Chapter 17 An Integrative Framework of Strategic International Human Resource Management

Randall S. Schuler, Peter J. Dowling and Helen De Cieri

Introduction

• Why the global playing field? Costs associated with new products are too great to be amortized only over one market.

• Need to manage globally (world as one vast market) and locally (world as a vast number of separate and loosely connected markets).

• MNE--any enterprise that carries out transactions in or between two sovereign entities, operating under a system of decision making that permits influence over resources and capabilities, where the transactions are subject to influence by factors exogenous to the home country environment of the enterprise.

Definition of SIHRM

• Strategic international human resource management-the linkage of international human resource management with the strategic needs of the business • Reasons for the development of strategic international human resource management include the recognition: – HRM at any level is important to strategy implementation; – major strategic components of multinational enterprises have a major influence on international management issues, functions and policies and practices; – many of these characteristics of SIHRM can influence the attainment of the concerns and goals of MNEs – there are a wide variety of factors that make the relationship between MNEs and SIHRM complex

Integrative Framework of SIHRM

• Figure 17.1 p. 322 • Strategic MNE components – Interunit Linkages • How these units are differentiated, integrated, controlled and co-ordinated – Internal Operations MNEs. Each unit has to: • Work within the confines of its local environment • Be operated as effectively as possible relative to the competitive strategy of the MNE and the unit itself.

Integrative Framework of SIHRM

• SIHRM issues – MNE needs to determine: • How to balance the needs for differentiation and for integration • How much autonomy it can and needs to grant to local units • How much to control and how to co-ordinate those units • How much control it will exert over the internal operations – SIHRM functions • Three areas: – MNE’s human resource orientation – Time, energy and financial resources devoted to operating the human resource organization in the MNE – Location of those resources and the human resource organization

Integrative Framework of SIHRM

• SIHRM policies and practices – Most relevant to the strategic needs of MNEs include those related to staffing, appraising, compensating and training and developing

Integrative Framework of SIHRM

• Exogenous factors include • industry characteristics • country/regional characteristics • Industry characteristics include • type of business and technology available • nature of the competitors • extent of change

Integrative Framework of SIHRM

• The country/regional characteristics include • political conditions • economic conditions • legal requirements • socio-cultural conditions • Endogenous factors include • structure of international operations • MNE’s headquarters international orientation • competitive strategy being used • MNE’s experience in managing international operations

Integrative Framework of SIHRM

• Concerns and goals – Global competitiveness – Efficiency – Local responsiveness (sensitivity) – Flexibility – Organizational learning (transfer of information)

Interunit Linkages in SIHRM

• See Figure 17.2 p. 328 • Key objective in interunit linkages appears to be balancing the needs of variety (diversity), co ordination and control for purposes of global competitiveness, flexibility and organizational learning • Major objectives in interunit linkages for SIHRM: Balancing the needs of autonomy, co-ordination and control for the purpose of global competitiveness, flexibility and learning through the use of the relevant SIHRM policies and practices.

SIHRM policies and practices

• Most directly associated with interunit linkages include: – determining and maintaining staffing levels that are an appropriate mix and flow of parent-country nationals (PCNs) – third-country nationals (TCNs) and host-country or local nationals (HCNs) and international assignees – developing HR policies and practices that link units but also allow local adaptation – using management development to create shared visions and mindsets to cohere interunit linkages

Internal Operations in SIHRM

• See Figure 17.3 p. 322 • Major objective is: being responsive to and effective in the local environment, yet willing and ready to act in a co-ordinated fashion with the rest of the MNE units.

SIHRM policies and practices

• Matching and adapting HR practices with the competitive strategy of the unit and the local culture and legal system • Creating a modus operandi whereby these HR practices can be modified to fit changing conditions • Creating a set of SIHRM policies at the MNE level that can encompass and legitimate the HR practices of the local units

Exogenous Factors

• Industry characteristics include the following factors: – type of business or industry – nature of the competitors – extent of change • Country/regional characteristics include: – political environment – economic environment – legal environment – socio-cultural environment

Endogenous Factors

• There are four endogenous factors that are thought to have a significant influence on SIHRM issues and the associated HR functions and policies and practices – Structure of the international operations – International orientation of the MNE – MNE’s competitive strategy – MNE’s experience in managing international operations

Implications for academics and HR professionals

• Academics – Implies a need for multidisciplinary knowledge – A cross-disciplinary research effort may be most effective for a complete understanding of strategic international human resource management – Using these multiple theoretical perspectives can enable the strategic international human resource management researcher to get a better understanding of the phenomenon to be examined enabling a better design to investigate testable and theoretically-based propositions

Implications for academics and HR professionals

• Professionals – Success of global businesses depends first and foremost on the quality of the MNE’s human resources and how effectively the enterprise’s human resources are managed and developed.

– There appear to be too many contingencies, too many controllable factors and perhaps even too many unknown factors.