International HRM - HR Management

This part examines the ways in which human resources are managed in the multinational corporation, usually referred to as international HRM. Taylor et al. (1996) define international HRM as:

As such the emphasis is on the role and organisation of international HR functions, the policies and practices they adopt and the relationship between the parent and its subsidiary operations in managing HR issues. As indicated in the introduction to this chapter, international HRM adopts a strongly strategic perspective in its examination of HRM. Thus its starting point is not the institutional environment, but rather the competitive environment.

A strategic perspective defines local competition in the form of, for example, the nature and degree of product demand or expectation of customer service, and so forth, and the extent to which corporate strategy needs to take these into account, i.e. to be locally sensitive. At the same time the multinational’s competitive advantage over national firms is based on its capacity to leverage resources on a global scale.

For example, to use the ‘know-how’ developed in one country to meet a market need in another, or to locate workforce resource-intensive activities in low-wage or less-regulated economies. However, leveraging global capability in these ways requires a degree of integration and/or coordination across the organisation. This is most effectively achieved through some degree of standardisation, frequently referred to as globalisation, in the HR policies and practices of the multinational.

The demands for localisation and globalization do not always sit comfortably together, and we consider how this dualism is addressed theoretically and the impact it has on HR policy and practice. For example, the types of concerns that dominate this field are: How can such organisations most efficiently structure their geographically dispersed operations? What is the nature of the control relationship between the parent and its subsidiaries?

Can and should human resource management policy and practice developed by the parent (headquarters) be transferred to subsidiaries in other countries? What types of human resource management activity should be centralised and what should be decentralised, why and how? How do the international mindsets of senior managers affect strategic orientation? What is the role and function of international managers?

We begin by examining the strategic priorities facing MNCs and considering some of the typologies proposed for understanding these organisations’ strategy and structure. Second, specific models of international HRM will be considered. Here the concern of the theorist is with what constitutes key international HRM activity, where it is located, and how it should be implemented to ensure a congruence between the organisation’s business strategy and the management of its human resources. Here you may recognize the parallel with debates in the field of domestic strategic HRM .

Third, we look at the role of expatriate managers in international organisations. Expatriates have received considerable attention over the years because of their extensive use by international parent firms to control and coordinate subsidiary activity. A lot of the work in this field focuses on the selection process, training provision and expatriation failure.

  • Strategic priorities in international organisations
  • Key concepts: integration, responsiveness and transfer of learning

The strategic priorities of a multinational play a key role in shaping the human resource strategies adopted. For this reason it is important to consider, in brief, three key concepts, integration, responsiveness and transfer of learning. These strategic concepts have their origins in the international business strategy literature, an area of theory that international The set of distinct activities, functions and processes that are directed at attracting, developing and maintaining an MNC’s human resources.

It is thus the aggregate of the various HRM systems used to manage people in the MNC, both at home and overseas. (Taylor et al., 1996: 960) HRM draws heavily upon. By gaining an appreciation of these concepts it becomes more transparent why multinationals are attempting to design human resource management systems and processes that attend to some or all of the following:

  1. are sensitive to cultural and institutional variation across countries;
  2. create an integrating global culture and way of managing employees;
  3. coordinate scarce, expensive and critical human resources;
  4. leverage learning across the network of subsidiaries.

International business strategists have attempted to generate theory that makes it easier to interpret the complex world of international business. One of the best known is Prahalad and Doz’s (1987) Integration– Responsiveness (IR) grid. They argue that international organisations are faced with pressures to integrate and coordinate their activities on the one hand and on the other to respond to local (national) variations.

The pressures driving integration and responsiveness faced by international organisations are summarised in Table.

Summary of the pressures making up the I–R grid

Summary of the pressures making up the I–R gridSummary of the pressures making up the I–R grid

These two pressures, namely integration and responsiveness, form the Integration–Responsiveness grid and MNCs adopt different strategies and structures depending on where they sit within this grid (see Harzing, 1999 for an in-depth review). So for example in a multi-domestic industry, such as utilities (e.g. water services), consumer demands and service provision are highly context-specific.

Thus the competitive strategy of a multinational’s French subsidiary, for example, is largely independent of that of its UK counterpart. This is necessary because regulatory requirements, customer norms or government policy requires a strategy that is responsive to local conditions. As such these subsidiaries compete in domestic markets and frequently with domestic companies. Equally, a decentralised organisational structure where subsidiaries are given a high degree of strategic and operational autonomy from their parent is the most efficient. However, often the parent retains some degree of control through setting performance targets.

This type of organisation would be located in the bottom righthand side of the grid. By contrast, in a global industry, such as consumer electronics, standardised product/service demands by customers and economies of scale dominate. The organisation’s strategy prioritises efficiencies by producing standardized products, locating in the most cost-effective economies and coordinating expensive resources such as equipment or R&D.

These organisations tend to centralise resources and responsibilities to the parent company, while the role of the subsidiaries tends to be sales and services. The strategic responsibility and operational freedom of subsidiaries are usually fairly tightly controlled by the parent. This type of organisation would be located in the top left-hand side of the grid. There is a considerable degree of empirical evidence supporting the existence of multidomestic and global organisational forms (Bartlett and Ghoshal, 1989; Harzing, 2000; Leong and Tan, 1993; Moenaert et al., 1994; Roth and Morrison, 1990).

And the I–R grid is a simple and effective tool for explaining the key priorities shaping these organisations’ strategies and structures. However, it is less effective at capturing the significance of the transfer of learning and innovation, which is an important strategic priority for the third type of international organisation, namely the transnational. This organisational form is located in the top right-hand portion of the grid. In the transnational industry organisations must respond to the simultaneous and often conflicting demands for integration and responsiveness, in addition to learning transfer.

Learning transfer refers to the diffusion of learning across the organisation; for example, a technology developed by a subsidiary or parent in one country may be transferred to other parts of the organisation located in other countries. The strategy in these organizations is more ‘incremental’ or ‘emergent’ (Mintzberg and Waters, 1989). Equally, the structure is more flexible and frequently referred to as an integrated network (Bartlett and Ghoshal, 1990).

There is a growing body of work illustrating that MNCs incorporate features of this ideal type (Bartlett and Ghoshal, 1989; Ghoshal and Westney, 1993; Harzing, 1999, 2000). Equally, it has undeniably ‘taken a strong foothold in the world of academics, consultants and MNCs’ top executives alike’ (Harzing, 1999: 43–4) and as such it has contributed to theorising and practice in the management of human resources in contemporary international organisations.

However, as Harzing (2000) points out, there is no empirical evidence, as yet, supporting the notion that transnational, nor indeed the multi-domestic or global, organisational forms yield the high-level performance outcomes that warrant their promotion as ‘ideal types’. In sum, MNCs are faced, to differing degrees, with the need to meet demands for local responsiveness, strategic integration and global learning and this in turn defines the international strategy of the organisation as being multi-domestic, global or transnational in character. The difference in strategy explains the difference in the structure of multinationals, as the two are interdependent, although the direction of causal relations is unclear.

These strategies also make quite different demands on the HR processes and practices adopted. For example, the extent to which subsidiary HR practices need to be sensitive to local employee values, the need for common management training programmes across the global organisation to facilitate integration and a common organisational culture, and the presence of processes and systems that allow knowledge to be generated collectively and dispersed where necessary are all tied into the strategic priorities of the MNC. It is to these HR issues that the following section turns.

I-R grid

I-R grid

  • Models of international HRM

Here we consider the models of international HRM that have been put forward to explain how the function is configured, the activities and roles undertaken and the factors affecting these. In contrast to the comparative HRM literature, discussed in the previous sections, it is interesting to consider how external and institutional factors are treated within these models. First, we will consider two models of strategic international HRM developed by Schuler et al. (1993) and Taylor et al. (1996).

The first and most comprehensive of these is the Schuler et al. model which was developed as an analytical framework that pulled together various conceptual and empirical work in the field providing researchers with a potential roadmap of the internal and external organizational factors influencing the issues, function, practices and impacts of international HRM. The importance of national context is recognised but not specified.

The second model by Taylor and colleagues focused more on the conditions under which the parent was more likely to exercise control over its subsidiaries’ activities. In particular, the model emphasised the resource dependencies that existed between the parent and its subsidiaries. This says little about national contextual issues, but is important, for unlike much previous writing in the field it recognises that subsidiaries of multinationals have much greater ability to control their own actions and influence the degree of parent control over them by using resources that the parent needs as a means of trading or negotiating.

The third model shifts its focus from the international HR function to the influence of management perceptions on multinational strategy. Perlmutter (1969) identifies variation in the mindsets or ways of thinking about the international environment, which he argues can affect the international nature of the organisation’s management processes. Schuler et al (1993) have used Perlmutter’s model to consider the implications for the role of the international HR function. The fourth and fifth models, by Adler and Ghadar (1990) and Milliman and Von Glinow (1990) respectively, are models of organisational change.

They focus more on the relative influence of host and home country factors in shaping the role of the international HR function and in particular the role of expatriate managers in enabling international strategy. Both models adopt a similar perspective in terms of seeing the multinational progress through various stages of internationalisation, with each stage bringing into focus the importance of home and host country priorities. Here we see the potential for overlap between much of the comparative work and international HR theory; however, as will be illustrated, the discussion of home and host contextual issues is scant.

  • Schuler et al., (1993): integrative framework of international HRM

The Schuler et al. (1993) integrative framework of international HRM was, in essence, a conceptual framework that attempted to map HRM activity to the varying strategic requirements for integration and local responsiveness which define MNC strategy. Because of this, it is extremely comprehensive in terms of the breadth of issues addressed, although this is at the expense of depth in the explanation of these issues. This framework built upon the work of strategic HRM theorists researching HRM in domestic companies (Boam and Sparrow, 1992; Schuler, 1992; Lengnick-Hall and Lengnick-Hall, 1988; Wright and McMahan, 1992). As such, Schuler et al. define strategic international HRM as:

Human resource management issues, functions, policies and practices that result from the strategic activities of multinational enterprises and that impact the international concerns and goals of those enterprises.

The overlap between the study of domestic and international HRM is discussed explicitly by Taylor et al. (1996: 960):

Strategic Human Resource Management (SHRM)…, is used to explicitly link with the strategic management processes of the organisation and to emphasise coordination or congruence among various human resource management practices. Thus, SIHRM is used to explicitly link IHRM with the strategy of the MNC.

Integrative framework of strategic international HRM in MNEs

Integrative framework of strategic international HRM in MNEs

This integrative framework of SIHRM identifies a series of strategic MNE (multinational enterprise) components, endogenous factors and exogenous factors that shape the issues, policy, practices and functions of HRM in international organisations. These determinants are explained, briefly:

  1. Strategic MNE components include interunit linkages and internal operations. Interunit linkage is concerned with the need to differentiate or integrate several operations which are geographically dispersed (Ghoshal and Bartlett, 1998; Prahalad and Doz, 1987). Internal operations refer to how each unit operates within its local environment. The restrictions of national institutional or legisative frameworks are recognised, along with the cultural diversity in attitudes towards work, management, authority and so forth (Hofstede, 1980; Laurent, 1983; Schein, 1984).
  2. Exogenous factors relate to issues external to the organisation. For example, industry characteristics such as type of business and technology available, nature of competitors, degree of change; and country/regional characteristics such as political conditions, economic conditions, legal requirements and socio-cultural context. They also argue that an extended version of this framework would include issues such as industry maturity, history, national industrial policy and level of unionisation. Here there is a clear overlap with the issues discussed by the comparative researchers.
  3. Endogenous factors relate to internal organisational issues. For example, structure of the organisation, experience, or stage of internationalisation, competitive strategy and headquarters’ international orientation.

Essentially the above three aspects of the framework bring together the work of the international management theorists and argue for their impingement on the management of human resources throughout the organisation. Specifically they argue that the strategic components, exogenous and endogenous factors affect the SIHRM function and associated policies and practices. The function can be affected in terms of its:

  1. orientation, i.e. the extent to which control of local activities is centralised or decentralised;
  2. the amount of financial and time resources committed to the development and management of international managers;
  3. where activities are located, i.e. in the local unit or at the corporate centre. Policies and practices are affected in terms of how they are developed and implemented to promote local autonomy, global coordination and integration.

Using agency theory (Jones, 1984) and resource dependency theory (Pfeffer and Salancik, 1978), Schuler et al. (1993) propose that an organisation’s approach to HRM will vary between using a high level of parent country nationals and normative control measures to direct local behaviour versus high levels of local or third country nationals and normative control measures to enable the centre to guide policies while still allowing for local adaptation.

HR philosophy will play a key role in providing local sites with general statements to guide their practices so they are in tune with the corporate approach but locally sensitive. There is also a need for local HR policy to fit with corporate policy if personnel are to be able to be selected, transferred and developed as an organisational resource as opposed to a subsidiary resource. As such they argue that in order for multinational companies to be flexible and adaptable to local circumstance, transfer learning and retain strategic integration, HR practices need to match strategic and cultural demands at the local level.

A ‘modus operandi’ needs to be developed to enable HR practices to fit changing circumstances, while global HR policies need to be developed to be flexible enough to be applied to local HR practice. This perspective therefore focuses not only on HR policies and practices for the management of international managers but on HR policies and practices for the management of local employees.

As indicated earlier, the role of national institutional factors is incorporated within the framework. Specifically, they argue that uncertain political environments and high economic risk demand greater monitoring and control from the parent, while high levels of heterogeneity and complexity in legislative conditions affecting labour relations are likely to lead to the greater utilisation of local employees, rather than expatriates, in senior management positions at the subsidiary level. They also recognise that cultural diversity will demand greater attention by HR professionals in contexts where there is a business demand for integration and coordination.

Thus the effects of the national institutional context are recognised in terms of the degree of control or autonomy given to the subsidiary by the parent and in terms of the centrality of expatriates. They also discuss the relationship between organisational structures and strategic international HRM policy and practice. They look at four structures, the international divisional structure, the multinational structure, the global and the transnational. They argue:

Given this, they propose that international divisional structures result in a strategic international HRM orientation that focuses on a single issue, namely the selection of senior managers to head up local operations. The multinational structure focuses on selecting managers from anywhere in the company who can run local operations autonomously and with sensitivity to local conditions. The global structure requires a strategic international HRM orientation that selects managers who can operate under centralised control conditions. The transnational structure requires selecting and developing managers who can balance both local and global perspectives.

Here again we see that the focus of the model is on explaining and matching the internal HR resources, via recruitment, selection or development, to meet the strategic needs of the organisations. Schuler et al. (1993: 451) conclude that strategic international HRM is concerned with:

Developing a fit between exogeneous and endogenous factors and balancing the competing demands of global versus local requirements as well as the needs of coordination, control and autonomy.

While the model is comprehensive, it has been criticised for failing to explain the micro political processes that underpin parent–subsidiary relations (Quintanilla, 1999) and for being overly descriptive (Holden, 2000). In addition, while the model alludes to the impact of international HRM on both the international and local workforces, in reality the discussion tends to focus on management employees only (Ferner, 1994).

Different structures of international operations create different requirements for autonomy, localisation and co-ordination, thus affecting the nature of and extent of SIHRM policies and practices; and the structures of the international operations of the MNE will impact the need for the units to develop mechanisms to respond to local conditions and to develop a flexible capability.

  • Taylor et al., (1996): exportive, integrative and adaptive model

Taylor et al. (1996) apply the resource-based theory of the firm to explain and predict why international organisations adopt different forms of strategic international HRM. Resource-based theory of the firm (Barney, 1991) applied to HR issues (Lado and Wilson, 1994) argues that HR can facilitate strategic goals by developing competencies within the organisation that are valuable, rare, hard to imitate and non-substitutable.

Competencies are:

  • valuable if they are differentiated and provide the company with something that they lack;
  • rare if they are scare or in short supply;
  • hard to imitate where, for example, they are embedded within the firm’s culture or history and thus based on collective values;
  • non-substitutable where they cannot be easily replaced through recruitment, for example in the case of tacit knowledge.

Applying this perspective, Taylor et al. suggested that the multinational could leverage resources at the national, firm and subsidiary level that could contribute to competitive advantage. Some of these resources would be context specific while others were context generalisable. This is illustrated by the exportive, integrative and adoptive strategic international HRM orientations towards corporate, subsidiary and employee grouplevel HR issues, policies and practices. The concepts of these three SIHRM forms are based on previous work in international management and SIHRM (Hedlund, 1986; Perlmutter, 1969; Rosenzweig and Nohria, 1994; Rosenzweig and Singh, 1991). Each of these three orientations is explained below:

  • Adaptive: HRM reflects subsidiary HRM systems designed to match the local environment. Differentiation is emphasised and HRM is concerned with the appointment of local senior mangers but also with little transfer of HRM philosophies, policies, or practices from the parent to subsidiary or between subsidiaries. This approach focuses on attending to local differentiation needs and is polycentric in nature.
  • Exportive: HRM focuses on replication of parent HR systems in subsidiaries. Integration is a key priority and all HRM functions are affected, not just the international ‘cadre’ (managers. This approach focuses on maximising global integration and is ethnocentric in nature.
  • Integrative: HRM is based on the notion of taking the best HRM systems from anywhere in the company and allowing for both global integration and local differentiation and is geocentric in nature.

At the level of the subsidiary the strategic international HRM orientation determines the level of transfer of parent HRM systems, which is based on the resource-dependency relationship between the parent and subsidiary. For example, exportive HRM leads to high control by the parent attained by the high level of transfer of its HRM systems to achieve global integration. Under these conditions the subsidiary is highly dependent on the parent for HR systems and processes to enable integration.

In contrast, the adaptive HRM orientation demands little control and transfer of practices by the parent as differientation is the priority. Under these conditions resource-dependency by both the parent and subsidiary is low. In the middle we have the integrative orientation which demands a balance between the transfer of some systems while maintaining the flexibility in the system to allow the subsidiary to adapt to the local context. Under these conditions, there is a parent–subsidiary inter-dependency. Finally, from the resourcedependence perspective they argue that parent control and standardisation of parent and subsidiary practice will be greater in those areas affecting employees ‘most critical to the MNC’s performance’ (Taylor et al., 1996: 978).

Taylor et al. also recognise that there are a number of factors that are likely to constrain the degree of parent control over subsidiary behaviour, namely method of subsidiary establishment, cultural and legal distance of host country from the parent or home country of the multinational. With respect to the first of these points, the evidence suggests that subsidiaries that have been acquired have less in common with their parent HR systems than those that are greenfield sites, although this pattern may change over time. Equally, the greater the dissimilarity between the parent company’s national culture and legal context, the less commonality between the parent and subsidiary’s HR systems.

This would follow from many of the institutional arguments outlined earlier. Their work raises a number of implications. First, unlike much of the previous work, Taylor et al. (1996) are more explicit about the impact of SIHRM on different occupational groups. They recognise that not all employees provide the same level of value to the company or provide the same level of critical resources.

Traditionally, broad distinctions have been made between white-collar and blue-collar workers. However, there is a need to further refine this by looking at other occupational groups that may be critical to competitive advantage, such as research staff or product designers. Second, their work raises a key question about the generalisability of HR practice beyond the context in which it was developed. What aspects of HRM practice are generalisable? Why? Third, their work does not acknowledge country of origin effects as important. Fourth and finally, their model lacks specificity with regard to what is transferred and how.

  • Perlmutter (1969): mindsets

Perlmutter (1969) is widely recognised as one of the first theorists to propose a networkbased model of how international companies organise globally. Perlmutter’s classification has been applied primarily in the international human resource management literature rather than the international business field, from where it originated. Kobrin (1994) explains that Perlmutter’s adoption by the international HRM theorists is largely because the classification is defined in terms of human resource management issues (e.g. training, recruiting, selecting people and resources).

Perlmutter initially defined three organisational types based on senior management’s cognitions or mindsets: the ethnocentric, polycentric and geocentric organisation. Later he defined a fourth mindset, namely, the regiocentric. He argues that senior management mindsets reflect the extent to which home, host, global or regional values are perceived as important and in turn influence the international nature of management processes used in the company. These mindsets have been adopted by many in the international HRM field as a way of classifying different HRM approaches, for example:

  • The ethnocentric mindset reflects a focus on home country values and ways of operating. As a consequence, key positions in subsidiaries are filled by parent country nationals (i.e. expatriates). This gives the parent a high degree of direct control over the subsidiaries’ operations.
  • The polycentric mindset focuses on host country values and ways of operating. As a result, key positions in the subsidiary are more likely to be filled by local employees and the parent company is less interested in controlling and homogenising the organizational culture.
  • The geocentric mindset focuses on global values and ways of operating. These global values are not nationally specific but instead transcend national boundaries and become almost acultural. This approach looks to use the best people for the job, selecting from all over the global organisation.
  • The regiocentric mindset focuses on regional values and ways of operating. As a result, the organisation is usually structured along regional geographical lines (e.g. Europe, America and Asia Pacific Rim) and employees move around within these regions.

This approach allows some degree of integration, but recognises regional diversity. Schuler et al. incorporate Perlmutter’s ideas into their framework, arguing that these attitudes underpin a multinational’s strategic international HRM orientation in terms of autonomy and standardisation of local HR practice (e.g. staffing, appraisal, compensation and training). The ethnocentric mindset promotes control and centralisation of HR activity, the polycentric mindset is aligned with local decentralisation, the geocentric mindset does not develop HR activity on the basis of nationality.

We also saw how these mindsets were associated with Taylor et al.’s integrative, adaptive and exportive orientations. While these relationships are somewhat scant in their detail, they allude to the widening scope of the role of a corporate strategic international HRM function as organisational structures become more complex and network rather than hierarchical in nature. One of the primary problems with Perlmutter’s approach is that it provides little explanation of how or why the organisation may move from one type of mindset orientation to another.

  • Adler and Ghadar (1990) and Milliman and von Glinnow (1990):

organisational change models

Two models based on an organisational change perspective have been put forward, namely the Product Life Cycle model of Adler and Ghadar (1990) and the Organisational Life Cycle model of Milliman and Von Glinnow (1990). These models have been designed to explain how and why the international HRM orientation of a multinational changes over time in line with changes in its corporate strategy. Both approaches also recognise the variable importance of the parent or home country context and the host country context throughout each stage. In doing so they take a largely cultural approach.

The Adler and Ghadar (1990) model is based on the product life cycle (PLC) during internationalisation, first observed and described by Vernon (1966), and is a stage model of organisational change. In Adler and Ghadar’s model they describe how the role of culture changes in salience and how HRM activities are modified at each stage in response to product strategic requirements and cultural requirements. These phases are described briefly in Table.

Phase I: domestic – here the focus is on the home market. The products/services are unique, they have not been available before, therefore the price is high relative to cost and competition minimal. As the products are unique there is no need for cultural sensitivity and if they are exported they are in a significantly strong position not to need adaptation. Indeed, exportation of the product/service is based on the premise that ‘foreigners’ want the product/service unadapted.

The HR needs are therefore not that demanding in international terms, i.e. expatriate assignments, internal business trips, cross-cultural training are not warranted for the expor market. The international work is restricted to product or project-specific technical competence (Mendenhall et al., 1987). As domestic sales tend to dominate profits, international aspects of management are not given to the best people nor seen as a valuable career move. International organizational development is not seen as relevant.

Globalisation and human resource management

Globalisation and human resource management

Phase II: International – competition increases and international markets become more important for profit. There is a shift in focus from product development (R&D) to manufacturing and plants are set up locally and divisional structures emerge. Cultural sensitivity becomes critical to effective corporate strategies. However, decision-making and control tend to remain with the parent. HR performs a vital role in attaining control of local operations. Home country personnel are used to transfer technology and management systems overseas where replication, rather than innovation, is the prime objective. Training in cultural sensitivity and adaptability is key at this stage.

Phase III: Multinational – the product/service reaches maturity, competition is intense and the price has fallen. Coordination of resources becomes a vital tool in the reduction of costs. The role of culture becomes less important as the issue of reducing costs takes central position. As such the best people are usually chosen for international posts to increase profits and control costs. The management assumption at this phase is that organisational culture is more important than national culture, therefore sensitivity to local cultures is seen to be less important and recruitment of international managers tends to be from those familiar with the parent culture.

Phase IV: Global – the three prior phases were based on hierarchical structures. This phase is based on the assumption that the organisation will need to operate in all three phases simultaneously and therefore build ‘complex networks of joint ventures, wholly owned subsidiaries and organisational and project defined alliances’ (Adler and Ghadar, 1990: 240). Under such conditions the role of culture comes again to the fore.

These organisations operate at a strategic level to combine responsive design and delivery quickly and cheaply. This negates the development of global R&D, production and marketing and therefore requires the management of culture and relationships external to the organisation. Success is based on international managers being able to communicate effectively in a culturally diverse environment. The delineation between expatriate and local managers disappears and the organisation needs to manage the dual demands of integration and local responsiveness (Doz and Prahalad, 1986).

However, the Adler and Ghadar (1990) model is criticised for its emphasis on the role of the expatriate manager and management expertise, with little reference to other employee groups. Milliman and Von Glinow (1990) also argue that as it focuses on a product life cycle it is too narrow. International organisations often have multiple products and the stage of the cycle may vary across the strategic business units (SBU), changing the parent–SBU relationship.

Therefore, in response Milliman and Von Glinow (1990) apply the organisational life cycle (OLC) approach to provide a more general framework to understanding SIHRM at the parent and subsidiary level. This model was further refined in the paper by Milliman et al., (1991). This approach is based on the premise that HRM responses will predictably vary in line with stages of organizational development. Their work highlights the importance of recognising the interrelationships between the parent and subsidiary level in defining the nature of international HRM.
They note that:

The Milliman and Von Glinnow (1990) model identifies four international HRM objectives, namely, timing, cost versus development, integration and differentiation:

  • Timing refers to whether the organisation takes a short-term or long-term perspective in its business and international HRM strategy. The former requires quick responses, the latter allows a longer period for implementation, which can mean longer international assignments and commitment to overseas operations.
  • Cost refers to whether the organisation needs to focus on lowering costs or can focus on longer-term development issues in its overseas operations and the career paths of its expatriate managers.
  • Integration relates to the use of expatriate managers in implementing informal control systems.
  • Differentiation refers to the development of a network of home and host country managers to facilitate communication and control between the parent and subsidiary. These four objectives change over four OLC stages, leading to a different pattern of international HRM. These stages are explained in brief below.

Stage 1. As the firm starts out, most of the international HRM is conducted on an ad hoc basis and international assignments focus on technical work skills, with little emphasis on cultural training. The need for integration or differentiation is minimal.

Stage 2. The number and extent of commitments in overseas operation increases. Short-term savings remain a priority and the need for integration is minimal However, for successive growth of the overseas markets, greater knowledge of the local environment is needed. Thus expatriate training in cultural sensitivity and languages becomes more important.The degree to which the corporate business and human resource strategies affect the SBU’s strategic choices and practices depends on a number of fundamental characteristics of the MNC, such as its organisational culture, management style, and control systems. Milliman and Von Glinow (1990: 28)

Stage 3. As the business becomes well established, the organisation can take a longerterm perspective and integration becomes key, particularly for controlling costs. Home country expatriates provide control, along with the transfer of home HRM systems and organisational culture. But as cultural sensitivity is less important, training in this area for expatriates diminishes and career development for this group is not so long-term. Sophisticated control systems such as socialisation, mentoring and succession planning are vital for promoting a unified organisational culture and integration.

Stage 4. The demands for both integration and differentiation are evident. In response, organisations need to invest in training and development to enhance the flexibility of the organisation to meet these demands. They also need to evolve a ‘multicentric cultural perspective’ (Milliman and Von Glinow, 1990: 32) which ensures awareness of the national cultures and subcultures at the subsidiary level.

The Milliman and Von Glinow (1990) model parallels closely the stages models proposed by Adler and Ghadar (1990). Both models provide prescriptions of international HRM types. While stages 1 to 3 are themselves supported by empirical work, the associated international HRM forms are theoretically extrapolated. Stage 4, like the work of the international management theorists, is largely a theoretical concept.

Mayrhofer and Brewster (1996) argue that in practice MNCs, irrespective of their need for integration or diversity, adopt an ethnocentric approach to IHRM, with many relying heavily on the use of expatriate managers to control overseas operations. Another problem with the stages model is that it has become less relevant as MNCs adopt both domestic and international markets simultaneously (Taylor and Beechler, 1993) and with acquisitions, mergers and de-mergers there is less evidence that multinationals have to pass through each of these phases in order to internationalise.

  • Expatriates

Here we turn our attention to one particular group of employees that many of the models of international HRM have been particularly occupied with, namely the expatriate. The expatriate manager is particular to the international organisation. These are employees who transfer from one country to another to undertake assignments that may vary from a few months to a few years (Brewster and Harris, 1999). They are often seen as one of the key mechanisms through which an organisation attends to the demand for integration and are viewed as a critical and significant resource (Adler and Bartholomew, 1992; Dowling et al., 1994; Forester and Johnson, 1996).

One of the major criticisms of the field of international HRM until recently has been its overemphasis on the expatriate manager. Given their central place in the evolution of the study of international HRM, we consider some of the reasons why this group of employees has been singled out as of particular importance. The importance of the expatriate manager to multinationals’ strategy became apparent through the now classic study undertaken by Edström and Galbraith (1977). They explained theoretically why expatriates are used by multinationals. The threefold classification they put forward has changed little over the years and remains one of the most widely cited texts on this issue in the field. The three primary motives for using expatriates are:

  • To fill positions. The lack of availability of managerial or technical knowledge in some countries means that the parent company will resource this through its own staff (Brewster and Scullion, 1997). In the past, expatriates have often been used for operations in Third World countries; however, the opening up of Eastern Europe also created a demand for expatriates (Hillman and Rudolph, 1996).
  • To provide management development opportunities. Here international assignments offer the individual and the company the opportunity to develop international management expertise. This seems more common in British than US international organisations (Brewster and Scullion, 1997).
  • To support organisational development. Here the concern is with altering or maintaining the company’s structures and processes. The process of socialisation, whereby expatriate managers build social networks across the parent–subsidiary structure, is seen as critical here.

Socialisatio is also recognised as a key mechanism of control. There have been many studies on the use of expatriates as a mechanism of control (see Harzing, 1999: 116–127 for a review). These highlight the role of expatriates in transferring the values of the parent to the subsidiary as a means of controlling its activities and achieving integration. While the Edström and Galbraith (1977) study has been widely accepted and adopted by researchers in the field, Harzing (1999) raises a number of legitimate concerns regarding its disjunction from the empirical evidence.

She concludes that there are a number of organisational factors that are likely to affect the importance of each role for each company (i.e. country of origin and destination, international strategy, industry, size and age of subsidiary). These are not accounted for by the classification. In addition, the empirical evidence suggests that many organisations use expatriates for direct control and not only indirect control via socialisation as emphasised in the Edström and Galbraith classification.

  • The transfer cycle

Much of the work on expatriates addresses the phases in the transfer cycle, namely, selection and training, relocation, adjustment and repatriation. Given their criticality to a multinational, it seems logical that a key concern of companies is how best to select and train such individuals. Research in the field has tended to focus on the criteria used to select expatriates. Interestingly, this suggests that technical expertise and domestic track record dominate over issues of language skills and cultural adaptability (Mendenhall et al., 1987).

However, the strategic antecedents of selection decisions are under-researched (Brewster and Scullion,1997). Where evidence is available it suggests that selection decisions are informal and reactive (Brewster, 1991) rather than strategic in nature.

The expatriate transfer cycle

The expatriate transfer cycle

In terms of formal training for expatriate assignments, this tends to be geared toward addressing the needs of the expatriate in terms of adjusting to the culture of the host country or the adjustment needs of the expatriate’s family (Dowling et al., 1994, 1999). Formal training tends to be limited (Scullion, 1993) and support focuses on practical relocation issues such as information on schools, assistance with moving, sorting visas, medical cover etc.

Informal development techniques are more common and tend to take the form of briefings, shadowing and visits (Scullion, 1993). Cross-cultural training has been identified by researchers (e.g. Brislin, 1986; Mendenhall and Oddou, 1986) as key to improving cross-cultural interactions, although a lack of belief in cultural training programmes by top management means that it tends not to be used by companies (Dowling and Schuler, 1991).

This is surprising given the strategic importance of culture outlined by Adler and Ghadar (1990). Equally, evidence on the failure of expatriate assignments indicates that poor cross-cultural communications or ‘culture clash’ (Torbiörn, 1985), alongside unhappiness of family members and language difficulties, are often relevant. For these reasons, training is argued as critical to enhancing the success of an assignment through easing the adjustment process.

Equally, the lack of training provision is seen as one explanation of assignment failure. Returning to the parent on completion of an assignment, repatriation, has proved problematic for many companies and failure to successfully repatriate managers has led many to leave the company. Some of the problems identified (Brewster and Scullion, 1997) include:

  • Loss of status. This may arise because an expatriate returns to a position they once held prior to the assignment or takes on a new position in the parent company that offers less status than the assignment position.
  • Loss of autonomy. Assignments may involve the expatriate heading up new operations. In such circumstances they are frequently given a high degree of operational autonomy, often because of the distance between themselves and the parent company, which is withdrawn when the expatriate returns home.
  • Loss of career direction. In many instances the international experience gained by expatriates is not a prerequisite for career advancement in the parent company. As such, many expatriates feel that their competence in this area is undervalued and not fully utilised by the company in settings outside of the expatriate assignment.

The cost of expatriate turnover due to repatriation failure is high, and is something companies have not addressed. It might be argued that the cost and assignment failure make the expatriate a less attractive integration tool. Further, we might speculate that the increase in other HR forums such as task forces, or HR committees, may in part take over the socialization and control roles of the expatriate. Furthermore, with the increasing emphasis on global learning, it suggests a need to consider the role of other occupational groups, particularly those more knowledge-intensive workers, in diffusing knowledge, again limiting the importance of the expatriate.

However, as yet, there is no empirical work that would support this speculation. Work in this field has been heavily criticised for its emphasis on description over theoretical explanation (Kochan et al., 1992). Studies have a normative tendency focusing on how expatriates are managed. As this is a relatively embryonic field of study, the need for description has been important. Equally, a functional focus is important and valuable for the practitioner community.

However, as in any field of research, there is also a need to move beyond description if the field is to develop. There is a need to develop the theoretical relations that underpin the concepts and issues that abound in the literature and empirical research to test and substantiate many of the concepts used. Brewster and Scullion (1997), in their review of the state of the field, also recognised the need to expand the study of international transfers to non-profit organisational contexts such as the United Nations, ILO, EU, charities, government and non-governmental aid organisations. The developments in the study of strategic international HRM (discussed above) have widened the definition of the term.

This has the potential for integrating expatriate policy with corporate and HR strategy. Some attempts have been made to develop models of international assignment appropriate to different strategic contexts (Welch and Welch, 1994), but work in this area is limited. Bonache and Cerviño (1997: 96) suggest that it is possible to meet many of the needs of globalisation without the use of expatriates, using instead ‘temporary foreign assignment for start-up operations; the hiring of competent local managers; socialisation of local managers into the corporate culture; extensive use of international management procedures; audits from headquarters; and formalisation and centralisation procedures’.

They argue that it is possible to find MNCs with the same international corporate strategy that each use expatriates in very different ways; equally, MNCs with very different corporate strategies may use expatriates in the same way. These apparent incongruities arise because strategy formulation is not undertaken by rational decision-makers, but by managers who socially construct reality helping to create their managerial vision. This perspective highlights the importance of considering not only the international corporate strategy of the firm in defining the international HR response but wider issues including environmental pressures and managerial vision.

  • Section conclusion

In this part we have looked at the organisational processes, policies and practices adopted by multinationals to address their international strategic goals. This has considered the question of the role of the international HR function, how it is organised and the activities undertaken. Furthermore, complex relationships between the internal configuration of organisational strategies and structures have been considered in terms of how these meet variable external influences.

The resource-dependent nature of parent–subsidiary relations as a mechanism of influence highlighted the multiple levels at which international HRM operates, and its differential impact on home and host country employees. Expatriates were identified as one employee group that have received considerable attention in the international HRM literature and their potential limitations as an internationalising force were considered.

Throughout, the prescriptive and conceptual nature of much of the work in this field was highlighted as detrimental to the theoretical robustness of the models and their utility in practice. Equally, the under-specification of national institutional factors in combination with strategic issues was evident. We argue that to fully understand and explain HRM in MNCs it is important to consider both strategic and institutionalist/comparative perspectives. However, these issues tend to be considered in relative isolation from each other. Further examination of the interdependency of strategic and institutional factors and their effect on HRM practice warrants greater emphasis. It is to these issues we now turn.

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