations provided more than half of Citigroup’s revenues, or $4.66 billion of a total $7.08 billion.

Citigroup will focus on two or three countries outside North America for growth, Mr. Prince said today, including India.

It is unclear how many of the relocated jobs could be moved to India, and Mr. Prince did not mention job cuts during his speech today. His speech was greeted with "rounds and rounds" of applause in Mumbai, said one person who listened to his speech.

Citigroup has 12,000 people on the ground in India in its business process outsourcing division, which processes credit card and mortgage payments and performs other back office functions. Sanjay Nayar, the Citigroup India head, told employees this month that the bank expects to grow that division by 200 employees a month, though that figure takes into account a very high turnover of employees.

Citigroup also has another 10,000 employees in India who work in 39 retail bank branches and 400 Citifinancial offices, as well as corporate and investment banking, private banking and wealth advisory.

During his town hall meeting, Mr. Prince gave an unexpected nod to John Reed, the former Citibank chief who tumultuously shared the top spot at Citigroup with Sanford Weill after it merged with Travelers Group.

Mr. Reed had often stressed that the future of banking would depend heavily on the internet, Mr. Prince told the India town meeting, a prediction that is bearing fruit.

BELFAST, Northern Ireland, March 26 — After years of mutual hostility and recrimination, the leaders of Northern Ireland’s dominant rival groups, Sinn Fein’s Gerry Adams and the Protestant leader, the Rev. Ian Paisley, met today for their first face-to-face talks and agreed to form a joint administration for the province on May 8.

The deal was hailed by Britain and Ireland as a historic breakthrough, more than four years after Northern Ireland’s local government was suspended in October, 2002, after a dispute over espionage activities by the Irish Republican Army.

“The word ‘historic’ has to be used,” said Brian Feeny, a historian at St. Mary’s University College in Belfast, “It was the only way it was ever going to work. The two leaders of the two traditions had to do the deal.”

If implemented, the agreement means Britain will formally hand back responsibility for running many of Northern Ireland’s internal affairs to an administration composed of Protestants and Catholics, with Mr. Paisley, the leader of the biggest party in the province, as First Minister and Martin McGuinness, Sinn Fein’s chief negotiator, as his deputy. Other smaller parties will also have seats in the government proportionate to their electoral showing.

“Today the clouds have lifted and people can see their future,” said Peter Hain, Britain’s Northern Ireland minister. British officials depicted the agreement as critically different from many previous false starts because the two main parties had made the deal themselves in direct talks that broke the province’s long-standing taboos on such encounters.

“The first time the two parties have ever met is today,” Prime Minister Tony Blair’s official spokesman, who customarily requests anonymity, told reporters in London. “In the past, it’s been us imposing dates on the parties. The crucial difference today is that this was an agreement reached by the parties themselves.”

The deal was announced by Mr. Adams and Mr. Paisley as they sat close together at a diamond-shaped table in the Stormont Parliament building — a sight that would have seemed impossible in the days when Mr. Paisley labeled Mr. Adams and his followers terrorists because of Sinn Fein’s affiliation with the I.R.A.

Such was Mr. Paisley’s opposition to any kind of settlement with Sinn Fein that he earned the nickname “Doctor No.” He was renowned for railing against the Vatican and what he called “popery,” once labeling the Roman Catholic Church “the mother of harlots and the abomination of the earth.”

While the province’s leaders failed to meet a March 26 deadline set by Britain and Ireland to restore local government, the fact that the two men named a date themselves — and sat together to say so — was taken as what Prime Minister Tony Blair of Britain called “a very remarkable coming together of people who, for very obvious reasons, have been strongly opposed in the past.”

Indeed, the sight of the two men, once sworn enemies, sitting feet apart was all the more striking in contrast to the once-familiar images of bloodshed that scarred Northern Ireland for decades. Some 3,720 people died in three decades of sectarian strife known as The Troubles that ended with an I.R.A. ceasefire 10 years ago and the Good Friday peace agreement in 1998.

After reading their statements, Mr. Adams and Mr. Paisley, head of the Democratic Unionist Party, shuffled their papers but did not shake hands. Nonetheless, in prepared statements, they sounded similar, conciliatory themes.

“We are very conscious of the many people who have suffered,” Mr. Adams said. “We owe it to them to build the best possible future. It is a time for generosity, a time to be mindful of the common good and of the future of all our people.”

A few minutes earlier, Mr. Paisley, who had insisted on the delay until May 8, had said: “We must not allow our justified loathing of the horrors and tragedies of the past to become a barrier to creating a better and more stable future. In looking to the future we must never forget those who have suffered during the dark period from which we are, please God, emerging.”

The two men sat in front of a single television camera and one photographer to record Mr. Paisley and Mr. Adams reading their respective scripts. Their meeting took place on the first floor of the Stormont Parliament Buildings, a 1930s structure that was a former symbol of Protestant hegemony in Northern Ireland where the main Good Friday accords were signed in 1998.

At that time, Mr. Paisley’s party rejected the very notion of sharing power with Sinn Fein. In elections five years later, his Democratic Unionists became Northern Ireland’s biggest Protestant party. Since then, in a series of halting negotiations, Mr. Paisley has begrudgingly nudged towards agreement on power-sharing in return for major concessions.

In 2005, the I.R.A. pledged to put its weapons beyond use and to pursue its goals by political means, not armed struggle. Right up until the last few weeks, Mr. Paisley pressed Sinn Fein for further concessions, including acceptance of the province’s policing arrangements, traditionally dominated by Protestants.

At a meeting last October in St. Andrew’s, Scotland, Britain and Ireland laid out a timetable that foresaw the power-sharing administration being revived today. Britain had threatened to restore full direct rule of Northern Ireland if that deadline was not met. But a British official said today: “If there’s a consensus about the way forward the British government isn’t going to stand in the way of that consensus.”

The St Andrew’s agreement also provided for elections earlier this month, in which both Sinn Fein and the Democratic Unionists strengthened their positions as the two most powerful parties in the province. The election strengthened Mr. Paisley’s hand against dissidents opposed to the deal within his own party.British officials maintain that the election three weeks ago also represented a demand from Northern Ireland’s 1.6 million people for the rival parties to end their conflicts and concentrate on local issues such as the price of water-supplies, health and education.

“It’s the triumph of normal politics, and we have waited a long time for that,” one British official said, speaking in return for anonymity. In hectic, last-minute negotiations here, the official said, Sinn Fein had agreed to a delay in return for a firm guarantee from the unionists to share power.

In London, Mr. Blair said: “This is a very important day for the people of Northern Ireland, but also for the people and history of these islands. And in a sense, everything we’ve done over the last 10 years has been a preparation for this moment, because the people of Northern Ireland have spoken through the election.”

“They have said they want peace and power-sharing and people working together and the political leadership has come in behind that and said: Well, we’ll deliver what the people want.”

The two sides remain divided in their basic aims, however, with Sinn Fein pressing for a united Ireland and the Democratic Unionists seeking continued links with mainland Britain.

“This won’t stop republicans being any less republican or nationalist, or making unionists less fiercely unionist,” Mr. Blair said. “But what it does mean is that people will come together, respecting each other’s point of view, and share power, make sure politics is only expressed by peaceful and democratic means.”

The agreement is particularly important for Mr. Blair since he plans to step down in the summer and wants to put in place a legacy that will include an agreement on Northern Ireland, ending a conflict whose roots date to the 17th century settlement of north-eastern Ireland by Protestants from Scotland and England. The restoration of Northern Ireland’s local administration would also fulfill an electoral promise to create local government in Scotland, Wales and Northern Ireland.

Mr. Adams, whose party is also competing for electoral advantage in the Irish Republic, said today’s agreement “marks the beginning of a new era of politics on this island.”

The two sides said that between now and May 8 they would hold meetings on the details of restoring the power-sharing executive and would jointly press the British government for an improved package of incentives to boost the province’s economy, which is heavily dependent on government subsidies.

Referring to his own party, which is affiliated to the I.R.A., and to Mr. Paisley’s Democratic Unionist Party, Mr. Adams said: “There are still many difficulties to be faced but let it be clear — the basis of the agreement between Sinn Fein and the D.U.P. follows Ian Paisley’s unequivocal and welcome commitment to support and participate fully in the political institutions on May 8.”

It is not totally clear why that date has been chosen. It would place the restoration of power-sharing government in Northern Ireland between local elections in Scotland and Wales and a national election expected several weeks later in the Irish Republic. Sinn Fein is also campaigning in that election and may benefit among Irish Republic voters by being seen as a party in the Belfast administration.

Jeffrey Donaldson, who had defected to the Democratic Unionists in opposition to the Good Friday accords, said today’s agreement “is for the next generation. We want to hand on a legacy. I know that the children will not have to endure what people of both sides have suffered.”

BERLIN, March 24 — The German sports-car maker Porsche said Saturday that it would make a takeover bid for Volkswagen, a symbolically audacious but largely legal step in its growing control over VW, Europe’s largest carmaker and the inventor of the once-ubiquitous Beetle.

Porsche plans to lift its stake in Volkswagen to 31 percent from 27.3 percent. Under German law, it is required to make an offer for the entire company once it owns more than 30 percent of the shares.

The offer of 100.92 euros ($134.40) a share is the minimum amount Porsche can legally offer other shareholders and is well below Volkswagen’s most recent closing price of 117.70 euros. A Porsche spokesman said it was not seeking to acquire a majority stake in Volkswagen any time soon.

“We expect very few, if any, shareholders to sell us their shares at this price,” the spokesman, Michael Baumann, said. “This gives us the freedom to move further without taking other special steps.”

The move confirms, however, that Porsche is determined to tighten its grip on Volkswagen, with which it has deep historical links. The two companies cooperate in manufacturing sport utility vehicles, and two of Porsche’s most senior executives serve on Volkswagen’s board.

In a statement, Volkswagen’s chief executive, Martin Winterkorn, said he welcomed Porsche’s increased stake.

Analysts said Porsche was forced to cross this threshold sooner than it might have wished because of the recent rally in Volkswagen’s share price. Many analysts had expected it to wait until a European court issued a ruling on a German law that protects Volkswagen from hostile takeover bids.

The court is expected to strike down the law, which places a cap on the voting rights of shareholders at 20 percent, regardless of how many shares they own. If it does not, Porsche could find itself holding a large stake in Volkswagen without commensurate voting power.

“It’s clearly a high-risk approach, because Porsche doesn’t know exactly what is going to happen at the court,” said Ferdinand Dudenhöffer, the director of the Center for Automotive Research in Gelsenkirchen.

Shares of Volkswagen have risen 37 percent this year, largely on speculation about Porsche’s intentions.

Porsche first acquired shares in Volkswagen in September 2005, saying it wanted to protect the independence of its partner. It has steadily increased its stake, occasionally ruffling Volkswagen’s other major shareholder, the state of Lower Saxony, which owns 20.5 percent.

The links between the two companies are longstanding, complex and personal. Ferdinand Porsche, the patriarch of the Porsche family, designed the Volkswagen Beetle at the behest of Hitler.

The chairman of Volkswagen’s supervisory board, Ferdinand K. Piëch, is a member of the Porsche family, which still controls the sports-car company. He was once chief executive of Volkswagen, and continues to exert influence over its day-to-day affairs.

Analysts regard Porsche’s growing stake in Volkswagen as a way for Mr. Piëch, an automotive engineer and billionaire industrialist, to reassemble the pieces of his grandfather’s empire.

If all of Volkswagen’s shareholders were to accept Porsche’s offer, Mr. Baumann said, the deal would be valued at about 35 billion euros ($46.6 billion). Porsche has lined up financing for that, though he made it clear that the carmaker does not intend to raise the offer beyond the current discounted level.

Porsche’s investment in Volkswagen has already shaken up the larger company. Last fall, Volkswagen dismissed its chief executive, Bernd Pischetsrieder, and replaced him with Mr. Winterkorn, a protégé of Mr. Piëch, who ran the company’s luxury car division, Audi.

Soon afterward, Volkswagen’s No. 2 executive, Wolfgang Bernhard, resigned. Mr. Bernhard, a former chief operating officer at Chrysler, had pushed a stringent cost-cutting program.

Since then, analysts say, Volkswagen has shifted its emphasis to high-quality engineering and design. These are hallmarks of Porsche, and of Mr. Piëch, when he was chief executive of VW.

“In the long-term, we’ll have to see how competitive Volkswagen will be in the market,” Mr. Dudenhöffer said. “The risk is Piëch wants to do everything. He wants to buy control, and he’s reversing Volkswagen’s strategy.”

In a long-anticipated challenge to YouTube and other online video sites, two big media companies yesterday announced a new venture to showcase their own programming across the Internet’s biggest Web sites, as well as a new jointly owned Web destination.

The News Corporation and NBC Universal will distribute their latest video fare, like episodes of “24” and “The Office” on AOL, Yahoo, MSN and MySpace, which together reach about 96 percent of the Internet’s audience in the United States.

The content, which will appear in an embedded media player on these Web sites as well as on a new separate video site that News Corporation and NBC Universal will introduce, will be supported by advertising and be free to viewers.

Viewers will also be able to edit the content and post their own videos, a popular feature of other online video sites, as well as buy downloads of movies from the 20th Century Fox and Universal Studios.

News Corporation and NBC Universal, like other media companies, have had complex and increasingly tense relationships with Google, which owns YouTube. The media companies’ copyrighted material, like television shows and music videos, show up on YouTube without the media companies’ permission. Viacom, which has held discussions on joining the unnamed new venture but so far has not done so, is suing YouTube for $1 billion on the grounds of copyright infringement.

While many media joint ventures have fizzled both online and off, the unnamed venture — which some working on the project referred to internally as “Caterpillar” — could represent one of the boldest efforts yet by conventional media companies to try to maintain control over their content and advertising relationships on the freewheeling Web.

The idea is to create a “one-stop shop” for advertisers that would give the media companies’ more clout in negotiating to distribute their video material around the Internet. The new company does not yet have a name or a management team but is expected to start operating this summer.

Jeff Zucker, the chief executive of NBC Universal, said that the distribution deals with the major Web destinations underscored that the new venture is not merely a defensive move against YouTube and Google, as some early reports had characterized it.

“I totally disagree with that,” Mr. Zucker said in an interview. “What this is doing is taking advantage of the huge marketplace, both on the advertising side and consumer side, for this kind of material.”

Peter A. Chernin, the president of the News Corporation, said the new site “has absolutely no resemblance” to YouTube and that Eric E. Schmidt, the chief executive of Google, is considering licensing the new venture’s fare just as other big Internet players have.

A Google spokesman confirmed that Mr. Schmidt spoke with Mr. Chernin yesterday morning by phone but declined to discuss any details about the call.

All the advertising in the video programming will be sold by either the media companies themselves or the new Web venture, and shows and clips will be displayed on a video player that will be embedded in sites like MSN and AOL. For the Internet companies who are distributing the shows, it allows them a new way to tap into the surging popularity of Internet video and vie with YouTube for viewers.

The impetus for announcing the business now, executives involved said, was the conclusion of deals with AOL, Yahoo, MSN and MySpace. The partners had also spent several months trying to recruit other media companies including Viacom, Walt Disney and CBS to join their start-up.

“This was never about speed, this was about getting it right,” Mr. Chernin said in an interview. “It took us this long to get it right.”

Carl D. Folta, a Viacom spokesman, said that “a new online video distribution platform that respects copyrights is a welcome addition to the industry.” Mr. Folta declined to comment on whether Viacom would join the venture.

Both of the founding companies have vast video assets. In addition to owning the NBC TV network, NBC Universal’s businesses include the cable channels USA Network, Sci-Fi Channel and Bravo. The News Corporation owns the Fox Television Network and MySpace.

Both companies have agreed to make their entertainment content available online only through the new venture or through their existing Web outlets such as NBC.com and Fox.com. Mr. Zucker said NBC would continue to promote NBC.com heavily alongside its programming.

Five people familiar with the terms of the new venture — none of whom wanted to be identified because they said the information was confidential — said the new company would get close to 90 percent of the gross revenue from any advertising displayed on a distributor Web site like AOL. The majority of new revenue generated by the new business will go to its media partners.

The venture will have its own sale force. But to avoid the appearance of one TV network’s fare getting more attention, marketers looking to advertise there will not be able to buy advertising based on individual shows or networks, but rather according to genre or demographic data.

At the same time, NBC or Fox can reclaim and sell the advertising inventory of any show it is distributing online by buying it back from the new company at a discount.

“Everything they’ve promised sounds great,” said James L. McQuivey, an analyst at Forrester Research. “But file this in the category of easier said than done. This is going to be a huge undertaking to pull off. The site has to be amazing, fun to use, well branded. It’s not something you can pull together in a couple of months.”

Because its content is coming from only two companies initially, this venture could invite comparisons to some earlier ill-starred attempts by media companies to compete online. For example, in 1999 Universal Music and Bertelsmann teamed up to start a site called GetMusic.com to compete with the popular file-sharing site Napster.

That venture, like others, did not survive even though Napster’s faded under legal pressure, because it did not offer a wide enough selection of programming to excite consumers.

The new video venture is different in several respects, however. For one, it is advertising-supported and represents a new, centralized way for the television networks to try extend their relationships with marketers online, where video is the fastest-growing category of advertising. The companies’ said initial advertisers include Cadbury Schweppes, Royal Caribbean, Cisco, Esurance, Intel and General Motors.

Jessica Reif Cohen, the media analyst at Merrill Lynch, said the new venture could provide “more significant reach than advertisers have previously been able to obtain online” for video.

Starz Sues Disney Over Film Sales

LOS ANGELES, March 22 — Starz Entertainment, a unit of Liberty Media, wants to block Walt Disney from selling movies over the Internet while those films are showing on Starz cable and Web services.

Starz filed suit Thursday in United States District Court for the Central District of California alleging that the sale of movies through Apple’s iTunes store and elsewhere violates a promise to license those films to Starz exclusively for a set period.

Starz contends it has paid Disney more than $1 billion for exclusive rights to show Disney films during blocks of time after the movies leave theaters. The lawsuit claims the contract prevents Disney from selling films on the Internet before they appear on Starz services, like the Starz and Encore video-on-demand movie channels or its online service, Vongo.

The lawsuit, against Disney’s Buena Vista unit, was filed after months of talks failed to produce a solution, Starz said.

“We believe Starz misreads its agreement with Buena Vista Television and that its claim is without merit,” a Disney spokeswoman, Kim Harbin, said in a statement. “BVT retained and has the right to sell its motion pictures in a wide range of mediums.”

Miguel Helft and Bill Carter contributed reporting.

Geert Hofstede is an influential Dutch expert on the interactions between national cultures and organizational cultures, and is an author of several books including Culture's Consequences (2nd, fully revised edition, 2001) and Cultures and Organizations, Software of the Mind (2nd, revised edition 2005, with Gert Jan Hofstede).
Hofstede demonstrated that there are national and regional cultural groupings that affect the behaviour of organizations, and that are very persistent across time.

Dimensions of culture

He has invented five dimensions of culture in his study of national influences:
Power distance - The degree to which the less powerful members of society expect there to be differences in the levels of power. A high score suggests that there is an expectation that some individuals wield larger amounts of power than others. A low score reflects the view that all people should have equal rights. Latin American and Arab nations are ranked the highest in this category; Scandinavian and Germanic speaking countries the least. Countries with high power distance rating are often characterized by a high rate of political violence.
Individualism vs. collectivism - individualism is contrasted with collectivism, and refers to the extent to which people are expected to stand up for themselves, or alternatively act predominantly as a member of the group or organisation. Latin American cultures rank the lowest in this category, while the U.S.A. is one of the most individualistic cultures.
Masculinity vs. femininity - refers to the value placed on traditionally male or female values. Masculine cultures value competitiveness, assertiveness, ambition, and the accumulation of wealth and material possessions, whereas feminine cultures place more value on relationships and quality of life. Japan is considered by Hofstede to be the most "masculine" culture, Sweden the most "feminine." The U.S. and UK are moderately masculine.
Uncertainty avoidance - reflects the extent to which a society attempts to cope with anxiety by minimizing uncertainty. Cultures that scored high in uncertainty avoidance prefer rules (e.g. about religion and food) and structured circumstances, and employees tend to remain longer with their present employer. Mediterranean cultures and Japan rank the highest in this category. (see below)
Long vs. short term orientation - describes a society's "time horizon," or the importance attached to the future versus the past and present. In long term oriented societies, thrift and perseverance are valued more; in short term oriented societies, respect for tradition and reciprocation of gifts and favors are valued more. Eastern nations tend to score especially high here, with Western nations scoring low and the less developed nations very low; China scored highest and Pakistan lowest.

Week nine (26th April 2009)

Managing Change and Global Integration

Learning outcomes
•    Gaining ability to diagnose the need, to implement and to evaluate change processes.
•    Understanding HRM´s role in fostering coordination mechanisms within the international firm.

Seminar tasks
•    Case-analysis
•    Discussion on experienced change management processes.
•    Exercise: Developing indicators to measure the effectiveness of HRM

Reading/activity for the week
•    Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 5 & 6 & 7

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Chapter 5, 6 and 7. Managing Change and Global Integration

CHAPTER 5 - SUMMARY

• Initially considered only a means of securing market access, alliances today are an integral part of global strategies in all aspects of the value chain. Using alliances to generate new knowledge is increasingly important.
• Alliances are mostly transitional entities; therefore longevity is poor measure of success. The aim is not to preserve the alliance at all costs but to contribute to the parent’s competitive position.
• Alliances are dynamic, migrating from one strategic orientation to another. Very few alliances remain complementary for long. Alliances among competitors are increasingly frequent, but they are also the most complex.
• The approach to HRM is largely driven by the strategic objectives of the partnership. This requires a focus both on managing the interfaces with the parent companies and on managing people inside the alliance itself.
• The firm’s HRM skills and reputation are an asset when exploring and negotiating alliances. Do not enter a complex alliance unless you have a good grasp of HRM basics, and avoid picking a partner who does not. The greater the expected value from the alliance, the more HR support is required.
• Equity control is a costly and relatively ineffective from of alliance control compared with investing in a carefully designed and implemented HRM strategy.
• Conflicting loyalties, complex relationships, boundary management issues, coupled with uncertainty and instability are characteristic of most alliances. Managers assigned to the alliance need high tolerance for ambiguity.
• Alliance learning is neither automatic nor free – there must be clear learning targets, sufficient investment in people, and a tight alignment of HRM practices with learning objectives.
• Alliances are full of tensions between competition and collaboration, between global and local interests, between leveraging and developing competencies. Mastering alliances helps firms learn to manage transnational pressures.

Appendix 5-1.
 

Appendix 5-2.
 

Appendix 5-3.
 

Appendix 5-4.
 

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CHAPTER 6 – SUMMARY

• Most merger or acquisition failures are linked to problems in post-merger integration. Cultural and people issues consistently rank among the main difficulties in executing acquisitions. Do not underestimate the importance of cross-cultural differences, but on the other hand do not confuse culture with poor management.
• Probably the most consistent predictor of M&A success is past experience in acquisitions. The more the company merges, the better it gets at merging and the stronger the talent and experience for the next merger. Companies that have solid foundations in HRM and a good track record in managing change also tend to be good at managing acquisitions.
• There are various strategic logics behind mergers – stand-alone, absorption, reverse merger, “best of both”, and transformation. Each has different implications for the nature of the post-merger integration process. Think about the end-state before you start.
• HR should be involved early in the acquisition planning since the “soft” aspects of the due diligence process, such as the assessment of culture and people practices in the organization to be acquired, are just as important as the financial analyses
• The integration process starts with the creation of a vision and strategy for the combined organization. Clear communication of the vision and strategy is an essential foundation for success. The guideline for effective communication is “play it straight”.
• However, well the acquisition has been prepared, one cannot avoid the merger syndrome – the shock/stress cycle experienced by the “losers” and the victory cycle experienced by the “winners”. The “first hundred days” need to be carefully managed providing insight, information, involvement, and inspiration.
• Many acquisitions fail, because of the loss of key talent, so retention is a key priority, an effort that should begin during due diligence so that retention plans can be put in place from the first day of the acquisition. In the long term, retention requires commitment form senior management to building personal relationships with the acquired talent.
• It is important to move with speed. Key decisions about management structure senior appointments, and people’s careers should be made as soon as possible. Uncertainty and anxiety after the acquisition drain energy form the business, increasing the risk of loss of customers.
• Several steps in the post-merger integration are known to foster success:

• Appoint an integration manager to speed up the process
• Measure M&A outcomes
• Assign accountability
• Secure and celebrate quick wins.
• Some firms see their competence in making international acquisitions as one of their core capabilities. They are distinguished by their ability to learn from past acquisitions, including the mistakes.

Appendix 6-1.
 

Appendix 6-2.

 
Appendix 6-3.
 

Appendix 6-4.
 

Appendix 6-5.
 
Appendix 6-6.

 
Appendix 6-7.
The wheel of fortune at General Electric
 

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CHAPTER 7 – SUMMARY

• Vertical and hierarchic means of coordination cannot cope with the complexity of demands facing the transnational firms. They must be complemented by worldwide horizontal coordination mechanisms – glue technology.

• The important tools of glue technology are largely the application of HRM:
• Cross-boundary teamwork
• Cross-boundary steering groups
• Know-how transfer leading to global knowledge management
• And global process management.

• Horizontal coordination takes place fundamentally through relationships and social ties. Electronic technologies leverage relationships but do not replace them, except for the transfer of simple codified knowledge.
• Unless there are sound HRM foundations that ensure basis job competence and performance, cross-border teamwork overstretches the organization.

• The generic lessons of project management apply to cross-boundary teams:
• On issues such as goal clarity
• The importance of staffing
• Sequencing complex projects
• Managing conflicts
• Paying careful attention to evaluation and to feedback/learning
• Through the risks of failure if they are not applied rigorously are greater.

• Cross-boundary steering groups in the shape of internal boards, functional councils, network leaders, and the like provide flexible and potent means of maintaining control while promoting empowerment and accountability at the lowest level possible.
• The ability of the transnational firm to transfer knowledge is a major source of competitive advantage. This can start by dissemination, creating social networks, focused initiatives, and innovation forums. But building systematic knowledge management capabilities involves:
• Focus,
  • Technology,
  • A leadership infrastructure
  • And above all removing cultural barriers.
• Global processes in the transnational firm can be viewed as horizontal standardization that links together critical activities with clear deliverables in mind. Two basic processes of concern to HRM are global performance management and leadership development, though there are many other candidates.
• While global performance management is conceptually simple, the different stages in the process – going from upstream strategic / business planning to downstream appraisal and rewards – involve difficult decisions as to whether these sub processes should be applied worldwide or be subject to local adaptation. Some commonality in the process of global performance management is needed, though the local context will always influence the actual implementation.
• Network coordination always requires a certain degree of normative integration (shared concepts, norms, attitudes, and values) induced by socialization. But excessive socialization can lead to dangerous organizational rigidities.

Appendix 7-1.
 

Appendix 7-2.
 

Innovation and Organisational Learning

 

Learning outcomes

Become aware of the difference of individual and organisational learning.

Understand the impact of organisational learning on overall and long-term competitive advantage.

 

Seminar tasks

Exercise on the Learning Company.

Case-study analysis

 

Reading/activity for the week

·      Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 9

 

·      Case 5: Smitha Moganthy (2006) : HP’s Strategy and Operations under Carly Fiorina and Mark Hurd. ICFAI Center for Management Research.

1.      Discuss the significance of the HP Way and how it strongly influenced success at HP.

2.      Although Carly Fiorina was appointed to streamline HP’s fragmented business, to what extent were her strategies aligned with the HP way?

3.      Did radical restructuring processes, like the merger with Compaq and others, enhance organisational learning?

4.      What processes could enhance innovation at HP?

 

 

 

Chapter 9. Innovation and Organisational Learning

• The future is increasingly unpredictable. This makes the capacity to change fast particularly important (in contrast to planning), posing new challenges for human resource and organizational management.
• Complex organizational change involves many tensions - between short-term and long-term success, between planning and experimentation, between bottom-up processes and top-down processes. Indeed, tension and paradox are at the heart of change, innovation, and knowledge management in transnational firms.
• Change can be seen as a spiral process in which one has to “anticipate the future in the present: guided by an understanding of dualities.
• When the multi-domestic firm experiences pressures to become transnational the most effective sequence of stages appears to be global rationalization first and then building collaborative integration afterwards. The “sour” is tackled initially, then the “sweet”.
• Subsidiary initiatives and entrepreneurship must be encouraged when the integrated mega-national firm experiences pressures for more local responsiveness. This changes the role and competencies of subsidiary general managers and business area managers.
• Transferring capabilities from the parent to the subsidiary is a complex, stepwise process that can take many years, not simply one of “technology transfer”. “Instant transnational” firms that are not handicapped by long domestic experience in the parent country may be able to shorten the process considerably.
• Professional service firms with their many internal tensions and complex matrices, face unusual tensions as they internationalize. There appear to be three organizational configurations in such firms, with corresponding implications for their approach to global knowledge management:
  • client-oriented,
  • creative problem-solving,
  • and solution-adaptation configurations.
• It is impossible to dictate or control innovation (which is the other side of the coin of knowledge management). But one can facilitate it, by encouraging variation/entrepreneurship and then selecting likely winners, by building trust and entrepreneurial social capital, through variable management geometry, by businesses when this is not possible.
• The mechanisms for fostering innovation all involve linking people, which is easiest when they are co-located and share a common context through socialization. We can expect to see an increasing variety of internal mechanisms (such as centres of excellence) and external mechanisms (learning alliances and communities of creation).
• The striking characteristic of global innovation and knowledge management is that it involves managing paradoxes and tensions. Reconciling these tensions, such as between convergence and divergence, means paying attention on procedural justice and other aspects of social architecture.

 

 

The role of HR in change processes: (p. 408-409)

The potential contribution of HR to the change process has so many facets that we can provide only a few examples:

1. Promoting champions of change
2. Creating dissatisfaction with status quo
3. Developing the confidence of top management sponsors to communicate directly with employees
4. Designing processes to build commitment fast through face-to-face confrontation of views
5. Vision building / agenda setting
6. The people aspects of implementation (it depends on the people’s motivation and skills)
7. Attention to succession management
8. Ensuring the balance between short- and long-term pressures
9. Ensuring consistency between words and action

Theses roles are the champion who promotes the need for change, the designer who assists in mapping out an effective change process, the facilitator who acts as a coach and catalyst, and demonstrator who is a role model through consistent behaviour. (Ulrich, 1997)

 

How Singapore became HP’s global centre of competence for printers – see p. 424.

 

 

 

Assignments:

• Scope: increase in numbers of people, dollars and functions to manage (traditional vertical development in responsibility)
• Project/task force assignment (integrative skills): working with other experts
• Cross-functional assignments (i.s.):  moving to a job where one has no expertise
• International assignments (i.s.)
• Staring from scratch: building something from nothing
• Change projects: fixing and stabilizing a failing operation
• Entrepreneurial projects: being given the go-ahead and resources to test out  a project initiative that the person has been fighting for.

Risk Management:

• Assessment of the sills, motives and attitudes of the individual
• Clarification of the goals and targets in the new assignment
• Coaching (supervision or informal)
• Mentoring
• Exposure to role models
• Training
• Access to people with experience
• Feedback

Hardship testing:

• Business failure and mistakes: ideas that fail, deals that fall apart
• Demotions, missed promotions, poor jobs.
• Subordinate performance problems: confronting a subordinate with a serious performance problem
• Breaking our of a rut: taking on a new career in response to discontent with the current job
• Personal trauma: crisis such as being fired, divorce, illness, or death.

 

Managing International Careers:
Mastering Expatriation

 

Learning outcomes

• Understanding major pitfalls of expatriation management.
• Identifying the most important success factors of selecting and developing expatriates.

§         To become aware of different career planning systems.

§         To consider new trends in management careers.

• To consider problems of dual careers, work –life balance

 

Seminar Tasks

Case analysis and discussion on expatriation.

Exercise in setting SMART career goals.

 

Reading

·       Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 3

·      Brewster, Chris and Harris, Hilary, Ed. (1999) : International Human Resource Management: Contemporary Issues in Europe, Routledge. Part III. P 161 – 277

 

·      Case 2: Stahl, G and Chua, CH (2003): From Jaguar to Bluebird: Mark Chan Returns Home After His Expatriate Assignment (A) and (B). INSEAD

 

Questions to answer:

1.      Should Mark accept the position offered in Singapore and return home? (Case A)

2.      What are his options? If Mark accepts the position offered in Singapore, what should his career plan be? (Case A)

3.      Who is to blame for the current situation? What factors contributed to Mark’s reentry problems and to those of his family? (Case A and B)

4.      What can the organization do to avoid the kind of problems illustrated in the case? From an HR perspective, what would be a more systematic approach to repatriation planning and international career development? (Case A and B)

 

 

 

Chapter 3. Managing International Careers: Mastering Expatriation

 

• Global integration means centralized control over key resources and operations that are strategic in the value chain. Decisions are made from a global perspective – in the extreme, the mega-national firm operates as if the world were a single market. Expatriation (e Auswanderug) is a principal tool of global integration.
  • The levers of global integration are centralization, or personal control
  • Standardization, based on control through formalization
  • Contracting, focused on control of outputs
  • Socialization, focused on control of norms and values
  • and mutual adjustment or control through informal interaction.

The business advantages of global integration

• Global integration can provide a firm operating internationally with a number of important benefits derived from a worldwide optimizations of resources:
  • Economies of scale (a company can lower its unit costs by centralizing critical value chain activities, such as manufacturing or logistics.)
  • Value chain linkages
  • Serving global customers (to the extent that customers are integrated an operate on a global basis, their suppliers may be forced to adopt similar structure)
  • Global branding (consumers product companies such as coca cola or Gillette promote a unified brand image around the world)
  • Leveraging capabilities
  • World-class standardization (key processes are standardized and centrally controlled)
  • Competitive platforms (tighter control of local subsidiaries by central headquarters)
  • Information advantage (sogo shosha)

The tools for global integration

• Five ways of exercising control
  • Centralization or personal control
  • Standardization, based on control through formalization
  • Contracting, focused on control of outputs
  • Socialization, built around control over norms and values
  • Mutual adjustment, or control through informal interaction.

Implementing global integration

• There are three complementary ways to implement globally integrated strategies:
  • Alignment of decision making to ensure that local decisions reflect a global perspective, particularly through personal control exercised by expatriates and performance management
  • Standardization of work processes using formalized control
  • And the socialization of key individuals who will occupy key positions both at the centre and in subsidiaries.
• There are two key types of international assignments – demand-driven and learning-driven. The former are driven primarily by corporate agency requirements (control and knowledge transfer) or by problem solving needs; the latter focus on organizational competence development and/or personal career enhancement.

Mastering expatriation

• Making an expatriate assignment into a success for the individual, the family and the firm requires paying attention to many factors from the time of initial selection until repatriation. A stating point is the recognition that expatriation is a process, not an event.

 

 

 

• Which personal traits and skills are the most relevant depends on the role the expatriates is expected to assume, for agency-type assignments, clear managerial qualifications together with the relevant professional skills and leadership skills are the essential foundation. In contrast, for learning-oriented assignments and relationship abilities and cultural awareness may be more important.
• The focus of research has shifted from explaining expatriate failure to understanding intercultural adjustments:
  • Adjustment to work,
  • The general environment abroad,
  • And (most difficult of all) to interacting with locale people
  • As well as to other factors such as conflicting allegiances.
• Family well-being is a critical element in expatriate effectiveness. The inability of the family to adjust to the new country is often the reason for assignment failure. Dual career couples are also more likely to experience stress in international assignments because of the expected negative effects of a career interruption.
• Tensions embedded in the expatriation process together with the changing demographics of the expatriate population – the growing number of women, third country nationals, and younger expatriates, and the need to adjust to dual careers – are changing the way in which companies approach international assignments.
• Global integration strategies may have a negative impact on the firm’s ability to be responsive to local needs and demands, be it those of customers, host governments, or the local employees. A big challenge facing many mega-national firms is a widespread perception that they are insensitive to local social issues.

 

 

  Understanding National and
Organisational Cultures

Learning outcomes

Explore frameworks of national and organisational culture.

Critically evaluate models of cultural mergers.

 

Seminar tasks

Exercise: Assessing national cultural profiles and its implication for managerial practices.

Video on BMW and Rover

 

Reading/activity for the week

·      Evans, Paul and Pucik, Vladimir (2002): The Global Challenge: Frameworks for International Human Resource Management, McGraw Hill, Chapter 4

Recommended reading

·      Noe, Raymond A., 2002, Hollenbeck, John R., Gerhart, Barry, Wright, Patrick M. Human Resource Management, 4^th edition, McGraw Hill, Chapter 15, p. 620-629

 

Chapter 4. Understanding National and Organisational Cultures

 

• What local responsiveness means is changing.
  • Traditionally, multi-domestic strategies were driven by market access arguments.
  • Increasingly local responsiveness is driven by notions of learning and by access to dispersed know-how or resources. Furthermore, local responsiveness, though once synonymous with country boundaries, now applies to any market with distinctive needs.
• HRM practices are more sensitive to local context than finance, marketing, or manufacturing practices, because HRM deals with people, and people differ across the world. But within HRM, some practices are more sensitive to context than others.
• National values and national business systems shape both the culture of the mother company and the need for adjustment in the host environment.
• Adjusting to local conditions is not just a trade off between mother company practices and host country practices; it is also driven by the practices of international peers. Be aware of how your networks also help to shape your reality.

 

• When expanding internationally, firms can use the concept of cultural distance as a guide to incremental learning in terms of where to head next, how to enter and what practices to import.
• Differences in culture can be leveraged to generate more strategic insights and alternatives, while differences in national business systems can be used to locate particular business activities in more stimulating environments. Local responsiveness does not just mean adjusting people to jobs, it also implies moving jobs to people.
• Localization involves carefully developing a long-term strategy with commitment at all levels to developing locals and retaining them. As much attention needs to be paid to the expatiates responsible do this task as to the locals themselves. Shortcuts lead to protracted difficulties.
• Localization does not necessarily imply “playing by the local rules”. Ultimately localization means local authority over local decision-making, tapping into the experience of headquarters, expatriates, and other subsidiaries. It is a question of who makes the decision and on what experience base, rather than where the decision is made. Localization is typically only one step toward transnational development, which means knowing which local rules one can break.
• Excessive local responsiveness tends to inhibit collaboration across boundaries and this may be just as detrimental to learning as excessive centralization.
• Adhering to local norms may contravene acceptable ethical standards back home, while imposing centralized standards may remove personal responsibility for distinguishing between practices that are merely different and those that are wrong. The area of ethics is the ultimate test of the ability to cope with the ambiguity of international business.

 

• Understand diversity
  • Know yourself: the cultural perspective (typically focused on the local culture / “country-of-origin” effect)
  • Know where you are: the institutional perspective (the key to understanding business behaviour in different countries lies in the interrelationships between economic, educational, financial, legal and political systems)
  • Know who you talk to: the network perspective (multinational companies are not only influenced by their origins and the norms in countries where they operate. There are also pressures to conform to international peers or competitors that are called “isomorphic” pressures. Zucker 1988)

 

The 4 generic roles of national organizations

 

Barriers of localizations can be harmed through the finding and developing of the local talents. Problems: retaining local talent / a disproportionate number of local managers trained to take over expatriate positions never actually fill those posts or do so only briefly. These high turnover rates have other consequences. In emerging markets, jealousies between locals and the “pseudo-locals” reproduce the resentments previously caused by lavish expatriate packages.

Expatriates are responsible for localization

When giving expatriates responsibility for implementing localizations, firms must pay close attention to three key areas: their selection, their mandate, and their motivation.

After the correct recruitment the developing process takes its place. This means: when it comes to finding suitable local candidates to take over from expatriates, the effort stats upstream with investments aimed at crating a meaningful presence in the local market. This leads to a professionally managed process spanning recruitment, training and development and retention. Retention (e Aufrechterhaltung). Inevitably , compensation looms large among the mechanisms to retain local technicians and managers.