Lec 7,8 Chapter 3

3
THE
ORGANIZATIONAL
CONTEXT
Copyright © 2017 Pearson Education, Ltd.

STANDARDIZATION AND LOCALIZATION OF HRM
PRACTICES
Processes, routines, procedures and practices can

be and should be transferred abroad and to what
degree these require country-specific adaptation
Replacement of expatriates with local staff
Instilling proper behaviour in the local workforce

through training programs and hiring practices so
that they can operate in the multinational’s way of
operations
1-2
STANDARDIZATION AND LOCALIZATION OF HRM
PRACTICES
HRM practices are globally standardized on

the basis of common principals and
objectives
 Common management practices include
 feeling of equal treatment among
managers involved in cross-border
activities
 common understanding of what is
expected from the employees
1-3
THE STANDARDIZATION AND LOCALIZATION OF
HRM
PRACTICES CULTURAL ENVIRONMENT
Many multinationals create a system that operates

effectively in multiple countries by exploiting local
differences and interdependencies and at the same
time they sustain global consistency.
 Unilever, for example, uses the same recruitment

criteria and appraisal system on a worldwide basis to
ensure a particular type of managerial behavior in each
subsidiary.

1-4
Balancing the standardization and localization
of human resource management in MNEs

1-5
FACTORS DRIVING STANDARDIZATION
A large MNE with a long international history and extensive

cross-border operations:
 pursues a multinational or transnational corporate strategy
 supported by a corresponding organizational structure
 reinforced by a shared worldwide corporate culture
However, in practice, we do not always observe perfect

adherence to these factors in all MNEs
For example, a worldwide corporate culture may not be

shared by all employees in all subsidiaries.

1-6
FACTORS DRIVING STANDARDIZATION
 Standardize HRM practices on a worldwide basis is

not appropriate for the whole workforce but aims at a
group of managers who are working at the cross-
border boundaries

1-7
FACTORS DRIVING LOCALIZATION
Factors driving localization include :

The cultural environment
The institutional environment
Mode of operation abroad
Subsidiary role

1-8
The Cultural Environment
Culture has an important impact on work and HRM
practices
Effectiveness of standardized practices might differ in

various cultural contexts
Triandis found that collectivist cultures may value a

more complete balance of intrinsic and extrinsic
rewards, while individualist culture may emphasize
extrinsic rewards

1-9
The Institutional Environment
Institutional pressures influences HR practices
Integration of HRM related elements with the education

system
For example, in Germany- dual vocational training system-

provides theoretical learning opportunities in part-time
schools- practical experience in companies
 In other countries such as France, this system is non-

existent
 The recruitment process and the selection criteria reflect the

importance of these qualifications
1-10
The Institutional Environment
Dowling and Liesch found that there was a clear preference
for using HCNs in key positions by multinationals operating
in India
Major reason for HCN preference was the belief that an

Indian would know more than an expatriate manager could
learn in years on the job
Khilji found that, although foreign multinationals in Pakistan

had formulated policies, implementation was low ‘because
managers brought up and trained in a hierarchical and
centralized set-up resist sharing power and involving
employees in decision making’
1-11
Mode of Operation Abroad
Ownership and control are therefore important factors that
need to be taken into consideration when multinationals
attempt to standardize work and HRM practices
For example, In late 1978, the Western firms that entered

China early were more or less forced to enter into joint
ventures with state-owned enterprises (SOEs), whereas
those entering later have been able to establish wholly
owned subsidiaries (WOSs).
A firm’s ability to independently implement processes and

procedures is naturally higher in wholly owned subsidiaries

1-12
Subsidiary Role
 The subsidiary role specifies the position of a particular unit in
terms of contribution to the efficiency of the whole MNE
 Subsidiaries are either knowledge providers or recipients
 Global innovators provide significant knowledge for other units

e.g. The parent firm develops HRM policies and practices which
are then transferred to its overseas affiliates
 Integrated player also creates knowledge but at the same time is

recipient of knowledge flows e.g. HRM practices and policies
between headquarters and subsidiaries are very similar, so can be
globally standardized and then localized elements when this is
needed.
1-13
Subsidiary Role
 Implementers rely heavily on knowledge from the parent or peer
subsidiaries and create a relatively small amount of knowledge
themselves
 E.g. global HRM decisions are mainly made in the parent
company, then the local subsidiaries are responsible for the
implementation process at the local level
 In the local innovator role, subsidiaries engage in the creation

of relevant country/region-specific knowledge.
 The HRM systems in such polycentric firms only have weak ties
with the headquarters. As every subsidiary operates
independently from the parent company and from other
subsidiaries. This independence results in a number of localized
HRM policies and practices.
1-14
Measures Creating The HRM Balance
Between Standardization And Localization
Coordination, communication and control processes between

parent organizations and subsidiaries
Person-oriented coordination
 HR managers from the headquarters as well as from the
foreign affiliates must exchange their knowledge, expectancies
and experiences on the different local contexts
 Meetings and common project work should be arranged for this
purpose.
Non-person-oriented coordination
 Include, for example, written material on HRM practices such
as handbooks or information leaflets, either provided in print or
via the intranet
1-15

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3

Copyright © 2017 Pearson Education, Ltd.

Processes, routines, procedures and practices can

Replacement of expatriates with local staff

Instilling proper behaviour in the local workforce

HRM practices are globally standardized on

Many multinationals create a system that operates

 Unilever, for example, uses the same recruitment

Copyright © 2017 Pearson Education, Ltd.

Copyright © 2017 Pearson Education, Ltd.

A large MNE with a long international history and extensive

However, in practice, we do not always observe perfect

For example, a worldwide corporate culture may not be

Copyright © 2017 Pearson Education, Ltd.

 Standardize HRM practices on a worldwide basis is

Copyright © 2017 Pearson Education, Ltd.

Factors driving localization include :

Copyright © 2017 Pearson Education, Ltd.

Effectiveness of standardized practices might differ in

Triandis found that collectivist cultures may value a

Copyright © 2017 Pearson Education, Ltd.

Integration of HRM related elements with the education

For example, in Germany- dual vocational training system-

 In other countries such as France, this system is non-

 The recruitment process and the selection criteria reflect the

Major reason for HCN preference was the belief that an

Khilji found that, although foreign multinationals in Pakistan

For example, In late 1978, the Western firms that entered

A firm’s ability to independently implement processes and

Copyright © 2017 Pearson Education, Ltd.

 Subsidiaries are either knowledge providers or recipients

 Global innovators provide significant knowledge for other units

 Integrated player also creates knowledge but at the same time is

 In the local innovator role, subsidiaries engage in the creation

Coordination, communication and control processes between

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