International human resource management - Chapter 2 pptx

Chapter objectives• structural responses to international growth • control and coordination mechanisms In this chapter, we examine how international growth places demands on management,

Chapter 2

The organizational context

Chapter objectives

• structural responses to international growth

• control and coordination mechanisms

In this chapter, we examine how international growth places demands on management, and the factors that impact on how managers of internationalizing firms responds to these

challenges We start with the premise that the human resource (HR) function does not operate in a vacuum, and that HR

activities are determined by, and influence, organisational

factors We cover the following areas:

Chapter objectives (cont.)

• mode of operation used in various international markets

• effect of responses on human resource management

approaches and activities.

It builds upon material covered in Chapter 1 to provide a

meaningful global and organizational context for drawing out the international dimension of human resource management – the central theme of this book.

Figure 2-1: Management demands of international growth

The path to global status

• Causes structural responses, due to:

– Strain imposed by growth and geographical

spread

– Need for improved coordination and control

across business units

– The constraints imposed by host-government

regulations on ownership and equity

• Evolution path common but not normative

Figure 2-3: Export department

Sales subsidiary

• Replacing foreign agents/distributors with own

through sales or branch offices/subsidiaries

• May be prompted by:

– Problems with foreign agents

– More confidence in international activities

– Desire for greater control

– Give greater support to exporting activities

• PCNs may be selected, leading to some HR

involvement

Figure 2-4: Sales subsidiary

International division

• Creation of a separate division in which all

international activities are grouped

• Resembles ‘miniature replica’ of domestic

organization

• Subsidiary managers report to head of

international division

• Objectives regarding foreign activities may

determine approach to staffing of key positions

– Expatriate management role of corporate HR

Global product/area division

• Strain of sheer size may prompt structural

change to either of these global approaches

• Choice typically influenced by:

– The extent to which key decisions are to be

made at the parent country headquarters or at

the subsidiary units (centralization versus

decentralization)

– Type or form of control exerted by parent over

Figure 2-6a: Global product division Figure 2-6b: Global area division

The matrix

• An attempt to integrate operations across

more than one dimension

• Violates Fayol’s principle of unity of

command

• Considered to bring into the management

system a philosophy of matching the

structure to the decision-making process

Problems with the Matrix

Bartlett and Ghoshal

language, time and

accountability

resolve conflicts and clarify confusion

Beyond the matrix

• Less hierarchical structural forms

– Heterarchy

– Transnational

– Networked firm

Figure 2-8: The networked organization

Quote by Accor CEO

Figure 2-10: Control mechanisms

Mode of operation and HRM

• Not just subsidiary operations

• Firms may also adopt contractual modes

Interfirm linkages

• Alliance (strategic alliance, cooperative

venture, collaborative venture or corporate linkage)

• A form of business relationship that:

– Involves some measure on interfirm integration – Stops short of a full merger or acquisition

HR factors

• HR issues and activities that affect the

successful functioning of international joint ventures include:

– Assigning mangers to the joint venture

– Evaluating their performance

– Handling aspects pertaining to career path

– Compensation benefits

Chapter summary

• The organizational context in which IHRM activities take place Different

structural arrangements have been identified as the firm moves along the path to multinational status – from export department through to more complex

varieties such as the matrix, heterarchy, transnational and networked.

• Control and coordination aspects Formal and informal mechanisms were

outlined, with emphasis on control through personal networks and relationships, and control through corporate culture, drawing out HRM implications.

(cont.)

The purpose of this chapter has been to identify the HR implications of the various options and responses that international growth places on the firm This chapter focused on:

Chapter summary (cont.)

• The various modes – such as wholly owned, franchising, management contracts and international joint ventures – used by multinationals for foreign market entry and expansion Again, we attempted to

demonstrate the IHRM implications of these various modes, although noting that most of the literature focuses on wholly owned subsidiaries and international joint ventures.

(cont.)

Chapter summary (cont.)

• How international growth affects the firm’s approach to HRM Firms vary from one another as they go through the stages of international development, and react in different ways to the circumstances they encounter in the various foreign markets There is a wide variety of matches between IHRM

approaches, organizational structure and stage of internationalization For example, almost half the US firms surveyed by Dowling55 reported that the operations of the HR function were unrelated to the nature of the firm’s

international operations A study of nine subsidiaries of multinationals

operating in Ireland by Monks56 found that the majority adopted a local

approach to the HR function, with headquarters involvement often limited to monitoring the financial implications of HR decisions.

(cont.)

Chapter summary (cont.)

• Stages of development, organizational forms and mode of operation should not be taken as normative Research does suggest a pattern and

a process of internationalization but firms do vary in how they adapt to international operations – we use nationality of the parent firm to

demonstrate this.

Through the approach taken in this chapter, we have been able to

demonstrate that there is an interconnection between international HRM approaches and activities and the organizational context and that HR

managers have a crucial role to play In order to perform this role better, it would seem important that HR managers understand the various

international structural options – along with the control and coordination