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IHRM Trends and Future Challenges

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Title: IHRM Trends and Future Challenges


1
Chapter 11
  • IHRM Trends and Future Challenges

2
Chapter Objectives
In this final chapter, we identify and comment on
observed trends and future directions regarding
  • International business ethics and HRM.
  • Mode of operation and IHRM.
  • Ownership issues relating to IHRM requirements of
    organizations other than large multinationals,
    such as
  • Small and medium-sized firms (SMEs)
  • Family-owned firms
  • Non-government organizations (NGOs).
  • Theoretical developments and research issues in
    IHRM.

3
Introduction
  • In this course, we have explored the IHRM issues
    in a multinational context. To that end, we have
    focused on several aspects
  • The implications that the process of
    internationalization has for the HR activities
    and policies.
  • Developing global leaders who to place in charge
    of foreign operations and units to cater for the
    managerial and technical demands of international
    business growth.
  • Host-country issues relating to standardization
    versus adaptation of work practices and their
    implications for HRM.
  • (cont.)

4
Introduction (cont.)
  • We tried to counter the imbalance towards
    expatriate issues, while recognizing the
    continued need to manage effectively
    international assignments, owing to the important
    strategic roles of expatriates and
    non-expatriates in sustaining international
    operations.
  • We identified the managerial responses to the
    changing global work environment, particularly
    developing the required global mindset to
    accompany global operations, the use of informal
    control mechanisms, horizontal communication,
    cross-border teams and international assignments.
  • We now turn our attention to trends and
    developments that present future challenges to
    IHRM.

5
International Business Ethics and HRM
  • When business is conducted across borders, the
    ethics program takes on added layers of
    complexity.
  • Especially problematic when multinationals
    operate in host countries that have
  • Different standards of business practice
  • Economically impoverished
  • Inadequate legal infrastructure
  • Governments are corrupt, and
  • Human rights are habitually violated
  • The question arises not only in the context of
    different home- and host-country employment
    practices but also in the central operations and
    policies of multinationals.

6
Ethical Relativism or Global Values?
  • Three main responses to the question
  • The ethical relativism believes that there are no
    universal or international rights and wrongs, it
    all depends on a particular cultures values and
    beliefs - when in Rome, do as the Romans do.
  • The ethical absolutism believes that when in
    Rome, one should do what one would do at home,
    regardless of what the Romans do. This view of
    ethics gives primacy to ones own cultural
    values.
  • In contrast, the ethical universalism believes
    that there are fundamental principles of right
    and wrong which transcend cultural boundaries and
    multinationals must adhere to these fundamental
    principles or global values.

7
Universal Ethical Principles
  • Universal ethical principles can be seen in the
    agreements among nations who are signatories to
  • The United Nations Declaration of Human Rights
  • The OECD Guidelines for Multinational Enterprises
    (adopted by the Organization of Economic
    Cooperation and Development)
  • The Caux Roundtable Principles of Business
  • They indicate the emergence of a trans-cultural
    corporate ethic and provide guidelines that have
    direct applicability to a number of the central
    operations and policies of multinationals
    including the HRM activities of staffing,
    compensation, employee training and occupational
    health and safety.
  • However, there are a wide range of situations
    where variations in business practice are
    permissible.

8
Self-regulation Initiatives International
Corporate Codes of Conduct
  • The need for international accords and corporate
    codes of conduct has grown commensurately with
    the spread of international business.
  • Translating ethical principles and values into
    practice in the international business domain,
    even allowing for some consensus within the
    international community, is an enormous task in
    the absence of a supranational legislative
    authority.
  • A number of mechanisms to facilitate the
    incorporation of ethical values into
    international business behavior have been
    suggested.

9
Caux Roundtable Principles for Business Conduct
  • The first international ethics code for business
  • Developed in 1994 by Japanese, European and North
    American business leaders meeting in Caux,
    Switzerland
  • Aimed to set a global benchmark against which
    individual firms could write their own codes and
    measure the behavior of their executives.
  • The Caux Principles are grounded in two basic
    ethical ideals kyosei and human dignity.

10
Caux Roundtable Principles for Business Conduct
(cont.)
  • The Japanese concept of kyosei means living and
    working together for the common good enabling
    cooperation and mutual prosperity to co-exist
    with healthy and fair competition.
  • Human dignity relates to the sacredness or value
    of each person as an end, not simply as the means
    to the fulfillment of others purposes or even
    majority prescription.
  • The Caux Principles aim to operationalize the
    twin values of living and working together and
    human dignity by promoting free trade,
    environmental and cultural integrity and the
    prevention of bribery and corruption.

11
Enforcement of Codes of Conduct
  • The attitudes of senior management play a crucial
    role in developing, implementing and sustaining
    high ethical standards.
  • HR professionals can help multinationals to
    institutionalize adherence to ethics codes
    through a range of HR activities including
    training and the performancereward system, e.g.
  • Johnson and Johnsons Credo meets the standards
    of the Caux Principles, the UNs Declaration of
    Human Rights and the OECD Guidelines for
    Multinational Enterprises.
  • Addressing the core human values of good
    citizenship, respect for human dignity, respect
    for basic rights and justice, and using them to
    define ethical behavior.

12
Government Regulation
  • New global developments on the criminalization of
    bribery
  • Bribery and corruption top the list of the most
    frequent ethical problems encountered by
    international managers.
  • The World Bank estimates that about 80 billion
    annually goes to corrupt government officials.
  • (cont.)

13
Is Bribery a Business Necessity?
  • Bribery involves the payment of agents to do
    things that are inconsistent with the purpose of
    their position or office in order to gain an
    unfair advantage.
  • Bribery can be distinguished from so-called gifts
    and facilitating or grease payments. The
    latter are payments to motivate agents to
    complete a task they would routinely do in the
    normal course of their duties.
  • It is now generally agreed that bribery
    undermines equity, efficiency and integrity in
    the public service, undercuts public confidence
    in markets and aid programs, adds to the cost of
    products and may affect the safety and economic
    well-being of the general public.

14
US Foreign Corrupt Practices Act
  • The US Foreign Corrupt Practices Act, enacted in
    1977
  • Prohibits US-based firms and US nationals from
    making bribery payments to foreign government
    officials.
  • Payments to agents violate the Act if it is known
    that the agent will use those payments to bribe a
    government official.
  • Amended in 1988, to permit facilitating
    payments but mandates record-keeping provisions
    to help ensure that illegal payments are not
    disguised as entertainment or business expenses.
  • The US lobbied other nation states for almost two
    decades to enact uniform domestic government
    regulations

15
Global Movement to Criminalize Bribery
  • The United Nations adopted the UN Declaration
    Against Corruption and Bribery in International
    Commercial Transactions, in December 1996.
  • Committed UN members to criminalize bribery and
    deny tax deductibility for bribes.

16
World Corruption Index
17
OCED Members Tax Treatment of Bribes
Source OECD
18
The Role of HR in Operationalizing Corporate
Ethics Programs
  • HR has a special role to play in the formulation,
    communication, monitoring, and enforcing an
    enterprises ethics program.
  • The US-based business ethics literature generally
    presents the view that the HR function along with
    finance and law is the appropriate locus of
    responsibility for an enterprises ethics
    program.
  • The 2003 SHRM/ERC survey found that 71 of HR
    professionals are involved in formulating ethics
    policies for their enterprises
  • 69 are a primary resource for their enterprises
    ethics initiative.
  • However, the SHRM respondents did not regard
    ethics as the sole responsibility of HR.
  • (cont.)

19
The Role of HR in Operationalizing Corporate
Ethics Programs (cont)
  • The findings suggest that responsibility for
    ethical leadership should cut across all
    functions and managerial levels, including line
    and senior managers.
  • At the same time, HR is well positioned to make
    an important contribution to creating,
    implementing and sustaining ethical
    organizational behavior within a strategic HR
    paradigm.
  • HR professionals have specialized expertise in
    the areas of organizational culture,
    communication, training, performance management,
    leadership, motivation, group dynamics,
    organizational structure and change management
    all of which are key factors for integrating
    responsibility for ethics into all aspects of
    organizational life.

20
The Role of HR in Operationalizing Corporate
Ethics Programs (cont.)
  • People involved in international business
    activities face many of the same ethical issues
    as those in domestic business,
  • The issues are more complex for IHRM because of
    the different social, economic, political,
    cultural and legal environments in which
    multinationals operate.
  • Consequently, multinationals will need to develop
    self-regulatory practices via codes of ethics and
    behavioral guidelines for expatriate, TCN and
    local HCN staff.
  • Firms which opt consciously or by default to
    leave ethical considerations up to the individual
    not only contribute to the pressures of operating
    in a foreign environment (e.g., poor performance
    or early recall of the expatriate), but also
    allow internal inconsistencies that affect total
    global performance.
  • (cont.)

21
The Role of HR in Operationalizing Corporate
Ethics Programs (cont.)
  • When recruiting and selecting expatriates,
    ability to manage with integrity could be a
    job-relevant criterion.
  • The pre-departure training of expatriates and the
    orientation program should include an ethics
    component. This might include formal studies in
    ethical theory and decision making as well as
    interactive discussion and role playing around
    dilemmas which expatriates are likely to
    encounter.
  • In an effort to sensitize managers to cultural
    diversity and to accept the point that home
    practices are not necessarily the best or only
    practices, there has been an emphasis in
    international business training on adapting to
    the way in which other cultures do business.
  • In designing training programs to meet the
    challenges of multinational business, HR
    professionals must raise not only the issue of
    cultural relativities but also the extent to
    which moral imperatives transcend national and
    cultural boundaries. Insufficient attention may
    result in unacceptable ethical compromises.
  • (cont.)

22
The Role of HR in Operationalizing Corporate
Ethics Programs (cont.)
  • It is also important for the HR department to
    monitor the social, ethical performance of the
    expatriate managers to ensure that as managers
    become familiar with the customs and practices of
    competition in the host country, they do not
    backslide into the rationalization that
    everybody else does it.
  • There is not yet agreement about what should
    constitute a global ethic to resolve the
    conflicts which arise in such a community.
    However, there is an emerging consensus about
    core human values which underlie cultural and
    national differences and the content of
    guidelines and codes which help to operationalize
    the ethical responsibilities of multinationals.

23
Mode of Operation and HRM
  • Emphasis on IJVs
  • Contractual modes such as licensing and
    management contracts present challenges for IHRM
    that have yet to be fully identified and explored
  • International projects often involve
    host-government agencies and present specific HR
    challenges

24
Ownership Issues
  • Small and medium-sized firms (SMEs)
  • International activities place stress on limited
    resources especially staff
  • Key individuals often represent the SMEs stock
    of international competence
  • Retaining key staff critical
  • Converting tacit knowledge into organizational
    knowledge a challenge

25
Family-owned Firms
  • Not just a sub-set of SMEs
  • Management succession presents special HR
    planning concerns
  • The globalization of family-owned firms has been
    a remote topic in international business studies

26
Non-Government Organizations
  • As active internationally as for-profit firms,
    yet receive less attention, e.g.
  • Red Cross
  • Greenpeace groups
  • These organizations share similar management and
    HR concerns
  • Often operate in high risk areas of the globe
  • Anti-globalization rallies and protest
  • Global terrorism
  • Broadening our focus of IHRM is important

27
Research Issues
  • The field of IHRM has been slow to develop a
    rigorous body of theory
  • Regarded as a marginal area
  • International studies are more expensive to fund
  • Major methodological problems
  • Defining culture and the emic-etic distinction
  • Static group comparisons
  • Translation and stimulus equivalence

28
Theoretical Developments
  • Possible to identify two streams of inquiry
  • The micro-level
  • The macro level
  • Low response to surveys may be a factor of
  • Culture
  • Language used
  • Lack of use of teams of researchers

29
A Model of Strategic HRM in MNEs
30
Chapter Summary and Concluding Remarks
  • Throughout this book, we have endeavored to
    highlight the challenges faced by firms as they
    confront human resource management concerns
    related to international business operations.
  • This chapter has identified trends and future
    challenges both managerial and academic that
    are likely to have an impact on IHRM, as a
    function and as a scientific field of study.
  • We specifically addressed several issues
  • (Cont.)

31
Chapter Summary (cont.)
  • International business ethics and HRM responses.
  • Modes of operation beyond wholly owned
    subsidiaries, and the IHRM activities that are
    required, such as training for contractual and
    project operations.
  • Ownership issues relating to SMEs, family-owned
    firms and NGOs, and the IHRM challenges specific
    to these organizations as they grow
    internationally that have remained relatively
    under-identified, despite their continuing
    importance in international business and global
    activities.
  • Research issues in IHRM studies and theoretical
    developments in order to understand the
    intricacies and inter-relationships between the
    IHRM functions and activities, firm
    internationalization, and strategic directions
    and goals.

32
Chapter Summary (cont.)
  • A consistent theme throughout this book has been
    the way in which IHRM requires a broader
    perspective of what operating internationally
    involves, and a clear recognition of the range of
    issues pertaining to all categories of staff
    operating in different functional, task and
    managerial capacities is essential.
  • As Poole stated international human resource
    management archetypically involves the world-wide
    management of people in the multinational
    enterprise.
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