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Socometal: Rewarding African Workers By: Evalde Mutabazi and C. Brooklyn Derr It was a most unusual meeting at a local café in Dakar. Diop, a young Senegalese engineer who was educated at one of Frances’s elite engineering grandes ‘ecoles in Lyon, was meeting with N’Diaye, a model factory worker to whom other workers from his tribe often turned when there were personal or professional difficulties. N’Diaye was a chief’s son, but he didn’t belong to the union and he was not an official representative of any group within the factory. Socometal is a metal container and can company. While multinational, this particular plant is a joint venture wherein 52 percent is owned by the French parent company and 48 percent is Senegalese. Over the last twenty years Socometal has grown in size from 150 to 800 employees and it has returns of about 400 million FCFA (African francs) or $144 million. The firm is often held up as a model in terms of its Africanization of management policies, whereby most managers are now West African with only 8-10 top managers coming from France. During the meeting N’Diaye asked Diop if he would accept an agreement to pay each worker for two extra hours in exchange for a 30 percent increase in daily production levels. If so, N’Diaye would the guarantor for this target production level that would enable the company to meet the order in the shortest time period. “If you accept my offer,” he said with a smile, “we could even produce more. We are at 12,000 (units) a day, but we’ve never been confronted with this situation. I would never have made this proposal to Mr. Bernard but, if you agree today, I will see that the 20,000 (unit) level is reached as of tomorrow evening. I’ll ask each worker to find ways of going faster, to communicate this to the others and to help each other if they have problems…” Mr. Olivier Bernard, a graduate of Ecole Centrale in Paris (one of Frances’s more prestigious engineering schools), was the French production manager, and Diop was the assistant production manager. Mr. Bernard was about 40 and had not succeeded at climbing the hierarchal ladder in the parent company. Some report that this was due to his tendency to be arrogant, uncommunicative and negative. His family lived in a very nice neighborhood in Marseille, and it was his practice to come to Dakar, precisely organize the work using various flowcharts, tell Diop exactly what was expected by a certain date and then return to France for periods of two to six weeks. This time he maintained that he had contracted a virus and needed to return for medical treatment. Shortly before Mr. Bernard fell ill, Socometal agreed to a contract requiring them to reach in short time a volume of production never before achieved. Mr. Bernard, after having done a quick calculation, declared, “We’ll never get that from our workers--- c’est impossible!” After organizing as best he could, he left for Marseille. Diop pondered what N’Diaye had proposed, and then he sought the opinions of influential people in different departments. Some of the French and Italian expatriates told him they were sure that the workers would not do overtime, but felt confident enough to take the risk. The next morning N’Diaye and Diop met in front of the factory and Diop gave his agreement on the condition that the 30 percent rise in daily production levels be reached that evening. He and the management would take a final decision on a wage increase only after assessing the results and on evaluating the ability of the workers to maintain this level of production in the long run. The reasons given by the French and Italian expatriates for why the Senegalese would not perform overtime or speed up their productivity are interesting. One older French logistics manager said, “Africans aren’t lazy but they work to live, and once they have enough they refuse to do more. It won’t make any sense to them to work harder or longer for more pay.” And the Italian human resource manager exclaimed, “We already tried two years ago to get them to do more faster. We threatened to fire anyone caught going too slow or missing more than one day’s work per month, and we told them they would all get bonuses if they reached the production target. We had the sense that they were laughing behind our backs and doing just enough to keep their jobs while maintaining the same production levels.” Four days after their first negotiation, the contract between Diop and N’Diaye went into action. Throughout the day N’Diaye gave his job on the line to two of his colleagues in order to have enough time and energy to mobilize all the workers. The workers found the agreement an excellent initiative. “This will be a chance to earn a bit more money, but especially to show them (the French management) that we’re more capable than they think,” declared one of the Senegalese foremen. From its first day of application the formula worked wonders. Working only one extra hour per day, every work unit produced 8 percent more than was forecast by Diop and N’Diaye. Over the next two months, the daily production level oscillated between 18,000 and 22,000 units per day --- between 38 and 43 percent more than the previous daily production. It was at this production level, never experienced during the history of the company, that Mr. Bernard found things when he returned from his illness. “I,” said Diop, “was very happy to see the workers so proud of their results, so satisfied with their pay raise and finally really involved in their work…. In view of some expatriates’ attitudes it was a veritable miracle…. But, instead of rejoicing, Mr. Bernard reproached me for giving two hours’ pay to the workers, who were only really doing one hour more than usual. ‘By making this absurd decision,’ he said, ‘you have put the management in danger of losing its authority over the workers. You have acted against house rules… You have created a precedent too costly for our business. Now, we must stop this ridiculous operation as quickly as possible. We must apply work regulations…’ And he slammed the door in my face before I had the time to say anything. After all, he has more power than me in this company, which is financed 52 percent by French people. Nevertheless, I thought I would go to see the managing director and explain myself and present my arguments. I owed this action to N’Diaye and his workers, who had trusted me, and I didn’t care if it made Bernard any angrier.” In the meantime, the decided to maintain the new production level in order to honor their word to N’Diaye and Diop. A foreman and friend of N’Diaye stated, “At least he knows how to listen and speak to us like men.” The foreman indicated, however, that they might return to the former production level if Bernard dealt with them as he did before. CASE DISCUSSION QUESTIONS 1. What are the underlying cultural assumptions for Mr. Bernard and how are these different from the basic assumptions of N’Diaye and Diop? 2. What would you do if you were Bernard’s boss, the managing director? 3. In what ways is a reward system a cultural phenomenon? How might you design an effective reward system for Senegal? SIXTH EDITION INTERNATIONAL HUMAN RESOURCE MANAGEMENT PETER. J. DOWLING, MARION FESTING AND ALLEN D. ENGLE, SR. INTERNATIONAL HUMAN RESOURCE MANAGEMENT SIXTH EDITION PETER J. DOWLING MARION FESTING ALLEN D. ENGLE, SR. International Human Resource Management, 6th Edition Peter J. Dowling, Marion Festing and Allen D. Engle, Sr. Publishing Director: Linden Harris Publisher: Andrew Ashwin Development Editor: Charlotte Green Production Editor: Alison Cooke Production Controller: Eyvett Davis Marketing Manager: Amanda Cheung Typesetter: Cenveo Publisher Services Cover design: Adam Renvoize © 2013, Cengage Learning EMEA ALL RIGHTS RESERVED. 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Products and services that are referred to in this book may be either trademarks and/or registered trademarks of their respective owners. The publishers and author/s make no claim to these trademarks. The publisher does not endorse, and accepts no responsibility or liability for, incorrect or defamatory content contained in hyperlinked material. For product information and technology assistance, contact emea.info@cengage.com. For permission to use material from this text or product, and for permission queries, email emea.permissions@cengage.com. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: 978-1-4080-3209-1 Cengage Learning EMEA Cheriton House, North Way, Andover, Hampshire, SP10 5BE United Kingdom Cengage Learning products are represented in Canada by Nelson Education Ltd. For your lifelong learning solutions, visit www.cengage.co.uk Purchase your next print book, e-book or e-chapter at www.cengagebrain.com Printed in China by RR Donnelley 1 2 3 4 5 6 7 8 9 10 – 15 14 13 BRIEF CONTENTS Preface Acknowledgements About the Authors Walk-Through Tour Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Introduction The Cultural Context of IHRM The Organizational Context IHRM in Cross-Border Mergers & Acquisitions, International Alliances and SMEs Sourcing Human Resources for Global Markets – Staffing, Recruitment and Selection International Performance Management International Training, Development and Careers International Compensation International Industrial Relations and The Global Institutional Context IHRM Trends and Future Challenges Spanning the Globe Quality Compliance at the Hawthorn Arms Wolfgang’s Balancing Act: Rewarding Healthcare Executives in a Dispersed Yet Integrated Firm Strategic Forecasts and Staffing Formulation: Executive and Managerial Planning for Bosch-Kazakhstan Local and International? Managing Complex Employment Expectations Expatriate Compensation at Robert Bosch GmbH: Coping With Modern Mobility Challenges Balancing Values – An Indian Perspective on Corporate Values from Scandinavia Just Another Move to China? The Impact of International Assignments on Expatriate Families viii x xii xiv 1 22 46 82 109 150 174 215 241 268 282 287 289 298 305 312 319 328 Glossary 334 Index 342 iii CONTENTS Preface Acknowledgements About the Authors Walk-Through Tour Chapter 1 Chapter 2 iv viii x xii xiv Introduction 1 Chapter Objectives 1 Scope of the Book 2 Defining International HRM 2 Differences between Domestic and International HRM 4 Variables that Moderate Differences between Domestic and International HRM 8 The Cultural Environment 9 Industry Type 11 Extent of Reliance of the Multinational on its Home-Country Domestic Market 12 Attitudes of Senior Management to International Operations 14 Applying a Strategic View of IHRM 15 The Changing Context of IHRM 17 Summary 17 Discussion Questions 19 Further Reading 19 Notes and References 19 The Cultural Context of IHRM 22 Chapter Objectives 22 Introduction 23 The Development of Cultures 38 Summary 39 Discussion Questions 40 Further Reading 40 Notes and References 40 CONTENTS Chapter 3 Chapter 4 Chapter 5 Chapter 6 The Organizational Context 46 Chapter Objectives 46 Introduction 47 Standardization and Localization of HRM Practices 48 Factors Driving Standardization 49 Factors Driving Localization 50 The Path to Global Status 56 Control Mechanisms 69 Summary 73 Discussion Questions 75 Further Reading 75 Notes and References 75 IHRM in Cross-Border Mergers & Acquisitions, International Alliances and SMEs 82 Chapter Objectives 82 Cross-Border Alliances 83 Cross-Border Mergers and Acquisitions 84 International Equity Joint Ventures 91 International SMEs 95 Summary 100 Discussion Questions 101 Further Reading 101 Notes and References 101 Sourcing Human Resources for Global Markets – Staffing, Recruitment and Selection 109 Chapter Objectives 109 Introduction 110 Approaches to Staffing 110 Transferring Staff for International Business Activities 116 The Roles of an Expatriate 119 The Roles of Non-Expatriates 122 The Roles of Inpatriates 123 Recruitment and Selection of International Managers 124 Expatriate Failure and Success 126 Selection Criteria 129 Expatriate Selection Processes in Practice 134 Dual Career Couples 137 Summary 140 Discussion Questions 142 Further Reading 142 Notes and References 142 International Performance Management 150 Chapter Objectives 150 v vi Chapter 7 Chapter 8 Chapter 9 CONTENTS Introduction 151 Multinational Performance Management 152 Control and Performance Management 154 Performance Management of International Employees 155 Performance Appraisal of International Employees 162 Summary 168 Discussion Questions 170 Further Reading 170 Notes and References 170 International Training, Development and Careers 174 Chapter Objectives 174 Introduction 175 Components of Effective Pre-Departure Training Programs 177 The Effectiveness of Pre-Departure Training 185 Developing Staff Through International Assignments 186 Trends in International Training and Development 189 Re-Entry and Career Issues 189 The Repatriation Process 191 Individual Reactions to Re-Entry 194 Responses by the MNE 199 Designing a Repatriation Program 205 Summary 207 Discussion Questions 209 Further Reading 209 Notes and References 209 International Compensation 215 Chapter Objectives 215 Introduction 216 Key Components of an International Compensation Program for Expatriates 217 Approaches to International Compensation of Expatriates 221 Tentative Conclusions: Patterns in Complexity, Challenges and Choices 232 Summary 235 Discussion Questions 236 Further Reading 236 Notes and References 236 International Industrial Relations and the Global Institutional Context 241 Chapter Objectives 241 Introduction 242 Key Issues in International Industrial Relations 243 Trade Unions and International Industrial Relations 246 The Response of Trade Unions to MNEs 248 Regional Integration: The European Union (EU) 251 Codes of Conduct – Monitoring HRM Practices Around the World 252 CONTENTS Managing Human Resources in ‘Offshoring Countries’ 253 Summary 259 Discussion Questions 261 Further Reading 261 Notes and References 261 IHRM Trends and Future Challenges 268 Chapter Objectives 268 Introduction 269 Summary and Concluding Remarks 277 Discussion Questions 279 Further Reading 279 Notes and References 279 Case 1 Spanning the Globe 282 Case 2 Quality Compliance at the Hawthorn Arms 287 Case 3 Wolfgang’s Balancing Act: Rewarding Healthcare Executives in a Dispersed Yet Integrated Firm 289 Case 4 Strategic Forecasts and Staffing Formulation: Executive and Managerial Planning for Bosch-Kazakhstan 298 Case 5 Local and International? Managing Complex Employment Expectations 305 Case 6 Expatriate Compensation at Robert Bosch GmbH: Coping With Modern Mobility Challenges 312 Case 7 Balancing Values – An Indian Perspective on Corporate Values from Scandinavia 319 Case 8 Just Another Move to China? The Impact of International Assignments on Expatriate Families 328 Chapter 10 Glossary 334 Index 342 vii PREFACE According to the 2012 World Investment Report issued by the United Nations the foreign affiliates of MNEs employed an estimated 69 million workers, who generated $28 trillion in sales and $7 trillion in value-added, some 9% up from 2010. In 1990, when the first edition of this textbook was published, a total of 24 million workers were employed. This is merely one of many metrics that demonstrate the extent of the globalization of business. With this increase in scale, the role of human resource management in sustaining this increase in international business activity is a central theme of this Sixth Edition of our textbook. In writing this new edition we have responded to feedback from users of previous editions and reorganized the format for the Sixth Edition into 10 chapters instead of 12 chapters. In carefully revising and updating the chapter Endnotes for this new edition we have been very careful to avoid the common trap of multiple editions – simply piling on more and more endnotes and leaving the reader to wade through the growing lists. By carefully culling Endnotes and the Further Reading sections at the end of each chapter our intention is to provide a reader just being introduced to the fascinating topic of HRM in a multinational context with a reasonable set of critical references as a starting point for their studies. At the same time, our more advanced readers will be able to evaluate our assessment of the most recent significant citations along with what we consider ‘classic’ empirical or conceptual articles and books. The more significant changes to the Sixth Edition include the following: l In response to feedback from teaching and professional colleagues, we have included a new chapter (Chapter 2) on The Cultural Context of IHRM. We decided to place this new chapter early in the book so that we now cover Culture in Chapter 2 and the Organizational Context in Chapter 3. l Chapter 4 is now titled IHRM in Cross-Border Mergers & Acquisitions, International Alliances and SMEs to provide specific contextual information on these important developments in international management. l Chapter 6 International Performance Management has been moved from later in the book to earlier to better reflect the importance of Performance Management in the IHRM process. l Chapter 7 International Training, Development and Careers has been moved from later in the book to earlier to better fit with Chapter 6. The important issue of career planning has also been moved to this chapter to better fit with contemporary IHR practice to link career development more systematically with training and development. l Chapter 9 International Industrial Relations and the Global Institutional Context has been extensively revised and updated and replaces two (Chapters 9 and 10) in the previous edition. Several of the IHRM in Action cases embedded throughout the chapters have been replaced or significantly updated. These changes will help students grasp the principles and models in the chapter and better apply these ideas to a range of settings or contexts. The eight in-depth cases at the end of the text have been written by the co-authors or solicited from global experts to provide a range of in-depth applications for all of the major functional areas of IHRM. Extensive teaching notes are provided for adopters of the text. Long time users of the text will find a more systematic and extensive set of cases, but hopefully our loyal adopters will still find some of their favorite cases remain as well. Our feedback on these end-of-text cases was outstandingly positive in the fifth Edition and we feel this new edition builds on that strength. viii PREFACE ix As in previous editions, the challenge of this Sixth Edition has been to organize the complexities particular to HRM activities in MNEs in such a way that provides teachers (of both undergraduate and graduate students) real choice as to how they will present the material. We have tried to find a balance that is meaningful and appropriate to the varying cultures represented by potential adopters and readers, and across educational traditions, institutions and forms, while accurately capturing the compelling realities facing HRM professionals in MNEs. As always, we welcome your comments and suggestions for improvement in this task. The author team remains an excellent example of collaborative work (across a significant number of time zones) in the 21st century with tri-continental representation from the Asia Pacific, Europe and North America. ACKNOWLEDGEMENTS First we would like to thank the scores of academics and practitioners who have come up to us at conferences and workshops, as well as communications by emails sent over the last four years, sharing with us their comments and suggestions. Many of the improvements to this new edition of the book outlined above are the direct result of these conversations. The tricky task of balancing the need for continuity and meeting expectations for an enduring and highly successful title with the need to update and revise materials in what is still a very young and dynamic academic area of study is made easier by the support of our peers and colleagues around the world. We thank you for your patience, ongoing interest in and commitment to our book. As with previous editions, we have received a great deal of assistance from numerous colleagues in various educational institutions and organizations across the globe. Particular thanks go to the following colleagues for their assistance with this edition of the book: Ruth Alas; Estonian Business School John Boudreau; University of Southern California Helen De Cieri; Monash University Barry Gerhart; University of Wisconsin-Madison Wolfgang Mayrhofer; Vienna University of Economics and Business Mark Mendenhall; University of Tennessee-Chattanooga Molly Pepper; Gonzaga University József Poór; Szent István University Gödöllö, Hungary Susanne Royer; University of Flensburg Hugh Scullion; National University of Ireland, Galway Günter Stahl; Vienna University of Economics and Business Shuming Zhao; Nanjing University Cherrie Zhu; Monash University Particular thanks go to Maike Andresen, Manfred Froehlecke, Martine Cardel Gertsen, Yvonne McNulty, Ihar Sahakiants and Mette Zølner for their case contributions. x ACKNOWLEDGEMENTS xi We also gratefully acknowledge the support of the following institutions: LA TROBE UNIVERSITY Peter Dowling thanks Leigh Drake, Executive Dean of the Faculty of Business, Economics and Law at La Trobe University, Tim Majoribanks, Head of the Department of Management and his colleagues in the HRM and International Business group for providing a supportive environment for writing and research. ESCP EUROPE, BERLIN CAMPUS Marion Festing thanks the Dean of ESCP-Europe, Professor Pascal Morand and her colleagues for providing a supportive environment for writing and research. Special thanks go to the team of the Chair of Human Resource Management and Intercultural Leadership for outstanding support. EASTERN KENTUCKY UNIVERSITY Allen Engle thanks the EKU Foundation Board as well as Robert Rogow, Dean of the College of Business and Technology for their ongoing financial support of research and travel. He would also like to acknowledge the longstanding technical and creative help of Ron Yoder and Florencia Tosiani. The assistance from staff at Cengage Learning UK has been greatly appreciated. In particular, we thank our Publishing Editor, Andrew Ashwin, for his ongoing assistance and advice with this edition and Charlotte Green for her work on the production of the book. The Publisher would like to thank the following academics who supplied feedback on the original proposal and during the writing process: Elaine Farndale; Tilburg University Rosmini Omar; University Teknologi Malaysia Nancy Long; San Jose State University Peter Mclean; University of Wollongong NSW Jay Leighton; Curtin University of Technology Anne-Marie Francesco; Hong Kong Baptist University Alan Burton-Jones; Bond University Finally, our personal thanks to the following individuals for their understanding, support and encouragement throughout the process of completing this Sixth Edition: Fiona Dowling Christian Daubenspeck, Janik and Annika Fred and Mary Engle, and Elizabeth Hoffman Engle Peter J. Dowling, Melbourne Marion Festing, Berlin Allen D. Engle, Sr, Richmond, Kentucky ABOUT THE AUTHORS PETER J. DOWLING (PhD, The Flinders University of South Australia) is Professor of International Management & Strategy at La Trobe University, Melbourne, Australia. Previous academic appointments include The University of Melbourne, Monash University, the University of Tasmania and Victoria University of Wellington. He has also held visiting appointments in the United States at Cornell University and Michigan State University and in Germany at the University of Paderborn and the University of Bayreuth. He has co-authored a number of books including Strategic Management: Competitiveness and Globalization (Pacific Rim 3rd Ed.) and Human Resource Management in Australia (2nd Ed) and written or co-authored over 70 journal articles and book chapters. He serves on the editorial boards of International Journal of Human Resource Management, Journal of World Business, Management International Review, Journal of International Management, Thunderbird International Business Review, Asia Pacific Journal of Human Resources and ZfP-German Journal of Research in Human Resource Management Research. Peter is currently President of the Australia & New Zealand International Business Academy, a Life Fellow of the Australian Human Resources Institute and a Fellow of the Australian & New Zealand Academy of Management. Former roles include past President of the Australian & New Zealand Academy of Management, past President of the International Federation of Scholarly Associations of Management and Founding Editor of Asia Pacific Journal of Human Resources. MARION FESTING (PhD, University of Paderborn) is Professor of Human Resource Management and Intercultural Leadership at ESCP Europe and Rector of the Berlin Campus of this business school. Previous appointments include the University of Paderborn, Germany. Marion has gained educational, research and work experience in France, Australia, Tunisia, Taiwan and the USA. She has co-authored and edited a number of books including a monograph on Strategic International Human Resource Management (Strategisches Internationales Personalmanagement – Second Edition) and a co-authored text on International Human Resource Management (Internationales Personalmanagement – Third Edition). Marion has also written or co-authored over 90 book chapters and journal articles and published in international journals such as Academy of Management Perspectives, Human Resource Management Review, Thunderbird International Business Review, Economic and Industrial Demography, European Management Journal, European Journal of International Management, Journal for East European Management Studies and International Journal of Globalization and Small Business. xii ABOUT THE AUTHORS xiii Marion is the Co-Editor of ZfP-German Journal of Research in Human Resource Management and serves on the editorial boards of International Journal of Human Resource Management, Career Development International, International Journal of Globalization and Small Business and Zeitschrift für Management. She was co-organizer of the sixth conference on International Human Resource Management in Paderborn in 1998, and co-chair of the various IHRM tracks at the International Federation of Scholarly Associations of Management (IFSAM) conferences including in Limerick in 2012. Her current research interests focus on transnational HRM strategies, global performance management, global careers and global compensation. ALLEN D. ENGLE, SR. (DBA, University of Kentucky) is a Professor of Management in the College of Business and Technology at Eastern Kentucky University. He is a national and regional professional member of World at Work (formerly the American Compensation Association) and of the Society for Human Resource Management and a long time member of the US Academy of Management. While at Eastern, he has taught courses in management (undergraduate and graduate), a number of areas within human resource administration, organizational behavior, organizational theory and international management (undergraduate and graduate). Allen holds a three-year appointment as Visiting Professor at ESCPEurope in Berlin. He has been Visiting Lecturer at the FHS ! Hochschule Für Technik, Wirtschaft und Soziale Arbeit, St Gallen in Switzerland and Visiting Professor of International Management at the University of Pécs in Hungary. His research interests are in the topic areas of compensation theory and practices, global performance management, leadership and organizational change, job analysis, managerial competencies and organizational design, particularly as they impact on multinational firms. He has published in regional, national and international academic journals, presenting academic papers on many of the topic areas presented above at conferences in the USA, Australia, Canada, Estonia, France, Germany, Hungary, Ireland, Italy, Slovenia, Spain and the United Kingdom. Allen has consulted for regional firms and presented professional seminars in the areas of performance appraisal systems, executive team building, strategically responsive compensation systems, intercultural management issues and organizational change. WALK THROUGH TOUR CHAPTER 1 INTRODUCTION FIGURE 1.3 The industry (or industries) within which the multinational is primarily involved The cultural environment Extent of reliance of the multinational on its home-country domestic market CHAPTER 1 INTRODUCTION 9 A model of the variables that moderate differences between domestic and international HRM Domestic and international activities of the HRM function Complexity involved in operating in different countries and employing different national categories of employees Attitudes of senior management Source: P. J. Dowling, ‘Completing the Puzzle: Issues in the Development of the Field of International Human Resource Management’, (mir) Management International Review, Special Issue No. 3/99 (1999), p. 31. Reproduced with kind permission from VS Verlag Für Sozialwissenschaften. THE CULTURAL ENVIRONMENT In Chapter 2, The Cultural Context of IHRM, we cover the concept of culture in considerable detail, so our comments in this introductory chapter are necessarily brief. There are many definitions of culture, but the term is usually used to describe a shaping process over time. This process generates relative stability, reflecting a shared knowledge structure that attenuates (i.e. reduces) variability in values, behavioral norms and patterns of behaviour.18 An important characteristic of culture is that it is so subtle a process that one is not always conscious of its relationship to values, attitudes and behaviours. One usually has to be confronted with a different culture in order to fully appreciate this effect. Anyone traveling abroad, either as a tourist or on business, experiences situations that demonstrate cultural differences in language, food, dress, hygiene and attitude to time. While the traveller can perceive these differences as novel, even enjoyable, for people required to live and work in a new country, such differences can prove difficult. They may experience culture shock – a phenomenon experienced by people who move across cultures. The new environment requires many adjustments in a relatively short period of time, challenging people’s frames of reference to such an extent that their sense of self, especially in terms of nationality, comes into question. People, in effect, experience a shock reaction to new cultural experiences that cause psychological disorientation because they misunderstand or do not recognize important cues. Culture shock can lead to negative feelings about the host country and its people and a longing to return home.19 Because international business involves the interaction and movement of people across national boundaries, an appreciation of cultural differences and when these differences are important is essential. Research into these aspects has assisted in furthering our understanding of the cultural environment as an important variable that moderates differences between domestic and international HRM. However, while cross-cultural and comparative research attempts to explore and explain similarities and differences, there are problems associated with such research. A major problem is that there is little agreement on either an exact definition of culture or on the operationalization of this concept. For many researchers, culture has become an Chapter Objectives In this introductory chapter, we establish the scope of the book. We: l Define key terms in international human resource management (IHRM) and consider several definitions of IHRM. l Introduce the historically significant issue of expatriate assignment management and review the evolution of these assignments to reflect the increasing diversity with regard to what constitutes international work and the type and length of international assignments. l Outline the differences between domestic and international human resource management, and detail a model that summarizes the variables that moderate these differences. l Present the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and faster and more detailed diffusion of these practices across organizational units and firms. 1 Chapter Objectives appear at the start of every chapter and help you monitor your understanding and progress through the chapter. 54 CHAPTER 3 THE ORGANIZATIONAL CONTEXT TABLE 3.1 Examples of the impact of the cultural and institutional context on HRM practices HRM practices Recruitment and selection Impact of the institutional context Education system The reputation of educational institutions such as public and private universities varies in different countries. This is reflected in the recruiting processes (i.e., HR marketing) and selection criteria of the firms in those countries. Training and development Education system Education systems differ between different countries (existence of a dual vocational training system, quality and reputation of higher education institutions). This has an effect on the training needs perceived and fulfilled by MNEs. Compensation Legislation and industrial relations Legislation such as the regulation of minimum wages or respective union agreements with respect to compensation have an impact on the firm’s compensation choices with Respect to pay mix and pay level. Task distribution Legislation and norms Legislations and respective norms Support gender-based division of labor to a differing extent in different countries. While in some countries the percentage of female managers is relatively high, in other countries it is not common that women work at all. Figures give a visual representation of key concepts or data. 170 CHAPTER 6 INTERNATIONAL PERFORMANCE MANAGEMENT IHRM in Action Case 6.1 A rainy expatriate performance appraisal Richard Hoffman, a Québécois Chemical Engineer working for a Canadian-based energy firm, was given a three-year expatriate assignment in Venezuela as a technical liaison and environmental protection project manager. His local project supervisor was Jean, a French engineer who had lived in French Guiana and then Venezuela for over 20 years. Richard thought that as a Francophone from Quebec, he and Jean would be able to build a quick working relationship. Rich sent Jean an early email (in French, and not the usual corporate English) containing what he thought of as the five most significant goals associated with his assignment – similar to the management by objectives section of the more or less standard performance appraisal forms he had filled out for years during earlier assignments in Edmonton, Toronto and at corporate headquarters in Montreal. After several months with no response from Jean, Richard caught Jean in the hallway between meetings and asked him about the email and his progress to date. ‘Don’t worry about that’, Jean responded blandly, ‘Just keep working to the deadlines and I will check with your co-workers and the other project managers on your work. Where Mode of operation abroad When addressing the mode of operation, it is helpful to examine this from the level of the local affiliate. Thus, we turn to firm-endogenous factors to determine the balance between global standardization and localization. Later in the chapter we will discuss the various modes of foreign operations and their associated HRM practices. A study by Buckley et al.36 provides two examples of how the mode of operation either inhibits or facilitates work standardization. In late 1978, the Chinese government announced an open-door policy and commenced economic reforms aimed at moving the country from a centrally planned to a market economy. Western firms that entered China early were more or less forced to enter into joint ventures with stateowned enterprises (SOEs), whereas those entering later have been able to establish wholly owned subsidiaries (WOSs). One case in the Buckley et al. study is Shanghai Bell – a joint venture formed in 1983 between a Belgian telecommunications firm (now Alcatel Bell), the Belgian government and the Chinese Postal and Telecommunications Industries Corporation (PTIC). There was a gradual transfer of relevant technology by the Belgian firm, with a long-term reliance on Belgian expatriates. The Belgian firm had limited control over the Chinese employees in the joint venture and was constrained by its partner’s expectations and differing goals. The second case researched was much different. The US telecommunications firm, Motorola, established a wholly owned operation in Tianjin, China, in 1992. Changing conditions in China meant that Motorola could effectively build a ‘transplant factory’: importing production equipment, organizational processes and practices from either the parent or other subsidiaries in its global network. This enabled Motorola to integrate the Chinese operation into the broader corporate network and to localize management. These have been supported by HRM initiatives such as a special management training program (China Accelerated Management Program – CAMP)37, English language training and transfer of Chinese employees into the US operations. Tables help to order significant data and trends. xiv did you go to engineering school by the way?’ Richard waited another six months and was becoming increasingly anxious as the firm’s annual review week approached. He finally caught up with Jean on a rainy Friday in the lobby of the office building as they both waited for their drivers to arrive. When asked about the upcoming performance review, Jean snorted and said. ‘C’est tout fini, it’s all been taken care of. Make an appointment with my assistant Louisa next week and we can go over the report we have sent to Montreal’. As Jean stepped gingerly into the rainy Caracas parking lot, Richard thought back to the last few weeks with his team, the sometimes loud disagreements with his fellow project managers, and wondered if it was too late in the day to call his old supervisor in Toronto. Source: Based on the synthesis of a series of expatriate experiences In principle, performance appraisal systems are designed carefully and often presumed to be static. Valid reasons exist for maintaining standard, traditionally used appraisals (e.g., when the system has been tested, has identified baselines, and reduces future development costs). These reasons are valid as long as the context of the performance does not change. In the expatriate setting, however, the performance context does change, and sometimes it changes dramatically. Given a global context, previous testing and established baselines grounded in domestic situations can become meaningless. IHRM in Action cases provide real-life examples of the concepts and issues covered in the chapter. CHAPTER 1 INTRODUCTION 17 CHAPTER 6 INTERNATIONAL PERFORMANCE MANAGEMENT 175 managing international operations.50 These elements are well-established as important factors for HRM in MNEs, as is the factor Organizational culture which is defined by Kidger as the ‘sense of common identify and purpose across the whole organization’,51 (page 81) and is the final organizational factor included in the framework. For MNEs seeking a high level of global integration, this factor may facilitate the development of a global mindset and enhance firm performance.52 Overall, the model offered by De Cieri and Dowling aims to assist in the crossfertilization of ideas to further develop theory and empirical research in strategic HRM in multinational firms. THE CHANGING CONTEXT OF IHRM As Figures 1.3 and 1.4 show, international firms compete in an increasingly complex environment where the level of challenge of doing business can be highly variable. Internationalizing firms rely on having the right people to manage and operate their businesses and good IHRM practices that are appropriate to the context in which they occur. This combination of appropriate people and HR practices has been a constant critical success factor in international business ventures. For example, the following quotation is taken from a detailed case study of a large US multinational, where the authors, Desatnick and Bennett53 concluded: The primary causes of failure in multinational ventures stem from a lack of understanding of the essential differences in managing human resources, at all levels, in foreign environments. Certain management philosophies and techniques have proved successful in the domestic environment: their application in a foreign environment too often leads to frustration, failure and underachievement. These ‘human’ considerations are as important as the financial and marketing criteria upon which so many decisions to undertake multinational ventures depend. This study was reported in 1978 but many international managers today would concur with the sentiments expressed in this quote. In this book we attempt to demonstrate some ways in which an appreciation of the international dimensions of HRM can assist in this process. SUMMARY The purpose of this chapter has been to provide an overview of the emerging field of international HRM. We did this by: l Defining key terms in IHRM and considering several definitions of IHRM. l Introducing the historically significant issue of expatriate assignment management and reviewing the evolution of these assignments to reflect the increasing diversity with regard to what constitutes international work and the type and length of international assignments. l Outlining the differences between domestic and international human resource management by looking at six factors which differentiate international and domestic HR (more HR activities; the need for a broader perspective; more involvement in employees’ personal lives; changes in emphasis as the workforce mix of expatriates and locals varies; risk exposure; and more external influences) and detailing a model which summarizes the variables that moderate these differences. l Presenting the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and faster and more detailed diffusion of these practices across organizational units and firms. Summary boxes at the end of each chapter provide a thorough re-cap of key issues and help you assess your understanding of key content. 290 DISCUSSION QUESTIONS 1 individual, the teamwork aspect gets lost. In an international location, it is perhaps desirable to focus more on how the PCN has settled in and is operating as part of a team rather than as an individual. In the section on the volatility of the global environment, several world events were listed that have had profound implications for the global and local strategies of MNEs. Select a recent world event, identify the specific HR implications that may arise from this, and devise policies as to how these may be handled. 2 Discuss the major factors associated with appraisal of expatriate managerial performance. 3 One of the dangers of performance appraisal is that, because the focus is so much on a particular 4 Why is it important to include hard, soft and contextual goals when assessing managerial performance? 5 In what ways would the role of a manager working in a non-standard international assignment arrangement differ from that of a typical expatriate manager? FURTHER READING Fey, C., Morgulis, Y., Park. S., Hyeon, J. and Bjorkman, I. (2009) ‘Opening the black box of the relationship between HRM practices and firm performance: A comparison of MNE subsidiaries in the USA, Finland and Russia. Journal of International Business Studies 40: 690–712. Cascio, W. (2006) ‘Global Performance Management Systems’, in G. Stahl and I. Björkman (eds), Handbook of Research in International Human Resource Management, Cheltenham: Edward Elgar, pp. 176–96. Engle, A., Dowling, P. and Festing, M. (2008) ‘State of Origin: Research in Global Performance Management, a Proposed Research Domain and Emerging Implications’, European Journal of International Management, 2 (2):153–69. Milliman, J., Nason, S., Zhu, C. and De Cieri, H. (2002) An Exploratory Assessment of the Purposes of Performance Appraisals in North and Central America and the Pacific Rim’, Asia Pacific Journal of Human Resources, 40(1): 105–22. Shay, J. P. and Baack, S. A. (2004) ‘Expatriate Assignment, Adjustment and Effectiveness: An Empirical Examination of the Big Picture’, Journal of International Business Studies, 35: 216–32. Shih, H., Chiang, Y. and Kim, I. (2005) ‘Expatriate Performance Management from MNEs of Different National Origins’, International Journal of Manpower, 26(2): 157–76. NOTES AND REFERENCES 1. Excellent overviews of research in this area are provided by P. Caligiuri, ‘Performance Measurement in a Cross–cultural Context’, in W. Bennett, C. Launce and J. Woehr (eds), Performance Management: Current Perspectives and Future Challenges (Mahwah, NJ: Lawrence Erlbaum Associates, 2006), pp. 227–44; and W. Cascio, ‘Global Performance Management Systems’, in G. Stahl and I. Björkman (eds), Handbook of Research in International Human Resource Management (Cheltenham: Edward Elgar, 2006), pp. 176–96. 2. Cascio, ‘Global Performance Management Systems’, p. 193. 3. C.A. Bartlett and S. Ghoshal, ‘Managing Across Borders: New Strategic Requirements’, Sloan Management Review (Summer, 1987), pp. 7–17. Discussion Questions are provided at the end of each chapter and are designed to give a platform for classroom discussion. CHAPTER 10 IHRM TRENDS AND FUTURE CHALLENGES CASE 2 QUALITY COMPLIANCE AT THE HAWTHORN ARMS By Allen D. Engle, Sr. DISCUSSION QUESTIONS 1 What is your view of international initiatives to criminalize foreign bribery? 2 Identify a number of HRM problems that typically arise with expatriate assignments. In what ways might the core ethical values and guidelines identified in this chapter apply to them? 3 Beyond checklists and systemic analysis, what actions can MNEs take to reduce risks related to terrorism? What roles can HRM take in these processes? 4 What IHRM activities would be pertinent to the sending, by Médecins Sans Frontieres, of a medical team into a country such as Bangladesh? FURTHER READING Burke, R. and Coopers, C. (eds.) (2008) International Terrorism and Threats to Security: Managerial and Organizational Challenges. Cheltenham, U.K.: Edward Elgar Publishing. Cross Cultural Management: An International Journal Special Issue (2011) Theme: ‘Expatriation – Old Issues, New Insights’. Volume 18, (2). Guest Editors: Jan Selmer and Vesa Suutari. Fortanier, F., Kolk, A. and Pinkse, J. (2011) Harmonization in CSR Reporting: MNEs and Global CSR Standards. Management International Review, 51 (5): 665–696. Lundby, K. and Jolton, J. (2010) (Eds), Going Global: Practical Applications and Recommendations for HR and OD Professionals in the Global Workspace (San Francisco, USA: Jossey-Bass, 2010). Morris, S.S., Wright, P.M., Trevor, J., Stiles, P., Stahl, G.K., Snell, S., Paauwe, J., and Farndale, E. (2009) Global Challenges to Replicating HR: The Role of People, Processes, and Systems. Human Resource Management, 48(6), 973–995. Wernick, D. and Von Glinow, M. (forthcoming). Reflections on the Evolving Terrorist Threat to Luxury Hotels: A Case Study on Marriott International. Thunderbird International Business Review. NOTES AND REFERENCES 1. See T. Jackson, International HRM: A Cross-cultural Approach, Chapter 5, ‘The Motivating Organization: The Japanese Model’ (London: Sage Publications, 2002), pp. 107–26; E. Ikegami, The Taming of the Samurai: Honorific Individualism and the Making of Modern Japan (Cambridge, MA: Harvard University Press, 1995); and J. Abegglen and G. Stalk, Kaisha: The Japanese Corporation (New York: Basic Books, 1985). 2. See http://www.oecd.org/department/ 0,3355,en_2649_34855_1_1_1_1_1,00.html for a comprehensive list of resources offered by the OECD on bribery in international business. 3. L. Carson, ‘Bribery Extortion, and the Foreign Corrupt Practices Act’, Philosophy and Public Affairs (1984) pp. 66–90. See also http://www.justice.gov/criminal/fraud/ fcpa/ for up-to-date information on the FCPA. For a recent review of ethics programs as a training topic and the potential responsibilities of IHRM staff in creating and maintaining such programs, see A. Vadera and R. Aguilera, ‘The Role of IHRM in the Formulation and Implementation of Ethics Programs in Multinational Enterprises’ in P. Sparrow (ed.) Handbook of International Human Resource Management (Chichester, U.K.: John Wiley and Sons, 2009) pp. 413–438. 4. W. Bottiglieri, M. Marder and E. Paderon, ‘The Foreign Corrupt Practices Act: Disclosure Requirements and Management Integrity’, SAM Advanced Journal, Winter (1991), pp. 21–7. Further Reading and Notes and References allow you to explore the subject further and act as a starting point for projects and assignments. Sitting in his room at the Hawthorn Arms Hotel in Shannon, Ireland, waiting for a morning flight to London and then on to Marseilles, Alistair Mackay reflects on how uninspiring hotel rooms are. He had just completed a series of meetings with Irish officials in Limerick, concluding with a debriefing session over a Guinness with his Irish colleagues to plan their next move. Negotiations over a potential contract were proceeding well but there would be labour implications that would require a formal response. Consequently, Alistair had missed the last evening flight out to London. ‘Another night away from the family. Thank goodness I am not missing our wedding anniversary tomorrow. I must remember to find something really special in the duty-free shop’. Six months ago, Alistair was appointed Director of Personnel Development, European Division, for Trianon, an Anglo-French avionics firm. Trianon had begun as a subcontractor for the Concorde, and gradually had gained a reputation in the 1970s and 1980s as a high quality, if sometimes undependable subcontractor for major French and British aerospace defence contractors. Attempts to expand into civilian markets by gaining contracts for the original European Airbus were unsuccessful, though today nearly 30 per cent of Trianon’s sales are through civilian contracts. Now, under new executive management, Trianon is focused on major navigational display contracts for the next generation of Airbus production. Prior to joining Trianon, Alistair had worked in the legal department of a Scottish bank. European Union employment requirements had become his speciality, and provided a springboard into his current position. His cell phone rings, and he receives an unexpected call from his colleague Henri Genadry, General Director of Joint Ventures, Mergers and Acquisitions, Display Division. Henri informs him that the expected outright purchase of a scanner-cathode ray tube production facility in Veceses, outside of Budapest, Hungary was not going ahead. Instead, the decision had been made at corporate headquarters in Marseilles for a ten-year joint venture with a Hungarian government backed firm. Henri goes on to explain that the Hungarian control and equity interests in this project are expected to make ministry officials in Budapest happy. Henri was hopeful the decision will make executives and administrators at Malev, the state supported airline, friendly to Trianon in the long term. ‘We will now need a ‘‘Quality Compliance Manager’’ for a three year assignment in Hungary. It is an important position as we will need to keep tight control on this joint venture operation. There will be some travel to France and Germany – at least in the first year – until we see how things are working out with these new partners’. Alistair asks, ‘When do you expect this ‘‘Quality Compliance’’ manager to be available?’ There is a pause on the other end of the line after which Henri blandly responds, ‘Five or six weeks if we are to meet corporate timetables. We expect the person to be in on the ground so to speak. We will need a realistic assessment of current processes for a start. The person will need to be familiar with the joint venture’s objectives and targets. We have some details through the due diligence process but skills audits were somewhat rushed’. Alistair then asks that details, including a job description, be emailed to his intranet address. ‘Well’ Henry admits, ‘this is out first joint venture the firm has been involved in outside of the UK, Germany or France. The job description will be very precise on the technical-‘‘quality’’ side, but vague on the administrative – ‘‘compliance’’ side. You may need to fill in the missing pieces as you see fit’. After a few more minutes of general chatting, Henri finishes the phone call. Alistair plugs his laptop into the telephone port on his room’s desk, and after a few false starts, logs on to the secure corporate web site and accesses three personnel files from a folder he had prepared some weeks ago in expectation that he would be asked for a decision. Of course, he had expected the position to be that of Project Engineer in an operation that the firm would have 100 per cent Longer Cases provide a detailed example of real-life Human Resource situations. Some cases are accompanied by figures, tables and notes. xv DIGITAL SUPPORT RESOURCES Dedicated Instructor Resources To discover the dedicated instructor online support resources accompanying this textbook, instructors should register here for access: http://login.cengage.com Resources include: ● Instructor’s Manual ● ExamView Testbank ● PowerPoint slides Online Student Resources Instructor access Instructors can access the online student resources by registering at http://login. cengage.com or by speaking to their local Cengage Learning EMEA representative. Instructor resources Instructors can use the integrated Engagement Tracker to track students’ preparation and engagement. The tracking tool can be used to monitor progress of the class as a whole, or for individual students. Student access Students can access the online platform using the unique personal access card included in the front of the book. Student resources A range of interactive learning tools tailored to the sixth edition of International Human Resource Management are available on the online platform, including: xvi ● Quizzes and self-test questions ● Interactive eBook ● Games ● Videos ● Glossary ● Flashcards ● Links to useful websites. CHAPTER 1 INTRODUCTION Chapter Objectives In this introductory chapter, we establish the scope of the book. We: l Define key terms in international human resource management (IHRM) and consider several definitions of IHRM. l Introduce the historically significant issue of expatriate assignment management and review the evolution of these assignments to reflect the increasing diversity with regard to what constitutes international work and the type and length of international assignments. l Outline the differences between domestic and international human resource management (HRM), and detail a model that summarizes the variables that moderate these differences. l Present the complexity of IHRM, the increasing potential for challenges to existing IHRM practices and current models, and an increasing awareness of the wide number of choices within IHRM practices due to increased transparency and faster and more detailed diffusion of these practices across organizational units and firms. 1 2 CHAPTER 1 INTRODUCTION SCOPE OF THE BOOK The field of international HRM has been characterized by three broad approaches.1 The first2 emphasizes cross-cultural management: examining human behavior within organizations from an international perspective. A second approach developed from the comparative industrial relations and HRM literature3 and seeks to describe, compare and analyze HRM systems in various countries. A third approach seeks to focus on aspects of HRM in multinational firms.4 These approaches are depicted in Figure 1.1. In this book, we take the third approach. Our objective is to explore the implications that the process of internationalization has for the activities and policies of HRM. In particular, we are interested in how HRM is practiced in multinational enterprises (MNEs). FIGURE 1.1 Inter-relationships between approaches to the field Cross-cultural management a IHRM in the multinational context b Comparative HR and IR systems As Figure 1.1 demonstrates, there is an inevitable overlap between the three approaches when one is attempting to provide an accurate view of the global realities of operating in the international business environment. Obviously, cross-cultural management issues are important when dealing with the cultural aspects of foreign operations. Some of these aspects will be taken up in Chapter 2 where we deal with the cultural context of HRM in the host country context – indicated by (a) in Figure 1.1. Chapter 9 deals with international industrial relations and the global institutional context and draws on literature from the comparative IR field – (b) in the above figure. While the focus of much of this book is on the established MNE – a firm which owns or controls business activities in more than one foreign country – we recognize that small, internationalizing firms which are yet to reach multinational firm status, and family-owned firms, also face international HRM issues and many of these issues are addressed in Chapter 4. DEFINING INTERNATIONAL HRM Before we can offer a definition of international HRM, we should first define the general field of HRM. Typically, HRM refers to those activities undertaken by an organization to effectively utilize its human resources. These activities would include at least the following: 1 Human resource planning. 2 Staffing (recruitment, selection, placement). 3 Performance management. 4 Training and development. 5 Compensation (remuneration) and benefits. 6 Industrial relations. CHAPTER 1 INTRODUCTION The question is of course which activities change when HRM goes international? A model developed by Morgan5 is helpful in terms of answering this question. He presents IHRM on three dimensions: 1 The broad human resource activities of procurement, allocation and utilization. (These three broad activities can be easily expanded into the six HR activities listed above.) 2 The national or country categories involved in international HRM activities: 3 l the host-country where a subsidiary may be located; l the parent-country where the firm is headquartered; and l ‘other’ countries that may be the source of labor, finance and other inputs. The three categories of employees of an international firm: l host-country nationals (HCNs); l parent-country nationals (PCNs); and l third-country nationals (TCNs). Thus, for example, the US multinational IBM employs British citizens in its British operations (HCNs), often sends US citizens (PCNs) to Asia-Pacific countries on assignment, and may send some of its Singaporean employees on an assignment to its Chinese operations (as TCNs). The nationality of the employee is a major factor in determining the person’s ‘category’, which in turn is frequently a major driver of the employee’s compensation and employment contract. Morgan defines international HRM as the interplay among the three dimensions of human resource activities, type of employees and countries of operation. We can see that in broad terms IHRM involves the same activities as domestic HRM (e.g. procurement refers to HR planning and staffing). However, domestic HRM is involved with employees within only one national boundary. Increasingly, domestic HRM is taking on some of the flavor of IHRM as it deals more and more with a multicultural workforce. Thus, some of the current focus of domestic HRM on issues of managing workforce diversity may prove to be beneficial to the practice of IHRM. However, it must be remembered that the way in which diversity is managed within a single national, legal and cultural context may not necessarily transfer to a multinational context without some modification. What is an expatriate? One obvious difference between domestic and international HRM is that staff are moved across national boundaries into various roles within the international firm’s foreign operations – these employees have traditionally been called ‘expatriates’. An expatriate is an employee who is working and temporarily residing in a foreign country. Many firms prefer to call such employees ‘international assignees’. While it is clear in the literature that PCNs are always expatriates, it is often overlooked that TCNs are also expatriates, as are HCNs who are transferred into parent country operations outside their own home country.6 Figure 1.2 illustrates how all three categories may become expatriates. The term inpatriate has come into vogue to signify the transfer of subsidiary staff into the parent country (headquarters) operations.7 For many managers this term has added a level of confusion surrounding the definition of an expatriate. The (US) Society for Human Resource Management defines an inpatriate as a ‘foreign manager in the US’. Thus, an inpatriate is also defined as an expatriate. A further indication of the confusion created by the use of the term ‘inpatriate’ is that some writers in international management define all HCN employees as inpatriates. HCNs only become ‘inpatriates’ when they are transferred into the parent-country operations as expatriates, as illustrated in Figure 1.2. 3 4 CHAPTER 1 INTRODUCTION Given the substantial amount of jargon in IHRM, it is questionable as to whether the term ‘inpatriate’ adds enough value to justify its use. However, some firms now use the term ‘inpatriate’ for all staff transferred into a country. For clarity, we will use the term expatriate throughout this text to refer to employees who are transferred out of their home base/parent country into some other area of the firm’s international operations. In doing so, we recognize that there is increasing diversity with regard to what constitutes international work, the type and length of international assignments and the increasingly strategic role of the HR function in many organizations, which in turn influences the nature of some expatriate roles. FIGURE 1.2 International assignments create expatriates Parent-country HQ/operations HCNs PCNs Subsidiary operations— country A HCNs National border PCNs TCNs Subsidiary operations— country B National border Stahl, Björkman and Morris have recognized this expansion in the scope of the field of IHRM in their Handbook of Research in International Human Resource Management where they define the field of IHRM as follows: We define the field of IHRM broadly to cover all issues related to managing the global workforce and its contribution to firm outcomes. Hence, our definition of IHRM covers a wide range of human resource issues facing MNEs in different parts of their organizations. Additionally we include comparative analyses of HRM in different countries.8 We believe that this broad definition accurately captures the expanding scope of the IHRM field and we will use this definition in this book. DIFFERENCES BETWEEN DOMESTIC AND INTERNATIONAL HRM In our view, the complexity of operating in different countries and employing different national categories of workers is a key variable that differentiates domestic and international HRM, rather than any major differences between the HRM activities performed. Dowling9 argues that the complexity of international HR can be attributed to six factors: 1 More HR activities. 2 The need for a broader perspective. CHAPTER 1 INTRODUCTION 3 More involvement in employees’ personal lives. 4 Changes in emphasis as the workforce mix of expatriates and locals varies. 5 Risk exposure. 6 Broader external influences. Each of these factors is now discussed in detail to illustrate its characteristics. More HR activities To operate in an international environment, a human resources department must engage in a number of activities that would not be necessary in a domestic environment. Examples of required international activities are: l international taxation; l international relocation and orientation; l administrative services for expatriates; l host-government relations; l language translation services. Expatriates are subject to international taxation, and often have both domestic (i.e. their homecountry) and host-country tax liabilities. Therefore, tax equalization policies must be designed to ensure that there is no tax incentive or disincentive associated with any particular international assignment.10 The administration of tax equalization policies is complicated by the wide variations in tax laws across host countries and by the possible time lag between the completion of an expatriate assignment and the settlement of domestic and international tax liabilities. In recognition of these difficulties, many MNEs retain the services of a major accounting firm for international taxation advice. International relocation and orientation involves the following activities: l arranging for pre-departure training; l providing immigration and travel details; l providing housing, shopping, medical care, recreation and schooling information; l finalizing compensation details such as delivery of salary overseas, determination of various overseas allowances and taxation treatment. The issues involved when expatriates return to their home-country (repatriation) are covered in detail in Chapter 7. Many of these factors may be a source of anxiety for the expatriate and require considerable time and attention to successfully resolve potential problems – certainly much more time than would be involved in a domestic transfer/relocation such as London to Glasgow, Frankfurt to Munich, New York to Dallas, Sydney to Melbourne, or Beijing to Shanghai. An MNE also needs to provide administrative services for expatriates in the host countries in which it operates. Providing these services can often be a time-consuming and complex activity because policies and procedures are not always clear-cut and may conflict with local conditions. Ethical questions can arise when a practice that is legal and accepted in the host country may be at best unethical and at worst illegal in the home country. For example, a situation may arise in which a host country requires an AIDS test for a work permit for an employee whose parent 5 6 CHAPTER 1 INTRODUCTION firm is headquartered in the USA, where employment-related AIDS testing remains a controversial issue. How does the corporate HR manager deal with the potential expatriate employee who refuses to meet this requirement for an AIDS test and the overseas affiliate which needs the services of a specialist expatriate from headquarters? These issues add to the complexity of providing administrative services to expatriates. Host-government relations represent an important activity for the HR department in an MNE, particularly in developing countries where work permits and other important certificates are often more easily obtained when a personal relationship exists between the relevant government officials and multinational managers. Maintaining such relationships helps resolve potential problems that can be caused by ambiguous eligibility and/or compliance criteria for documentation such as work permits. US-based multinationals, however, must be careful in how they deal with relevant government officials, as payment or payment-in-kind, such as dinners and gifts, may violate the US Foreign Corrupt Practices Act (FCPA).11 Provision of language translation services for internal and external correspondence is an additional international activity for the HR department. Morgan12 notes that if the HR department is the major user of language translation services, the role of this translation group is often expanded to provide translation services to all foreign operation departments within the MNE. The need for a broader perspective Human resource managers working in a domestic environment generally administer programs for a single national group of employees who are covered by a uniform compensation policy and taxed by one national government. Because HR managers working in an international environment face the problem of designing and administering programs for more than one national group of employees (e.g. PCN, HCN and TCN employees who may work together in Zurich at the European regional headquarters of a US-based multinational), they need to take a broader view of issues. For example, a broader, more international perspective on expatriate benefits would endorse the view that all expatriate employees, regardless of nationality should receive a foreign service or expatriate premium when working in a foreign location. Yet some MNEs that routinely pay such premiums to their PCN employees on overseas assignment (even if the assignments are to desirable locations) are reluctant to pay premiums to foreign nationals assigned to the home country of the firm. Such a policy confirms the traditional perception of many HCN and TCN employees that PCN employees (particularly US and European PCNs) are given preferential treatment.13 Complex equity issues arise when employees of various nationalities work together, and the resolution of these issues remains one of the major challenges in the IHRM field. (Equity issues with regard to compensation are discussed in Chapter 8.) More involvement in employees’ personal lives A greater degree of involvement in employees’ personal lives is necessary for the selection, training and effective management of both PCN and TCN employees. The HR department or HR professional needs to ensure that the expatriate employee understands housing arrangements, health care, and all aspects of the compensation package provided for the assignment (costof-living allowances, premiums, taxes and so on). Many MNEs have an ‘International HR Services’ section that coordinates administration of the above programs and provides services for PCNs and TCNs, such as handling their banking, investments, home rental while on assignment, coordinating home visits and final repatriation. In the domestic setting, the HR department’s involvement with an employee’s family is relatively limited and may not extend beyond providing employee benefits such as health insurance coverage for eligible family members and some assistance in relocating the employee and family members. In the international setting, however, the HR department must be much more CHAPTER 1 INTRODUCTION involved in order to provide the level of support required and will need to know more about the employee’s personal life. For example, some national governments require the presentation of a marriage certificate before granting a visa for an accompanying spouse. Thus, marital status could become an aspect of the selection process, regardless of the best intentions of the MNE to avoid using a potentially discriminatory selection criterion. In such a situation, the HR department should advise all candidates being considered for the position of the host country’s visa requirements with regard to marital status and allow candidates to decide whether they wish to remain in the selection process. Apart from providing suitable housing and schooling in the assignment location, the HR department may also need to assist children placed at boarding schools in the home country – a situation that is less frequently encountered in the United States but relatively common in many other countries, particularly former British colonies such as Singapore, Hong Kong, Australia and New Zealand and in Europe.14 In more remote or less hospitable assignment locations, the HR department may be required to develop, and even run, recreational programs. For a domestic assignment, most of these matters either would not arise or would be seen as the responsibility of the employee rather than the HR department. In a sense the ‘psychological contract’ is now between the MNE and the entire immediate family of the international assignee. Changes in emphasis as the workforce mix of PCNs and HCNs varies As foreign operations mature, the emphasis put on various human resource activities change. For example, as the need for PCNs and TCNs declines and more trained locals become available, resources previously allocated to areas such as expatriate taxation, relocation and orientation are transferred to activities such as local staff selection, training and management development. The latter activity may require the establishment of a program to bring highpotential local staff to corporate headquarters for developmental assignments. The need to change emphasis in HR operations as a foreign subsidiary matures is clearly a factor that would broaden the responsibilities of local HR activities such as human resource planning, staffing, training and development and compensation. Risk exposure Frequently the human and financial consequences of failure in the international arena are more severe than in domestic business. For example, while we discuss the topic in more detail in Chapter 5, expatriate failure (the premature return of an expatriate from an international assignment) and under-performance while on international assignment is a potentially high-cost problem for MNEs. The direct costs of failure (salary, training costs, travel costs and relocation expenses) to the parent firm may be as high as three times the domestic salary plus relocation expenses, depending on currency exchange rates and location of assignments. Indirect costs such as loss of foreign market share and damage to key host-country relationships may be considerable. Another aspect of risk exposure that is relevant to IHRM is terrorism, particularly since the World Trade Center attack in New York in 2001. Most major MNEs must now consider political risk and terrorism when planning international meetings and assignments and spending on protection against terrorism is increasing. Terrorism has also clearly had an effect on the way in which employees assess potential international assignment locations.15 The HR department may also need to devise emergency evacuation procedures for highly volatile assignment locations subject to political or terrorist violence, or major epidemic or pandemic crises such as severe acute respiratory syndrome (SARS) and avian influenza.16 For a comprehensive analysis of the impact of SARS on human resource management in the Hong Kong service sector, see Lee and Warner.17 7 8 CHAPTER 1 INTRODUCTION Broader external influences The major external factors that influence IHRM are the type of government, the state of the economy and the generally accepted practices of doing business in each of the various host countries in which MNEs operate. A host government can, for example, dictate hiring procedures, as has been the case until recently in Malaysia. The Malaysian Government during the 1970s introduced a requirement that foreign firms comply with an extensive set of affirmative action rules designed to provide additional employment opportunities for the indigenous Malay ethnic group who constitute the majority of the population of Malaysia but tend to be underrepresented in business and professional employment groups relative to Chinese Malaysians and Indian Malaysians. Various statistics showing employment levels of indigenous Malays throughout the firm (particularly at middle and senior management levels) were required to be forwarded to the relevant government department. Many foreign investors regarded these requirements as a major reason for complaints about bureaucracy and inflexibility with regard to perceived affirmative action appointments at management level in Malaysia and these complaints are one significant reason for the subsequent revision of these requirements. In developed countries, labor is more expensive and better organized than in less-developed countries and governments require compliance with guidelines on issues such as labor relations, taxation and health and safety. These factors shape the activities of the subsidiary HR manager to a considerable extent. In less-developed countries, labor tends to be cheaper, less organized and government regulation is less pervasive, so these factors take less time. The subsidiary HR manager must spend more time, however, learning and interpreting the local ways of doing business and the general code of conduct regarding activities such as gift giving and employment of family members. It is also likely that the subsidiary HR manager will become more involved in administering benefits either provided or financed by the MNE, such as housing, education and other facilities not readily available in the local economy. VARIABLES THAT MODERATE DIFFERENCES BETWEEN DOMESTIC AND INTERNATIONAL HRM Earlier in this chapter it was argued that the complexity involved in operating in different countries and employing different national categories of employees is a key variable that differentiates domestic and international HRM, rather than any major differences between the HRM activities performed. Many firms from advanced economies with limited experience in international business underestimate the complexities involved in successful international operations – particularly in emerging economies. There is considerable evidence to suggest that business failures in the international arena are often linked to poor management of human resources. In addition to complexity, there are four other variables that moderate (that is, either diminish or accentuate) differences between domestic and international HRM. These four additional moderators are: l The cultural environment. l The industry (or industries) with which the multinational is primarily involved. l The extent of reliance of the multinational on its home-country domestic market. l The attitudes of senior management. Together with the complexity involved in operating in different countries, these five variables constitute a model that explains the differences between domestic and international HRM (see Figure 1.3). CHAPTER 1 INTRODUCTION FIGURE 1.3 A model of the variables that moderate differences between domestic and international HRM The industry (or industries) within which the multinational is primarily involved The cultural environment Extent of reliance of the multinational on its home-country domestic market Domestic and international activities of the HRM function Complexity involved in operating in different countries and employing different national categories of employees Attitudes of senior management Source: P. J. Dowling, ‘Completing the Puzzle: Issues in the Development of the Field of International Human Resource Management’, (mir) Management International Review, Special Issue No. 3/99 (1999), p. 31. Reproduced with kind permission from VS Verlag Für Sozialwissenschaften. THE CULTURAL ENVIRONMENT In Chapter 2, The Cultural Context of IHRM, we cover the concept of culture in considerable detail, so our comments in this introductory chapter are necessarily brief. There are many definitions of culture, but the term is usually used to describe a shaping process over time. This process generates relative stability, reflecting a shared knowledge structure that attenuates (i.e. reduces) variability in values, behavioral norms and patterns of behavior.18 An important characteristic of culture is that it is so subtle a process that one is not always conscious of its relationship to values, attitudes and behaviors. One usually has to be confronted with a different culture in order to fully appreciate this effect. Anyone traveling abroad, either as a tourist or on business, experiences situations that demonstrate cultural differences in language, food, dress, hygiene and attitude to time. While the traveller can perceive these differences as novel, even enjoyable, for people required to live and work in a new country, such differences can prove difficult. They may experience culture shock – a phenomenon experienced by people who move across cultures. The new environment requires many adjustments in a relatively short period of time, challenging people’s frames of reference to such an extent that their sense of self, especially in terms of nationality, comes into question. People, in effect, experience a shock reaction to new cultural experiences that cause psychological disorientation because they misunderstand or do not recognize important cues. Culture shock can lead to negative feelings about the host country and its people and a longing to return home.19 Because international business involves the interaction and movement of people across national boundaries, an appreciation of cultural differences and when these differences are important is essential. Research into these aspects has assisted in furthering our understanding of the cultural environment as an important variable that moderates differences between domestic and international HRM. However, while cross-cultural and comparative research attempts to explore and explain similarities and differences, there are problems associated with such research. A major problem is that there is little agreement on either an exact definition of culture or on the operationalization of this concept. For many researchers, culture has become an 9 10 CHAPTER 1 INTRODUCTION omnibus variable, representing a range of social, historic, economic and political factors that are invoked post hoc to explain similarity or dissimilarity in the results of a study. As Bhagat and McQuaid20 have noted, ‘Culture has often served simply as a synonym for nation without any further conceptual grounding. In effect, national differences found in the characteristics of organizations or their members have been interpreted as cultural differences’. To reduce these difficulties, culture needs to be defined a priori rather than post hoc and it should not be assumed that national differences necessarily represent cultural differences. Another issue in cross-cultural research concerns the emic-etic distinction.21 Emic refers to culture-specific aspects of concepts or behavior, and etic refers to culture-common aspects. These terms have been borrowed from linguistics: a phonemic system documents meaningful sounds specific to a given language, and a phonetic system organizes all sounds that have meaning in any language.22 Both the emic and etic approaches are legitimate research orientations. A major problem may arise, however, if a researcher imposes an etic approach (that is, assumes universality across cultures) when there is little or no evidence for doing so. A well-known example of an imposed etic approach is the ‘convergence hypothesis’ that dominated much of US and European management research in the 1950s and 1960s. This approach was based on two key assumptions.23 The first assumption was that there were principles of sound management that held regardless of national environments. Thus, the existence of local or national practices that deviated from these principles simply indicated a need to change these local practices. The second assumption was that the universality of sound management practices would lead to societies becoming more and more alike in the future. Given that the USA was the leading industrial economy at that time, the point of convergence was the US model. To use Kuhn’s24 terminology, the convergence hypothesis became an established paradigm that many researchers found difficult to give up, despite a growing body of evidence supporting a divergence hypothesis. In an important early paper that reviewed the convergence/divergence debate, Child25 made the point that there is evidence for both convergence and divergence. The majority of the convergence studies, however, focus on macrolevel variables (for example, organizational structure and technology used by MNEs across cultures) and the majority of the divergence studies focus on microlevel variables (for example, the behavior of people within firms). His conclusion was that although firms in different countries are becoming more alike (an etic or convergence approach), the behavior of individuals within these firms is maintaining its cultural specificity (an emic or divergence approach). As noted above, both emic and etic approaches are legitimate research orientations, but methodological difficulties may arise if the distinction between these two approaches is ignored or if unwarranted universality assumptions are made.26 The debate on assumptions of universality is not limited to the literature in international management as this issue has also become a topic of debate in the field of international relations and strategic studies where international management research is cited.27 For a review of the convergence/divergence question, see Brewster.28 Cultural awareness and the role of the international HR manager Despite the methodological concerns about cross-cultural research, it is now generally recognized that culturally insensitive attitudes and behaviors stemming from ignorance or from misguided beliefs (‘my way is best’, or ‘what works at home will work here’) are not only inappropriate but can all-too-often contribute to international business failure. Therefore, an awareness of cultural differences is essential for the HR manager at corporate headquarters as well as in the host location.29 Activities such as hiring, promoting, rewarding and dismissal will be determined by the legal context and practices of the host country and usually are based on a value system relevant to that country’s culture. A firm may decide to head up a new overseas operation with an expatriate general manager but appoint as the HR department manager a local, a person who is familiar with the host country’s HR practices. This particular policy approach can assist in avoiding problems but can still lead to dilemmas for senior managers. For example, in a number of developing countries (Indonesia is one such example) local CHAPTER 1 INTRODUCTION managers are expected (i.e. there is a perceived obligation) to employ their extended family if they are in a position to do so. This may lead to a situation where people are hired who do not possess the required technical competence. While this could be seen as a successful example of adapting to local expectations and customs, from a Western perspective this practice would be seen as nepotism, a negative practice which is not in the best interests of the enterprise because the best people have not been hired for the job. Coping with cultural differences, and recognizing how and when these differences are relevant, is a constant challenge for international firms. Helping to prepare assignees and their families for working and living in a new cultural environment has become a key activity for HR departments in those MNEs that appreciate (or have been forced, through experience, to appreciate) the impact that the cultural environment can have on staff performance and well-being. INDUSTRY TYPE Porter30 suggests that the industry (or industries if the firm is a conglomerate) in which a MNE is involved is of considerable importance because patterns of international competition vary widely from one industry to another. At one end of the continuum of international competition is the multidomestic industry, one in which competition in each country is essentially independent of competition in other countries. Traditional examples include retailing, distribution and insurance. At the other end of the continuum is the global industry, one in which a firm’s competitive position in one country is significantly influenced by its position in other countries. Examples include commercial aircraft, semiconductors and copiers. The key distinction between a multidomestic industry and a global industry is described by Porter as follows: The global industry is not merely a collection of domestic industries but a series of linked domestic industries in which the rivals compete against each other on a truly worldwide basis . . . In a multidomestic industry, then, international strategy collapses to a series of domestic strategies. The issues that are uniquely international revolve around how to do business abroad, how to select good countries in which to compete (or assess country risk), and mechanisms to achieve the one-time transfer of know-how. These are questions that are relatively well developed in the literature. In a global industry, however, managing international activities like a portfolio will undermine the possibility of achieving competitive advantage. In a global industry, a firm must in some way integrate its activities on a worldwide basis to capture the linkages among countries. (Page 12) The role of the HRM function in multidomestic and global industries can be analyzed using Porter’s value-chain model.31 In Porter’s model, HRM is seen as one of four support activities for the five primary activities of the firm. Since human resources are involved in each of the primary and support activities, the HRM function is seen as cutting across the entire value chain of a firm. If the firm is in a multidomestic industry, the role of the HR department will most likely be more domestic in structure and orientation. At times there may be considerable demand for international services from the HRM function (for example, when a new plant or office is established in a foreign location and the need for expatriate employees arises), but these activities would not be pivotal – indeed, many of these services may be provided via consultants and/or temporary employees. The main role for the HRM function would be to support the primary activities of the firm in each domestic market to achieve a competitive advantage through either cost/efficiency or product/service differentiation. If the multinational is in a global industry, however, the ‘imperative for coordination’ described by Porter would require a HRM function structured to deliver the international support required by the primary activities of the MNE. The need to develop coordination raises complex problems for any multinational. As Laurent32 has noted: In order to build, maintain, and develop their corporate identity, multinational organizations need to strive for consistency in their ways of managing people on a worldwide basis. Yet, and in order to be 11 12 CHAPTER 1 INTRODUCTION effective locally, they also need to adapt those ways to the specific cultural requirements of different societies. While the global nature of the business may call for increased consistency, the variety of cultural environments may be calling for differentiation. Laurent proposes that a truly international conception of human resource management would require the following steps: 1 An explicit recognition by the parent organization that its own peculiar ways of managing human resources reflect some assumptions and values of its home culture. 2 An explicit recognition by the parent organization that its peculiar ways are neither universally better nor worse than others but are different and likely to exhibit strengths and weaknesses, particularly abroad. 3 An explicit recognition by the parent organization that its foreign subsidiaries may have other preferred ways of managing people that are neither intrinsically better nor worse, but could possibly be more effective locally. 4 A willingness from headquarters to not only acknowledge cultural differences, but also to take active steps in order to make them discussable and therefore usable. 5 The building of a genuine belief by all parties involved that more creative and effective ways of managing people could be developed as a result of cross-cultural learning. In offering this proposal, Laurent acknowledges that these are difficult steps that few firms have taken: They have more to do with states of mind and mindsets than with behavior. As such, these processes can only be facilitated and this may represent a primary mission for executives in charge of international human resource management. (p. 100) Implicit in Laurent’s analysis is the idea that by taking the steps he describes, a MNE attempting to implement a global strategy via coordination of activities would be better able to work through the difficulties and complex trade-offs inherent in such a strategy. Increasingly, multinationals are taking a more strategic approach to the role of HRM and are using staff transfers and training programs to assist in coordination of activities. We discuss these issues in more detail in subsequent chapters of the book. EXTENT OF RELIANCE OF THE MULTINATIONAL ON ITS HOME-COUNTRY DOMESTIC MARKET A pervasive but often ignored factor that influences the behavior of MNEs and resultant HR practices is the extent of reliance of the multinational on its home-country domestic market. When for example, we look through lists of very large firms (such as those that appear in Fortune and other business magazines), it is frequently assumed that a global market perspective would be dominant in the firm’s culture and thinking. However, size is not the only key variable when looking at a multinational – the extent of reliance of the multinational on its home-country domestic market is also very important. In fact, for many firms, a small home market is one of the key drivers for seeking new international markets. The United Nations Conference on Trade and Development (UNCTAD) in its annual survey of foreign direct investment calculates what it refers to as an index of transnationality, which is an average of ratios of foreign assets to total assets; foreign sales to total sales; and foreign employment to total employment. The ‘top ten’ MNEs ranked by transnationality are shown in Table 1.1. Based on 2 3 4 5 6 7 8 9 10 87 40 66 67 3 72 13 46 10 ArcelorMittal Anglo American Anheuser-Busch Inbev SA Linde AG Vodafone Group Plc WPP Group Plc Pernod Ricard SA Nokia ABB Ltd. Xstrata PLC Corporation Luxembourg United Kingdom Netherlands Germany United Kingdom United Kingdom France Finland Switzerland United Kingdom Home economy Metal and metal products Mining & quarrying Food, beverages and tobacco Chemicals Telecommunications Business services Food, beverages and tobacco Electrical & electronic equipment Engineerig services Mining & quarrying Industry c 127 127 44 413 106 247 29 847 201 570 31 567 32 237 50 006 26 875 52 227 Foreign 133 088 49 738 113 170 33 158 218 955 35 661 35 159 55 090 33 181 55 314 Total Assets (Millions of dollars and number of employees) The world’s top 10 non-financial TNCs, ranked by Transnationality Index (TNI)a 112 689 21 766 18 699 16 574 60 197 11 966 8 845 73 662 33 166 25 215 Foreign 26 311 23 558 18 527 69 250 13 717 9 850 74 192 34 912 27 952 Total 124 936 Sales 239 455 95 000 108 425 44 278 68 747 88 467 16 260 101 559 113 900 37 883 Foreign d 315 867 105 000 119 874 51 908 79 097 97 438 18 975 125 829 119 600 39 940 Total Employment 87.2 87.5 87.9 88.3 88.6 88.9 89.1 90.3 90.4 93.2 TNIb (Per cent) Source: The data in this table is based on the World Investment Report, 2009; Transnational Corporations, Agricultural Production and Development, United Nations Conference on Trade and Development (UNCTAD), 2009. Reproduced with permission. a. All data are based on the companies’ annual reports unless otherwise stated. b. TNI, the Transnationlity Index, is calculated as the average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. c. Industry classification for companies follows the United States Standard Industrial Classification as used by the United States Securities and Exchange Commission (SEC). d. In a number of cases foreign employment data were calculated by applying the share of foreign employment in total employment of the previous year to total employment of 2008. 1 37 Foreign TNIb assets Ranking by: TABLE 1.1 CHAPTER 1 INTRODUCTION 13 14 CHAPTER 1 INTRODUCTION this index of transnationality, the most foreign-oriented multinational is Xstrata (United Kingdom), with an average of 93.2 per cent of the three ratios (foreign assets to total assets, foreign sales to total sales and foreign employment to total employment) located outside of the UK. All of the top ten firms based on transnationality are European. The only US firms in the first 30 multinationals ranked by the transnational index are Liberty Global (Telecommunications) ranked 13, Schlumberger (Consumer services) ranked 25 and Coca-Cola (Food & beverages) ranked 29. The reason for this lower ranking of US firms in terms of the transnational index is as obvious as it is important – the size of the domestic market for US firms. A very large domestic market (for US firms this is in effect th...
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OUTLINE
1. INTRODUCTION
2. BODY
3. CONCLUSION
4. REFERENCE


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Mini-Case Assignment
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MANAGEMENT

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Socometal Company is diverse in terms of employees’ composition, who are both African
and French based, with a current population of around eight hundred people. It is a joint venture
that calls for mixed leadership styles, which is very evident in the presented article. Mr. Diop
believes in listening to employees to find a solution towards increasing production outputs, while
Mr. Bernard believes that employees cannot boost the production levels and he relies on
authoritative leadership style. The article being a mixture of leadership styles would imply various
cultural assumptions, which are listed as follows;
Assumptions from Diop and N’diaye...


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