Human Resource Management 3rd

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Chapter 7: Strategic international human resource
management

LEARNING OBJECTIVES

• Explain what strategic international human resource management (SIHRM) is

and how it differs from domestic human resource management
• Identify the three key approaches organisations may adopt when developing
their international HRM strategies and practices
• Identify the factors that will influence the SIHRM approach an organisation
adopts
• Discuss the cross-cultural issues related to the HR function
• Discuss the issues associated with managing international assignments
• Explain how the resource-based view of SIHRM creates a sustainable
competitive advantage.

A VIEW FROM THE FIELD: International business operations at

Bosch

Summary

Robert Bosch (Australia) Pty Ltd (RBAU) is a regional subsidiary of the global Bosch
Group, one of the world’s largest private industrial corporations, with 306 000
employees in over 300 production locations, and a sales revenue of €52.3 billion
(approximately AU$66.9 billion) in 2012. Headquartered in Victoria and employing
some 1400 people in Australia and New Zealand, RBAU manufactures automotive
products and supplies and distributes power tools, gas hot water systems,
Blaupunkt car audio and navigation equipment.

This case looks at how the HRM at RBAU operates within the global Bosch Group HR
structure and responds to local business and cultural issues.

Discussion questions (p. 213)

1. Review the experience of RBAU in operating within the Bosch Group

HRM agenda. What are the features and clues to the success of the General
Manager (GM) and his team?
Students should identify a number of key themes in this case.

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• Leveraging the global frameworks: The RBAU HRM team has maximised the
systems and policies developed by the Bosch Group to improve efficiencies and
reduce costs in the delivery of HR services in Australia.
• Building strong relationships with the local business: The RBAU HRM team has
established strong relationships with the local business. The ‘Resources Ledger’
referred to in the case study allows the GM to ensure he has resources available
to respond quickly to the specific demands of the local business.
• Lean efficient HR operations: The HRM team operates within the ‘lean
manufacturing principles’ adopted by the business. This requires a focus on lean
services geared very specifically to what the company needs rather than the
latest fad. The application of technology to paper-based activities has also
greatly improved efficiency and allowed HR resources to be re-allocated to
strategic and project-based work.
• Board seat and sponsorship: The inclusion of the general HR manager as a
member of the Board of Management of RBAU is significant for the profile of the
function. A seat at the board table allows the HRM function to contribute
expertise to key business decisions and engage the senior leadership team as
partners and sponsors of HRM activity.
• Successful local initiatives: The successes of local initiatives, including the move
to self-insure for workers’ compensation and the introduction of the LeaD
program (an experiential modular development program designed for first-time
leaders), has greatly improved the profile and acceptance of HRM as a value-
add function.

2. Examine the RBAU case and consider ways in which a country’s HR

group could influence the broader SHRM agenda of its global parent.
An HRM group can best influence the broader agenda by developing innovative
programs that address broader business challenges and can be applied across
global operations.

The RBAU HRM team has used its local initiatives to contribute to cost efficiencies
allowing the overall Australian operations to continue to compete in the very cost-
sensitive automotive industry. Its innovative efforts in the area of self-insurance
and associated savings have caused the global operation to consider possible
application elsewhere.

Similarly, the success of the LeaD program (which supports BHS Principle Two,
Leadership Development) has drawn attention to the RBAU initiative and the

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possible use of this program elsewhere around the operation. This program
supports the global efforts to improve the quality of leadership and create an
environment where employees and the business prosper.

3. What are some of the potential issues associated with a SHRM agenda
developed without reference to the local issues you face in your country of
operation?
Students should identify national culture and country-specific factors including the
economic system, the government mandate and the industrial relations (IR)
framework as factors that make it difficult to develop a generic, one-size-fits-all
SHRM agenda. Each country of operation will have conditions that are unique and
need to be considered in the development and implementation of HR policies and
programs. For example, IR frameworks are minimal in some parts of Asia in
comparison to the highly regulated IR framework in Australia. In contrast, Australia
has a more complex and onerous taxation system in comparison to Singapore and
Hong Kong. These variations have significant implications for remuneration and
benefits policies.

Failure to take into account country-specific conditions when tailoring HR policies

may cause difficulties in conforming to a country’s legal and/or cultural
requirements.

A MANAGER’S CHALLENGE: Western MNCs in Asia

Summary

This case study looks at two Australian construction companies operating in

Malaysia – Concrete Construction Group (CCG) and Leighton Asia. The case outlines
their very different approaches to SIHRM, including how they apply them in
practice.

Discussion questions (p. 214)

1. Why are both companies currently thriving in Asia despite their vastly
different SIHRM approaches?
These companies are thriving because their different SIHRM approaches are aligned
with their marketing strategies and corporate cultures. CCG’s ethnocentric
management orientation, where power and decision making are centralised from
head office, aligns with its stated corporate culture of ‘Western best practice’ and
Australian expertise as its point of difference. Leighton Asia, however, has adopted

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a polycentric management orientation where the subsidiary is managed by local
Chinese managers who are encouraged to match their practices to local business
practices. Leighton Asia’s strategy is to highlight its local presence as its main
differentiating characteristic.

2. What conditions would change the success of their strategies?

The success of these strategies could be altered by a change in prevailing attitudes
or the value placed on ‘Western best practice’. Less flexibility in adapting to Asian
conditions may result in breaches of cultural values, beliefs, norms or social and
business etiquette, which may impact on their success in that country. Changes in
the economic system, political stability or the regulatory environment may make it
more difficult for a more ethnocentric organisation to continue trading in the region.

REVIEW QUESTIONS (p. 215)

Review Question 7.1

What is meant by the term ‘strategic international HRM’? How does SIHRM
differ from HRM in a domestic setting?
Strategic international HRM refers to the set of distinct activities, functions and
processes that are directed at attracting, developing and maintaining MNC’s
(multinational corporations’) human resources. It must be conducted in line with
the organisation’s strategic international management process. SIHRM is much
more complex than SHRM in a domestic setting and it needs to take into
consideration additional factors and the impact they have on HR policies and
practices. These factors include the national culture, economic system, government
mandate, the regulatory/legal environment, political stability, labour groups, public
opinion, labour market skills and education.

Review Question 7.2

There are three approaches to SIHRM. Identify and describe each of these
approaches. In your answer, provide examples of when each approach will
be most useful.
The three approaches to SIHRM are:

1. Globalised approach: When an organisation adopts a globalised approach to

SIHRM it uses the HRM strategy and practices of the global parent company.
International fast food restaurant chains such as McDonald’s use a global
approach to SIHRM. The global approach can be seen when you enter any
McDonald’s store in the world: the stores are designed similarly and the staff

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 are trained in a consistent manner. This is a deliberate strategy to ensure
familiarity for international customers.
2. Localised approach: A localised approach to SIHRM is when an organisation
adapts its HRM strategy and practices to the local environment. For example,
this strategy is likely to be preferred by organisations working in highly
regulated industries, such as in the financial sector.
3. Adaptation approach: This approach may take one of two forms depending on
whether SIHRM adaptation is required at the macro level (strategy) or the micro
level (practices). In the first instance an organisation may adopt a globalised
strategy while localising practices. Alternatively, it may localise its HRM strategy
while globalising practices. Organisations likely to employ an adaptation
approach include construction companies such as Leighton or John Holland.
While the nature of these organisations is consistent across countries, country-
specific factors require some adaptation.

There is not one best approach to SIHRM. The approach that is best for an
organisation will depend on both the company objectives and the situation in which
it is operating. When deciding which approach to take, a company needs to
consider the nature of the business, the organisation’s goals and culture, national
culture and country-specific factors.

Review Question 7.3

What are the major challenges associated with expatriation and
repatriation? In your answer, draw up a table listing the problems
associated with each of expatriation and repatriation. Are these problems
similar? What are some key initiatives an HR manager can take to resolve
these problems?
In addition to the issues of increased competition and cultural differences discussed
in the chapter, there are two major challenges to SIHRM: expatriation and
repatriation.

Expatriation is the process of sending a home-country national to a foreign country

to work. Once employees have undertaken the expatriation process, their return
home is known as repatriation. This is where the expatriate undergoes a process of
re-acclimatising to their home country and organisation. Repatriation is an
important and sensitive process as employees have to re-orientate themselves to
the home organisation.

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Expatriation Repatriation

International adjustment in terms of … Depending on the length of time the

expatriate spent abroad …

1. Culture shock 1. Reverse culture shock

• Language • Emotional response such as isolation
• Work ethics and social events and an inability to fit back into the
• Transport home culture
• Religious beliefs and expectations • Disengagement with previous social
• Food differences groups.
• Attitudes towards women and other
races and ethnicities.

2. Working in foreign operations 2. Working in national operations

• Unfamiliar with new colleagues
• Feeling isolated or lonely at work
• Possible language barriers
• Different cultural environment
(e.g. food and social norms).
• Disengagement with previous social
groups
• Loss of power and status
• Relocated office or shifted
organisational structure causing loss
and confusion.

3. Personal relationships 3. Personal relationships

• Family adjustment (e.g. finding a • Family readjustment (e.g. finding a
place to live, settling children in place to live, settling children in
school and organising work for a school and organising work for a
partner). partner).

It is evident that the problems associated with each are similar. Some key
initiatives an HR manager can take to resolve the problems associated with
expatriation and repatriation include:

Expatriation
• Expatriate training (e.g. language lessons, learning about new cultures and the
impact they have on work and personal lives, developing support networks in
the host country and implementing mechanisms to cope with change, such as
counselling).
• Teaching expatriates the signs of culture shock and how it can be managed. A
key way to avoid ‘expatriate failure’ (i.e. the expatriate not being able to
effectively perform their job and being terminated or recalled back home) is to
be aware of the warning signs of culture shock and address them before they
spiral out of control.
• Technological support (e.g. email, the intranet and teleconferencing). This helps
expatriates to maintain contact with the home branch so that they feel they are
still a part of the home organisation. This connection also assists in the
repatriation process because the expatriate is already familiar with company

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 developments and changes and doesn’t experience intense culture shock upon
their return.
• Providing settlement time and support to assist expatriates to locate housing,
schooling and employment for their family.
• Supporting the expatriate to return home on a regular basis. This is especially
important if the expatriate has left their family or a partner at home for the
duration of their assignment.

Repatriation
• Physical and psychological training (e.g. communicating what their new job will
be, where they will be located and their key responsibilities and tasks). It is
important that this is undertaken before their final voyage home.
• Helping the repatriate to ease into their new work life by working part time
initially or having a vacation before they recommence work. Provide settlement
time to assist them to locate housing, schooling and employment for their
family.
• Arranging social events to reintroduce the expatriate (and their family) to the
country and to the organisation. Counselling may also be required, as children
and parents alike get used to their old environment and can experience feelings
of confusion and disillusion.

Review Question 7.4

Briefly outline the cross-cultural considerations for the following
international HRM practices: training and development; performance
appraisals and remuneration.
Cross-cultural training and development (CCTD) is an important and common
strategy for responding to SIHRM issues, and its application and focus have evolved
over time. Helping employees to develop the knowledge and skills to better respond
to cultural differences was initially focused on preparing employees to work
overseas on expatriate assignments. This focus, however, has been broadened to
preparing employees to work in multicultural teams wherever they may be. Specific
CCTD training for managers is also becoming more common, with content covering
cognitive, emotional and behavioural knowledge and skill development.

Cross-cultural considerations for performance appraisals include an understanding

of differences in employee motivation and, in particular, whether there are cultural
differences in intrinsic versus extrinsic motivators for work performance. It can be a

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challenge aligning local performance management strategies with the strategic
direction of head office while still allowing for responsiveness to local cultures.

Employees’ perceptions of how they are rewarded with pay and conditions also can
be affected by cross-cultural considerations. Rewards given cooperatively versus
independently can affect motivation differently in different cultures, as can the way
different rewards (such as work–life balance and positive work relationships) are
valued.

Review Question 7.5

Besides an organisation’s management orientation, what other key factors
will influence its decision regarding the SIHRM approach it adopts? How do
these key factors, including the organisation’s management orientation,
influence this decision?
In addition to an organisation’s management orientation, managers need to
consider local national culture (e.g. differences in individualism–collectivism,
masculinity–femininity, uncertainty avoidance, power distance and time
orientation); country-specific factors (e.g. economic system, regulatory framework,
political stability, labour groups, such as unions and the industrial relations
framework); cross-cultural considerations in relation to HR practices (e.g. training
and development, performance appraisals, remuneration and staffing); and how to
manage international assignments such as expatriate repatriation.

Review Question 7.6

What are the key factors that MNCs need to consider for selecting the right
approach to SIHRM?
MNCs and global organisations should select the appropriate SIHRM strategy based
on three main factors: organisational orientation, national culture and country-
specific factors.

Organisational orientation
MNCs may have four orientations towards management: ethnocentric, polycentric,
geocentric and regiocentric.

Managers with an ethnocentric orientation will adopt a globalised approach to

SIHRM; namely, using the SIHRM strategy and practices of the parent company
globally.

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Managers with a polycentric and regiocentric orientation will adopt a localised
approach to SIHRM; namely, adapting the SIHRM strategy and practices to the local
environment.

Managers with a geocentric orientation will adopt an adaptation approach to

SIHRM, which may take one or two forms depending on whether SIHRM adaptation
is required at the macro level (strategy) or the micro level (practices).

National culture
National culture has an impact on both overall management practices and HRM
strategy. Differences between the home and the host countries will determine how
effective parent-company SHRM strategy and practices are in subsidiary countries.
Key dimensions in which cultures can vary (i.e. individualism–collectivism,
masculinity–femininity, uncertainty avoidance, power distance and time orientation)
will affect the degree to which:

• The parent company is willing and able to adapt its strategy and practices to
suit the conditions in the subsidiary country
• It may be necessary to adapt parent-company strategy and practices to suit the
conditions in the subsidiary countries
• The parent-company strategy and practices will be effective in subsidiary
countries.

Country-specific factors
When an organisation is determining which SIHRM approach to implement, it must
take into account a number of factors specific to each country in which it operates.
These factors include the economic system; government mandate; the
regulatory/legal environment; political stability; labour groups, such as unions;
public opinion; employment and industrial relations frameworks; labour market
skills and education; and language and cultural differences. These factors will
influence the degree to which IHRM strategy and practices are transferable and
acceptable in a global context.

Contingent upon these factors, an organisation can adopt a globalised approach, a

localised approach, or an adaptation approach to formulate its SIHRM strategies.

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