Readings and Cases in International Human Resource Management

Sebastian B. Reiche, Günter K. Stahl, Mark E. Mendenhall, Gary R. Oddou, Sebastian B. Reiche, Günter K. Stahl, Mark E. Mendenhall, Gary R. Oddou, B. Sebastian Reiche, Günter K. Stahl, Mark E. Mendenhall, Gary R. Oddou

• Publisher: Taylor & Francis
• Year: 2016
• eBook ISBN: 9781317361909
• Edition: 6
• Topic: Negocios y empresa
• Subtopic: Negocios en general

The new edition of Readings and Cases in International Human Resource Management examines the interactions between people, cultures, and human resource systems in a wide variety of regions throughout the world.

Taking account of recent developments in the international human resources management (IHRM) field, the sixth edition will enable students to meet the international challenges they will face in the workforce, and sensitize them to the complexity of human resource issues in the era of globalization.

Features include:

• 
  
  

• New readings and case studies that account for recent changes in the field, positioned alongside "tried and true" material.
• An increased focus on cross-cultural diversity and tools to bridge "social distance" between team members.
• Supplemental material and teaching notes, available for download, to enhance instructors' abilities to use the readings and cases with their students.

With well-known contributors and field experts, this is the ideal accompaniment for any class in international human resource management, organizational studies, or international business.

PART I

The Context of IHRM: Challenges, Strategies, and External Forces

Readings

• Paul Evans, Vladimir Pucik, and Ingmar Björkman

PUTTING THE CHALLENGES OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT INTO PERSPECTIVE

• Randal S. Schuler, Susan E. Jackson, and Ibraiz Tarique

MANAGING GLOBAL TALENT CHALLENGES WITH GLOBAL TALENT MANAGEMENT INITIATIVES

• Wes Harry and David G. Collings

LOCALISATION: SOCIETIES, ORGANIZATIONS AND EMPLOYEES

Cases

• Ingmar Björkman

PETER HANSON: BUILDING A WORLD-CLASS PRODUCT DEVELOPMENT CENTRE FOR HI TECH SYSTEMS IN CHINA

• Evalde Mutabazi and C. Brooklyn Derr

SOCOMETAL: REWARDING AFRICAN WORKERS

• Roger Hallowell, David Bowen, and Carin-Isabel Knoop

FOUR SEASONS GOES TO PARIS

Reading 1.1

Paul Evans, Vladimir Pucik, and Ingmar Björkman

PUTTING THE CHALLENGES OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT INTO PERSPECTIVE*

---

LIKE MANY OTHER COMPANIES, the Swedish-Swiss corporation ABB that was born out of a merger in 1988 wanted to be a fast-growing firm with a wide international presence. Percy Barnevik, its Swedish CEO, is notable for recognizing the dilemmas that this involved, adopting the now well-known corporate mantra of “acting local but thinking global.” His vision was to create an international company that was able to deal effectively with three internal contradictions: being global and local, big and small, and radically decentralized with centralized reporting and control.¹ The key principle was local entrepreneurship, so most of the decision-making was to be done at the lowest possible level, in the 5,000 independent profit centers, the business units that became the foundation of the ABB organization.

Influential country managers controlled operations in countries within a matrix structure of regions and business segments. ABB also established business-steering committees and functional councils to coordinate the different units, exploit synergies, and help transfer knowledge and best practices across the network of local units. The firm developed a management information system called ABACUS that contained data on the performance of the profit centers. Barnevik and his team of top managers traveled extensively to ensure communication and knowledge-sharing across units, while international assignments helped instill all units with the corporate ethos that Barnevik was pursuing: initiative, action, and risk-taking.

However, after becoming one of the most admired companies in the world during its first 10 years, ABB encountered significant problems in its second decade. Hit by the economic downturn in Europe, limitations in the firm’s management started to emerge. While flexible and responsive to local contexts, ABB had failed to achieve sufficient global synergies and efficiency. Conflicts between business areas and national units meant that many managers felt that decision-making was unclear. The local profit centers continued to operate their own human resources management (HRM) systems, which were, at best, aligned at national levels but not at regional or global levels.

Barnevik’s successors between 1997 and 2005 tried to impose more clarity and discipline by eliminating the country managers and regions, giving more power to global businesses, also introducing centralized corporate processes to improve global control, coordination, and efficiency. However, these top-down initiatives further increased the complexity of the firm, and without country managers in place to coordinate local operations, the company verged on paralysis. Country managers were reintroduced, the structure was simplified by selling all businesses except for two (power and automation), and a new global ABB People Strategy was launched, aimed at linking HRM with the business. By 2005, ABB was profitable once again but had shrunk from 213,000 employees (in 1997) to 102,000. A new CEO, Fred Kindle, found a firm with a high degree of local entrepreneurship and innovation, but with limited coordination and still unsatisfactory global efficiency. Barnevik’s contra-dictions were still on the table.

In this reading, we examine the challenges facing ABB from the historic perspective of internationalization of the firm and the concomitant evolution of HRM. The dilemmas faced by ABB have always existed. What has changed is the nature and speed of communication between a company’s headquarters and its subsidiaries around the world. But the essential problems of being flexible and responsive to local market needs while promoting global efficiency, avoiding duplication, and coordinating and controlling diverse units and people remain.

As we will discuss, some modern firms have adopted a multidomestic strategy, with autonomous local operations that can respond readily to local needs, while others pursue a centralized meganational strategy to prevent duplication and make global operations more efficient. Their approach to human resource management is radically different.

However, both of these strategies have limitations, leading to the idea that con-temporary global corporations have many contradictions, as ABB recognized. They have to be simultaneously local and global in scope, centralized and decentralized, capable of delivering short-term results while developing future assets, managing multiple alliances without full control, and responding to market pressures to do things better and cheaper and faster. In light of this, we examine the concept of the transnational organization, at the heart of which is the notion of contradiction,² and we explore the implications for people management.

EARLY INTERNATIONALIZATION

International business is not a recent phenomenon, nor is international HRM a product of the twentieth or twenty-first century. The Assyrians, Phoenicians, Greeks, and Romans all engaged in extensive cross-border trade. Roman organizations spanning Asia, Africa, and Europe are often heralded as the first global companies, in that they covered the whole of the known world.

The pioneers of international business were the sixteenth- and seventeenth-century trading companies—the English and Dutch East India companies, the Muscovy Company, the Hudson’s Bay Company, and the Royal African Company.³ They exchanged merchandise and services across continents and had a geographical spread to rival today’s multinational firms. They signed on crews and chartered ships, and engaged the services of experts with skills in trade negotiations and foreign languages, capable of assessing the quality of goods and determining how they should be handled and loaded. These companies were obliged to delegate considerable responsibility to local representatives running their operations in far-away countries, which created a new challenge: how could local managers be encouraged to use their discretionary powers to the best advantage of the company? The trading companies had to develop control structures and systems to monitor the behavior of their scattered agents.

Formal rules and procedures were one way of exercising control, but this did not eliminate the temptations of opportunistic behavior for those far from the center. Other control measures were therefore developed, such as employment con-tracts stipulating that managers would work hard and in the interests of the company. Failure to do so could lead to reprimand or dismissal. Setting performance measures was the next step. These included the ratio of capital to tonnage, the amount of outstanding credit on advance contracts, whether ships sailed on time, and the care taken in loading mixed cargoes. There were also generous financial incentives, such as remuneration packages comprising a fixed cash component and a sizeable bonus. Such a mix of control approaches was not far off contemporary methods used to evaluate and reward managerial performance in large multinationals.

The Impact of Industrialization

The Industrial Revolution originated in Britain in the late eighteenth century. The emergence of the factory system in Europe and the US had a dramatic impact both on international business and on the management of people. The spread of industrialization in Europe and the US provided growing markets for minerals and foodstuffs and prompted a global search for sources of supply.

Cross-border manufacturing began to emerge by the mid-nineteenth century. But it was difficult to exercise real control over distant operations. The rare manufacturing firms that ventured abroad often used family members to manage their international operations. For example, when Siemens set up its St Petersburg factory in 1855, a brother of the founder was put in charge. In 1863, another brother established a factory to produce sea cables in Britain. Keeping it in the family was the best guarantee that those in distant subsidiaries could be trusted not to act opportunistically.

The international spread of rail networks and the advent of steamships in the 1850s and 1860s brought new speed and reliability to international travel, while the invention of the telegraph uncoupled long-distance communication from transportation. It became possible for firms to manufacture in large batches and to seek volume distribution in mass markets. The rapid growth in firm size provided a domestic platform from which to expand abroad, paving the way for a surge in international business activity in the last decades of the nineteenth century.⁴

The late nineteenth and early twentieth centuries saw a number of developments in international business and people-management practices. In parallel with developments in transport and communication, industrialization was having a significant impact on the organization of firms. They were being reshaped by new manufacturing techniques, by the increased specialization and division of labor, and by a change in the composition of the workforce from skilled tradesmen to unskilled workers, previously agrarian, who were unaccustomed to industry requirements such as punctuality, regular attendance, supervision, and the mechanical pacing of work effort— similar to the situation in labor-intensive industries in China during the last 30 years. Early personnel management practices were shaped in factories experiencing discipline and motivation problems, where entrepreneurs such as Robert Owen in Scotland (often referred to as the father of modern personnel management) began to pay more attention to working conditions and the welfare of employees.

The growth in international manufacturing sustained a flourishing service sector, which provided the global infrastructure—finance, insurance, transport—to permit the international flow of goods. All this led to a degree of internationalization that the world would not see again until it had fully recovered from the damage to the global economy created by two world wars. It was a golden age for multinationals, with foreign direct investment accounting for around 9 percent of world output.⁵

War and Economic Depression

The outbreak of World War I, followed by a period of economic depression and then World War II, transformed management practices and multinational activity in very different ways, stimulating the development of people-management practices but suppressing international trade.

The sudden influx of inexperienced workers (many of them women) into factories in 1915 to service war needs increased the pressure on managers to find ways to improve productivity rapidly. Tasks had to be simplified and redesigned for novices. To contain labor unrest, more attention had to be paid to working conditions and employee demands, which also meant training first-line supervisors. These initiatives centralized many of the aspects of employment relations previously discharged by individual line managers. In some progressive firms, employees began to be viewed as resources, and the alignment of interest between the firm and workers was emphasized. The 1920s also saw the development of teaching and research, journals, and consulting firms in personnel management.⁶

However, the Great Depression was the start of a bifurcation in employment practices in the US and Japan, the latter having gone through a period of rapid industrialization and economic growth. Leading firms in both the US and Japan were experimenting with corpo...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Illustrations
• B. Sebastian Reiche, Günter K. Stahl , Mark E. Mendenhall, and Gary R. Oddou Preface: The White Water Rapids of International Human Resource Management: Robin Earl’s Dilemma
• Acknowledgments
• List of Contributors
• Part I The Context of IHRM: Challenges, Strategies, and External Forces
• Part II Cross-Cultural and Diversity Management
• Part III Global Staffing and Management of Global Mobility
• Part IV People Issues in Global Teams, Alliances, Mergers, and Acquisitions
• Part V Responsible Leadership in a Global and Cross-Cultural Context
• Index