International Human Resource Management

Christopher Brewster, Elizabeth Houldsworth, Paul Sparrow, Guy Vernon

• Publisher: CIPD - Kogan Page
• Year: 2016
• ISBN:
  9781843984184
• Edition: 4
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

International Human Resource Management is a critically engaging and student friendly textbook for International HRM modules at all levels, including the CIPD Level 7 Advanced International HRM module. Providing wide international coverage and incorporating a global strategy perspective, it offers a particular focus on cross-cultural, comparative and strategic HRM issues, with a strong emphasis on culture and its impact on organizational behaviour and HRM.This fully updated 4th edition of International Human Resource Management includes extended coverage of cross-cultural management, a broader scope of countries and key topics such as global talent management, global leadership, global knowledge management, and differing national contexts. Filled with geographically diverse examples and case studies, and covering topics from culture and reward systems to managing expatriate assignment and diversity in international forms of working, it is an ideal textbook for all students of international HRM as well as HRM specialists and practicing managers. Online supporting resources include an instructor's manual, lecture slides and additional case studies.

CHAPTER 1

International HRM: An Introduction

LEARNING OUTCOMES

When you have read this chapter, you will:

• appreciate the growing internationalisation of the world in which human resource management (HRM) is conducted
• understand the additional complexity of HRM in an international context
• be able to describe the strengths and weaknesses of the universalist and contextualist paradigms
• be able to describe the key features of the three main approaches to international HRM (IHRM)
• be able to identify some of the key HRM challenges facing organisations working internationally
• understand the format of the rest of the book.

1.1 INTRODUCTION

This chapter is a general introduction to the book – it outlines the main objectives of the text and the rationale behind its structure. We begin by briefly noting the changing context to international business and the implications for HRM. In explaining the nature of international HRM (IHRM): we outline the importance of countries and present the three main sections of the book: the institutional and cultural context; aspects of comparative HRM; and IHRM. In so doing we explore the differences between domestic and international HRM for practitioners. Then we provide an outline of the book, offering a guide to each chapter. The final section explains what is new about this latest edition.

Whilst all the chapters in this edition of the book have been updated to pick up developments in both the literature and practice since the previous edition was published in 2011, the aim remains the same: to help you explore the meaning and implications of the concepts of contextual, comparative and international HRM. We do not assume that there is only one way of defining or understanding the nature of HRM. On the contrary, we believe that HRM varies according to the country in which it is conducted: the country that provides the institutional and cultural environment for HRM. We address the issues raised by the fact that HRM is different from country to country. This must have an effect on people like you, who are trying to gain an understanding of the full range of meanings of HRM. It will also affect those, like some of you, who are trying to manage HRM in organisations whose reach crosses national boundaries. These issues are covered in this text.

A key task for organisations which operate across international boundaries is to manage the different stresses of the drive for integration (being coherent across the world) and differentiation (being adaptive to local environments). Reading this text will give you some flavour of the way that HRM – and particularly what is seen as ‘good’ HRM – is defined differently in different national cultures, and is presented and operates differently in different national institutional environments; some flavour too of the ways in which international organisations attempt to deal with the issues these differences create.

We believe that the text will be of value to anyone involved in, or interested in, comparative and international HRM. Whereas in the past the book has focused particularly on HRM specialists, for this edition we have sought to take a more general approach, acknowledging that some readers may only be studying IHRM as one component in a broader qualification programme.

REFLECTIVE ACTIVITY 1.1

• Why would adopting a global approach to managing people be beneficial to an organisation?
• Why might it be harmful?

Provide examples for each perspective.

For many of you, these first paragraphs will already be raising some key questions. What is the culture of Spain, with its mix of Castilian, Catalan, Andalucian, Basque, and other heritages? Or of Singapore, with its Malay, Indian and Chinese populations? What is the institutional and labour market position of the EU where many laws apply across national boundaries and there are few institutional limitations to cross-border labour markets? Do our findings apply to emerging market countries and under-developed countries in the same way that they apply to the rich countries of the world? Inevitably, basing the text on national differences blurs important ‘within-nation’ and ‘beyond-country’ issues. These are critical matters – but outside the scope of this text. We have chosen here to concentrate upon the national differences partly because they are so powerful (institutional differences like employment laws, labour markets, trade unions, etc. tend to operate at national level, even where the cultural boundaries are blurred), and partly as an introduction to an often-neglected element of HRM – the fact that it does vary considerably around the world. Our consideration of these issues is focused on Europe, but we will take the opportunity to draw on examples from other continents whenever that is appropriate.

The number of books and articles on international and comparative HRM has expanded almost exponentially since the first edition of this text was published a decade or more ago. Whereas in many organisations IHRM used to be the concern of a rather separate department arranging terms and conditions for expatriate employees, it is increasingly becoming a more significant part of organisations’ attempts to manage their entire workforce across the world in the most cost-effective manner possible. As such, it is becoming a key contributor to organisational success. It is little wonder that it is beginning to attract the attention of more researchers, publishers and consultancies.

It is a truism to point out that the world is becoming more international. This applies to our technology, our travel, our economies and our communications – if not always obviously to our understanding. The growth of global enterprises leads to increased permeability in traditional business boundaries, which in turn leads to high rates of economic change, a growing number and diversity of participants, rising complexity and uncertainty. Traditionally much of our understanding of IHRM has been based on the study of multinational corporations (MNCs). An MNC is defined as an enterprise that operates in several countries but is managed from one home country. MNCs may be of four forms: a decentralised corporation that has a strong home country presence; a global and centralised corporation that can acquire a cost advantage through centralised production; an international company that builds on the parent company’s technology or research and development; or a transnational enterprise that combines all three of these approaches. In general, MNCs may not have co-ordinated product offerings in each country, because they are more focused on adapting their products and service to each individual local market. Even some famously international brands (MacDonalds, Coca Cola) vary in different markets. Some people prefer to use the term multinational enterprise (MNE) because the word corporation implies a business organisation, whereas many other forms of organisation such as non-governmental bodies or charities might be deemed to have multinational characteristics. The term transnational corporation (TNC) is typically used to describe much more complex organisations that have invested in foreign operations, have a central corporate facility, but have decision-making, R&D and marketing powers in a variety of foreign markets. As we do not here focus on governments’ international operations (Liesink et al 2016), or intergovernmental organisations (Brewster et al 2016) or international charities or religious groups (Brewster and Lee 2006), we shall generally use the abbreviation MNCs throughout the textbook for the sake of convenience and simplicity.

MNCs are presented as being economically dominant – the world’s 1,000 largest companies produce 80% of the world’s industrial output. They are seen as being crucial to the vitality, health and level of innovation of a geographic location, notably because they help connect it to other and distant international sources of complementary specialised knowledge and expertise. In the process MNCs build and discover new opportunities for themselves as well as for others (Cantwell 2014). Each year the United Nations Conference on Trade and Development (UNCTAD) issues a World Investment Report focused on trends in foreign direct investment (FDI) worldwide and at the regional and country levels. At the time of writing, the latest data, the World Investment Report, the 25th in the series (UNCTAD 2015), covers 2014. Foreign Direct Investment (FDI) inflows in 2014 declined by 16% to $1.2 trillion mainly because of the fragility of the global economy, policy uncertainty for investors and elevated geopolitical risks. As one of the major developed markets in the world, Europe, and the Eurozone area within it, faced major challenges to its stability over the treatment of Greek debt and US economic recovery remained fragile.

In 2003 economists at Goldman Sachs bracketed Brazil with Russia, India and China as the BRIC economies that would come to dominate the world. Developing economies extended their lead in global inflows of FDI, with China becoming the world’s largest recipient of FDI. Developing economies now make up five of the top ten FDI recipients in the world. However, interpreting trends in IHRM that might result from shifts in economic power is never easy and complex factors are always at play. Although the Chinese economy has continued to grow, though less rapidly, and so has the Indian economy, the performance of emerging markets is still very volatile. Brazil seems to have stalled and at the time of writing it is difficult to know what is happening in Russia, as a combination of sanctions and falling oil prices seem to be leading to a recession there. Doubts are also beginning to be expressed even about growth in China, with stock market crashes and worries about unsustainable levels of debt featuring in the business press.

We see a number of traditional regional strategies, often reflecting past cultural and institutional linkages. These create new patterns of mobility and trade. There is also much discussion about relative levels of productivity around the world driving investment and growth and the role of labour arbitrage, with MNCs being able to take advantage of lower wages abroad. In reality, MNCs consider many factors when they think about locating activities in various markets. The behaviour of MNCs is driven by many issues, such as complex supply chains at risk of disruption, energy prices, and inventory costs associated with importing. We also witness different responses internationally within the labour force. These shifts are not always as easy or rapid as made out in the business press.

Whatever the driving factors, we do nonetheless seem to be witnessing the global transfer of work – either in terms of the creation of new jobs or through the global sourcing of certain parts of an individual’s or unit’s work. This is having a major impact on the type of organisations and nature of work that remain viable in different parts of the world. In the first wave of globalisation two decades ago, low-level manufacturing work began to transfer to low-cost locations. In the second wave simple service work such as credit card processing began to relocate. In the third wave higher-skill white-collar work is being transferred.

1.2 WHAT IS INTERNATIONAL HUMAN RESOURCE MANAGEMENT?

In all these MNCs or MNEs, HRM is a key to success. For the vast majority of organisations, the cost of the people who do the work is the largest single item of operating costs. Increasingly, in the modern world, the capabilities and the knowledge incorporated in an organisation’s human resources are the key to performance. So on both the cost and benefit sides of the equation...