Issues, Challenges, and Theoretical Developments in HRM

1
Chapter 16
Issues, Challenges, and Theoretical Developments
in HRM
2
Chapter Outline

• Managing People in an International Context
• China
• India
• Human Resource Issues in Multicultural Corporate
  Social Responsibility
• Summary

3
Managing People in An International Context

• As a way of illustrating the situations that may
  confront multi-nationals attempting to penetrate
  developing markets, we will look at key HRM
  aspects of operating in two different countries -

4
China and
India

• As a way of illustrating the situations that may
  confront multi-nationals attempting to penetrate
  developing markets, we will look at key HRM
  aspects of operating in two different countries -

5
Looking at China

• Economic Reforms
• Staffing
• Performance Appraisal
• Compensation
• Training and Development
• Implications for Multinationals

6
Economic Reforms

• In 1978, an open-door policy began moving China
  from a centrally planned to a market economy
• By 1996, China absorbed a FDI of U.S. 171.8
  billion
• In 1995, employment in FIEs increased to
  8,820,000 employees
• Many FIEs are either under-performing or failing
• The legacy of management with Chinese
  characteristics still weighs heavily on all
  industrial enterprises operating in China.

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Staffing

• Pre-reform staffing practices
• Post-reform staffing practices (October 1986)
• Labor-contract system two-way selection
• Western recruitment methods

8
Performance Appraisal

• Pre-reform appraisal practices
• Post-reform appraisal practices
• Political considerations
• Tool used for determining bonus and wages
• Weaken old practices of egalitarianism and
  abolish the iron rice bowl

9
Compensation

• Pre-reform compensation practices
• Post-reform compensation practices
• Enterprise Law 1988
• Diversified wage packages
• Bonuses tied to individual performance

10
Training and Development

• Pre-reform training and development practices
• Post-reform training and development practices
• Labor Law 1995
• Vocational qualification verification system
• Nationwide program of management training

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Implications for Multinationals

• By way of conclusion, discuss the following
  questions
• How can foreign firms develop effective HRM
  strategies to improve the productivity of their
  work force in China?
• To what extent can foreign multinationals
  transfer their home-countrys HR practices to
  their subsidiaries in China?
• What are the future HRM issues for China due to
  its ongoing economic reforms?

12
Looking at India

• Background Information
• Dealing with Bureaucracy
• Unfamiliarity and Cultural Distance
• Staffing
• Recruitment and Selection of Host Country
  Nationals (HCN)
• Compensation
• Training and Development
• Implications for Multinationals

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Background Information

• Population of 973.5 million
• Fifth largest country
• Post independence Import-substitution policy
• Low cost of Indian labor/ low level of
  productivity
• Competitive with technically qualified, software
  professionals.

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Dealing with Bureaucracy

• Ninth most corrupt country in the world.
• Pervasive corruption linked to excessive control
  and unfulfilled demand
• Red tape
• Widespread tax evasion

Possible Solution Establish international joint
ventures (IJV) with a partner who knows the
business and the bureaucracy, one with the right
connections.
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Unfamiliarity and Cultural Differences

• I.J. Sharma in The Culture Context of Indian
  Managers, states

An average Indian manager represents a plausible
picture of the average Indians resistance for
change, his willingness to delegate but
unwillingness to accept authority, his fear of
taking an independent decision, his possessive
attitude towards his inferiors and his abject
surrender to his superiors, his strict observance
of rituals and his disregard of them in practice,
his preaching of high morals against personal
immorality, and his near-desperate efforts at
maintaining the status quo while talking of
change.
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Staffing

• In complex cultural context like India, it may be
  more advantageous to use local managers.

• Indian manager knows more than an expatriate
  manager could learn in years on the job
• Avoids extra costs associated with relocating
  expatriates
• Reluctance of many Western managers to live in
  India
• Ensures continuity of management as HCNs are
  likely to stay longer in the position and
• Creates higher morale among HCNs due to a
  perceived career path.

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Recruitment and Selection of HCNs

• Careful selection of workforce is important!

• Using an IJV can assist in identifying a suitable
  workforce
• IJV may use existing human resources of the local
  partner
• The Industrial Dispute Act
• Dismissals and layoffs are difficult

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Compensation

• Foreign multinationals find it difficult to
  retain high-quality local staff because of the
  economic liberalization in the early 1990s.
• A shortage of skilled people is due to a rapid
  rise in foreign and local investments.
• Preconditions to retain experienced staff
  includes continuous pay increases and commitment
  to improve working conditions.
• Pressure on minimum wage level.

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Training and Development
Expatriate training in negotiation and conflict
resolution skills is advocated to enable them to
cope with, and resolve, the unexpected issues
inherent in the Indian context and IJV situation.
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Training and Development
Multinational may provide extensive training
programs for local staff to address low labor
productivity.
21
Training and Development
Introduction of new production equipment and
concepts, such as quality management, require
additional training.
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Implications for Multinationals

• Suggestions
• Include local staff and practices in building a
  performance-based work culture in Indian
  operations.
• Choose a skill-based approach to improve labor
  productivity and better performance.
• Hire quality HCNs rather than employing
  expatriates.
• Include staff training and development.

Remember, having the right people in the right
place remains the perennial challenge for firms
operating internationally.
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Chapter Outline

• Managing People in an International Context
• China
• India
• Human Resource Issues in Multicultural Corporate
  Social Responsibility
• Summary

24
Human Resource Issues in Multinational Corporate
Social Responsibility

• Our intention is to demonstrate the complexity
  that surrounds international business conduct,
  for the multinational, and for expatriates and
  local staff in subsidiary operations.

When in Rome, do as the Romans?
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The Multinational as a Global Citizen

• How do you identify common ethical values that
  underlie cultural, religious, and philosophical
  differences?
• Western and Eastern philosophical traditions
  share four fundamental core human values

• Good citizenship
• Respect for human dignity
• Respect for basic rights
• Respect for basic equity

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International Accords and Corporate Codes of
Conduct

• Caux Roundtable Principles for Business Conduct
  (1994)
• OECD Guidelines for Multinational Enterprises
  (1976)
• International Labor Office Tripartite Declaration
  of Principles Concerning Multinational
  Enterprises and Social Policy (1977)

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International Accords and Corporate Codes of
Conduct

• Industries or individual firms can develop
  self-regulatory codes

• Organizational relations
• Economic relations
• Employee relations
• Customer relations
• Industrial Relations
• Political relations

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International Accords and Corporate Codes of
Conduct

• A common difficulty with codes of conduct is
  their enforcement.

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Bribery A Recurring Problem in International
Business

• Bribery and corruption top the list of the
• most frequent ethical problems.

• U.S.85 billion in bribes is involved
• Some argue a lenient approach
• Bribery undermines public confidence in markets
• Adds to cost of products
• Affects the safety and economic well-being of the
  general public

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Bribery A Recurring Problem in International
Business

• Regulation?

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Implications for the HR Function of the
Multinational Firm

• Ethical issues are also people issues and have
  direct implications for the HR function. HR
  professionals may be required to

• Minimize exposure of employees to corrupt conduct
  by developing codes of conduct
• Ensure training programs cover areas of ethical
  concern
• Align performance appraisal and compensation
  system to support ethical standards
• Be conversant with requests made of staff
  operating internationally and provide negotiating
  skill training to handle problems
• Ensure employees understand the difference
  between corrupt bribery payments, gifts, and
  allowable facilitation payments.

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Theoretical Developments in International HRM

• Two streams of theoretical inquiry

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Example of macro-level

• Exogenous Factors
• Industry characteristics
• Country-regional characters
• Inter-organizational networks

• Strategic HRM
• HR function strategy
• HR practices

• MNE Concerns and Goals
• Competitiveness
• Efficiency
• Balance of global integration and local
  responsiveness
• Flexibility

• Endogenous Factors
• MNE structure
• Structure of international operations
• Intra-organizational networks
• Mechanisms of co-ordination
• Organizational industry life cycle
• International entry mode
• MNE strategy
• Corporate-level strategy
• Business-level strategy
• Experience in managing international operations
• Headquarters international orientation

• Source H. De Cieri, and P.J. Dowling, 1998.
  Strategic human resource management in
  multinational enterprises Theoretical and
  empirical developments, unpublished paper.

34
Chapter Outline

• Managing People in an International Context
• China
• India
• Human Resource Issues in Multicultural Corporate
  Social Responsibility
• Summary

35
Chapter Outline
We reviewed key HRM aspects of operating in two
different countries, China and India, as a way of
illustrating the situations that may confront
multinationals attempting to penetrate developing
markets. We discussed questions often raised
about the existence of trans-cultural standards
of moral behavior and the implications for IHR
and international managers. We briefly visited
theoretical developments in international HRM to
learn about the necessary robust frameworks and
models pertaining to a more mature scientific
field of inquiry.

• Summary