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South Korean MNEs’ international HRM approach: Hybridization of global standards and local practices Chul Chung a,* , Paul Sparrow b,1 , O¨ du¨ l Bozkurt c,2 aHenley Business School, University of Reading, Whiteknights, Reading RG6 6UD, UK bLancaster University Management School, Lancaster LA1 4YX, UK cDepartment of Business and Management, University of Sussex, Falmer, Brighton BN1 9QF, UK 1. Introduction Over the last two decades, the issue of the global standardiza- tion versus localization of subsidiary-HRM practices has been a central debate in the literature on human resource management (HRM) of multinational enterprises (MNEs) (Festing, Knappert, Dowling, & Engle, 2012; Pudelko & Harzing, 2007). Extant research on the issue has mainly focused on MNEs based in developed economies such as the U.S., European countries, and Japan (Thite, Wilkinson, & Shah, 2012). Recently, there has been a growing interest in various aspects of the activities of a ‘‘second wave’’ of MNEs from emerging economies (Bonaglia, Goldstein, & Mathews, 2007) such as, Brazil, China, India, Mexico and Russia as they grow in number and size. As attention shifts to emerging markets, there are important research questions that should be investigated, particularly in MNEs from newly industrialized economies (e.g., South Korea, Singapore, and Taiwan). Although the size of newly industrialized economies is smaller than that of major emerging economies, foreign direct investment (FDI) from newly industrial- ized economies is still growing, and unlike MNEs from emerging markets, there are a significant number of MNEs from among thesethat occupy leading positions in their global markets (Filatotchev, Strange, Piesse, & Lien, 2007; UNCTAD, 2006). This study explores South Korean MNEs’ approach to subsidi- ary-HRM practices. Research on Korean MNEs could have implications to wider groups of MNEs. First, Korean MNEs compete successfully in global markets against MNEs from developed economies and they are widely considered to be exemplars of successful MNEs from newly industrialized economies (UNCTAD, 2006). Some Korean MNEs are large, with a wide geographical reach in multiple subsidiary locations around the world and in leading positions in their respective sectors. In other words, these MNEs resemble and therefore are directly comparable with their counterparts based in developed economies in terms of size, global presence, and position in the global market. Secondly, at the same time, as their home country lacks a dominant status in the world economy, they might experience a ‘‘liability of origin,’’ which refers to the distinctive challenges or disadvantages stemming from their national origins (Bartlett & Ghoshal, 2000; Chang, Mellahi, & Wilkinson, 2009; Chung, Bozkurt, & Sparrow, 2012; Glover & Wilkinson, 2007; Ramachandran & Pant, 2010). Hence under- standing the current state of their international HRM reveals insights, not just for subsequent cohorts of MNEs from newly industrialized economies and emerging markets, but also for the general domain of contemporary MNEs in general. We argue it is particularly important to see whether South Korean MNEs adopt a distinctive approach to subsidiary-HRM practices, which may call into question the current dominant assumptions about HRM strategy and practice in MNEs, as these assumptions are Journal of World Business 49 (2014) 549–559 A R T I C L E I N F O Article history: Available online 1 January 2014 Keywords: International human resource management Korean Multinational Enterprises (MNEs) Hybridization Liability of origin A B S T R A C T This paper analyses the international Human Resource Management (HRM) approaches of Korean Multinational Enterprises (MNEs). Through a study of nine major Korean MNEs’ approaches to subsidiary-HRM, it is argued that the firms pursue hybridization through a blending of localization and global standardization across detailed elements in five broad HRM practice areas. Local discretion is allowed if not counter to global HRM system requirements and ‘‘global best practices’’ used as the template for global standardization of selected HRM elements. This strategic orientation appears to be part of a deliberate response to the ‘‘liabilities of origin’’ born by firms from non-dominant economies. 2013 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +44 1183787751; fax: +44 1183784029. E-mail addresses: [email protected] (C. Chung), [email protected] (P. Sparrow), [email protected] (O¨ . Bozkurt). 1Tel.: +44 1524 510911. 2Tel.: +44 7748 297948. Contents lists available at ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb 1090-9516/$ – see front matter 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.jwb.2013.12.008 predominantly informed by what is known about MNEs based in developed countries. An understanding of how South Korean MNEs approach their global people management is critical to debates on the possible emergence of an ‘‘Asia Pacific model of HRM’’ (Dowling & Donnelly, 2013, p. 172). We present the findings of a study that examines parent companies’ approach to subsidiary-HRM practices of nine Korean MNEs, all of which enjoy internationally competitive positions in their respective sectors. The major part of study is based on thirty interviews with HR executives and senior managers from the corporate headquarters directly responsible for the development and implementation of the IHRM strategy in the firms. As one part of the interview process, we used a structured-interview instru- ment designed to examine the different orientations toward global standardization and localization at the detailed element level within each of five HRM practice areas across the nine MNEs (job and grade, recruitment and selection, training and development, performance management, compensation and benefits). In total we gathered data on each of forty-seven elements about which decisions needed to be made with regard to global standardization or localization: nine for job and grade system, six for recruitment and selection, six for learning and development, sixteen for performance management, and ten for compensation and benefits. In our findings, we show that the IHRM approaches of the Korean MNEs are best captured by a distinctive approach of hybridization across these elements of individual HRM practices, rather than more wholesale orientations of ‘‘global standardization’’ or ‘‘localization’’. The remainder of the paper is structured as follows. First, we present the currently dominant understanding and assumptions in research on the IHRM strategy of MNEs. After a discussion of our research methodology and an introduction of the case organiza- tions, the empirical findings are presented. We then offer an interpretation of the findings with reference to existing theoretical assumptions, and conclude with a discussion of the contribution of the study and its limitations, as well as suggestions for future research. 2. International HRM strategy in the literature: dominant assumptions and new challenges One of the key issues in the practice of IHRM is the need to manage the dual pressures of global integration and local responsiveness (Brewster, Sparrow, & Harris, 2005). Research on the issue has examined the degree of global integration or local responsiveness in IHRM (see for example Bjo¨ rkman & Lervik, 2007; Brewster, Wood, & Brookes, 2008; Chung et al., 2012; Evans, Pucik, & Barsoux, 2002; Farndale & Paauwe, 2007; Farndale, Brewster, & Poutsma, 2008; Rosenzweig, 2006). It has also begun to distinguish the use of particular mechanisms in IHRM integration (Smale, Bjo¨ rkman, & Sumelius, 2013). Much empirical study in the area is underpinned by the integrative IHRM model of Taylor, Beechler, and Napier (1996), which argues that an integrated approach regarding IHRM strategy and practices has to distinguish the corporate-wide level from that of affiliates, and also from the employee-group level. Given that our main interest is in company- wide IHRM strategies, we also work with this definition of IHRM strategy, even while we recognize there may be more than three abstract orientations or routes to globalization of HRM. Accord- ingly, we define IHRM strategy as the general approach or orientation taken by an MNE ‘‘in the design of its overall IHRM system, particularly the HRM systems to be used in its overseas affiliates’’ (Taylor et al., 1996, p. 966). Three key assumptions have been dominant in research on orientations to IHRM strategy. First, the degree of standardization (versus localization) of subsidiary-HRM practices has beenconsidered as a key dimension underlying different orientations in IHRM strategy (Brewster et al., 2008; Dickmann & Mu¨ ller- Camen, 2006; Pudelko & Harzing, 2007). Taylor et al. (1996) identified three generic IHRM orientations at the corporate-level of MNEs: exportive, whereby corporate HR actors attempt to transfer parent company’s HRM system to subsidiaries; adaptive, whereby they attempt to adapt subsidiary HRM system as much as possible to the local context; and integrative, in which ‘‘the best’’ approaches are sought from parent and subsidiary practices. In most empirical IHRM research, the degrees of standardization as an integration mechanism has been examined by assessing the similarity between parent and subsidiary firm practices (e.g. Bjo¨ rkman, 2006; Brewster et al., 2008; Rosenzweig, 2006). Second, previous studies have typically examined the degree of standardization either at the overall practice level (e.g. perfor- mance management, recruitment and selection, compensation, etc.) or the level of entire HRM functions, through the use of measures that aggregate ratings on the degrees of standardization for individual HRM practices (Bjo¨ rkman, 2006). For example, a pioneering study on HRM practices of MNEs by Rosenzweig and Nohria (1994) examined whether subsidiary-HRM practices were similar to parent’s or local practices in each of six HRM practice areas such as employee benefits, annual time off, variable compensation for managers, and so forth. Research has increas- ingly looked at the implementation of particular HRM practices, for example talent management (Hartmann, Feisel, & Schober, 2010) or global performance management (Festing, Knappert, Dowling, & Engle, 2012) in different subsidiary locations. Importantly, while standardization may be implemented across a specific element of an individual HRM practice, the approach toward another element of the same practice at the same time may be defined by localization (Brewster et al., 2005). For example, an MNE in the energy sector mapped a set of generic HR processes by breaking these down into detailed elements and revamping the country role around each process to establish a new HR system architecture. Decisions were made as to whether to allow local aberrations from the globally designed process on a detailed element-by-element basis in each HRM practice (Sparrow, Brewster, & Harris, 2004). The third dominant assumption is that in attempts to standardize HRM processes, parent-company practices are the major reference, in line with the aforementioned orientations of IHRM strategy (see e.g., Bartlett & Ghoshal, 1989; Bjo¨ rkman, 2006; Rosenzweig, 2006). This is evident in the widespread tendency to treat similarity of practices between parent company and subsidiaries as a key indicator of global integration of HRM within IHRM research (Hannon, Huang, & Jaw, 1995; Kim & Gray, 2005; Rosenzweig, 2006; Rosenzweig & Nohria, 1994). The use of parent practices as the major reference of standardization reflects MNEs’ taken-for-granted views on effective HRM practices, the embedd- edness of their practices in their home countries (e.g. Bjo¨ rkman, 2006) or their ‘‘administrative heritage’’ (Bartlett & Ghoshal, 1989; Taylor et al., 1996). However, the dominant assumptions above have been chal- lenged by more recent scholarship, which depicts a more complex picture in IHRM. Regarding the first and second assumptions, several recent studies show that the constitution of IHRM strategy and practices could be far more nuanced and complex than the rather simplistic framework that the degree of standardization versus localization suggests. For example, work by Edwards and colleagues highlights that a number of complex patterns of transfer, negotiation, and combination of practices exist in the process of globalizing HRM (Edwards, 2011; Edwards, Jalette, & Tregaskis, 2012; Edwards & Rees, 2008; Edwards & Tempel, 2010). In a detailed case study of Japanese multinational retail firms, both in their home country and in their subsidiaries in China, Gamble (2010) finds that the construction of subsidiary-HRM practices in C. Chung et al. / Journal of World Business 49 (2014) 549–559 550 MNEs is too complex a phenomenon to be explained by the traditional standardization versus localization continuum. In order to capture the complexity of IHRM, Gamble proposes the concept of ‘‘hybridization’’, which involves complex patterns of creating new management practices through simultaneous processes of highly selective adoption, transfer, and local adaptation. Other research by Sparrow and colleagues on HR globalization within western MNEs makes a distinction between standardization and optimization to capture the more nuanced and detailed approach MNEs adopt in their IHRM strategy (Brewster et al., 2005; Sparrow et al., 2004). Standardization occurs when HRM processes designed at headquarters are applied to country operations either formally or tacitly based on the expectation of performance benefits, as seen by corporate headquarters (Martin & Beaumont, 2001). Optimiza- tion involves the discipline of adjusting a process based on multiple viewpoints so as to obtain a particular goal by setting or optimizing a specified set of parameters without violating some core constraints. Case studies examining the globalization of HR functions at the element level in western MNEs reinforce this emerging view through the investigation of areas such as international recruitment (Sparrow, 2007), the evolution of international mobility functions (Sparrow, 2012) and the devel- opment of global talent-management processes (Garavan, 2012; Sparrow, Farndale, & Scullion, 2013). Regarding the third assumption, questions have also been raised about the most appropriate locus of reference for potential standardization. Pudelko and Harzing (2007) note that practices from outside the organization, such as ‘‘global best practices’’ that do not necessarily originate from the parent company may be utilized as a reference for standardization. In this paper we argue that IHRM research needs to adopt a broader frame of reference when considering the origin of practices for standardization. This broadening also demands far more sophisticated methodologies than have typically been used in related research. The dominant assumptions in the extant research on IHRM strategy become problematic in the distinctive context of the emerging MNEs, such as South Korean MNEs. These firms might not be driven by the same assumptions about the globalization of their HRM. MNEs from developed countries often claim legitimacy in the transfer of parent-company practices to subsidiaries, presenting them as ‘‘advanced practices’’ and a source of competitiveness, corroborated by the global status of the home country. MNEs from home countries that lack such claims to legitimacy might not attempt the same approach to globalization of their practices. First, they may be more sensitive to diverse institutional pressures and reluctant to transfer home country practices to subsidiaries because of such perceived shortcomings (Bartlett & Ghoshal, 2000; Chang et al., 2009; Smith & Meiksins, 1995). Second, the practices that exist in the parent company or home country might not be mature because of limited heritage and experience in conducting global business (Cuervo-Cazurra &Genc, 2008; Dunning, Kim, & Park, 2008; Luo & Tung, 2007; Ramachandran & Pant, 2010). South Korean MNEs, and by extension MNEs from other newly industrialized economies, may challenge some dominant assumptions within current IHRM debates. This paper addresses the following central research questions: – RQ1: What is the overall orientation in Korean MNEs’ approaches to subsidiary-HRM practices in terms of global standardization and localization? – RQ2: At which level do Korean firms intend to standardize subsidiary-HRM practices? – RQ3: What is the origin of practices for standardization in Korean MNEs’ approaches to subsidiary-HRM practices? 3. Methodology A multiple-case study method was adopted in this study as appropriate for the investigation of the similarities among Korean MNEs in their corporate IHRM strategies. Nine major MNEs were included in this comparison. The case companies were selected based on (1) accessibility, (2) public awareness of their ‘‘Global HR’’ activities and (3) representativeness in their sectors in terms of firm size. Though one cannot generalize the findings in this study based on the small number of cases to the larger population of Korean MNEs, the nine firms captured a considerable range of sectors, including automobiles, electronics, steel, industrial wire and cable, infrastructure building, IT services, cosmetics, and confectionary. Crucially for the study at hand, all nine firms included in the study had very concrete, focused, and active globalization strategies, which included HR functions. The proportion of revenues generated overseas spanned a range from the mid-teen percent to over eighty percent. Total sales likewise spread across a wide range (see Table 1). This, of course, suggests that variables such as the percentage of revenues generated from overseas or total sales might moderate the overall results we report. As companies’ efforts for globalizing HRM were mainly focused on white-collar employees, our research only includes their approaches to subsidiary-HRM practices for this segment of employees. To gain a basic understanding of each company, a range of documents was collected and reviewed, including annual reports and company profile documents. Primary data for analysis were collected through thirty interviews with thirty-one key infor- mants. In each company interviews were arranged through an initial key contact, a HR manager in a corporate HR team. Each interview was conducted on a one-to-one basis except one interview that was carried out with two interviewees. Twenty- nine interviewees (between two to five interviewees for each of nine companies) were HR executives and HR senior managers at Table 1 Profile of case study companies. ID no. Company Industry Total sales (billion USD)Proportion of sales abroad (%) Number of employees/ % of employee abroad 1 AutoCo Auto 55.1 75 124,000/30 2 ElecCo1 Electronics 135.7 83 190,000/50 3 ElecCo2 Electronics 48.2 85 93,000/65 4 SteelCo Steel 53.2 39 27,000/37 5 CableCo Wire and cable 6.8 70 8050/70 6 ConfCo Confectionery 1.1 52 5900/63 7 EbizCo Online game 0.6 36 3300/27 8 CosmeCo Cosmetics 1.8 16 8600/48 9 InfraCo Heavy equipment 21.6 55 38,000/47 Annual reports (2010), company websites, interview.C. Chung et al. / Journal of World Business 49 (2014) 549–559 551 the corporate headquarters of the nine MNEs. They were key informants who were directly responsible for the development and implementation of IHRM strategy, including activities associated with globalizing HRM at the firm level. The purpose of using multiple interviewees was to capture a holistic picture of the company’s approach to subsidiary HRM practices, as a single interviewee may have been unable to answer all of the questions given the wide range of information sought at the organizational level. Thus interviews in a given case company were largely complementary to each other. When there were multiple responses to a question from different interviewees in a company, we checked on consistency and found those responses tended to be highly congruent with each other and the congruent responses were adopted in the data analysis. Non-congruent responses are noted as competing explanations or caveats to our findings. Given the focus of questioning was on each company’s approach and its policy-design intent, this was to be expected. Additionally, to gather information regarding general trends in global HR activities in South Korea, two interviews were conducted with directors of the Seoul offices of two international HR consultancies, which had been and were, at the time of research, involved in multiple Global HR projects with a large number of Korean MNEs. Interviews were carried out at the interviewees’ workplaces and each interview lasted from one to one and a half hours. All interviews were tape- recorded and transcribed. Interviews carried out for the study were of two types. Where the focus was on the investigation of emergent phenomena, interviews were semi-structured. Where the focus was on the collection of detailed data so as to allow for the analysis of element-level practices across the nine MNEs in the study, a more structured approach was adopted. In practice, this meant that interviews with informants about the overall corporate IHRM strategy and the activities associated with globalizing HRM, as well as the justifications offered for the pursuit of these particular directions in IHRM strategy, were semi-structured. Interviews with the structured-interview instrument that solicited data for the analysis of an individual firm’s orientations at the element level of IHRM practices, categorized as globally standardized (following globally common standards), localized (allowing subsidiary discretion to respond to local needs), or modified (allowing local modifications on the global standards), were structured. Method- ologically, our two-pronged approach was best suited to pursue further the suggestions in previous literature that globalization can happen at the detailed element level in HRM practices (Rosenz- weig, 2006), remedying the tendency in much of the extant literature only to investigate this at the broad practice level. The semi-structured interview topics included descriptions of IHRM strategy, specific IHRM initiatives and the reasons for the pursuit of given IHRM strategies. Every interviewee in the nine firms was asked about these general strategic themes. The structured-interview instrument solicited data about five broad HRM practice areas that have widely been identified as core areas of practice in previous research (Huselid, 1995; Youndt, Snell, Dean, & Lepak, 1996): job and grades, recruitment and selection, learning & development, performance management, compensa- tion and benefits. It entailed data at the detailed element level of practices within each of these practice areas. For example, the general HRM area of performance management was expanded to comprise sixteen elements, such as performance evaluation factors; performance measurement items; weighting of evaluation factors; performance-rating scale and so on (see Table 2). The list of forty-seven elements representing generic design elements of the five HRM practice areas were identified in an earlier study (Chung et al., 2012) with two Korean MNEs (AutoCo and ElecCo2) which also participated in this study. Both companies already had a series of elements of HRM practices in their global HRM guidelines.Common elements were identified by comparison between the two companies and a generalizable element list was developed. The respondents could answer the instrument without difficulties and the list of elements in the instrument covered their HRM practices comprehensively. Such detailed data collection at the level of elements was essential given our stated purposes, as it made it possible to refrain from a priori assumptions about the existence of a universal and homogenous orientation in the strategies across different HRM practice areas. It also enabled a systematic comparison across the firms. For the structured-interview part, one interviewee for each company was identified by key contacts as the most appropriate informant who had been involved in the development of corporate guidelines for subsidiary-HRM practices. This individual was first asked to respond to the structured-interview instrument as well as the semi-structured interview questions. Most interviewees could respond to the instrument without difficulty, offering explanations of why their companies adopted the particular approaches to subsidiary HRM. In two companies (AutoCo; ElecCo2), two interviewees were separately involved in responding to the instrument, as one could not answer questions in all the categories in the instrument due to the respondent’s scope of job responsibilities. The results of initial responses to the instrument by one or two interviewees were then reviewed by another respondent. In most cases they were confirmed without disagree- ment, but in a few cases the initial responses were amended in the following interviews as it became apparent that there had been misunderstandings of categories in the instrument by the former interviewees. The data analysis followed four steps. The first step coded the structured-interview data for each company regarding parent companies’ guidelines for subsidiary-HRM practices. As the data collection described earlier was highly structured, it could be coded in a straightforward manner. The results are shown in Table 2. In the second step, the semi-structured interview data for each interviewee were coded for accounts regarding: (1) the parent company’s approach to subsidiary-HRM practices, and (2) the rationale or reason for adopting the approach. Pre-defined coding categories were used for IHRM strategy and influencing factors on this strategy. Each selected interview account in each category was then coded using labels that summarized key notions in the interview account. The codes were then classified into higher-level codes through inductive reasoning. These codes were provisional and subject to re-coding if signaled by the subsequent company- level analysis. The third step focused on analyzing the coded individual data at the company level. After aggregating the results of coding the semi-structured interview data at company level, each initial higher-level code was re-examined across interviewees for each company and refined to reflect common views across interviewees. When necessary, more abstract constructs were identified and coded. After refining provisional codes, the coded results of the semi-structured interview data were reviewed alongside those of the structured-interview data. Key features of the parent company’s approaches to subsidiary-HRM practices and the rationales behind these approaches were identified for each company, based on the understanding that had been gained through the coding process. In the fourth step, the common or distinctive patterns in company-level approaches to subsidiary- HRM practices and the rationales of these approaches were examined across companies. The key findings in relation to the research questions were drawn from this comparative analysis. Given that our focus is to examine parent companies’ approaches to subsidiary-HRM practices, the reports from inter- viewees in headquarters need to be verified through examining whether such approaches are actually recognized and implemen- ted in each subsidiary. We tied reports from headquarters C. Chung et al. / Journal of World Business 49 (2014) 549–559 552 regarding subsidiary HRM practices to the actual practices implemented in the six subsidiaries of one MNE to demonstrate the validity of our findings. It would be beyond the scope of a single qualitative study to investigate all subsidiaries of the nine companies. However, we conducted supplemental research with six subsidiaries of an MNE to examine the fit with the reports from headquarters-level interviews. This company was selected because it showed most of the common patterns identified as important across the nine firms in the parent companies’ approach to subsidiary-HRM practices and we could control and match the functions served by its subsidiaries. Among the six subsidiaries, three subsidiaries are located in India and the other three are located in the U.S., againenabling multiple site comparisons within a single country. The three subsidiaries in each host country include a sales office, a manufacturing plant, and a research and development center. The level of economic development of a host country and the function of a subsidiary were identified in the initial study at the corporate level as important factors that could lead to different patterns in the implementation of parent firms’ policies regarding subsidiary HRM. Thirty-six interviews were conducted across the six subsidiaries. To capture the state of implementation of subsidi- ary-HRM practices, five to seven interviewees in a subsidiary, including local HR managers, an HR expatriate, the head of the subsidiary and two to three line managers, were included in the study. Interviews were conducted on a one-to-one basis. In each Table 2 Summary of global HRM guidelines of the case companies. Component of HRM practices in MNEs 1–9 1a 2 3 4 5 6 7 8 9 Job and grade Job classification: job family Gb G G M M M M G M Job classification: job list G G Mb M M M M M L Job description: category Lb L M M L L M G G Job description: content L L M M L L M M M Grade: number G G G G M L M G G Grade: criteria/definition G G M G M L M G G Grade: title G L M L M M M G M Promotion: requirement/criteria G L M M M L M G M Promotion: process L G L M M L M M M Recruitment and selection Recruiting methods L G L M L L M M M Recruiting message L L L M M L L L L Selection: criteria M L L M M L M L M Selection: assessor M L L M M L M L L Selection: process L G L M M L M L M Selection: assessment tools L L L M M L L L M Learning and development Succession planning: executive pool G G G M G M L M G Succession planning: high potential talent L G G M G L L M G Learning program: leader G G G G G L L M L Learning program: Common competency G G G G G M G M G Learning program: profession/job related L L M M M L L M L Learning delivery/operation M L M M M L L M L Performance management Performance evaluation factor G G G L G M G G G Performance measurement item L M M L M M M M M Weighting of evaluation factors G G G L M M G M M Performance rating scale G G G L M M G M L Forced distribution M G G L M M G M L Evaluation cycle/frequency G G G L M M M M G Performance management process G G G L M M M M M Performance evaluation assessor L M M L M M M M L Performance management form L G G L M M G M M Linkages to other HR applications L G G L G M M M M Common competency G G G L L L G M G Leadership competency G G G L G L L M G Job skill/competency L L G L M L L M L Competency assessment process G L G L M L M M G Competency assessor L L G L M L M M G Competency assessment rating scale G L G L M L G M G Compensation and benefit Employee pay structure L G G L M M L G L Employee base pay range L L L L L L L M L Employee base pay increase M M L L L L L M L Employee Incentive L L M L M L L M L Executive pay structure L L G L M G M M G Executive base pay range L L G L L G M M M Executive base pay increase L L G L L G M M M Executive Incentive L L G L M G M M M Benefit: employee L L L L L L L M L Benefit: executive L L G L L M L M L aCompany ID number. bG: globally common (following globally common standards); M: modified (allowing local modifications on the global standards); L: localized (allowing subsidiary discretion to respond to local needs).C. Chung et al. / Journal of World Business 49 (2014) 549–559 553 subsidiary, the local HR manager and an HR expatriate were asked to provide information regarding the implementation of head- quarters’ guidelines on subsidiary-HRM practices. A structured- interview template similar to the one used for the headquarters- level study was used at the interviews. The subsequent interviews were conducted with line managers and the head of subsidiary to verify the information received from the local HR manager and the HR expatriate. When there is a divergence of views between the local HR manager and the HR expatriate, the interview data from line managers and the head of subsidiary was considered to ascertain the current state of implementation in a particular area of HRM practices. 4. Findings In every firm we found evidence of a hybridization approach, which involves careful choices of specific elements of HRM practices for global standardization, modification of global standards, or localization, in parent firms’ approach to subsidi- ary-HRM practices. The analysis of orientations across the forty- seven elements of the five HRM practices reveals that evidence is lacking for universal, wholesale, and homogeneous strategies that can be coherently summarized as global standardization or localization. Rather, in each participant firm, we observe that viable options are sought and selected from among the three orientations – global standardization, modification of standards, and pure localization – for each element of HRM practices. We now elaborate on this main claim. 4.1. The emerging ‘‘global HR’’ in Korean MNEs: views from the institutional context Changes in HRM practices in South Korea that occurred after the 1997 Asian financial crisis have been well reported in the literature. These were broadly related to the implementation of new concepts and practices, such as performance-oriented HRM systems, within the Korean business context (see e.g., Bae & Rowley, 2001; Bae & Rowley, 2003). Our interview data confirm that the most significant HR issues as seen by key actors in Korean MNEs are the challenges posed by the perceived need for the globalization of the HR function. Interviewees consistently argued that there was a clear and widespread trend among Korean MNEs for attempts at the globalization of HRM at the firm level. According to our interview data, large Korean MNEs such as ElecCo1, ElecCo2, and AutoCo, which were established and developed their businesses in global markets earlier than most other Korean firms, initiated projects for globalizing their HR function from the mid-2000s onwards. Subsequently, other Korean MNEs from a range of industries joined the stream of globalizing efforts. According to one key informant at the subsidiary of a major American HR consultancy firm, which was a HR-consulting service provider to numerous Korean MNEs, ‘‘Global HR’’ has been established as a common and critical issue for MNEs from the Korean institutional context: ‘‘Within[the last] 5–6 years. . . the term, ‘‘Global HR’’ has been used widely in Korean business society. Before then, a main focus of Korean companies’ headquarters had been on expatriation. . . As the internationalization of businesses by Korean companies has rapidly progressed, core functions such as marketing, R&D, and manufacturing went outside Korea. Some Korean companies even acquired foreign MNEs, which means a large number of employees are now non-Koreans. Korean MNEs began to think of how the major practices of HRM such as the grade system, performance management, reward,and recruitment should be designed and managed in a global context’’ (Director, major HR consultancy) This view was supported in all of the nine case companies. Previously, the management of subsidiary HR functions had been largely delegated to subsidiary HR managers, mostly hired in each host country. Corporate HR staff had not been overly concerned with the operation of HRM in individual subsidiaries. However, the rapid growth of business in foreign markets produced significant pressure for the corporate HR staff to initiate globalizing efforts across their organizations, linking the corporate HR function and foreign subsidiaries. 4.2. A hybridization approach at the level of element of practices A range of activities may be labeled as ‘‘Global HR’’, but our interviewees mainly defined it as those common activities associated with the development of global HRM guidelines, designed to guide and regulate HRM practices in subsidiaries or, in some cases, across an entire MNE, including the parent company. With regard to research questions 1 and 2, our objective is to show how the adoption of an HR strategy that is selectively adaptive to pressures of global standardization and localization at the level of element of HRM practices affords both a more nuanced and context-dependent approach to the globalization of HR activities. We found that case companies regulated their subsidi- ary-HRM practices carefully, deciding which elements of the HRM practices needed to be globally standardized (following globally common standards), localized (allowing subsidiary discretion to respond to local needs), or modified (allowing local modifications on the global standards). The choices made for each element of practice reflected a nuanced understanding of where local discretion was possible without impacting the high-level global requirements of the HR system as a whole. It is difficult to assess a broad HRM topical area as globally standardized or localized without carefully examining at the level of its individual elements, and even harder to describe the overall IHRM strategy. The literature traditionally defines this IHRM strategy using the traditional dichotomy of global standardization versus localization as the general orientation in the overall system design. However, the notion of ‘‘hybridization’’ describes an IHRM strategy based on combining different orientations together. Some elements of a practice are standardized, while others are allowed to be modified based on the global standards, and yet other elements are allowed to be localized. The corporate HR staff of the firm try to select a viable option from the three alternatives for each element of the HRM practice (e.g., the performance evaluation factor, performance measurement item, weighting of evaluation factors, performance rating scale, etc.) in order to achieve a set of objectives (e.g., the globally common logics of actions, such as maintaining performance-oriented management style, facilitating global staffing, etc.) within the potential constraints (e.g., the accepted legal and cultural context of host countries). The pattern of the IHRM strategies in all nine case companies could be described as such a hybridization approach. However, the actual outcome of such endeavors was different according to the particular context of each company (see Table 2). The hybridization approach at the element level refers to the intended approach, not the realized one. As reported elsewhere (e.g., Chung et al., 2012; Gamble, 2003; Gamble, 2010; Kostova & Roth, 2002), there are potential gaps between the corporate headquarters’ intentions and actual implementation in subsidiaries. The analysis across the nine firms shows that all can be classified as being oriented toward a hybridization approach at the element level as described above. Although variations in the C. Chung et al. / Journal of World Business 49 (2014) 549–559 554 particular blend of hybridization exist across the MNEs in their overall approach, there is not one case that could be classified as being geared predominantly toward either global standardization or localization. Even in the electronics and automotive sectors, which have been recognized as examples of globally integrated industries (Porter, 1986), the Korean MNEs intended to standardize only a highly selective range of elements within their HRM practices. Most interviewees were reluctant to describe their IHRM strategy as being based on a global-local dichotomy, as shown by a corporate HR manager: ‘‘Actually, we began to approach the issue of global HRM with the concept of standardization, but, after giving careful consideration to it, we finally concluded that it might be unrealistic to stick to a standard model which is developed by the center due to the complexity in each subsidiary situation. We thought that how to deploy and make it work in each subsidiary is a real issue. So, we took the view of local optimization, utilizing [external global] best practices as just one source of reference.’’ (Corporate HR manager, SteelCo) As illustrated above, Korean MNEs standardize their HRM activities selectively, based on a finer level of practices. This tendency was explained by a senior manager involved in the development and implementation of global HRM guidelines in his company as follows: ‘‘We developed something called a ‘global HR standard’ and deployed it to all subsidiaries. Initially, we intended to define core areas for global standardization on an entire practice-by- practice basis, such as global grade system, job classification system, performance management and so on. For example, regarding the grade, we wanted to say, this is our mandatory standard system that every subsidiary should follow. However, after a pilot test with several subsidiaries, we found that the approach was unrealistic and a more sensible approach would be needed to accommodate diverse local needs as well as to maintain key element as globally common. Thus, we break down major HRM tasks into more detailed elements and decided which one should be a key area for global standardiza- tion.’’ (Corporate HR senior manager, AutoCo) With regard to the research question 3, a distinctive aspect in the IHRM strategy of Korean MNEs is the strong willingness to adopt what they believe are ‘‘global best practices’’ or ‘‘global standards’’ as a source of standardization. Seven out of nine case organizations used benchmarking with leading U.S. MNEs, and eight of the MNEs hired U.S.-based global consultancies to support their globalizing efforts. HRM practices used by US-based MNEs have been widely introduced to Korean companies since the Asian financial crisis in 1997. Information was gathered through benchmarking and work with consultancies. However, the scope and depth of the implementation of these practices differed among Korean MNEs. The majority reported that their parent companies could not fully implement espoused ‘‘ideal’’ practices for a number of reasons, such as internal constraints in their home countries based on resistance from labor unions and the continued influence of traditional practices. Home practices represented a mix of traditional seniority-based and a newly introduced performance- based system. When they developed global HRM guidelines for subsidiaries, they were not willing to consider their parent companies’ current practices as the major reference, but rather adopted ‘‘global best practice’’ as a basis of standardization: ‘‘The HRM practices of the Korean headquarters may be effective in Korea, but, could they be the same in other countries? We don’t think so. Why? Because it [the context] isvery different. Then what would be an alternative? Maybe something like ‘global best practices’ could be considered as a tool or source if they are more applicable universally, even though it might not be really the best one.’’ (Corporate HR executive, ElecCo2) Although our study of nine MNEs potentially limits the ability to generalize our findings, we identified an indication of the potential impact of the sector on the IHRM approaches of the companies. Companies 1, 2, 3 from automotive and electronics, considered as examples of globally integrated industries by Porter (1986), expressed an intention to standardize more elements of HRM practices than the other companies, as shown in Table 2. Whilst those three companies tried to standardize 40–55 percent of elements of HRM practices, the other five companies (4, 5, 6, 7, 8) targeted only 9–17 percent, and one company (9) intended to standardize 30 percent of the elements. It remains unclear whether the differences are the result of an industry effect or an international strategy effect, as all three firms in the globally integrated industries seem to be oriented toward a global strategy, while the other firms are oriented toward a multi-domestic one. We conducted a follow-up study to partially assess how the parent companies’ approaches to subsidiary-HRM practices, as reported in the corporate-headquarters level study, are actually recognized and implemented at the subsidiary level. Table 3 shows the recognition and implementation of the corporate guidelines on HRM practices by six subsidiaries of MNE 1. First, corporate guidelines regarding subsidiary-HRM practices set a ‘Global HRM Standard’. These guidelines lay out the desired features of HRM practices that subsidiaries are expected to adopt and which elements of HRM practices are required to be globally common. All HR managers in the six subsidiaries have some knowledge of their corporate-headquarters approaches to subsid- iary-HRM practices, and from such knowledge determine which elements can either be modified from the global standard or are left to the full discretion of subsidiaries. Second, although there are variations across subsidiaries and elements of HRM practices, all six subsidiaries implemented the corporate guidelines to some extent. As expected and specified in the global standards, significant parts of the mandatory standardi- zation elements were adopted by subsidiaries. Those elements that were subject to rejection or modification by local actors take on especial importance. For example, in India, there was a major point of difference between the intentions of the headquarters and the subsidiary practices in the grade system. The global standards specified a five-level grade system. This could not be implemented in India, where a highly differentiated hierarchical grade system was the norm and standard in the local labor market, for both domestic and foreign-owned firms. A ten-level grade system was introduced. Local actors had successfully persuaded corporate- headquarters actors that implementation of their own local version of the grade system, based on their localization logic, was preferable. We also found significant variations among the different subsidiaries located in the same host country. In the U.S. the more mature research and development function subsidiary showed a low level of acceptance of the corporate guidelines. By contrast, the U.S. plant, which was a newly established subsidiary, was perceived as more willing to adopt the corporate guideline. 4.3. The potential explanation on the IHRM strategy of the Korean MNEs Although we cannot generalize from nine cases, we found evidence that explains why Korean firms pursued the approaches they did, especially the utilization of a ‘‘global best practices’’ instead of the use of parent practices for global standardization of C. Chung et al. / Journal of World Business 49 (2014) 549–559 555 subsidiary HRM practices. Two factors stood out: (1) HRM-related institutional conditions of the home country; and (2) cognitive conditions of HRM-related actors in the corporate headquarters. Regarding the institutional conditions, the case companies perceived a lack of mature practices in their home country due to the rapidly changing institutional environment. Before the financial crisis, HRM practices in Korea were largely influenced by Japanese HRM practices (Bae & Rowley, 2003). After the crisis U.S. practices gained legitimacy as being more advanced and effective, and have been introduced widely in Korea. However, changes are still in progress, contested between U.S. and Japanese-style HRM practices (Bae & Rowley, 2003). Newly legitimized practices are still not fully established by Korean MNEs as the desired forms. There is variability in implementing these new ‘‘ideal’’ practices, and a lack of strong legacy practices in parent companies. Our Korean MNEs opted to standardize particular elements of their HRM practices across subsidiaries, developing and utilizing prototypes closer to ‘‘global best practices’’ rather than transferring current parent practices. An HR planning manager involved in global HR projects explained: ‘‘We developed and deployed new global practices which were not stemming from parent-company practices, but based on benchmarking studies of well-known global companies. . . .We don’t think our HR practices in the headquarters are the ideal ones we want to implement and changing HR practices in Korea could be quite difficult and need more time due to potential industrial relation issues. In a sense, we could feel more comfortable in implementing the new global practices in foreign subsidiaries first.’’ (HR planning manager, SteelCo) Second, with regard to cognitive conditions, the majority of respondents from the case companies expressed their less- privileged status as an MNE from a non-dominant economy. They were explicitly concerned that if a label of ‘‘Made in Korea’’ isimprinted in their global HR practices, it will not be received positively by subsidiary employees. This cognitive orientation might explain why the Korean MNEs utilized diverse external sources of practices actively and were highly concerned about the legitimization of their global practices, by relying on more visible processes of hybridization. A corporate HR manager in a case company which is a leading MNE in the sector supported this view: ‘‘U.S. companies already have global concepts in their home practices in that their practices may be adopted by subsidiaries without serious conflicts as ‘advanced’ ones. They don’t need to develop something new for globalization. If Korea is (becomes) a dominant country. . . we might be able to plant our practices to other countries in the same way. . . But, we don’t have ‘the global consensus’ that the U.S. firms have. If we try to implement something called Korean practices in our U.S. subsidiary, they may say we are crazy! We change ours just because we need to do it.’’ (corporate HR manager, ElecCo1) Even a well-known brand company among our case companies described itself as a company from a non-dominant economy. Regardless of outsiders’ views, they believe that their parent HRM practices would not be welcomed by employees in subsidiaries if perceived as ‘‘Made in Korea’’. We found that the less privileged status of their home country, as perceived by the interviewees, is one of the factors that may help explain the companies’ approaches to subsidiary-HRM practices, such as adopting what they believe are ‘‘global best practices’’ or ‘‘global standards’’. Arguably, this kind of ‘‘liability of origin’’ might be found among MNEs from other newly industrialized or emerging economies. 5. Discussion Our study finds that Korean MNEs take a more nuanced approach in their IHRM strategy, rather than adopting a position along a global standardization versus localization dichotomy. We Table 3 Implementation of the corporate headquarters guidelines at subsidiaries: case of MNE 1. Category of assessment US sales US plant US R&D India sales India plant India R&D 1. Recognition of the corporate-headquarters guideline regarding subsidiary-HRM practices Yes Yes Yes Yes Yes Yes 2. Subsidiary’s assessment of the degree of implementing the components of HRM practices which were defined as ‘globally common’ (following globally common standards) by the corporate headquarters Job classification: job family M Ga Ma La L M Job classification: job list M G M M M L Grade: number G G M L L L Grade: criteria/definition G G M L L L Grade: title G M L L L L Promotion: requirement/criteria G M M M M L Selection: criteria (core elements) b G M L M M M Selection: assessor (HR interview) b G G L G G G Succession planning: executive pool M M M M M M Learning program: leader M G L G G M Learning program: common competency G G M G G G Performance evaluation factor G G M G G G Weighting of evaluation factors M G M G G M Performance rating scale G G M G G G Evaluation cycle/frequency G G M G G G Performance management process G G M G G G Common competency G G M G G n/a Leadership competency G G M G G n/a Competency assessment process G G M G G n/a Competency assessment rating scale G G M G G n/a (Pay philosophy – pay for performance) b G G G G G G aG: adopt the global standard guideline; M: modify the global standard guideline to accommodate local needs; L: utilize HRM practices which were developed locally to accommodate local needs; n/a: not applicable (not yet introduced). bAdditional company-specific information which is not included in Table 2. C. Chung et al. / Journal of World Business 49 (2014) 549–559 556 identify their overall orientation to IHRM strategy as a hybridiza- tion approach, whereby practices adopted at the element level are drawn from diverse sources, including so-called ‘‘global best practices’’. This finding may challenge the dominant assumptions of the current IHRM literature that we identified earlier (Table 4). There is a clear contrast between the widely shared assumptions about the IHRM strategies of MNEs and what we found in this empirical study. Our understanding of the IHRM strategies of MNEs demands critical re-examination. Closer studies of MNEs from newly industrialized economies and emerging markets promise to extend such understanding by encompassing a wider, heterogeneous group of MNEs. This orientation was related to the distinctive institutional and cognitive conditions that characterize their status as MNEs from a newly industrialized economy. This strategic orientation, rather than being an unintended aggregate consequence of ad-hoc practical solutions for individual HRM practices, should be under- stood as part of a deliberate attempt by Korean MNEs to overcome their ‘‘liability of origin’’ (Bartlett & Ghoshal, 2000; Chang et al., 2009; Ramachandran & Pant, 2010). The IHRM strategy is conditioned by (1) the absence of mature and unique national bundles of HRM practices due to recent and rapid changes in the home country institutional context and (2) the self-perception of less-privileged status as firms based in a non-dominant economy. Arguably, such institutional and cognitive conditions also apply widely to the larger population of MNEs from newly industrialized economies and emerging markets. The study of Korean MNEs’ IHRM strategies reveals critical features of the new generation of MNEs based in the less-developed economies. It builds a more nuanced approach that recognizes the multiple institutional pressures experienced by these firms in ways that are distinct from their competitors based in developed home countries. 5.1. Theoretical implications A number of theoretical implications arise from our study of Korean MNEs. First, contrary to previously identified orientations of IHRM strategy, our findings show that these MNEs pursue more nuanced approaches. We found a hybridization approach to be the focal strategy for these firms – a combination of standardization, localization, or modification at the level of element that comprises broad HR practice areas. Such a nuanced approach has also been observed in MNEs from developed countries in prior research (e.g., Gamble, 2010; Sparrow et al., 2004). However, some key features of the context of MNEs from South Korea, a newly industrialized economy, render such approaches more explicit. New constructs and/or new typologies to help capture emergent repertoires of IHRM strategy are needed that go beyond the traditional global standardization–localization dichotomy and concepts such as hybridization (e.g., Gamble, 2010), optimization (e.g., Sparrow et al., 2004), and duality (e.g., Brewster et al., 2008; Evans et al., 2002) deserve more sustained empirical attention. MNEs from newly industrialized economies and emerging markets constitute particu- larly pressing and promising cases for empirical and theoretical enhancement of our current understandings of IHRM strategy. Second, our findings highlight that MNEs from South Korea utilize external ‘‘global best practices’’ as an alternative to parent-company practices, which have been recognized as a major source of standardization. Indeed, our particular finding on this area suggests that this emphasis on ‘‘universal best practice’’ may be more prominent and observable in the IHRM strategies of MNEs from newly industrialized economies and emerging markets and that they therefore may very well be more active and critical agents in the diffusion of dominant models and approaches on a global scale than previously recognized. In turn, we see such so- called ‘‘global best practices’’ to be widely linked to a dominance effect, which refers to the tendency of following and learning a role model – widely perceived as best practices – stemming from a country that occupies a dominant position in a hierarchy of national economies (Smith & Meiksins, 1995). In a study on HRM practices of MNEs headquartered in the U.S., Germany and Japan, Pudelko and Harzing (2007) found that their subsidiary-HRM practices can be shaped not only by local practices or parent practices, but also by ‘‘global best practices’’ coming from U.S. MNEs. MNEs from newly industrialized economies and emerging markets, lacking an institutionally and organizationally mature and entrenched set of alternative HRM practices, and feeling inclined to adopt already legitimized practices due to their distinctive institutional and cognitive conditions, may indeed emerge as the frontrunners of the adoption of global best practices, and, arguably, key actors in the perpetuation and consolidation of dominance effects. Third, our findings show that the liabilities of origin, particularly the role of institutional instability and the perceived weak legitimacy of being a non-dominant economy, play a significant role in shaping IHRM strategies of emerging MNEs. This is a distinctive variation of the ‘‘country-of-origin’’ effect (see Ferner, 1997). Previous IHRM research has examined the effect of country of origin by assessing the similarity between subsidiary- HRM practices with home country practices based on two assumptions: (1) the existence of dominant HRM practices which are strongly embedded in a home country; (2) parent company’s willingness to transfer those practices to subsidiaries because they are taken for granted as an appropriate way of managing people or a critical source of the company’s competitiveness. Our study of Korean MNEs shows it is problematic to presuppose these conditions in MNEs from newly industrialized economies and emerging markets. Emerging MNEs lack clearly demarcated and consolidated dominant practices in their home country due to the contestation among different institutions in the process of rapid transformation. Even if there are practices recognized as being effective in the home countries, the perceived weakness of legitimacy makes expectations of local adoption of these home country HRM practices precarious. Strategies of practice standard- ization based on home country standards are unlikely. When we examine the country-of-origin effects in the HRM practices of MNEs from newly industrialized economies and emerging markets, the similarity of practices between home country and subsidiary practices may be a poor, and even misleading, indicator of the effect. 5.2. Managerial relevance Contrary to the dominant assumption that standardization might occur at the overall HRM-function level or the Table 4 Dominant assumptions versus key findings. Dimension Dominant assumptions Key findings Overall orientation Standardization or localization Hybridization Level of standardization Overall HRM function or HRM practice Detailed element within HRM practice Major origin of practices for standardization Parent company practices ‘‘Global best practice’’ C. Chung et al. / Journal of World Business 49 (2014) 549–559 557 HRM-practices level, our study shows that MNEs attempt to standardize their HRM practices highly selectively at the finer level within a practice. This further suggests that there is an important managerial implication for the practice of HRM within MNEs. A corporate headquarters of an MNE might need to consider carefully the needs of standardization at a very detailed level, differentiating each element of HR practices, rather than being constrained by traditional ‘‘lumping’’ typologies that attempt to manage at the entire HRM-function level or overall practice level. The latter approaches may have serious limitations in being able to adequately consider the complex pattern of IHRM approaches that will be the most effective within MNEs. 5.3. Limitations and future research We recognize our study is not without limitations. First, as it relies on data mainly from the headquarters of each MNE, we only examine the headquarters’ view on the firm’s strategic orientation in IHRM. However, a seemingly optimal alternative could very well be interpreted differently by subsidiary actors and thus actual implementation at the subsidiary level could diverge considerably from that intended and envisioned by the headquarters. Several interviewees at subsidiaries of a MNE mentioned that even though there are mandatory requirements in subsidiary-HRM practices, which were intended to be followed by all subsidiaries, variations from the corporate guideline may exist in a particular subsidiary. Future research is needed to build upon our findings to provide data on the actual implementation of selected IHRM strategies at the subsidiary level. Second, in seeking to identify commonalities across Korean MNEs in their approaches to subsidiary-HRM practices, we recognize that such approaches could differ depending on the industry and on company characteristics such as size and degree of internationalization of businesses (Rosenzweig & Nohria, 1994; Schuler, Dowling, & De Cieri, 1993). The nine Korean companies vary in terms of size, industry and proportion of sales abroad but our study does not allow us to systematically test the effects of each of these factors on MNE approaches to subsidiary-HRM practices. Future research with a larger sample would be well placed to explore the patterns of differences in the international HRM approaches across companies and effects of various factors on them. 6. Conclusions Through the case study of nine Korean MNEs, this research makes several contributions to emerging research on HRM of MNEs from South Korea as well as the extension of extant research on IHRM strategy. First, it addresses the lack of empirical research on HRM in the context of MNEs from newly industrialized economies and emerging markets, which are becoming more prominent in the world economy. Second, through examining the detailed elements of each HRM practice, this research identifies the hybridization approach at the element level of practices as a distinctive IHRM strategy that has hitherto not been highlighted in the IHRM scholarship. Third, this study addresses the lack of attention to the liabilities of origin as a key determinant of IHRM approach especially in MNEs from newly industrialized economies and emerging markets. Fourth, this research identifies gaps between dominant assumptions and the empirical findings of emerging MNEs and suggests that studies on MNEs from newly industrialized economies and emerging markets could contribute to expand extant theories by challenging their taken-for-granted assumptions. The findings from the study of Korean MNEs have significant implications for other MNEs from newly industrialized economiesand emerging markets. The distinctive institutional and cognitive conditions we identified as important in shaping the IHRM strategies of companies are likely to also be found in MNEs from other newly industrialized economies and emerging markets. However, such inference only calls for further empirical investiga- tion on cases of MNEs from other economies. 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International HRM Day 5 – Managing Change & Knowledge Wednesday 22nd February 2017 Paul Hunter Email: [email protected] Day 4 Recap  Critical need for global staffing – creation of strategic value, however can be a complex and problematic process.  MNC staffing policies – ethnocentric, polycentric and geocentric.  Expatriates and their role as knowledge agents – management of relationships, psychological contract issues. Experiences associated with being an expatriate.  Role of flexpatriate – shorter assignments, up to 3 months, short notice travel. Managing Change & Knowledge IHRM Considerations “Management and change are synonymous; it is impossible to undertake a journey, for in many respects that is what change is, without first addressing the purpose of the trip, the route you wish to travel and with whom. Managing change is about handling the complexities of travel. It is about evaluating, planning and implementing operational, tactical and strategic journeys” (Paton et al, 2008)  Change: There Will Always Be Change…. – is not new – will not go away – is a challenge – can be managed – should be a way of life – should be welcomed (Paton, 2008)  Within most organisations, change is inevitable, particularly for those organisations who want to compete in a dynamic global business environment.  Change can occur internally within organisations re structures, processes or practice reviews or they are governed externally i.e. by regulator or technological changes. (Beech & MacIntosh, 20 12) Change Failure  Organisational change is increasingly the norm, yet the high levels of failure indicate that effective management of these changes is an issue.  Do HR and organisations anticipate and understand the concepts of change? • A poll by Prosci in 2012, showed that 80% of organisations experienced confusion about the concepts of change and change management. • In 1996, John Kotter published ‘Leading Change’. His research revealed that only 30 percent of change programs succeed. (M cKinsey, 2009) Key Drivers of Change  Consider your MSc learning to date, what are the key drivers of change within an organisation today?  Characteristics which are key for IHRM: Organisational Perspectives Management Perspectives Globalisation People Technology Skills & Performance Competition Resources Government & Legal Design & Operation Working patterns Rate of change Cultural & Lifestyle Typical Internal/Strategic Change Initiatives Leadership changes Merger or Acquisition Organisation structure changes Strategic changes Technology changes Cultural changes Global expansion Preconditions for Change  Organisations need to ensure that they understand the reasons behind the change: • Why are we undertaking this change, what do we plan to achieve/get out if it? • What will happen if we don’t? • What current problems will it and won’t it solve? • What potential new problems could it create? • Why is now the right time for this change? • What are the risks involved?  inhibiting factor Group Exercise In your teams discuss scenarios in which you, personally, have experienced change. For example, during your time in Scotland, have you felt the pressure to “change”, or “adapt” your values, attitudes and/or behaviours? Why? Have you found the experience p ositive? Challenging? Stressful? Upsetting? Why? How have you responded to this change? PERSONAL DEVELOPMENT AND SELF -IMPRO VEMENT MAY INVOLVE CHANGE THAT REQUIRES A REASSESSMENT AND RECONFIGURATION OF PRE -EXISTING VALUES AND BELIEFS, WHICH CAN BE STRESSFUL. AS POTENTIAL HR PROFESSIONALS YOU MUST REALISE THAT CHANGE INITIATIVES MUST BE DESIGNED AND IMPLEMENTED SENSITIVELY, CONSTRUCTIVELY AND COLLABORATIVELY. People’s Resistance To Change  HR need to be aware of ‘people’s resist ance to change’. Some typical reasons for this: • Self interest (human needs?) i.e. unwillingness to let go; • Concern over skills and training; • Lack of confidence/lack of understanding & knowledge. • Awareness from Hofstede’s ‘Power Distance’ and ‘Uncertain Avoidance’ theories. • John Kotter discusses how to deal with resistance to change. Do you agree with his views? The Change Curve TIME Completion Change Point Denial Application Blames self/others Development Confusion Acceptance Immobilisation The Change Curve Change Point Description Immobilisation People need time to get used to the new situation, support and understanding this is a natural response Denial People need patience, clear directions and allowance to explore their own approach to things Frustration Tolerance, encouragement to think Acceptance Acceptance, reassurance that it is ok to do things their way Development Support and encouragement that they can succeed Application Encouragement to take responsibility Completion People are now competent – good management practice Reaction Behaviour Shock, Disengagement (withdrawn)  Taking the path of least resistance  Believe the change won’t happen or at least won’t affect them Denial, Disorientation (confusion)  Have lost sight of where they fit in  Know what they are but don’t know what the organisation has become High Emotions: Anger/Disenchantment  Outwardly display anger which maybe masked feelings  Blocked and energy goes into preserving the block Sadness/Anxiety  Exposed and vulnerable  Feel something they identify with has been taken away  Put in the time but not the energy  Keep a low profile  Don’t ask questions  Refuse to be drawn into conversation about the change  Asks lots of questions  Unsure  Focus on details  Do not prioritise  Don’t understand the goals or direction  Communicate the negative  Enlist support against the change  Refuse to talk about it  Blaming others  Sulking  Reminiscing and dwelling on the past  Go back to how things were  “its not fair” or “it won’t work” HR – The Change Advisor  Normally the remit of the HR Director, particularly in the case of a large organisation change.  Has the ability to influence all key stakeholders within an organisation.  Will work with internal stakeholders (particularly the change agent), through the process of designing and implementing change, challenging and guiding them to get it right.  Ensures that issues e.g. organisation redesign/restructure and due process are appropriate and effective through and after change. Change Management is seen by some to be a core skill requirement for HR. HR Benefits of Successful Change Management  If change is successfully implemented there can be many benefits and a reduced impact of risk :  Organisation performance & productivity improvements;  Rise in engagement and morale;  Better team working;  Increased reputation. HR Issues of Unsuccessful Change Management  However if change is not implemented properly, a number of areas might be damaged and therefore increased risk occurs : • Reputation; • Morale; • Resource(s) alignment issues. HR Questions • Do senior management understand the full potential, impact and effect on their long term strategy? • Impact of the needs, skills and culture of the organisation and it’s people? • Which aspects of our culture will help support/hinder the change? • What has our history of change been; do we tend to embrace or resist it, where or when does change tend to get stuck and why? • What are other threats to success – how can we mitigate them? HR Need to Respond to the Emotional Journey  Need to understand what local and international staff might experience and consider: • How are people reacting to the changes/resultant implications for them? Are the reactions different in foreign offices? • What do staff believe they are losing and what do they believe they might gain? • How clear is it to them what will change and when? • How and when will they start the transition to the new role/tasks they might have to do? How can we support them? • Will the change work globally? If not, what other options do we have? HR – Understanding System Implications  HR need to ensure that, dependent on the scale of changes, they understand and review how this effects existing HR policies, systems, processes and structure.  Questions to consider: • Have we got the structure right? • Are our HR processes fit for future purpose? • Will our HR systems deliver what is needed? • When realigned of HR processes and fit occurs, will it achieve the goals of the change? • Above all, do our people understand what they and others have to do in the changed environment? HR – Champions of Change  HR must ensure they have the skill, knowledge and credibility within the organisation to act as “ champions of change ”.  A long term sustainability of a change, through effective design and delivery of learning initiatives, is required.  The key for HR is to build credible relationships throughout the organisation which enable them to anticipate change and be involved from the very beginning.  A ‘Communication Plan’ is vital. HR – Champions of Change  HR must ensure that they are involved at the initial stage of change and do the following: • advise senior management of the current skills within the organisation; • assess the impact of change in one area/department/site on another part of the organisation – develop requirements for training; • are being used to communicate and negotiate change, engaging with various stakeholders, understanding their concerns; • help pe ople cope with change; • develop/implement a change management toolkit. Managing Change & Knowledge Importance of Knowledge Management from an IHRM perspective Importance of Knowledge Management  Effective knowledge management is important both to exploit existing capabilities on a global scale and to explore new ideas that can be developed into new product and service offerings.  Companies easily fall into the trap of not managing knowledge or focusing too much on one aspect of operation at the expense of the other.  Implemented HR practices can enhance knowledge sharing. Includes developing processes for exploiting existing knowledge and exploring new knowledge.  Will help the development of change within organisations. Knowledge Sharing in MNCs  Knowledge sharing in MNCs is facilitated by cross -unit social capital, organisational values of collaboration and sharing, and global mindsets.  MNCs need to establish effective ways of accessing and retaining external knowledge.  Both explicit and tacit knowledge are important to MNCs. Explicit & Tacit Knowledge  Explicit knowledge: • knowledge that individuals and organisations know they have – i.e incorporated in texts and manuals (organisation documentation) , and relatively easy to pass on to others. • most knowledge stored in IT databases and systems is explicit.  Tacit knowledge : • personal, context specific and hard to formalise and communicate. Individuals may even not be conscious of it. • Tacit knowledge often underlies complex skills and is fundamental to the intuitive feel acquired through experience. Tacit Knowledge – Make It Explicit  Invest in making tacit knowledge explicit, (Nonaka, 1994). • Individuals explain tacit concepts that are otherwise difficult to articulate by conveying ‘intui tive images’ that people can understand. • But must know the type of knowledge that is accorded high value and how it will be made accessible. Assessing the Effectiveness of Knowledge Sharing  Knowledge sharing in MNCs is often influenced by: • the ability/understanding and willingness of the source to share knowledge (sender); • the ability and willingness of the receiving unit to absorb knowledge (receiver); • the characteristics of the relationship between the sending and receiving units. • Consideration of personal threats imply impact of knowledge sharing. Stimulating Knowledge Sharing  MNCs can make knowledge sharing effective, efficient and fast by: • disseminating information about superior performance and knowledge; • selecting expatriates/flexpatriates with knowledge sharing in mind; • designing appropriate structural mechanisms; • building a conducive social architecture. HRM Practices to Motivate & Absorb/Share Knowledge  Developing appropriate HR pra ctices i.e. recruiting people with required skills and knowledge who can communicate/coach others.  Investments in training & development of employees can also contribute, as training enhances the quality of human capital needed to achieve the knowledge go als of an organisation.  Performance management systems – feedback and direction for enhancing their competencies to meet the organisation’s knowledge needs. Gaining Access to External Knowledge  Turning new knowledge that has been acquired from outside the corporation into a commercially viable innovation involves capabilities in assimilating and recombining that new knowledge.  The levers that MNCs have at their disposal to enhance cross – border knowledge sharing are also relevant for external knowledge acquisition.  However, firms may use additional approaches to access knowledge from the outside: • scanning or tapping into the lo cal knowledge base; • partnering or merging with other firms; • playing the virtual market. Global Knowledge Management Case Study Review Global Knowledge Management – Case Study Review 1. Evaluate P&G’s approach to managing knowledge and innovation. 2. What are the barriers that a multinational organisation has to overcome to harness the potential of a Connect + Develop model? What are the implications for HR? Day 6 – Thursday 23rd February The Dark Side of International Employment IHRM Assignment Question
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This article was downloaded by: [University of Glasgow] On: 12 February 2015, At: 08:37 Publisher: Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK The International Journal of Human Resource Management Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/rijh20 Adopting a common corporate language: IHRM implications Rebecca Marschan-Piekkari , Denice Welch & Lawrence Welch Published online: 18 Feb 2011. To cite this article: Rebecca Marschan-Piekkari , Denice Welch & Lawrence Welch (1999) Adopting a common corporate language: IHRM implications, The International Journal of Human Resource Management, 10:3, 377-390, DOI: 10.1080/095851999340387 To link to this article: http://dx.doi.org/10.1080/095851999340387 PLEASE SCROLL DOWN FOR ARTICLE Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) contained in the publications on our platform. However, Taylor & Francis, our agents, and our licensors make no representations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of the Content. Any opinions and views expressed in this publication are the opinions and views of the authors, and are not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon and should be independently verified with primary sources of information. Taylor and Francis shall not be liable for any losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoever or howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use of the Content. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http:// www.tandfonline.com/page/terms-and-conditionsDownloaded by [University of Glasgow] at 08:37 12 February 2015 Adopting a common corporate language : IHRM implication s Rebecca Marschan-Piekkari, Denice W elch and Lawrence W elc h Abstract As companies internationalize and expand their operations into mor e countries, language questions inevitably come to the fore. As a response to operating in many languages and co-ordinating a multinational workforce, companies may adopt a common language for internal communication. However, the challenges associated wit h such a `language standardization ‘ and the broader HR considerations have receive d limited scholarly attention in the extant literature. This article addresses, therefore, th e implications of language issues for a range of international HRM activities, includin g staff selection, training and development, and international assignments. We also explor e language policies in the light of HR considerations and the strategic positioning of language-competent staff. The insights gained from various company examples demon – strate that multinationals rely on short-term and long-term HR responses to deal with th e language issue. The analysis also reveals the critical role played by expatriates as language nodes, suggesting the need for a more long-term approach to the developmen t of language competencies in multinationals . Keywords Human resource management; language standardization; language nodes ; multinational management; expatriates; international staff transfers . As a company builds operations in multiple foreign locations, it inevitably takes on a more and more diverse multinational workforce. While local employees enabl e important local market responses to be made, they also increase the demands on effective inter-unit co-ordination. From this perspective, handling a global workforc e becomes an important issue for the modern multinational (MNC). As a senior executiv e of the Swedish multinational, Electrolux, is quoted as saying, `Everything that has to do with employing people is becoming more and more strategic ‘ (Lester, 1994a). A ke y aspect of the role of people in achieving local responsiveness yet effective co-ordinatio n in a multinational environment is the language / s in which they operate and which the y use to communicate internally in the internationalizing company . In response to the demands of operating in multiple foreign-language environments , several MNCs, such as Siemens, Electrolux and Olivetti, have nominated one of ® cia l language as the basis of communication within the company (Lester, 1994b), be it th e parent-country language or another language. Somewhat curiously though, the broade r HR implications of language issues within the MNC, including `language standardiza – tion ‘ through the imposition of a common language, remain relatively unexplore d (Marschan et al ., 1997). The challenges posed by cross-language interaction are deal t with only at a general level in the area of cross-cultural communication literature ± fo r Rebecca Marschan-Piekkari, Research Associate, Shef ® eld University, Management Schoo l (e-mail [email protected] ® eld.ac.uk). Denice Welch, Associate Professor of Internationa l Management. Lawrence Welch, Professor of International Marketing, Norwegian School of Management. The International Journal of Human Resource Management 10:3 June 1999 377 ± 39 0 Copyright € Routledge 1999 0958 ± 519 2Downloaded by [University of Glasgow] at 08:37 12 February 2015 example, negotiating and selling in foreign markets. There are not only the obviou s marketing issues connected with cross-language foreign operations, but also the interna l communication and reporting requirements of a company that includes a languag e diverse workforce. Despite the relatively large body of literature on the ® rm ‘ s international growth, and on the process of internationalization (see, for example , Buckley and Ghauri, 1993; Bj Èorkman and Forsgren, 1997), little is known about ho w ® rms confront the language issues and, in some cases, decide to introduce a compan y language. For companies emerging from countries with a language well used internationally ± for example, English-speaking countries such as the United States and the Unite d Kingdom ± it is clearly possible to internationalize and not confront the language issu e simply by entering other English-speaking markets. For instance, a Canadian ® rm moving into the United States, then Australia, New Zealand and the United Kingdom , can postpone language complications of international growth for some time. In fact , research on the patterns of companies ‘ internationalization has revealed the importanc e of so-called psychic (or cultural) distance, which includes language as one importan t component (Johanson and Vahlne, 1977; Petersen and Pedersen, 1997). There is clearl y a tendency to favour operations in countries using the same language as one ‘ s own . Even with a later spread into countries using a variety of languages, though, languag e may still not be regarded as an important internal communication issue at an English – speaking multinational ‘ s headquarters. As Fixman found in a study of the languag e needs of US-based multinationals : the less foreign language knowledge my interview partners had, the more they tended to view foreign language use as a mechanical skill . . . . Most individuals whom I inter – viewed perceived foreign languages to be of only secondary value for executives . (Fixman, 1990: 27, 33 ) It is dif ® cult, however, even impossible, for companies internationalizing from non – English speaking countries, especially those with a language little used in th e international arena, to adopt such an approach. Cross-language demands tend to be more obvious and pressing. Companies internationalizing from Finland know that ther e is virtually no scope for utilizing Finnish in their international operations. While ther e is a paucity of empirical studies on this issue, it could be expected that, for multi – nationals based in non-English-speaking countries, cross-language adaptations and th e selection of a common company language will occur at an earlier stage of international – ization compared to their counterparts from the English-speaking world (Luostarinen , 1979). Given the above, this article aims at augmenting our understanding of the HR challenges associated with the use of multiple languages by a dispersed internationa l workforce as international activities expand. We begin by examining how an inter – nationalizing company copes with the language issue through the adoption of a standardized, company-wide language. The implications for a range of internationa l HRM activities are then explored, including staff selection, training and development , and international assignments. We also consider the strategic positioning of language – competent staff, given the critical role that expatriates often play as `languag e nodes’ . Methodology This article draws primarily on data from an exploratory qualitative study of a Finnis h multinational ± Kone Elevators (Marschan, 1996). Kone may be viewed as a critica l 378 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 case (Patton, 1990) because of its non-English-speaking base, and the maturity an d extent of its global operations. In 1997, Kone had 150 foreign subsidiaries in fort y countries, with about 22,500 employees worldwide, of whom 92 per cent worke d outside Finland, and 65 per cent were non-native speakers of English (Kone Annua l Report, 1997) . Language issues within Kone emerged from an in-depth case study involving an investigation of inter-unit communication processes consequent upon the move toward s a less hierarchical organizational form. Communication issues were examined in Kone ‘ s twenty- ® ve foreign units operating in Northern, Central and Southern Europe , Mexico and the Far East. One hundred and ten persons were interviewed from to p management (22 per cent), middle management (52 per cent) and operating leve l (26 per cent). The interviews, conducted during 1994 ± 5, were held in the premises of the units investigated. In line with established qualitative research protocol, th e interviews were complemented with observation and documentation to enhance dat a triangulation (Yin, 1994) . During ® eldwork, the importance of company language skills (that is, English ) emerged as an in ¯ uential theme, initially as a barrier to inter-unit communication ¯ ows . It became clear that language skills also functioned as a facilitator and a source of power in information exchanges within the case company. In order to develop th e language theme, three steps were taken following the original case study (Eisenhardt , 1989; Patton, 1990). First, the emergent theme of language was iterated with Kone dat a and extant literature. Second, in September and October 1997, six Kone key informant s were interviewed through telephone and e-mail, representing human resources , language training, management development, technical training and customer service . These interviews yielded data that enabled the language theme to be extended. In addition, this article utilizes data from an investigation of language issues and thei r effect on international operations in the Finnish industrial and mining compan y Outokumpu (Palo, 1997) . Language standardizatio n The adoption of a common company language, or so-called `langauge standardization ‘ , has many advantages from a management perspective : 1 It facilitates formal reporting between units in the various foreign locations, thu s minimizing the potential for miscommunication and allowing for ease of access to company documents such as technical and product manuals; operating procedures ; and record-keeping . 2 It enhances informal communication and information ¯ ow between subsidiaries . 3 It assists in fostering a sense of belonging to a global `family ‘ , which has bee n suggested as an important element in the multinational ‘ s use of soft contro l mechanisms such as corporate culture (Ferner et al ., 1995). While these advantages are somewhat obvious, as mentioned earlier little is know n about when the decision to introduce a company language is taken, or if it occur s formally at all. Because of the dominance of English as an international busines s language, it may be that English becomes the common language by default. Th e experiences of two Finnish companies, Kone and Outokumpu, provide an indication of possible processes at work within multinationals that lead to the adoption of a commo n company-wide language . Kone, the third largest elevator company in the world, started to grow internationall y through foreign acquisitions in the late 1960s and early 1970s. In 1968 Kone acquire d Marschan-Piekkari et al. : Adopting a common corporate languag e 379Downloaded by [University of Glasgow] at 08:37 12 February 2015 a large elevator company in Sweden, and in 1970 and 1973 it expanded to Austria an d Germany. Consequently, it became necessary in Kone to use a common language in internal communication with foreign subsidiaries. In fact, already by the end of th e 1960s, English was used in ® nancial reporting which represented an important means to integrate acquired units with the rest of Kone. In Kone, the introduction of the of ® cia l company language followed a rather emergent strategy. As a Finnish manager with a tenure of more than thirty years recalled : As far as I know, in Kone no language has ever been declared the of ® cial compan y language. English has simply evolved by itself and it has become the natural language fo r internal communications: a practical solution with the increasing internationalization of the company . The Finnish metals group, Outokumpu, while having a long history of internationa l operations, rapidly increased its activities in the late 1980s through the establishment of foreign sales and production subsidiaries (Palo, 1997). As a result, an increasing amoun t of communication was conducted in English, which became the semi-of ® cial languag e within the company. Outokumpu adopted English as its of ® cial language for interna l communication in the early 1990s. As with Kone, the formal recognition of th e language issue did not occur overnight, but appears to have been triggered by th e increased number of foreign customers and non-Finnish employees, as two interviewee s in Finland explained : Our customers were in English, German and Swedish speaking areas. [Therefore], som e reports were circulated in English which were previously done in Finnish . (Palo, 1997: 76 ) We had realized [the importance of English] earlier because we had operations in th e USA. Everything was done automatically in English . (Palo, 1997: 76 ) Although Outokumpu had been involved in exporting activities since 1915 an d licensing agreements since the 1950s, it would appear that the establishment of foreig n subsidiaries, via acquisition, forced the need for a common language, due to the growt h of the non-Finnish workforce . For some multinationals, rather than strict emphasis on language standardization, th e way to cope with their multiple language environment has been to accommodate a degree of ¯ exibility in language use: using more than one of ® cial language and / or permitting exceptions in certain circumstances in some subsidiaries. For example , Lester (1994b) reports that, while Nestle has designated both French and English as th e of ® cial languages, it allows some inter-subsidiary communication in a wider range of languages. Kone ‘ s Northern European units (Nordic countries) often use `skandina – viska ‘ in inter-subsidiary communication. Despite the willingness to accommodat e multiple languages, especially at the informal, interpersonal level (Steyaert an d Janssens, 1997), the danger from the headquarters ‘ perspective is that this will creat e confusion. In a Swedish-Swiss multinational, where English is the common language , the former Chief Executive Of ® cer Percy Barnevik explained : Every manager with a global role must be ¯ uent in English, and anyone with regiona l general management responsibilities must be competent in English . . . . We are adaman t about the language requirement ± and it creates problems. Only 30% of our manager s speak English as their ® rst language . (Taylor, 1991: 94 ± 5) 380 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 Thus, co-ordination and control imperatives tend to push multinationals toward s language standardization, even if this is not fully accomplished. As a Kone top manage r commented, `In the late 1960s [the] ambitious goal was set that personnel should be able to communicate internally in English. Still today it has not been achieved even though we have a good common language. ‘ In Outokumpu, despite its designation of English as th e of ® cial language, board minutes were still written in Finnish in 1997 . (Palo, 1997 ) As the above company examples indicate, adoption of a common, company-wid e language may alleviate some of the internal communication and co-ordination problem s caused by multiple languages within the multinational, but it can also create a range of different challenges that may emerge as critical HR issues . Language issues and human resource managemen t Whether of ® cial or not, once the company utilizes a common language, certain force s will be set in train which affect the behaviour of individuals. Language standardizatio n sends a de ® nite message to employees at various levels. In the case of Kone, in 1972 , the company decided that all top management meetings would be held in English . Simultaneous translation facilities were provided initially, but thereafter it was mad e clear to top managers throughout Kone that internal company matters would be handle d in English. The onus was clearly placed upon managers to become competent in th e selected common language. One could argue that there was also an implicit message: `i f you are interested in career progression in this company, it is essential that you lear n the common language ‘ . By publishing company documents such as appointments , promotions and organizational charts in English, Kone placed additional pressure on staff in top positions to learn the company language . In Outokumpu, there was a degree of resistance to learning the company languag e among staff in acquired units who had worked for the local company before th e acquisition (Palo, 1997: 76); and some confusion about how far the of ® cial languag e actually extended in the acquisition. For example, a Spanish manager related : I do not know if it [English] is supposed to be the of ® cial language for everyone of us . I mean there are people that started working before . . . . Outokumpu started owning thi s company. So, I do not know if it is an obligation for everyone of us to speak English an d to communicate in English, maybe just for a certain type of people . While the post-acquisition literature recognizes that human resource managemen t processes are a critical part of successful integration, the implications of languag e standardization are seldom discussed (see, for example, Buono and Bowditch, 1989 ; Lohrum, 1996; Nahavandi and Malekzadeh, 1988; Shrivastava, 1986) . Over time, in the more mature sections of the multinational, the use of the commo n language within the company tends to become more established and accepted as part of the basic routines and behaviour, particularly at subsidiary top level and at head – quarters. In Kone, at the top management level, operating in English has become suc h an accepted part of normal operations, even its administrative heritage, that it seems th e issue of language is no longer a key management concern. It would appear that th e company top executive team at headquarters, key expatriates and longer-servin g employees have become comfortable with the requirement to operate in the workplac e predominantly in English. This very comfort, though, may mask the continuin g importance of language as a factor in international operations, in a way not dissimila r Marschan-Piekkari et al. : Adopting a common corporate languag e 381Downloaded by [University of Glasgow] at 08:37 12 February 2015 to the attitude of some multinationals from English-speaking countries who ar e dismissive of the signi ® cance of language (Fixman, 1990) . At a base level, language is an issue concerning individuals and their competence ; companies do not have languages, people do. Thus, IHRM activities related to staf f selection, performance appraisal, training and development and international assign – ments are critically important in the ability of the multinational to function effectivel y in a multiple-language environment. The remainder of this paper identi ® es some of th e HR challenges posed by the language issue and suggests policy responses to deal wit h these. Staff selectio n In some respects the language issue would seem to be a simple one for multinationa l companies: to adjust staff selection policies to take account of language competence in the hiring (and ® ring) of staff so that the required mix of languages at the variou s subsidiaries is obtained. As Lester notes on the basis of Nestle ‘ s experience, `the easies t and cheapest way to approach the language problem is to hire people already possessin g the required skills ‘ (1994b: 43). Clearly, though, the balance of language and othe r skills (e.g. technical) does not always come as neatly packaged as required. In addition , many companies exhibit a strong bias towards technical expertise in the selectio n process. In her study of US-based companies, Fixman (1990) found that foreign – language skills played only a secondary role in both hiring and career advancement ± technical skills were the critical factor. Her interviewees expressed con ® dence `tha t when foreign language skills were needed, they could be found in their company ‘ (Fixman, 1990: 42) . At the subsidiary level, as mentioned previously, the adoption of a common compan y language, or the insertion of a newly acquired foreign operation into such a regime , inevitably creates pressure for some of the staff to have the relevant languag e competence. In the short term, this may be handled by transferring expatriates to th e subsidiary to facilitate co-ordination and control; but over time there is an inevitabl e drift towards hiring staff with the required language skills. In Kone ‘ s case, this wa s evident in their Spanish subsidiary where English-language skills were lacking amon g staff who needed to communicate with other parts of the Kone network. The obviou s response was deliberately to include English competence as a required component in the selection process (Marschan et al ., 1997). P erformance appraisa l Pressure may be applied regarding the need for common company-wide languag e competence during performance appraisal interviews. However, this may depend on th e attitude held regarding language skills within the company. For example, Fixma n reports that none of the US companies she interviewed `directly included informatio n on foreign language skills in performance reviews of their employees ‘ (1990: 43). Sh e adds: `foreign language is not assessed as a separate skill, but if it is necessary for th e job, it will make a difference in a performance review ‘ . This could equally apply to competence in the common company-wide language. In fact, the impact may be particularly felt at the subsidiary level where the language interface may be mor e dramatic. An individual ‘ s ability to perform to required standards may be restricted by limited company language competence, which might constrain access to important job – related information from headquarters. It would also emerge in cases where th e individual ‘ s appraisal interview is conducted in the company language by an expatriat e 382 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 manager. Of course, there are individuals who, despite being motivated to acquire th e desired language, are unable to achieve an adequate level of pro ® ciency, and this barrie r may affect the career progressions of otherwise highly capable and useful employees . Even for those who have the ability to acquire languages, the imposition of a compan y language may create tension between the technical and language demands of jo b performance. Acquiring language pro ® ciency is a demanding exercise in terms of tim e and effort and has to be set against all the other demands on employees ‘ time . Training and developmen t Rather than solely `buying in ‘ language skills through hiring people with the require d competence in the common company language, the provision of language training can , and does, play an important role in ensuring that the multinational has access to neede d language skills. The German company, Siemens, for example, undertakes a heav y investment in company-sponsored language training, providing opportunities for staf f globally to acquire or improve skills in German (parent-company language), Englis h (common language), French and Spanish (Lester, 1994b). Kone likewise offers trainin g courses in various languages both at the corporate level and in individual subsidiaries . For example, a Kone language training of ® cer stressed the importance of interna l information exchanges : Unlike many of our Finnish competitors who train their staff to communicate with th e ® nal customer, our objective is to improve staff ‘ s ability to communicate in Englis h internally with other subsidiaries. Local subsidiary personnel in turn communicate wit h the ® nal customer in the local language . Already, in the early 1970s, corporate language courses in English were provided, as the company expanded internationally through acquisitions, and the increased need fo r using English in communication between headquarters and the acquired units becam e evident. During the last few years, the demands on personnel to become pro ® cient in the company language have been pushed further down the hierarchy to lower level s within Kone as internal customer ± supplier relationships have been formed acros s subsidiaries ± for instance, sales staff in Hong Kong may need to communicate directl y with technical engineers in Austrian factories . However, in Kone, language training at the subsidiary level varied considerably , from no course offerings to comprehensive programmes. From a subsidiary perspective , participation in company-sponsored language courses was even seen as a reward, as a top manager involved in management training mentioned : These corporate language courses can be seen as a reward to participants an d subsidiaries. As participants need to have a certain level of English before they ca n attend, this is a way of rewarding personnel for their language studies and encouragin g subsidiaries to continue investing locally in language training . Once a common company language has been established, it becomes an importan t entry path to corporate training and management development programmes, potentia l international assignments and promotion ± as illustrated in Figure 1. An importan t incentive to learn the company language is thereby created. As Pearson points out, `i n the absence of compulsion, there will still be a drift to the use of [the commo n company-wide language] . . . people know which side their bread is buttered ‘ (1989 : 147). For those who do not acquire competence in the common language, the reality is that there will be virtually no opportunities to participate in company-wide activitie s and they will remain con ® ned to their local operation . Marschan-Piekkari et al. : Adopting a common corporate languag e 383Downloaded by [University of Glasgow] at 08:37 12 February 2015 Training programmes are not only avenues for career advancement, but also forum s for making broader company contacts. Participation in corporate training courses offer s an opportunity to gain `know who ‘ information, including knowledge about people in other parts of the company with matching language skills. It was evident in Kone tha t some subsidiary managers deliberately sent staff to training courses in order to expan d non-common language-based networks. For example, a Spanish manager took part in a corporate training course in Finland with the secondary purpose of identifying Spanish – speaking staff in other subsidiaries. Paradoxically, this was particularly important fo r those coming from subsidiaries that lacked depth in English-language skills, and was a strategy to ensure informal communication lines beyond those available through thei r limited English skills . At the same time, language competence can be a major inhibitor on the developmen t of staff. For example, managers in the Spanish and Mexican Kone subsidiarie s commented that they did not have staff with suf ® cient skills in English to send to corporate technical training and management courses. Such a barrier not only has caree r advancement consequences for the individuals concerned, but obviously affects th e overall skills level of the various subsidiaries. As the Finnish manager responsible fo r Kone ‘ s global training and management development programmes admitted, `It is an unknown area for us [Kone management] how much of the need for technical trainin g is in fact hidden behind the language problems ‘ . For a company of Kone ‘ s maturity in international operations, this is perhaps an indication of the fact that, even with its lon g experience in coping with language-related issues, language standardization is no simple panacea for dealing with the problems created by a multinational ‘ s multiple – language environment . Figure 1 HR implications of language standardizatio n 384 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 Knowledge transfe r Competence in the common company language is clearly critical for effectiv e knowledge transfer and sharing within a multinational. Kone makes use of internationa l projects to transfer knowledge residing in various parts of its large and geographicall y dispersed organization. In this context, the use of teams with members from variou s functional areas has accentuated the need for increased horizontal communication an d associated language skills. The technical personnel and troubleshooters on such short – term, speci ® c foreign assignments also need to have appropriate language skills. As a training of ® cer at Kone ‘ s corporate headquarters explained : These persons [technical personnel and troubleshooters] are technically very competent , but their language skills have been poor. . . . The dif ® culty in sending such person s abroad is that technical knowledge is not necessarily transferred in an ef ® cient way. If th e technical person concentrates too much on the project itself, stays for a fairly short tim e and does not interact enough with local staff, the competence level of local personne l does not increase. We have not been very satis ® ed with the present arrangement. We have to require suf ® cient language skills . Indeed, one could argue that the transfer of language skills should be a prelude to th e movement of knowledge and information. While it is possible for the process to be facilitated through the outsourcing of some document translation, it can be time – consuming, and may compromise sensitive technical and commercial informatio n (Fixman, 1990). Similarly, there are constraints on the use of translators / interpreters in meetings and training sessions, and computer-aided instruction. Of course, wit h improvements in information technology, it is likely that more effective electroni c translation facilities will be developed. However, these are still unlikely to remov e the barriers created by language difference ± particularly with regard to informal , person-to-person communication and tacit knowledge transfer (Nonaka and Takeuchi , 1995). Expatriates and international assignment s The contribution of expatriates to internal information exchanges as they move betwee n headquarters and subsidiaries, or from subsidiary to subsidiary, has long bee n acknowledged in the international management and IHRM literature (Edst r Èom and Galbraith, 1977; Ondrack, 1985). The place of language in this process, however, ha s received little attention. Where language skills have been recognized, they are regarde d in the expatriate management literature as a selection criterion in terms of the languag e requirement of the receiving subsidiary (see, for example, Dowling et al ., 1998). In much of this literature, it tends to be assumed that expatriates automatically have th e required ¯ uency in the common company language, which is not surprising given th e predominance of American research in the ® eld. Expatriates in companies such as AB B and Kone are required to be ¯ uent in English (the common company language) as a prerequisite for foreign assignments, even though, for most expatriates in such multi – nationals, this is not their mother tongue. Table 1 shows that, in Kone in 1997, 74 pe r cent of expatriates were non-native speakers of English (i.e. 104 out of 140). Further , host-country language pro ® ciency, if required, is normally developed during pre – departure training. Little is known, though, about the extent to which the languag e requirement constrains the recruitment and selection of potential high-calibr e expatriates. The examination of Kone Elevators suggests that, where expatriates possess critica l language skills from a headquarters and a subsidiary perspective, they may play an Marschan-Piekkari et al. : Adopting a common corporate languag e 385Downloaded by [University of Glasgow] at 08:37 12 February 2015 enhanced, even pivotal role, in internal communication exchanges. As the number of expatriates increases, such a role may be considerable. In Kone, the number of expatriate s has almost doubled from the early 1980s to 140 persons in 1997. Simultaneously, th e spread of nationalities among the expatriate group has increased: in 1997, the pro – portion of Finns had reduced from 63 per cent in 1995 to 50 per cent; and the majorit y of the other half were native speakers of English, namely Australians, British , Americans and Canadians (TCNs) . The expatriates ‘ language skills may sometimes become so important that the y develop into language node s , though this is often an unseen side of the expatriate ‘ s role . In the host country, the expatriate becomes the interface, through language, betwee n headquarters and the local subsidiary, and also between subsidiaries (see Figure 2) . The language node role might be far broader than that which ¯ ows from th e expatriate ‘ s competence in the common company-wide language. In Kone, not only wa s this role found to cross subsidiary and functional boundaries, but the content of th e exchanges covered a wide range, going beyond the expatriate ‘ s normal job descriptio n and responsibility, including in some cases negative performance feedback (Marscha n et al ., 1997). As Figure 2 demonstrates, an expatriate (Mr X) who becomes competen t in the host-country language may develop into an important language node after th e completion of the foreign assignment, based on this acquired language skill. That is, th e nodal role may continue and even extend after repatriation. For example, current staf f in Kone ‘ s Spanish and Mexican subsidiaries rely on a Spanish-speaking Finn wh o learnt Spanish while on a foreign assignment in Venezuela in 1978 ± 80. During inter – views conducted in these locations in 1995, reference was made to the Finnis h expatriate ‘ s nodal role, as the following comments reveal : We enter [the unit in Finland] through a person . . . who speaks Spanish. Since thi s person speaks Spanish the communication is very direct with him. He is the start of T able 1 Expatriates by nationality in Kone, 199 7 Native speaker s of English No. of expatriate s Non-native speaker s of English No. of expatriate s Australia Canada UK USA 11 3 18 4 Austria Belgium China Chile Czech Republi c Germany Egypt Finland France Hong Kong Italy Malaysia Netherlands New Zealan d Singapore Sweden Taiwan 2 2 1 1 1 5 1 70 6 1 1 1 3 1 1 3 4 Total 140 36 (26%) 104 (74%) Source : Kone company documents . 386 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 everything and we are able to communicate well with him, he passes us on to othe r persons. (Spanish manager ) Basically, I communicate with Finland directly with Mr X. He is a person who speak s perfect Spanish, which has facilitated enormously the communication. . . . The perso n before him . . . was excellent but he did not speak Spanish. . . . Being able to spea k Spanish has helped tremendously. I think it is an advantage for Kone to have people lik e him. (Mexican manager ) The Finn was subsequently interviewed about this role. He explained that his curren t position in Finland is as a member of a team responsible for marketing activities in Latin America. During almost twenty years since his repatriation, word-of-mouth abou t this Finnish person ‘ s language capabilities and lift competence had spread from th e subsidiary in Venezuela to Mexico and other subsidiaries, and `new colleagues hav e been informed about [his] Spanish skills ‘ . His `fame ‘ spread to the Spanish subsidiar y after he acted as an interpreter when a delegation from that subsidiary visited Finland . Figure 2 shows the potential long-term effects of the expatriate acting as a languag e node, outside the common company language. It also demonstrates how vulnerable suc h language-based communication ¯ ows are because they are so person-bound, and ye t their power and positive in ¯ uence may be considerable . C onclusion and implication s The above discussion highlights the important role played by language within the globa l networks of multinational companies ± an aspect of international business operations , Figure 2 Expatriates as language node s Marschan-Piekkari et al. : Adopting a common corporate languag e 387Downloaded by [University of Glasgow] at 08:37 12 February 2015 and IHRM, that has tended to be somewhat overlooked both in the academic literatur e and at the company level. Our examination of two Finnish multinationals suggests that , even though many multinational companies have adopted a common corporat e language as a way of dealing with the challenges of co-ordination and control in thei r multiple-language environment, this may mask a wide range of continuing languag e problems, some a consequence of the common language itself . The experience of Kone also demonstrates that, despite all its experience in international business operations, language continues to pose a signi ® cant managemen t challenge. Kone ‘ s recent expansion into China, for example, has raised a whole raft of new demands regarding Chinese-language competence for the large number of expatriates (PCNs and TCNs) required in China, accompanied by a need for resource s to allow Chinese subsidiary staff to acquire the necessary competence in the commo n company language. In total, Kone has expatriates in twenty- ® ve different countries. In terms of location, China is the fourth largest recipient of Kone expatriates (see Table 2) . One could argue that anticipating language demands should have preceded marke t entry, given the length of time it takes to reach the required level of languag e competence. It may even prove dif ® cult to maintain in the Chinese operations th e common company language approach used elsewhere, at least in the short term . As internationalization takes companies, like Kone, into more diverse markets, th e language issue is likely to become even more demanding. In response, it could be T able 2 Expatriates by host country in Kone, 199 7 English-speaking countries No. of expatriate s Non-English speakin g countries No. of expatriate s UK USA 1 5 Belgium China Czech Republi c Finland Germany Hong Kong Indonesia Italy Japan Malaysia Mexico Netherlands Philippines Poland Russia Saudi Arabi a Singapore Sweden Thailand Turkey Ukraine United Arab Emirate s Venezuela 33 12 3 9 4 20 2 17 2 1 1 2 4 1 4 1 3 2 2 1 1 8 1 Total 140 6 (4%) 134 (96%) Source : Kone company documents . 388 The International Journal of Human Resource Managemen tDownloaded by [University of Glasgow] at 08:37 12 February 2015 argued that an important ® rst step is recognition at the highest levels of th e multinational that the language challenge goes beyond the decision to accept a commo n company language, requiring a more strategic approach to language management. Th e limited research in this area indicates that language issues are too important to be delegated to language training centres, particularly given the current tendency to outsource language programmes. They are also too important to be decentralized at th e subsidiary level, without adequate monitoring and control. To illustrate: the manager of training and management development at Kone ‘ s headquarters commented : There are subsidiaries, particularly in southern Europe, where local management tries to restrict international communication at organizational levels below them and in a wa y monopolize the contacts with the rest of Kone. In such units little is invested in loca l [common company] language training . Kone subsidiaries ‘ HR budgets include an allocation for language training, but th e controls have been rather `soft ‘ ; that is, there were no sanctions if targets were no t met. It has been suggested that one way to ensure language is given a more strategi c position, at all levels within the global organization, is to appoint a language of ® cer: to co-ordinate and develop language policies; oversee their implementation; and assist in the auditing of current and future language needs (Marschan et al ., 1997). The languag e of ® cer could report to the corporate HR manager. This would have the added advantag e of allowing HR policies to be developed that incorporate language abilities into aspect s such as recruitment, selection, training, management development, performance manage – ment and staff transfers. For instance, a specially designated language of ® cer ma y encourage investigation of related issues, such as: should the expatriate ‘ s ability to function as a language node be formalized, and made part of expatriate selection an d their role? And, should performance appraisal and promotion decisions take close r account of language pro ® ciency (for example, recognition of acquisition of languag e skills)? The appointment of a Language Of ® cer may also help to overcome a prevailin g attitude among many corporate representatives that foreign-language skills can be buil t easily, whereas international experience and professional competence are seen to involve far more time and effort (Fixman, 1990). As a Kone manager said, `I think that , with rather small investments, language skills can be acquired and improved, but tha t does not apply for professional competence ‘ . The language of ® cer could also assist in the development of language-base d communication channels within the global network, through the building of a languag e pro ® le of staff that could then be distributed, thus enhancing the ability of staff to contact those with the relevant language competence. Likewise, HR staff could play a more proactive role in developing language competence throughout the multinational ‘ s global network . Acknowledgements Rebecca Marschan-Piekkari would like to acknowledge the following foundations fo r their ® nancial support: Ella & George Elirnroothinsaatio, Liikesuistysrahasto, and Jenn y & Antii Wihurirn rahasto . References Bj Èorkman, I. and Forsgren, M. (1997) The Nature of the International Firm: Nordic Contribution s to International Business Researc h . Copenhagen: Copenhagen Business School Press . Marschan-Piekkari et al. : Adopting a common corporate languag e 389Downloaded by [University of Glasgow] at 08:37 12 February 2015 Buckley, P. and Ghauri, P.N. (1993) Internationalisation of the Firm: A Reade r . London: Academic Press . Buono, A.F. and Bowditch, J.L. (1989) The Human Side of Mergers and Acquisitions: Managin g Collisions between People, Cultures, and Organization s . San Francisco: Jossey-Bass . 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for magz64 help, from Tina Li
South Korean MNEs’ international HRM approach: Hybridization of global standards and local practices Chul Chung a,* , Paul Sparrow b,1 , O¨ du¨ l Bozkurt c,2 aHenley Business School, University of Reading, Whiteknights, Reading RG6 6UD, UK bLancaster University Management School, Lancaster LA1 4YX, UK cDepartment of Business and Management, University of Sussex, Falmer, Brighton BN1 9QF, UK 1. Introduction Over the last two decades, the issue of the global standardiza- tion versus localization of subsidiary-HRM practices has been a central debate in the literature on human resource management (HRM) of multinational enterprises (MNEs) (Festing, Knappert, Dowling, & Engle, 2012; Pudelko & Harzing, 2007). Extant research on the issue has mainly focused on MNEs based in developed economies such as the U.S., European countries, and Japan (Thite, Wilkinson, & Shah, 2012). Recently, there has been a growing interest in various aspects of the activities of a ‘‘second wave’’ of MNEs from emerging economies (Bonaglia, Goldstein, & Mathews, 2007) such as, Brazil, China, India, Mexico and Russia as they grow in number and size. As attention shifts to emerging markets, there are important research questions that should be investigated, particularly in MNEs from newly industrialized economies (e.g., South Korea, Singapore, and Taiwan). Although the size of newly industrialized economies is smaller than that of major emerging economies, foreign direct investment (FDI) from newly industrial- ized economies is still growing, and unlike MNEs from emerging markets, there are a significant number of MNEs from among thesethat occupy leading positions in their global markets (Filatotchev, Strange, Piesse, & Lien, 2007; UNCTAD, 2006). This study explores South Korean MNEs’ approach to subsidi- ary-HRM practices. Research on Korean MNEs could have implications to wider groups of MNEs. First, Korean MNEs compete successfully in global markets against MNEs from developed economies and they are widely considered to be exemplars of successful MNEs from newly industrialized economies (UNCTAD, 2006). Some Korean MNEs are large, with a wide geographical reach in multiple subsidiary locations around the world and in leading positions in their respective sectors. In other words, these MNEs resemble and therefore are directly comparable with their counterparts based in developed economies in terms of size, global presence, and position in the global market. Secondly, at the same time, as their home country lacks a dominant status in the world economy, they might experience a ‘‘liability of origin,’’ which refers to the distinctive challenges or disadvantages stemming from their national origins (Bartlett & Ghoshal, 2000; Chang, Mellahi, & Wilkinson, 2009; Chung, Bozkurt, & Sparrow, 2012; Glover & Wilkinson, 2007; Ramachandran & Pant, 2010). Hence under- standing the current state of their international HRM reveals insights, not just for subsequent cohorts of MNEs from newly industrialized economies and emerging markets, but also for the general domain of contemporary MNEs in general. We argue it is particularly important to see whether South Korean MNEs adopt a distinctive approach to subsidiary-HRM practices, which may call into question the current dominant assumptions about HRM strategy and practice in MNEs, as these assumptions are Journal of World Business 49 (2014) 549–559 A R T I C L E I N F O Article history: Available online 1 January 2014 Keywords: International human resource management Korean Multinational Enterprises (MNEs) Hybridization Liability of origin A B S T R A C T This paper analyses the international Human Resource Management (HRM) approaches of Korean Multinational Enterprises (MNEs). Through a study of nine major Korean MNEs’ approaches to subsidiary-HRM, it is argued that the firms pursue hybridization through a blending of localization and global standardization across detailed elements in five broad HRM practice areas. Local discretion is allowed if not counter to global HRM system requirements and ‘‘global best practices’’ used as the template for global standardization of selected HRM elements. This strategic orientation appears to be part of a deliberate response to the ‘‘liabilities of origin’’ born by firms from non-dominant economies. 2013 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +44 1183787751; fax: +44 1183784029. E-mail addresses: [email protected] (C. Chung), [email protected] (P. Sparrow), [email protected] (O¨ . Bozkurt). 1Tel.: +44 1524 510911. 2Tel.: +44 7748 297948. Contents lists available at ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb 1090-9516/$ – see front matter 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.jwb.2013.12.008 predominantly informed by what is known about MNEs based in developed countries. An understanding of how South Korean MNEs approach their global people management is critical to debates on the possible emergence of an ‘‘Asia Pacific model of HRM’’ (Dowling & Donnelly, 2013, p. 172). We present the findings of a study that examines parent companies’ approach to subsidiary-HRM practices of nine Korean MNEs, all of which enjoy internationally competitive positions in their respective sectors. The major part of study is based on thirty interviews with HR executives and senior managers from the corporate headquarters directly responsible for the development and implementation of the IHRM strategy in the firms. As one part of the interview process, we used a structured-interview instru- ment designed to examine the different orientations toward global standardization and localization at the detailed element level within each of five HRM practice areas across the nine MNEs (job and grade, recruitment and selection, training and development, performance management, compensation and benefits). In total we gathered data on each of forty-seven elements about which decisions needed to be made with regard to global standardization or localization: nine for job and grade system, six for recruitment and selection, six for learning and development, sixteen for performance management, and ten for compensation and benefits. In our findings, we show that the IHRM approaches of the Korean MNEs are best captured by a distinctive approach of hybridization across these elements of individual HRM practices, rather than more wholesale orientations of ‘‘global standardization’’ or ‘‘localization’’. The remainder of the paper is structured as follows. First, we present the currently dominant understanding and assumptions in research on the IHRM strategy of MNEs. After a discussion of our research methodology and an introduction of the case organiza- tions, the empirical findings are presented. We then offer an interpretation of the findings with reference to existing theoretical assumptions, and conclude with a discussion of the contribution of the study and its limitations, as well as suggestions for future research. 2. International HRM strategy in the literature: dominant assumptions and new challenges One of the key issues in the practice of IHRM is the need to manage the dual pressures of global integration and local responsiveness (Brewster, Sparrow, & Harris, 2005). Research on the issue has examined the degree of global integration or local responsiveness in IHRM (see for example Bjo¨ rkman & Lervik, 2007; Brewster, Wood, & Brookes, 2008; Chung et al., 2012; Evans, Pucik, & Barsoux, 2002; Farndale & Paauwe, 2007; Farndale, Brewster, & Poutsma, 2008; Rosenzweig, 2006). It has also begun to distinguish the use of particular mechanisms in IHRM integration (Smale, Bjo¨ rkman, & Sumelius, 2013). Much empirical study in the area is underpinned by the integrative IHRM model of Taylor, Beechler, and Napier (1996), which argues that an integrated approach regarding IHRM strategy and practices has to distinguish the corporate-wide level from that of affiliates, and also from the employee-group level. Given that our main interest is in company- wide IHRM strategies, we also work with this definition of IHRM strategy, even while we recognize there may be more than three abstract orientations or routes to globalization of HRM. Accord- ingly, we define IHRM strategy as the general approach or orientation taken by an MNE ‘‘in the design of its overall IHRM system, particularly the HRM systems to be used in its overseas affiliates’’ (Taylor et al., 1996, p. 966). Three key assumptions have been dominant in research on orientations to IHRM strategy. First, the degree of standardization (versus localization) of subsidiary-HRM practices has beenconsidered as a key dimension underlying different orientations in IHRM strategy (Brewster et al., 2008; Dickmann & Mu¨ ller- Camen, 2006; Pudelko & Harzing, 2007). Taylor et al. (1996) identified three generic IHRM orientations at the corporate-level of MNEs: exportive, whereby corporate HR actors attempt to transfer parent company’s HRM system to subsidiaries; adaptive, whereby they attempt to adapt subsidiary HRM system as much as possible to the local context; and integrative, in which ‘‘the best’’ approaches are sought from parent and subsidiary practices. In most empirical IHRM research, the degrees of standardization as an integration mechanism has been examined by assessing the similarity between parent and subsidiary firm practices (e.g. Bjo¨ rkman, 2006; Brewster et al., 2008; Rosenzweig, 2006). Second, previous studies have typically examined the degree of standardization either at the overall practice level (e.g. perfor- mance management, recruitment and selection, compensation, etc.) or the level of entire HRM functions, through the use of measures that aggregate ratings on the degrees of standardization for individual HRM practices (Bjo¨ rkman, 2006). For example, a pioneering study on HRM practices of MNEs by Rosenzweig and Nohria (1994) examined whether subsidiary-HRM practices were similar to parent’s or local practices in each of six HRM practice areas such as employee benefits, annual time off, variable compensation for managers, and so forth. Research has increas- ingly looked at the implementation of particular HRM practices, for example talent management (Hartmann, Feisel, & Schober, 2010) or global performance management (Festing, Knappert, Dowling, & Engle, 2012) in different subsidiary locations. Importantly, while standardization may be implemented across a specific element of an individual HRM practice, the approach toward another element of the same practice at the same time may be defined by localization (Brewster et al., 2005). For example, an MNE in the energy sector mapped a set of generic HR processes by breaking these down into detailed elements and revamping the country role around each process to establish a new HR system architecture. Decisions were made as to whether to allow local aberrations from the globally designed process on a detailed element-by-element basis in each HRM practice (Sparrow, Brewster, & Harris, 2004). The third dominant assumption is that in attempts to standardize HRM processes, parent-company practices are the major reference, in line with the aforementioned orientations of IHRM strategy (see e.g., Bartlett & Ghoshal, 1989; Bjo¨ rkman, 2006; Rosenzweig, 2006). This is evident in the widespread tendency to treat similarity of practices between parent company and subsidiaries as a key indicator of global integration of HRM within IHRM research (Hannon, Huang, & Jaw, 1995; Kim & Gray, 2005; Rosenzweig, 2006; Rosenzweig & Nohria, 1994). The use of parent practices as the major reference of standardization reflects MNEs’ taken-for-granted views on effective HRM practices, the embedd- edness of their practices in their home countries (e.g. Bjo¨ rkman, 2006) or their ‘‘administrative heritage’’ (Bartlett & Ghoshal, 1989; Taylor et al., 1996). However, the dominant assumptions above have been chal- lenged by more recent scholarship, which depicts a more complex picture in IHRM. Regarding the first and second assumptions, several recent studies show that the constitution of IHRM strategy and practices could be far more nuanced and complex than the rather simplistic framework that the degree of standardization versus localization suggests. For example, work by Edwards and colleagues highlights that a number of complex patterns of transfer, negotiation, and combination of practices exist in the process of globalizing HRM (Edwards, 2011; Edwards, Jalette, & Tregaskis, 2012; Edwards & Rees, 2008; Edwards & Tempel, 2010). In a detailed case study of Japanese multinational retail firms, both in their home country and in their subsidiaries in China, Gamble (2010) finds that the construction of subsidiary-HRM practices in C. Chung et al. / Journal of World Business 49 (2014) 549–559 550 MNEs is too complex a phenomenon to be explained by the traditional standardization versus localization continuum. In order to capture the complexity of IHRM, Gamble proposes the concept of ‘‘hybridization’’, which involves complex patterns of creating new management practices through simultaneous processes of highly selective adoption, transfer, and local adaptation. Other research by Sparrow and colleagues on HR globalization within western MNEs makes a distinction between standardization and optimization to capture the more nuanced and detailed approach MNEs adopt in their IHRM strategy (Brewster et al., 2005; Sparrow et al., 2004). Standardization occurs when HRM processes designed at headquarters are applied to country operations either formally or tacitly based on the expectation of performance benefits, as seen by corporate headquarters (Martin & Beaumont, 2001). Optimiza- tion involves the discipline of adjusting a process based on multiple viewpoints so as to obtain a particular goal by setting or optimizing a specified set of parameters without violating some core constraints. Case studies examining the globalization of HR functions at the element level in western MNEs reinforce this emerging view through the investigation of areas such as international recruitment (Sparrow, 2007), the evolution of international mobility functions (Sparrow, 2012) and the devel- opment of global talent-management processes (Garavan, 2012; Sparrow, Farndale, & Scullion, 2013). Regarding the third assumption, questions have also been raised about the most appropriate locus of reference for potential standardization. Pudelko and Harzing (2007) note that practices from outside the organization, such as ‘‘global best practices’’ that do not necessarily originate from the parent company may be utilized as a reference for standardization. In this paper we argue that IHRM research needs to adopt a broader frame of reference when considering the origin of practices for standardization. This broadening also demands far more sophisticated methodologies than have typically been used in related research. The dominant assumptions in the extant research on IHRM strategy become problematic in the distinctive context of the emerging MNEs, such as South Korean MNEs. These firms might not be driven by the same assumptions about the globalization of their HRM. MNEs from developed countries often claim legitimacy in the transfer of parent-company practices to subsidiaries, presenting them as ‘‘advanced practices’’ and a source of competitiveness, corroborated by the global status of the home country. MNEs from home countries that lack such claims to legitimacy might not attempt the same approach to globalization of their practices. First, they may be more sensitive to diverse institutional pressures and reluctant to transfer home country practices to subsidiaries because of such perceived shortcomings (Bartlett & Ghoshal, 2000; Chang et al., 2009; Smith & Meiksins, 1995). Second, the practices that exist in the parent company or home country might not be mature because of limited heritage and experience in conducting global business (Cuervo-Cazurra &Genc, 2008; Dunning, Kim, & Park, 2008; Luo & Tung, 2007; Ramachandran & Pant, 2010). South Korean MNEs, and by extension MNEs from other newly industrialized economies, may challenge some dominant assumptions within current IHRM debates. This paper addresses the following central research questions: – RQ1: What is the overall orientation in Korean MNEs’ approaches to subsidiary-HRM practices in terms of global standardization and localization? – RQ2: At which level do Korean firms intend to standardize subsidiary-HRM practices? – RQ3: What is the origin of practices for standardization in Korean MNEs’ approaches to subsidiary-HRM practices? 3. Methodology A multiple-case study method was adopted in this study as appropriate for the investigation of the similarities among Korean MNEs in their corporate IHRM strategies. Nine major MNEs were included in this comparison. The case companies were selected based on (1) accessibility, (2) public awareness of their ‘‘Global HR’’ activities and (3) representativeness in their sectors in terms of firm size. Though one cannot generalize the findings in this study based on the small number of cases to the larger population of Korean MNEs, the nine firms captured a considerable range of sectors, including automobiles, electronics, steel, industrial wire and cable, infrastructure building, IT services, cosmetics, and confectionary. Crucially for the study at hand, all nine firms included in the study had very concrete, focused, and active globalization strategies, which included HR functions. The proportion of revenues generated overseas spanned a range from the mid-teen percent to over eighty percent. Total sales likewise spread across a wide range (see Table 1). This, of course, suggests that variables such as the percentage of revenues generated from overseas or total sales might moderate the overall results we report. As companies’ efforts for globalizing HRM were mainly focused on white-collar employees, our research only includes their approaches to subsidiary-HRM practices for this segment of employees. To gain a basic understanding of each company, a range of documents was collected and reviewed, including annual reports and company profile documents. Primary data for analysis were collected through thirty interviews with thirty-one key infor- mants. In each company interviews were arranged through an initial key contact, a HR manager in a corporate HR team. Each interview was conducted on a one-to-one basis except one interview that was carried out with two interviewees. Twenty- nine interviewees (between two to five interviewees for each of nine companies) were HR executives and HR senior managers at Table 1 Profile of case study companies. ID no. Company Industry Total sales (billion USD)Proportion of sales abroad (%) Number of employees/ % of employee abroad 1 AutoCo Auto 55.1 75 124,000/30 2 ElecCo1 Electronics 135.7 83 190,000/50 3 ElecCo2 Electronics 48.2 85 93,000/65 4 SteelCo Steel 53.2 39 27,000/37 5 CableCo Wire and cable 6.8 70 8050/70 6 ConfCo Confectionery 1.1 52 5900/63 7 EbizCo Online game 0.6 36 3300/27 8 CosmeCo Cosmetics 1.8 16 8600/48 9 InfraCo Heavy equipment 21.6 55 38,000/47 Annual reports (2010), company websites, interview.C. Chung et al. / Journal of World Business 49 (2014) 549–559 551 the corporate headquarters of the nine MNEs. They were key informants who were directly responsible for the development and implementation of IHRM strategy, including activities associated with globalizing HRM at the firm level. The purpose of using multiple interviewees was to capture a holistic picture of the company’s approach to subsidiary HRM practices, as a single interviewee may have been unable to answer all of the questions given the wide range of information sought at the organizational level. Thus interviews in a given case company were largely complementary to each other. When there were multiple responses to a question from different interviewees in a company, we checked on consistency and found those responses tended to be highly congruent with each other and the congruent responses were adopted in the data analysis. Non-congruent responses are noted as competing explanations or caveats to our findings. Given the focus of questioning was on each company’s approach and its policy-design intent, this was to be expected. Additionally, to gather information regarding general trends in global HR activities in South Korea, two interviews were conducted with directors of the Seoul offices of two international HR consultancies, which had been and were, at the time of research, involved in multiple Global HR projects with a large number of Korean MNEs. Interviews were carried out at the interviewees’ workplaces and each interview lasted from one to one and a half hours. All interviews were tape- recorded and transcribed. Interviews carried out for the study were of two types. Where the focus was on the investigation of emergent phenomena, interviews were semi-structured. Where the focus was on the collection of detailed data so as to allow for the analysis of element-level practices across the nine MNEs in the study, a more structured approach was adopted. In practice, this meant that interviews with informants about the overall corporate IHRM strategy and the activities associated with globalizing HRM, as well as the justifications offered for the pursuit of these particular directions in IHRM strategy, were semi-structured. Interviews with the structured-interview instrument that solicited data for the analysis of an individual firm’s orientations at the element level of IHRM practices, categorized as globally standardized (following globally common standards), localized (allowing subsidiary discretion to respond to local needs), or modified (allowing local modifications on the global standards), were structured. Method- ologically, our two-pronged approach was best suited to pursue further the suggestions in previous literature that globalization can happen at the detailed element level in HRM practices (Rosenz- weig, 2006), remedying the tendency in much of the extant literature only to investigate this at the broad practice level. The semi-structured interview topics included descriptions of IHRM strategy, specific IHRM initiatives and the reasons for the pursuit of given IHRM strategies. Every interviewee in the nine firms was asked about these general strategic themes. The structured-interview instrument solicited data about five broad HRM practice areas that have widely been identified as core areas of practice in previous research (Huselid, 1995; Youndt, Snell, Dean, & Lepak, 1996): job and grades, recruitment and selection, learning & development, performance management, compensa- tion and benefits. It entailed data at the detailed element level of practices within each of these practice areas. For example, the general HRM area of performance management was expanded to comprise sixteen elements, such as performance evaluation factors; performance measurement items; weighting of evaluation factors; performance-rating scale and so on (see Table 2). The list of forty-seven elements representing generic design elements of the five HRM practice areas were identified in an earlier study (Chung et al., 2012) with two Korean MNEs (AutoCo and ElecCo2) which also participated in this study. Both companies already had a series of elements of HRM practices in their global HRM guidelines.Common elements were identified by comparison between the two companies and a generalizable element list was developed. The respondents could answer the instrument without difficulties and the list of elements in the instrument covered their HRM practices comprehensively. Such detailed data collection at the level of elements was essential given our stated purposes, as it made it possible to refrain from a priori assumptions about the existence of a universal and homogenous orientation in the strategies across different HRM practice areas. It also enabled a systematic comparison across the firms. For the structured-interview part, one interviewee for each company was identified by key contacts as the most appropriate informant who had been involved in the development of corporate guidelines for subsidiary-HRM practices. This individual was first asked to respond to the structured-interview instrument as well as the semi-structured interview questions. Most interviewees could respond to the instrument without difficulty, offering explanations of why their companies adopted the particular approaches to subsidiary HRM. In two companies (AutoCo; ElecCo2), two interviewees were separately involved in responding to the instrument, as one could not answer questions in all the categories in the instrument due to the respondent’s scope of job responsibilities. The results of initial responses to the instrument by one or two interviewees were then reviewed by another respondent. In most cases they were confirmed without disagree- ment, but in a few cases the initial responses were amended in the following interviews as it became apparent that there had been misunderstandings of categories in the instrument by the former interviewees. The data analysis followed four steps. The first step coded the structured-interview data for each company regarding parent companies’ guidelines for subsidiary-HRM practices. As the data collection described earlier was highly structured, it could be coded in a straightforward manner. The results are shown in Table 2. In the second step, the semi-structured interview data for each interviewee were coded for accounts regarding: (1) the parent company’s approach to subsidiary-HRM practices, and (2) the rationale or reason for adopting the approach. Pre-defined coding categories were used for IHRM strategy and influencing factors on this strategy. Each selected interview account in each category was then coded using labels that summarized key notions in the interview account. The codes were then classified into higher-level codes through inductive reasoning. These codes were provisional and subject to re-coding if signaled by the subsequent company- level analysis. The third step focused on analyzing the coded individual data at the company level. After aggregating the results of coding the semi-structured interview data at company level, each initial higher-level code was re-examined across interviewees for each company and refined to reflect common views across interviewees. When necessary, more abstract constructs were identified and coded. After refining provisional codes, the coded results of the semi-structured interview data were reviewed alongside those of the structured-interview data. Key features of the parent company’s approaches to subsidiary-HRM practices and the rationales behind these approaches were identified for each company, based on the understanding that had been gained through the coding process. In the fourth step, the common or distinctive patterns in company-level approaches to subsidiary- HRM practices and the rationales of these approaches were examined across companies. The key findings in relation to the research questions were drawn from this comparative analysis. Given that our focus is to examine parent companies’ approaches to subsidiary-HRM practices, the reports from inter- viewees in headquarters need to be verified through examining whether such approaches are actually recognized and implemen- ted in each subsidiary. We tied reports from headquarters C. Chung et al. / Journal of World Business 49 (2014) 549–559 552 regarding subsidiary HRM practices to the actual practices implemented in the six subsidiaries of one MNE to demonstrate the validity of our findings. It would be beyond the scope of a single qualitative study to investigate all subsidiaries of the nine companies. However, we conducted supplemental research with six subsidiaries of an MNE to examine the fit with the reports from headquarters-level interviews. This company was selected because it showed most of the common patterns identified as important across the nine firms in the parent companies’ approach to subsidiary-HRM practices and we could control and match the functions served by its subsidiaries. Among the six subsidiaries, three subsidiaries are located in India and the other three are located in the U.S., againenabling multiple site comparisons within a single country. The three subsidiaries in each host country include a sales office, a manufacturing plant, and a research and development center. The level of economic development of a host country and the function of a subsidiary were identified in the initial study at the corporate level as important factors that could lead to different patterns in the implementation of parent firms’ policies regarding subsidiary HRM. Thirty-six interviews were conducted across the six subsidiaries. To capture the state of implementation of subsidi- ary-HRM practices, five to seven interviewees in a subsidiary, including local HR managers, an HR expatriate, the head of the subsidiary and two to three line managers, were included in the study. Interviews were conducted on a one-to-one basis. In each Table 2 Summary of global HRM guidelines of the case companies. Component of HRM practices in MNEs 1–9 1a 2 3 4 5 6 7 8 9 Job and grade Job classification: job family Gb G G M M M M G M Job classification: job list G G Mb M M M M M L Job description: category Lb L M M L L M G G Job description: content L L M M L L M M M Grade: number G G G G M L M G G Grade: criteria/definition G G M G M L M G G Grade: title G L M L M M M G M Promotion: requirement/criteria G L M M M L M G M Promotion: process L G L M M L M M M Recruitment and selection Recruiting methods L G L M L L M M M Recruiting message L L L M M L L L L Selection: criteria M L L M M L M L M Selection: assessor M L L M M L M L L Selection: process L G L M M L M L M Selection: assessment tools L L L M M L L L M Learning and development Succession planning: executive pool G G G M G M L M G Succession planning: high potential talent L G G M G L L M G Learning program: leader G G G G G L L M L Learning program: Common competency G G G G G M G M G Learning program: profession/job related L L M M M L L M L Learning delivery/operation M L M M M L L M L Performance management Performance evaluation factor G G G L G M G G G Performance measurement item L M M L M M M M M Weighting of evaluation factors G G G L M M G M M Performance rating scale G G G L M M G M L Forced distribution M G G L M M G M L Evaluation cycle/frequency G G G L M M M M G Performance management process G G G L M M M M M Performance evaluation assessor L M M L M M M M L Performance management form L G G L M M G M M Linkages to other HR applications L G G L G M M M M Common competency G G G L L L G M G Leadership competency G G G L G L L M G Job skill/competency L L G L M L L M L Competency assessment process G L G L M L M M G Competency assessor L L G L M L M M G Competency assessment rating scale G L G L M L G M G Compensation and benefit Employee pay structure L G G L M M L G L Employee base pay range L L L L L L L M L Employee base pay increase M M L L L L L M L Employee Incentive L L M L M L L M L Executive pay structure L L G L M G M M G Executive base pay range L L G L L G M M M Executive base pay increase L L G L L G M M M Executive Incentive L L G L M G M M M Benefit: employee L L L L L L L M L Benefit: executive L L G L L M L M L aCompany ID number. bG: globally common (following globally common standards); M: modified (allowing local modifications on the global standards); L: localized (allowing subsidiary discretion to respond to local needs).C. Chung et al. / Journal of World Business 49 (2014) 549–559 553 subsidiary, the local HR manager and an HR expatriate were asked to provide information regarding the implementation of head- quarters’ guidelines on subsidiary-HRM practices. A structured- interview template similar to the one used for the headquarters- level study was used at the interviews. The subsequent interviews were conducted with line managers and the head of subsidiary to verify the information received from the local HR manager and the HR expatriate. When there is a divergence of views between the local HR manager and the HR expatriate, the interview data from line managers and the head of subsidiary was considered to ascertain the current state of implementation in a particular area of HRM practices. 4. Findings In every firm we found evidence of a hybridization approach, which involves careful choices of specific elements of HRM practices for global standardization, modification of global standards, or localization, in parent firms’ approach to subsidi- ary-HRM practices. The analysis of orientations across the forty- seven elements of the five HRM practices reveals that evidence is lacking for universal, wholesale, and homogeneous strategies that can be coherently summarized as global standardization or localization. Rather, in each participant firm, we observe that viable options are sought and selected from among the three orientations – global standardization, modification of standards, and pure localization – for each element of HRM practices. We now elaborate on this main claim. 4.1. The emerging ‘‘global HR’’ in Korean MNEs: views from the institutional context Changes in HRM practices in South Korea that occurred after the 1997 Asian financial crisis have been well reported in the literature. These were broadly related to the implementation of new concepts and practices, such as performance-oriented HRM systems, within the Korean business context (see e.g., Bae & Rowley, 2001; Bae & Rowley, 2003). Our interview data confirm that the most significant HR issues as seen by key actors in Korean MNEs are the challenges posed by the perceived need for the globalization of the HR function. Interviewees consistently argued that there was a clear and widespread trend among Korean MNEs for attempts at the globalization of HRM at the firm level. According to our interview data, large Korean MNEs such as ElecCo1, ElecCo2, and AutoCo, which were established and developed their businesses in global markets earlier than most other Korean firms, initiated projects for globalizing their HR function from the mid-2000s onwards. Subsequently, other Korean MNEs from a range of industries joined the stream of globalizing efforts. According to one key informant at the subsidiary of a major American HR consultancy firm, which was a HR-consulting service provider to numerous Korean MNEs, ‘‘Global HR’’ has been established as a common and critical issue for MNEs from the Korean institutional context: ‘‘Within[the last] 5–6 years. . . the term, ‘‘Global HR’’ has been used widely in Korean business society. Before then, a main focus of Korean companies’ headquarters had been on expatriation. . . As the internationalization of businesses by Korean companies has rapidly progressed, core functions such as marketing, R&D, and manufacturing went outside Korea. Some Korean companies even acquired foreign MNEs, which means a large number of employees are now non-Koreans. Korean MNEs began to think of how the major practices of HRM such as the grade system, performance management, reward,and recruitment should be designed and managed in a global context’’ (Director, major HR consultancy) This view was supported in all of the nine case companies. Previously, the management of subsidiary HR functions had been largely delegated to subsidiary HR managers, mostly hired in each host country. Corporate HR staff had not been overly concerned with the operation of HRM in individual subsidiaries. However, the rapid growth of business in foreign markets produced significant pressure for the corporate HR staff to initiate globalizing efforts across their organizations, linking the corporate HR function and foreign subsidiaries. 4.2. A hybridization approach at the level of element of practices A range of activities may be labeled as ‘‘Global HR’’, but our interviewees mainly defined it as those common activities associated with the development of global HRM guidelines, designed to guide and regulate HRM practices in subsidiaries or, in some cases, across an entire MNE, including the parent company. With regard to research questions 1 and 2, our objective is to show how the adoption of an HR strategy that is selectively adaptive to pressures of global standardization and localization at the level of element of HRM practices affords both a more nuanced and context-dependent approach to the globalization of HR activities. We found that case companies regulated their subsidi- ary-HRM practices carefully, deciding which elements of the HRM practices needed to be globally standardized (following globally common standards), localized (allowing subsidiary discretion to respond to local needs), or modified (allowing local modifications on the global standards). The choices made for each element of practice reflected a nuanced understanding of where local discretion was possible without impacting the high-level global requirements of the HR system as a whole. It is difficult to assess a broad HRM topical area as globally standardized or localized without carefully examining at the level of its individual elements, and even harder to describe the overall IHRM strategy. The literature traditionally defines this IHRM strategy using the traditional dichotomy of global standardization versus localization as the general orientation in the overall system design. However, the notion of ‘‘hybridization’’ describes an IHRM strategy based on combining different orientations together. Some elements of a practice are standardized, while others are allowed to be modified based on the global standards, and yet other elements are allowed to be localized. The corporate HR staff of the firm try to select a viable option from the three alternatives for each element of the HRM practice (e.g., the performance evaluation factor, performance measurement item, weighting of evaluation factors, performance rating scale, etc.) in order to achieve a set of objectives (e.g., the globally common logics of actions, such as maintaining performance-oriented management style, facilitating global staffing, etc.) within the potential constraints (e.g., the accepted legal and cultural context of host countries). The pattern of the IHRM strategies in all nine case companies could be described as such a hybridization approach. However, the actual outcome of such endeavors was different according to the particular context of each company (see Table 2). The hybridization approach at the element level refers to the intended approach, not the realized one. As reported elsewhere (e.g., Chung et al., 2012; Gamble, 2003; Gamble, 2010; Kostova & Roth, 2002), there are potential gaps between the corporate headquarters’ intentions and actual implementation in subsidiaries. The analysis across the nine firms shows that all can be classified as being oriented toward a hybridization approach at the element level as described above. Although variations in the C. Chung et al. / Journal of World Business 49 (2014) 549–559 554 particular blend of hybridization exist across the MNEs in their overall approach, there is not one case that could be classified as being geared predominantly toward either global standardization or localization. Even in the electronics and automotive sectors, which have been recognized as examples of globally integrated industries (Porter, 1986), the Korean MNEs intended to standardize only a highly selective range of elements within their HRM practices. Most interviewees were reluctant to describe their IHRM strategy as being based on a global-local dichotomy, as shown by a corporate HR manager: ‘‘Actually, we began to approach the issue of global HRM with the concept of standardization, but, after giving careful consideration to it, we finally concluded that it might be unrealistic to stick to a standard model which is developed by the center due to the complexity in each subsidiary situation. We thought that how to deploy and make it work in each subsidiary is a real issue. So, we took the view of local optimization, utilizing [external global] best practices as just one source of reference.’’ (Corporate HR manager, SteelCo) As illustrated above, Korean MNEs standardize their HRM activities selectively, based on a finer level of practices. This tendency was explained by a senior manager involved in the development and implementation of global HRM guidelines in his company as follows: ‘‘We developed something called a ‘global HR standard’ and deployed it to all subsidiaries. Initially, we intended to define core areas for global standardization on an entire practice-by- practice basis, such as global grade system, job classification system, performance management and so on. For example, regarding the grade, we wanted to say, this is our mandatory standard system that every subsidiary should follow. However, after a pilot test with several subsidiaries, we found that the approach was unrealistic and a more sensible approach would be needed to accommodate diverse local needs as well as to maintain key element as globally common. Thus, we break down major HRM tasks into more detailed elements and decided which one should be a key area for global standardiza- tion.’’ (Corporate HR senior manager, AutoCo) With regard to the research question 3, a distinctive aspect in the IHRM strategy of Korean MNEs is the strong willingness to adopt what they believe are ‘‘global best practices’’ or ‘‘global standards’’ as a source of standardization. Seven out of nine case organizations used benchmarking with leading U.S. MNEs, and eight of the MNEs hired U.S.-based global consultancies to support their globalizing efforts. HRM practices used by US-based MNEs have been widely introduced to Korean companies since the Asian financial crisis in 1997. Information was gathered through benchmarking and work with consultancies. However, the scope and depth of the implementation of these practices differed among Korean MNEs. The majority reported that their parent companies could not fully implement espoused ‘‘ideal’’ practices for a number of reasons, such as internal constraints in their home countries based on resistance from labor unions and the continued influence of traditional practices. Home practices represented a mix of traditional seniority-based and a newly introduced performance- based system. When they developed global HRM guidelines for subsidiaries, they were not willing to consider their parent companies’ current practices as the major reference, but rather adopted ‘‘global best practice’’ as a basis of standardization: ‘‘The HRM practices of the Korean headquarters may be effective in Korea, but, could they be the same in other countries? We don’t think so. Why? Because it [the context] isvery different. Then what would be an alternative? Maybe something like ‘global best practices’ could be considered as a tool or source if they are more applicable universally, even though it might not be really the best one.’’ (Corporate HR executive, ElecCo2) Although our study of nine MNEs potentially limits the ability to generalize our findings, we identified an indication of the potential impact of the sector on the IHRM approaches of the companies. Companies 1, 2, 3 from automotive and electronics, considered as examples of globally integrated industries by Porter (1986), expressed an intention to standardize more elements of HRM practices than the other companies, as shown in Table 2. Whilst those three companies tried to standardize 40–55 percent of elements of HRM practices, the other five companies (4, 5, 6, 7, 8) targeted only 9–17 percent, and one company (9) intended to standardize 30 percent of the elements. It remains unclear whether the differences are the result of an industry effect or an international strategy effect, as all three firms in the globally integrated industries seem to be oriented toward a global strategy, while the other firms are oriented toward a multi-domestic one. We conducted a follow-up study to partially assess how the parent companies’ approaches to subsidiary-HRM practices, as reported in the corporate-headquarters level study, are actually recognized and implemented at the subsidiary level. Table 3 shows the recognition and implementation of the corporate guidelines on HRM practices by six subsidiaries of MNE 1. First, corporate guidelines regarding subsidiary-HRM practices set a ‘Global HRM Standard’. These guidelines lay out the desired features of HRM practices that subsidiaries are expected to adopt and which elements of HRM practices are required to be globally common. All HR managers in the six subsidiaries have some knowledge of their corporate-headquarters approaches to subsid- iary-HRM practices, and from such knowledge determine which elements can either be modified from the global standard or are left to the full discretion of subsidiaries. Second, although there are variations across subsidiaries and elements of HRM practices, all six subsidiaries implemented the corporate guidelines to some extent. As expected and specified in the global standards, significant parts of the mandatory standardi- zation elements were adopted by subsidiaries. Those elements that were subject to rejection or modification by local actors take on especial importance. For example, in India, there was a major point of difference between the intentions of the headquarters and the subsidiary practices in the grade system. The global standards specified a five-level grade system. This could not be implemented in India, where a highly differentiated hierarchical grade system was the norm and standard in the local labor market, for both domestic and foreign-owned firms. A ten-level grade system was introduced. Local actors had successfully persuaded corporate- headquarters actors that implementation of their own local version of the grade system, based on their localization logic, was preferable. We also found significant variations among the different subsidiaries located in the same host country. In the U.S. the more mature research and development function subsidiary showed a low level of acceptance of the corporate guidelines. By contrast, the U.S. plant, which was a newly established subsidiary, was perceived as more willing to adopt the corporate guideline. 4.3. The potential explanation on the IHRM strategy of the Korean MNEs Although we cannot generalize from nine cases, we found evidence that explains why Korean firms pursued the approaches they did, especially the utilization of a ‘‘global best practices’’ instead of the use of parent practices for global standardization of C. Chung et al. / Journal of World Business 49 (2014) 549–559 555 subsidiary HRM practices. Two factors stood out: (1) HRM-related institutional conditions of the home country; and (2) cognitive conditions of HRM-related actors in the corporate headquarters. Regarding the institutional conditions, the case companies perceived a lack of mature practices in their home country due to the rapidly changing institutional environment. Before the financial crisis, HRM practices in Korea were largely influenced by Japanese HRM practices (Bae & Rowley, 2003). After the crisis U.S. practices gained legitimacy as being more advanced and effective, and have been introduced widely in Korea. However, changes are still in progress, contested between U.S. and Japanese-style HRM practices (Bae & Rowley, 2003). Newly legitimized practices are still not fully established by Korean MNEs as the desired forms. There is variability in implementing these new ‘‘ideal’’ practices, and a lack of strong legacy practices in parent companies. Our Korean MNEs opted to standardize particular elements of their HRM practices across subsidiaries, developing and utilizing prototypes closer to ‘‘global best practices’’ rather than transferring current parent practices. An HR planning manager involved in global HR projects explained: ‘‘We developed and deployed new global practices which were not stemming from parent-company practices, but based on benchmarking studies of well-known global companies. . . .We don’t think our HR practices in the headquarters are the ideal ones we want to implement and changing HR practices in Korea could be quite difficult and need more time due to potential industrial relation issues. In a sense, we could feel more comfortable in implementing the new global practices in foreign subsidiaries first.’’ (HR planning manager, SteelCo) Second, with regard to cognitive conditions, the majority of respondents from the case companies expressed their less- privileged status as an MNE from a non-dominant economy. They were explicitly concerned that if a label of ‘‘Made in Korea’’ isimprinted in their global HR practices, it will not be received positively by subsidiary employees. This cognitive orientation might explain why the Korean MNEs utilized diverse external sources of practices actively and were highly concerned about the legitimization of their global practices, by relying on more visible processes of hybridization. A corporate HR manager in a case company which is a leading MNE in the sector supported this view: ‘‘U.S. companies already have global concepts in their home practices in that their practices may be adopted by subsidiaries without serious conflicts as ‘advanced’ ones. They don’t need to develop something new for globalization. If Korea is (becomes) a dominant country. . . we might be able to plant our practices to other countries in the same way. . . But, we don’t have ‘the global consensus’ that the U.S. firms have. If we try to implement something called Korean practices in our U.S. subsidiary, they may say we are crazy! We change ours just because we need to do it.’’ (corporate HR manager, ElecCo1) Even a well-known brand company among our case companies described itself as a company from a non-dominant economy. Regardless of outsiders’ views, they believe that their parent HRM practices would not be welcomed by employees in subsidiaries if perceived as ‘‘Made in Korea’’. We found that the less privileged status of their home country, as perceived by the interviewees, is one of the factors that may help explain the companies’ approaches to subsidiary-HRM practices, such as adopting what they believe are ‘‘global best practices’’ or ‘‘global standards’’. Arguably, this kind of ‘‘liability of origin’’ might be found among MNEs from other newly industrialized or emerging economies. 5. Discussion Our study finds that Korean MNEs take a more nuanced approach in their IHRM strategy, rather than adopting a position along a global standardization versus localization dichotomy. We Table 3 Implementation of the corporate headquarters guidelines at subsidiaries: case of MNE 1. Category of assessment US sales US plant US R&D India sales India plant India R&D 1. Recognition of the corporate-headquarters guideline regarding subsidiary-HRM practices Yes Yes Yes Yes Yes Yes 2. Subsidiary’s assessment of the degree of implementing the components of HRM practices which were defined as ‘globally common’ (following globally common standards) by the corporate headquarters Job classification: job family M Ga Ma La L M Job classification: job list M G M M M L Grade: number G G M L L L Grade: criteria/definition G G M L L L Grade: title G M L L L L Promotion: requirement/criteria G M M M M L Selection: criteria (core elements) b G M L M M M Selection: assessor (HR interview) b G G L G G G Succession planning: executive pool M M M M M M Learning program: leader M G L G G M Learning program: common competency G G M G G G Performance evaluation factor G G M G G G Weighting of evaluation factors M G M G G M Performance rating scale G G M G G G Evaluation cycle/frequency G G M G G G Performance management process G G M G G G Common competency G G M G G n/a Leadership competency G G M G G n/a Competency assessment process G G M G G n/a Competency assessment rating scale G G M G G n/a (Pay philosophy – pay for performance) b G G G G G G aG: adopt the global standard guideline; M: modify the global standard guideline to accommodate local needs; L: utilize HRM practices which were developed locally to accommodate local needs; n/a: not applicable (not yet introduced). bAdditional company-specific information which is not included in Table 2. C. Chung et al. / Journal of World Business 49 (2014) 549–559 556 identify their overall orientation to IHRM strategy as a hybridiza- tion approach, whereby practices adopted at the element level are drawn from diverse sources, including so-called ‘‘global best practices’’. This finding may challenge the dominant assumptions of the current IHRM literature that we identified earlier (Table 4). There is a clear contrast between the widely shared assumptions about the IHRM strategies of MNEs and what we found in this empirical study. Our understanding of the IHRM strategies of MNEs demands critical re-examination. Closer studies of MNEs from newly industrialized economies and emerging markets promise to extend such understanding by encompassing a wider, heterogeneous group of MNEs. This orientation was related to the distinctive institutional and cognitive conditions that characterize their status as MNEs from a newly industrialized economy. This strategic orientation, rather than being an unintended aggregate consequence of ad-hoc practical solutions for individual HRM practices, should be under- stood as part of a deliberate attempt by Korean MNEs to overcome their ‘‘liability of origin’’ (Bartlett & Ghoshal, 2000; Chang et al., 2009; Ramachandran & Pant, 2010). The IHRM strategy is conditioned by (1) the absence of mature and unique national bundles of HRM practices due to recent and rapid changes in the home country institutional context and (2) the self-perception of less-privileged status as firms based in a non-dominant economy. Arguably, such institutional and cognitive conditions also apply widely to the larger population of MNEs from newly industrialized economies and emerging markets. The study of Korean MNEs’ IHRM strategies reveals critical features of the new generation of MNEs based in the less-developed economies. It builds a more nuanced approach that recognizes the multiple institutional pressures experienced by these firms in ways that are distinct from their competitors based in developed home countries. 5.1. Theoretical implications A number of theoretical implications arise from our study of Korean MNEs. First, contrary to previously identified orientations of IHRM strategy, our findings show that these MNEs pursue more nuanced approaches. We found a hybridization approach to be the focal strategy for these firms – a combination of standardization, localization, or modification at the level of element that comprises broad HR practice areas. Such a nuanced approach has also been observed in MNEs from developed countries in prior research (e.g., Gamble, 2010; Sparrow et al., 2004). However, some key features of the context of MNEs from South Korea, a newly industrialized economy, render such approaches more explicit. New constructs and/or new typologies to help capture emergent repertoires of IHRM strategy are needed that go beyond the traditional global standardization–localization dichotomy and concepts such as hybridization (e.g., Gamble, 2010), optimization (e.g., Sparrow et al., 2004), and duality (e.g., Brewster et al., 2008; Evans et al., 2002) deserve more sustained empirical attention. MNEs from newly industrialized economies and emerging markets constitute particu- larly pressing and promising cases for empirical and theoretical enhancement of our current understandings of IHRM strategy. Second, our findings highlight that MNEs from South Korea utilize external ‘‘global best practices’’ as an alternative to parent-company practices, which have been recognized as a major source of standardization. Indeed, our particular finding on this area suggests that this emphasis on ‘‘universal best practice’’ may be more prominent and observable in the IHRM strategies of MNEs from newly industrialized economies and emerging markets and that they therefore may very well be more active and critical agents in the diffusion of dominant models and approaches on a global scale than previously recognized. In turn, we see such so- called ‘‘global best practices’’ to be widely linked to a dominance effect, which refers to the tendency of following and learning a role model – widely perceived as best practices – stemming from a country that occupies a dominant position in a hierarchy of national economies (Smith & Meiksins, 1995). In a study on HRM practices of MNEs headquartered in the U.S., Germany and Japan, Pudelko and Harzing (2007) found that their subsidiary-HRM practices can be shaped not only by local practices or parent practices, but also by ‘‘global best practices’’ coming from U.S. MNEs. MNEs from newly industrialized economies and emerging markets, lacking an institutionally and organizationally mature and entrenched set of alternative HRM practices, and feeling inclined to adopt already legitimized practices due to their distinctive institutional and cognitive conditions, may indeed emerge as the frontrunners of the adoption of global best practices, and, arguably, key actors in the perpetuation and consolidation of dominance effects. Third, our findings show that the liabilities of origin, particularly the role of institutional instability and the perceived weak legitimacy of being a non-dominant economy, play a significant role in shaping IHRM strategies of emerging MNEs. This is a distinctive variation of the ‘‘country-of-origin’’ effect (see Ferner, 1997). Previous IHRM research has examined the effect of country of origin by assessing the similarity between subsidiary- HRM practices with home country practices based on two assumptions: (1) the existence of dominant HRM practices which are strongly embedded in a home country; (2) parent company’s willingness to transfer those practices to subsidiaries because they are taken for granted as an appropriate way of managing people or a critical source of the company’s competitiveness. Our study of Korean MNEs shows it is problematic to presuppose these conditions in MNEs from newly industrialized economies and emerging markets. Emerging MNEs lack clearly demarcated and consolidated dominant practices in their home country due to the contestation among different institutions in the process of rapid transformation. Even if there are practices recognized as being effective in the home countries, the perceived weakness of legitimacy makes expectations of local adoption of these home country HRM practices precarious. Strategies of practice standard- ization based on home country standards are unlikely. When we examine the country-of-origin effects in the HRM practices of MNEs from newly industrialized economies and emerging markets, the similarity of practices between home country and subsidiary practices may be a poor, and even misleading, indicator of the effect. 5.2. Managerial relevance Contrary to the dominant assumption that standardization might occur at the overall HRM-function level or the Table 4 Dominant assumptions versus key findings. Dimension Dominant assumptions Key findings Overall orientation Standardization or localization Hybridization Level of standardization Overall HRM function or HRM practice Detailed element within HRM practice Major origin of practices for standardization Parent company practices ‘‘Global best practice’’ C. Chung et al. / Journal of World Business 49 (2014) 549–559 557 HRM-practices level, our study shows that MNEs attempt to standardize their HRM practices highly selectively at the finer level within a practice. This further suggests that there is an important managerial implication for the practice of HRM within MNEs. A corporate headquarters of an MNE might need to consider carefully the needs of standardization at a very detailed level, differentiating each element of HR practices, rather than being constrained by traditional ‘‘lumping’’ typologies that attempt to manage at the entire HRM-function level or overall practice level. The latter approaches may have serious limitations in being able to adequately consider the complex pattern of IHRM approaches that will be the most effective within MNEs. 5.3. Limitations and future research We recognize our study is not without limitations. First, as it relies on data mainly from the headquarters of each MNE, we only examine the headquarters’ view on the firm’s strategic orientation in IHRM. However, a seemingly optimal alternative could very well be interpreted differently by subsidiary actors and thus actual implementation at the subsidiary level could diverge considerably from that intended and envisioned by the headquarters. Several interviewees at subsidiaries of a MNE mentioned that even though there are mandatory requirements in subsidiary-HRM practices, which were intended to be followed by all subsidiaries, variations from the corporate guideline may exist in a particular subsidiary. Future research is needed to build upon our findings to provide data on the actual implementation of selected IHRM strategies at the subsidiary level. Second, in seeking to identify commonalities across Korean MNEs in their approaches to subsidiary-HRM practices, we recognize that such approaches could differ depending on the industry and on company characteristics such as size and degree of internationalization of businesses (Rosenzweig & Nohria, 1994; Schuler, Dowling, & De Cieri, 1993). The nine Korean companies vary in terms of size, industry and proportion of sales abroad but our study does not allow us to systematically test the effects of each of these factors on MNE approaches to subsidiary-HRM practices. Future research with a larger sample would be well placed to explore the patterns of differences in the international HRM approaches across companies and effects of various factors on them. 6. Conclusions Through the case study of nine Korean MNEs, this research makes several contributions to emerging research on HRM of MNEs from South Korea as well as the extension of extant research on IHRM strategy. First, it addresses the lack of empirical research on HRM in the context of MNEs from newly industrialized economies and emerging markets, which are becoming more prominent in the world economy. Second, through examining the detailed elements of each HRM practice, this research identifies the hybridization approach at the element level of practices as a distinctive IHRM strategy that has hitherto not been highlighted in the IHRM scholarship. Third, this study addresses the lack of attention to the liabilities of origin as a key determinant of IHRM approach especially in MNEs from newly industrialized economies and emerging markets. Fourth, this research identifies gaps between dominant assumptions and the empirical findings of emerging MNEs and suggests that studies on MNEs from newly industrialized economies and emerging markets could contribute to expand extant theories by challenging their taken-for-granted assumptions. The findings from the study of Korean MNEs have significant implications for other MNEs from newly industrialized economiesand emerging markets. The distinctive institutional and cognitive conditions we identified as important in shaping the IHRM strategies of companies are likely to also be found in MNEs from other newly industrialized economies and emerging markets. However, such inference only calls for further empirical investiga- tion on cases of MNEs from other economies. 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for magz64 help, from Tina Li
Measuring HRM effectiveness: Considering multiple stakeholders in a global context Saba Colakoglu ⁎, David P. Lepak, Ying Hong Rutgers, The State University of New Jersey, School of Management and Labor Relations, Department of Human Resource Management, Piscataway, NJ 08854, United States Abstract Strategic human resource management research has mostly gravitated towards financial measures of performance in order to assess the effectiveness of human resource management initiatives. In this paper, we argue that focusing on organizational performance mainly from financial stakeholders’ perspective is no longer sufficient. We discuss the implications of globalization, changing nature of work and the need to satisfy multiple stakeholders on how we measure the effectiveness of human resource management systems. We provide examples from several reach streams that focus on stakeholders other than shareholders as their main outcome of interest. © 2006 Elsevier Inc. All rights reserved. Keywords:Stakeholders; Globalization; Organizational performance; Strategic human resource management The context in which organizations operate continues to evolve. Globalization and advances in technological sophistication as well as the changing nature of work influence how companies are structured and where employees work. The growing trends towards alternative forms of organizations such as offshoring and virtual organizations are examples of how companies respond to these factors. Increased experimentation with alternative forms of work such as the use of contingent workers, consultancy partnerships, as well as core and non-core employees is dramatically altering the nature of work and relationships between employees as well as between employees and their organization. While there are certainly many implications of these trends for organizations, we argue that these trends have a significant impact on strategic human resource management (HRM). A central argument underlying this paper is that as organizations evolve, it is important that as a field of research we revisit the role of HRM and human resource (HR) practices in organizations and, in particular, how we evaluate the effectiveness of HR initiatives within strategic HRM research. At a basic level, strategic HRM research has tended to gravitate toward measures of financial- or market-based organizational performance as its dependent variable (Becker & Huselid, 1998; Rogers & Wright, 1998). While these types of performance metrics are certainly critical for organizational success, we argue that it may be too simplistic to Human Resource Management Review 16 (2006) 209–218 www.socscinet.com/bam/humres ⁎ Corresponding author. Tel.: +1 732 445 0742; fax: +1 732 445 2830. E-mail address:[email protected](S. Colakoglu). 1053-4822/$ – see front matter © 2006 Elsevier Inc. All rights reserved. doi:10.1016/j.hrmr.2006.03.003 focus primarily on the financial performance of organizations as an indication of the effectiveness of HR initiatives or as an indication that they are capable of sustaining that performance. Rather, within the evolving organizational context, it is important to have a firm understanding of what the appropriate HR metrics are for different scenarios. Organizations are not nearly as homogeneous as the nature of our empirical research would suggest. Internally, employees vary with respect to their contribution to the core business of an organization (Huselid, Becker, & Beatty, 2005; Lepak & Snell, 1999) and externally, organizations vary on the relative importance of their obligations to different stakeholder groups (Jones & Wicks, 1999). A one-size-fits-all approach to managing and measuring HR initiatives may not reflect how firms manage their diverse pool of human capital as well as their relative performance of meeting the needs of different stakeholder groups. The crux of our arguments are that certain performance measures may be more or less important in different contexts and we should be cautious paying particular attention to only a limited subset of performance measures. The rest of our paper is structured as follows. First, we review some of the traditional approaches to measuring HRM effectiveness and consider additional streams of research that incorporate other stakeholders’ interests which may inform future strategic HRM research. We then explore how measures of HR effectiveness that researchers emphasize might be influenced by the emerging trends of globalization and the changing nature of work. These trends fundamentally influence the structure and location of organizations and their operations as well as the nature of work different employee groups perform. 1. HRM and performance One critical question in HRM research that has garnered considerable attention is how much difference HRM can make in organizational functions and for organizational performance. In part, this question has been posed to justify the existence of HR functions, which have traditionally been viewed as a cost to be reduced (Becker & Gerhart, 1996), and is a natural extension of theories and beliefs that how people are managed can make a difference. While we agree that it is a critical endeavor to examine the relationship between HR practices and systems with performance, the domain of research is fairly muddled (Wright & Sherman, 1999). One of the primary reasons for this is that the choice of performance measures used in research studies varies widely. In particular, researchers have drawn from a wide array of performance measures that vary in terms of: (1) their proximity to employee contributions or the level of aggregation in which they are measured, and (2) the relevant stakeholder group of focus. 1.1. Proximal versus distal HR measures HRM researchers have varied in the level of analysis of the performance measures they emphasized. While traditional HRM research has generally focused on individual level outcomes such as job performance (e.g.Wright & Boswell, 2002), job satisfaction (e.g.Seibert, Silver, & Randolph, 2004), and motivation (e.g.Bloom, 1999), strategic HRM research has focused on unit or firm level outcomes related to labor productivity (Huselid, 1995; Koch & McGrath, 1996; MacDuffie, 1995) scrap rate (Arthur, 1994), sales growth (Batt, 2002; Guthrie, 2001), return on assets (ROA) and return on investment (ROI) (Delery & Doty, 1996), and market-based performance (Huselid, 1995). These aggregate level outcomes can further be differentiated by department level, plant (site) level, business unit level, and firm (corporate) level performance measures (Rogers & Wright, 1998). Looking across the potential measures of HR effectiveness,Dyer and Reeves (1995a,1995b)suggested that measures of organizational performance in HR research may vary based on the measures’ level of proximity to the HR practices. According to their categorization, HR practices have their most immediate impact on employees since employee outcomes such as turnover, absenteeism, job satisfaction, commitment, and motivation are in a closer line of sight to HR practices. They propose that HR practices also have the strongest effect on such employee outcomes, as these outcomes are to some extent the initial goal for designing the HR practices. The second category of organizational performance which is more distal to HR practices than individual level employee outcomes includes more macro level outcomes associated with aggregates of individual efforts, such as indicators of productivity, quality of products and customer service. The third category of performance noted byDyer and Reeves (1995a,1995b)encompasses financial and accounting outcomes, such as ROA, ROI, and profitability. Finally, the most distal performance measure to HR practices is the capital market outcome, such as stock price, growth, and returns. 210S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 While some researchers have suggested that more proximal or intermediate outcomes may be a more appropriate level for HR research (Arthur, 1994; Delery & Doty, 1996; MacDuffie, 1995), the focal interest of many strategic HR studies has been placed on firm or corporate performance (Becker & Huselid, 1998; Rogers & Wright, 1998). The focus on organizational level performance measures is understandable as it is quite illuminating for researchers and convincing for managers to find a significant impact of HR on more distal outcomes such as financial or market performance than on more immediate outcomes such as employee behavior.Becker and Gerhart (1996) argue that corporate market measures of financial performance are particularly meaningful andBecker and Huselid (1998)identified the advantage of focusing on the corporate level of analysis of performance when they stated that corporate performance is the“raison d’etre”of strategic HRM research because HR policies and systems can be tied to meaningful performance data such as market performance and accounting measures of performance (e.g., sales, ROA, ROE, ROI). Moreover, because many corporations are required to report these data, researchers may be able to access relevant performance measures from a secondary source of data. These are certainly advantages for reducing common method bias concerns and increasing practical applicability of study results (Lepak, Liao, Chung, & Harden, in press). Although corporate or firm level performance metrics are important to examine, it cannot be drawn that certain outcomes are definitely more important than others. First, corporate performance measures may be viewed as quite distal from HR practices and likely to be influenced by more proximal performance measures related to HR initiatives. Indeed,Rogers and Wright (1998)point out that the more proximal outcomes serve as a means for achieving those higher-level outcomes. For instance, employee motivation may serve to enhance employees’ effort and performance and subsequently their aggregated performance. Nevertheless, these distal performance metrics are the specific HR metrics of which many practitioners and researchers emphasize. Second, the most relevant performance measures may fundamentally depend on the vantage point of focus for research; a perspective that is directly related to considerations of different stakeholder groups. 1.2. Stakeholder groups While we might conceptualize many different internal and external parties of an organization who have a vested interest in its operations,Hitt, Ireland, and Hoskisson (2005)suggest that there exist three primary groups of stakeholders that exert distinct pressures on organizations and are directly impacted by the performance of organizations. First, companies must attend to the needs of capital market stakeholders–shareholders and major suppliers of capital such as banks. Second, companies must consider the needs and demands of product market stakeholders–the primary customers, suppliers, unions, and host communities with whom organizations conduct business. Finally, companies must also consider the needs of organizational stakeholders, the employees and managers within the organization. In line with the stakeholder framework,Rogers and Wright (1998)proposed a Performance Information Market (PIM) system which includes four major markets that allow different stakeholders (in a broad sense) to evaluate organizational performance: (1) the financial market; (2) the labor market; (3) the consumer (product) market; and (4) the political (social) market. Their PIM system extends the focus of HR research to include other stakeholders’ interests such as the labor market, the society, customers, suppliers, and unions. The stakeholder group that has traditionally been of primary interest in the strategic HRM literature has been the capital market stakeholders. For example,Rogers and Wright (1998)reviewed 59 studies that examined the relationship between HR and various organizational outcomes and revealed that only two of the studies used employee outcomes such as turnover as the outcome of interest. On the other hand, 40 of the studies reviewed byRogers and Wright (1998)used accounting measures and financial market measures of performance such as ROA, ROE, ROI, and Tobin’sQthat directly serve the interests of the capital market stakeholders. Unfortunately, the importance of designing HR practices that address the concerns of multiple stakeholders is not widely acknowledged in HR research (Boselie, Dietz, & Boon, 2005; Schuler & Jackson, 2005). Indeed, a common feature of recent publications in strategic HRM discuss the relative impact of HR systems on outcomes such as sales per employee or return on assets associated with a standard deviation increase or decrease in the level of HR system use. This is powerful information. But, it is clearly oriented toward financial-based metrics. One implication of this focus on capital market performance measures is that it tends to ignore the importance of other potential stakeholder groups, as well as other potential types of performance measures. If we recognize 211 S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 that the demands and relative power of different stakeholder groups may put serious constraints and opportunities on the operations and the direction of organizations, it might be fruitful to consider how performance measures in strategic HRM research might be related to alternative stakeholder perspectives. For example, how would our outcome measures look if we explicitly considered stakeholder groups other than capital market stakeholders? In the following sections, we briefly explore some research that has explicitly considered product and organizational market stakeholders’ interests as their main outcome. 1.2.1. Product-market stakeholders and outcomes One area of research that has specifically considered the impact of HR initiatives on product market stakeholders is‘climate for service’research. In this research stream, customer satisfaction is treated as a mediating variable between HR practices and business performance and it is slightly different from more traditional strategic HRM research by its focus on the customer as the main outcome of interest. In general, climate can be defined as the employees’ perceptions of the routines and rewards that characterize a setting (Schneider & Reichers, 1990) and can be understood as the immediate environment surrounding the individuals when they enter an organization. Climate research generally has a strategic target or focus of interest such as service, justice, or safety, and attempts to identify those elements of the work environment–as described by employees–that correlate, or link, to critically important organizational outcomes such as customer satisfaction (Lepak et al., in press). Studies that indicate a significant and positive relationship between how favorably members of an organization describe their organizational environment and customer satisfaction levels are numerous. In their review of this literature,Wiley and Brooks (2000)reported that various dimensions of work climate, such as customer orientation, quality emphasis, teamwork/cooperation, and involvement/empowerment have been found to correlate with overall customer satisfaction. Such dimensions of climate are certainly related to HR practices. For instance,Liao and Chuang (2004)suggested that HR practices for customer service focusing on employee involvement, training, and performance incentive as the most relevant for employee performance in service settings.Liao and Chuang (2004)found that service climate and employee involvement explain individual- level employee service performance which, in turn, is related to customer satisfaction and loyalty. Since product-market stakeholders are those stakeholders that are positioned outside the organization, unions may be one of the stakeholders that belong to this group (Hitt et al., 2005). According to the industrial relations framework, collective forms of employee representation, such as unions, are the most efficient ones for promoting industrial democracy. As noted byFreeman and Medoff (1979), there are two fundamentally different views of unions and their relationship with organizational outcomes. According to the collective-voice view, unions uphold the interests of employees, shareholders, and society by improving communication between managers and workers, collecting information concerning the preferences of workers, enhancing productivity, as well as reducing pay inequality among workers, and represent the political interests of lower income and disadvantaged people. According to the monopolistic view, unions raise wages above competitive levels, reduces productivity, destructs society’s productivity through frequent strikes, and fights for their own interests in the political arena. These two faces of unionism place unions in a controversial position within the stakeholder theory: do unions sacrifice the business and societal interests for their own, or do unions contribute to advance these interests all together. Although the evidence about the effects of unions on performance is mixed, unions are an important stakeholder group that needs to be taken into account along with employees, customers, suppliers, financial institutions, shareholders, and the like. Unions clearly have a vested interest in organizations, and in many cases may serve an influential role in how organizations operate. Understanding the strategic HRM from a union perspective may provide additional insights into the different measures of performance that need to be considered by organizations. Finally, other stakeholders that are positioned outside the organization such as suppliers, alliance partners and local communities have generally not been taken into consideration although these stakeholders may be affected by HRM as well as influence HRM. In many companies HR has a continuing and equally important responsibility for meeting the needs of multiple stakeholders and needs to change the mindset that equates strategic HRM with only“having a seat at the table”and “showing bottom-line results”(Schuler & Jackson, 2005) by considering multiple stakeholder needs. While important, focusing solely on a bottom-line emphasis does not consider the views of product market stakeholders that might provide additional insights into strategic HRM research. 212S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 1.2.2. Organizational stakeholders and outcomes There are several research domains that have paid more attention to organizational stakeholders–in particular, employees as a stakeholder group. On the one hand, there is a long history in traditional HRM research that examines the impact of various HR practices and activities on employee outcomes. A large volume of research has accumulated in this area over the years examining the impact of single HR practices such as selection (e.g.Barrick, Patton, & Haugland, 2000), training and development (e.g.Frayne & Geringer, 2000), recruitment (e.g.Phillips, 1998), compensation (e.g.Rynes & Bono, 2000), and performance management (e.g.Welbourne, Johnson, & Erez, 1998)on individual level outcomes. Although there is a considerable emphasis even within this research stream on the outcome of job performance (Wright & Boswell, 2002), researchers have also investigated these practices’ impact on more employee-focused outcomes such as job satisfaction (e.g.Seibert et al., 2004), motivation (e.g.Bloom 1999), socialization (e.g.Klein & Weaver, 2000), career success (e.g.Janasz, Sullivan, & Whiting, 2003), and occupational safety (Zacharatos, Barling, & Iverson, 2005). An emphasis on such employee-focused outcomes takes into account the importance of meeting the needs and interests of employees as major stakeholders in the organization. A secondary stream that has focused on employees, as well as on unions that we discussed above, is the industrial relations (IR) paradigm. IR research focuses on the employee as the main stakeholder of interest. One of the main differences between IR research and strategic HRM research is that while strategic HRM approaches the study of work and employment from the employer’s perspective, and thus implicitly the shareholders’ or capital market perspective, industrial relations research approaches the same topic from the employee’s standpoint (Kaufman, 2001), explaining why individual workers may be at a power disadvantage against the corporation and advocating collective forms of dealing between employees and employers. Interestingly, researchers coming from an IR standpoint often address similar issues as strategic HRM researchers, albeit from different perspectives. Researchers emphasizing high involvement HR systems tend to focus on the use of certain HR practices that directly influence the nature and scope of the jobs employees perform (Lepak et al., in press; Zacharatos et al., 2005). For example, IR researchers such asOsterman (1994)examined the implementation of several innovative or flexible work place practices, such as job rotation, quality circles, total quality management, and participation. While these practices have considerable overlap with those HR systems addressed by strategic HRM researchers, the major advantage of the perspective adopted here not only target the interests of the shareholder, but equally importantly, emphasizes the benefits of the employees. Even so, the fact that researchers from strategic HRM and industrial relations backgrounds share common interest in a broadly conceived notion of HR practices suggests research opportunities of examining the potential for mutual gains initiatives that may benefit both employees as well as capital market stakeholders. 2. The changing context and HRM outcomes Our discussion about performance measures in HRM research highlights several factors that play an important role in HRM research. The first one is the level of analysis issue. HRM outcome measures vary in terms of the level of analysis at which they are captured as well as the degree of proximity to the impact of employees and the HR practices in place. In addition, HRM outcome measures may vary according to three different stakeholder groups. In light of these considerations, the relevant and most appropriate performance measure should weigh organizational goals with respect to salient stakeholders. In the remainder of this paper we build on these distinctions and explore how considerations of HR effectiveness may be viewed in the context of the two emerging trends noted at the outset– globalization and the changing nature of work. 2.1. Globalization The growth of world trade has consistently surpassed world production since the 1950s, and total stock of the world’s foreign direct investment has reached almost $7 trillion as of 2002 (UNCTAD, 2002). More than 850,000 foreign subsidiaries of about 65,000 parent firms continue to contribute to the world economy everyday (WTO, 2002). Theories that explain the determinants of international trade and existence of multinational corporations are numerous. For example, Adam Smith argued that division of labor between countries is present whenever location and labor advantages make it possible for one country to produce a product cheaper than other countries. Extending this theory, the Heckscher–Ohlin theorem argues that these cost differences among countries result from the differences in 213 S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 factor endowments such as labor, land, and capital. For example, most developing nations have more labor available per quantity of capital compared to developed nations. Such cost advantages make it possible for organizations to enjoy economies of scale by placing their operations in locations that offer relative cost advantages. What these theories indicate is that as long as organizations enjoy the benefits of moving their operations and sales beyond their national borders, globalization will continue to be a major driver of organizational actions and change. By doing so, however, organizations are often faced with tensions that result from the need to be responsive to local conditions as well as to integrate their operations on a global scale (Bartlett & Ghoshal, 1987, 1988; Doz, Bartlett, & Prahalad, 1981). Performance of many organizations depends on their ability to cope with heterogeneous cultural, institutional, and competitive environments, to coordinate their geographically and culturally dispersed resources, and to leverage innovations across national borders (Carpenter, Sanders, & Gregersen, 2001). These issues are compounded if we recognize that the needs, concerns, and demands of different stakeholder groups may not only be different from each other, but also different in each location based on strategic, cultural, and institutional considerations. Organizations vary on the reason why they enter new markets and also vary in the mode they choose to enter a market. Such variations in goals and entry modes have different implications for how we measure effectiveness from the stakeholders’ perspective. While some operations are set up just to adapt global products to local markets and engage in the sales and marketing of that product, some operations have a much broader value-added scope within a multinationals’ network (Birkinshaw & Morrison, 1996). Still other operations are set up to provide certain expertise to the rest of the multinational with minimal local interface. In these scenarios, the capital market stakeholders may be most interested in the extent to which local operations are able to fulfill the role imposed by the headquarters. While we acknowledge that measures which are proximal to capital stakeholder interests may be somewhat distal to HR practices, we may look into the performance of each individual subsidiary based on the“role”imposed by the multinational organization on that subsidiary or based on the reason why the multinational chose to enter that market. In addition, organizations choose from a number of different options when entering a new market. They can either enter with a wholly owned entry mode (e.g. greenfield investments) or opt for equity-based entry modes (e.g. joint ventures, mergers, and acquisitions). In wholly owned entry modes, organizations maximize the amount of control they can exert on subsidiaries while limiting the local resources of which they may gain access (Woodcock, Beamish, & Makino, 1994). In equity-based entry modes, organizations have less control over subsidiary operations but have rapid access to new markets and may operate effectively by partnering with local companies (Schuler, Jackson, & Luo, 2004). Equity-based entry modes facilitate organizational learning and enable organizations to capitalize on the existing competence and resources of their alliance partners (Makino & Delios, 1996). When measuring performance from the capital market stakeholders’ perspective, the goals of other alliance partners also need to be considered. For example, if motive for establishing an alliance is to attain rapid access to local distribution channels for one partner and gain technological know-how for the other partner, the shareholders of each partner are concerned about different dimensions of performance that need to be integrated into the performance measures we examine. From a product market stakeholder perspective, there may be fundamental differences in what it means to meet the needs of customers, suppliers, unions, and host communities in various locations in which organizations conduct business. Customers are concerned about the quality, innovativeness and cost of the services and products they buy as well as their convenience and speed. HR practices can be instrumental in determining the quality and variety of products and services a firm delivers to its customers. However, based on cultural differences and values, local customer needs and wants may vary from location to location. Researchers interested in measuring the impact of HR systems on customers may also need to take into account these differences in consumer values and behavior. HR practices that impact customer outcomes positively in one country may not be equally effective in eliciting the same outcome or a fundamentally different customer outcome in another country. While these examples are admittedly simplistic, they point to a key issue. How HR functions is likely to be influenced by the context in which organizations operate. How we measure the effectiveness of HR activities must be couched in terms of the relative cultural, legal, and institutional factors present in different international locations. 2.2. The changing nature of work As companies continue to locate operations outside their national borders, they rely on a more heterogeneous workforce to carry out their activities based on differences in nationality and culture. Due to the forces of globalization, 214S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 organizations are likely to confront at least some aspect of internationalization and new HR issues to deal with (Briscoe & Schuler, 2004). One issue that has received much attention in this context where organizations try to achieve economies of global scale isoffshoring(substituting foreign for domestic labor). Although manufacturing jobs have long been a target for such offshoring, the current trend is towards white-collar jobs that were previously insulated from foreign competition. For example, many call centers and back office operations are being offshored to India, Eastern Europe, and Philippines as a result of declining communication costs, the Internet, and other technological advances. The low labor costs coupled with the necessary human capital that is needed to do the job (e.g. competency in spoken English) make these locations attractive for many organizations that try to achieve global economies of scale. While these jobs may often be considered as part of the peripheral functions of the organizations and thus be expected targets for offshoring, the recent trend is towards the internationalization of R&D activities which requires advanced human capital and strong knowledge management systems. For instance, since 1993, when Motorola established the first foreign-owned R&D lab in China, the number of foreign R&D units in China has reached 700. Similarly, the Indian R&D activities of General Electric employ more than 2000 people in diverse areas such as aircraft engines, consumer durables, and medical equipment and the contribution of South-East and East-Asian countries to global semiconductor design has reached 30% as of 2002, from practically nothing in the mid-1990s (UNCTAD, 2005). What this trend implies is that companies need to manage their portfolio of employment arrangements on a truly global scale while taking into account local cultural and national differences. Adopting an architectural perspective, Lepak and Snell (1999)note that there are four types of employment modes that require different HR strategies based on the value and uniqueness of human capital each employee group possesses. Increased outsourcing and offshoring to foreign countries may mean that human capital that varies in its value and uniqueness for the organization may be scattered throughout the world making the management of HR architecture more complicated. It may be that organizations that understand their global HR architecture and manage human capital differentially taking into account cultural differences will be able to create a competitive advantage.Huselid et al. (2005)note that unless companies are able to match A positions (positions that are most crucial for executing strategy) with high performers, organizations will not be able to realize an HR-based competitive advantage. With globalization and offshoring, both the positions and the high-performers that can fill these positions may be dispersed throughout the world. It is a challenge for organizations to find out key talent wherever they are located in the organization, place them in the right position and manage them based on their spot in the HR architecture. In our discussion of measuring effectiveness of HR from the perspective of organizational market stakeholders, we suggested that employee-focused outcomes that take into account the importance of meeting the needs and interests of employees are particularly important. While HR practices can have a significant impact on such outcomes, the heterogeneity of the workforce in terms of cultural values implies that HR practices that are effective in satisfying the needs of organizational stakeholders in one cultural context may not be as effective in another cultural context. For example, an individual performance-based incentive scheme may have a positive impact on employee outcomes in a cultural context that is highly individualistic (e.g. U.S.), but an opposite impact in a collectivistic cultural context (e.g. China). Moreover, the meaning of employee outcomes may be culturally sensitive. Given that most of the employee outcome constructs considered in strategic HRM research have been developed in the Western part of the world, we may need to rethink and investigate their meaning from different cultural perspectives. For example, career success may be related to reaching a high organizational status in a high-power distance culture, while it may be related to achievement of monetary goals in a performance- oriented culture. Therefore, researchers need to be sensitive to cultural nuances when measuring HR effectiveness at the individual level. Another way to think about how we measure effectiveness of HR from the individual employees’ perspective is to consider which employment mode the employee falls into in the HR architecture (Lepak & Snell, 1999, 2002). Some individual outcomes may be more critical or interesting in one employment mode, while others may be more relevant in a different employment mode. For example, the impact of HR practices on the level of organizational commitment may not be as important for contractual employees, while it may be very critical for core employees since their human capital is highly valuable and unique. Similarly, if an organization has made the initiative of planning its workforce based on positions and players (Huselid et al., 2005), it may be more important to assess how HR practices impact the satisfaction and commitment of A players, while it may be more critical to assess how HR practices impact the job performance of B players. Therefore, a choice of outcome measures should take into consideration the contextual 215 S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 demands, especially with regard to the new global workforce, as well as the relative role of employee groups within a company’s broader HR architecture. 3. Discussion Strategic HRM researchers have spent considerable effort examining what HR systems are, which practices should be included in these systems, how these practices operate to influence organizational outcomes, and theories that shed light on to the relation between HRM and organizational outcomes. For example, researchers mostly agree that HRM systems, rather than single HRM practices have an impact on organizational outcomes (Becker & Huselid, 1998; Huselid, 1995; Ichniowski, Shaw, & Prennushi, 1997; Wright & Snell, 1998). Despite some variation across studies as to which practices should be considered, researchers mostly agree that practices such as selective staffing, intensive training and development programs, employee involvement, and job security should be among them (Arthur, 1992; Huselid, 1995; MacDuffie, 1995). Strategic HRM research is also consistent in terms of its treatment of higher-level contingency variables such as strategy, industry or developmental stage of an organization as critical factors that influence the use and effectiveness of HR systems (Jackson, Schuler, & Rivero, 1989; Baird & Meshoulam, 1988). Most often, researchers try to find evidence for the alignment between HRM practices and these higher-level contingencies which is suggested to improve organizational outcomes. While strategic HRM research has made considerable progress in these areas, researchers have not paid equal attention to defining and refining the outcome construct of interest, namely‘performance’. In general, strategic HRM often postulates‘firm performance’as the dependent variable. However, performance is a multidimensional construct (Gilley & Rasheed, 2000; Rogers & Wright, 1998). Performance varies by how proximal it is to the intended impact of HR practices, the level at which it is aggregated, and by the stakeholder groups whose interests are met. In this paper, we have tried to emphasize that as the context in which we measure the effectiveness of HRM is changing, focusing on the right organizational outcome becomes more challenging but at the same time more important for advancing this field of research. Strategic HRM researchers need to think about workforce management on a global scale and from multiple stakeholders’ perspective, taking into account the diversity of interests between and within stakeholder groups. Just as the climate research has a strategic focus of interest such as innovation, safety, or service and aligns both the dependent and the independent variables with the focus of interest, there is a need to be more explicit regarding the direction of our research and what HR systems are geared toward achieving which outcomes (Lepak et al., in press). Considering multiple stakeholders in strategic HRM is a worthy endeavor, but not without its challenges. By definition, stakeholders have diverse and potentially conflicting interests. If there is a pie to be shared by different stakeholders, it may be the case that each stakeholder group desires to increase its share at the cost of other stakeholders. Shareholders want to have larger profits; customers look for high quality products and services with low price tags and employees desire a meaningful job in which their earnings are in line with their perceived contribution. Moreover, society expects corporations to be socially responsible by considering the needs of the local communities in which they operate. When researchers focus exclusively on financial or market performance, they tend to ignore how the bigger picture may look like and whether high financial performance is being achieved at the cost of other stakeholders. For example, efficiency and cost-cutting measures may prove to be beneficial for shareholders and customers (if the low cost is reflected in the price of goods and services), but it is not as appealing to employees who may have to pay health insurance from their own pockets. Organizations who score high on financial performance metrics may not be doing equally well on other types of metrics that focus on other stakeholders. Conversely, an organization that is not performing well financially may be performing well from another stockholder’s perspective. From a research perspective, does finding a positive relationship between HR practices and social responsibility, for example, diminish in importance if the HR practices are only marginally related to financial metrics? In this paper, we have focused on how the increased presence of globalization and the changing nature of work may impact the way we think about measuring HR effectiveness. Our key point is that relying on a single performance measure to assess the benefits or implications of HRM in different types of companies and in different contexts may mask the relative importance of different performance measures for those companies. We encourage future research to examine the relationship among these performance outcomes, as well as if there are certain contexts in which different 216S. Colakoglu et al. / Human Resource Management Review 16 (2006) 209–218 performance measures have more or less importance, to provide insights into how best to evaluate the impact of HRM activities. 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for magz64 help, from Tina Li
Converging on IHRM Best Practices • 123 CONVERGING ON IHRM BEST PRACTICES: LESSONS LEARNED FROM A GLOBALLY DISTRIBUTED CONSORTIUM ON THEORY AND PRACTICE Human Resource Management, Spring 2002, Vol. 41, No. 1, Pp. 123–140 © 2002 Wiley Periodicals, Inc. This article published in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/hrm.10023 Mary Ann Von Glinow, Ellen A. Drost, and Mary B. Teagarden This article captures the results of the “Best Practices” Project and attempts to identify which IHRM practices are universally embraced in our ten-country/region sample. Here we present a compelling argument for understanding cultural contexts by seeking and establishing derived etics. No longer content with the traditional conduct of cross-cultural research, we challenge “how” we do research, and encourage gatekeepers to broaden their research lenses with multiple embedded contexts—polycontextuality—as they search for answers. We find anomalies, and counterintuitive findings, and through our “gap analysis,” we discovered several universally em- braced etics or best practices. We believe we have not only made a significant contribution to research, but, in particular, we offer a solution methodology for conducting globally distributed IHRM research. These findings signal new directions for all deeply involved in managing within and across different cultures. © 2002 Wiley Periodicals, Inc. Introduction This special issue has addressed a complicated and somewhat maligned term of late—best practices—in International Human Resource Management. In brief, the challenge of the Best Practices Project reported on in this spe- cial issue was to identify which HR practices stood out across which countries and why. Were there universal “best practices,” or purely context-specific practices that were meaning- less out of cultural context? Such analyses de facto demand consideration of a number of contextual, cultural, and organizational vari- ables. The research quandaries associated within the massive data sets reported here were exacerbated by philosophical challenges which lie at the root of what researchers are trained not to go beyond: the scientific method. Despite it all, the Best Practices Project (the multiresearcher, multicultural, multinational, interdisciplinary research con-sortium described in the previous articles) has succeeded in shedding light on theoretical and practical arguments for how IHRM practices and the effectiveness of their use, can and do vary in response to cultural and other contex- tual factors. In short, this project’s findings have revealed that there are IHRM “best prac- tices.” However, they are not as universal as we had hoped. This is not a semantic teaser. We believe that, in total, we have been able to derive some IHRM best practices common to the cultures we have compared. However, we haven’t analyzed the population of all cultures; thus the term “universal” cannot be fully em- braced. Some of this is simply not knowable at this point in the research process: not from these data nor from any other large scale, glo- bally distributed research consortium such as this. Some of this is due to the state of our “theory” around IHRM; some of it is due to methodological issues. We will begin with what we do not know now (nor could we expect to 124 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 know as a result of this large-scale study) and then iterate up the knowledge chain. We will then identify what these data have told us about “best practices” and subsequently dis- cuss some of the unusual and/or counterintuitive findings. Practitioners and academics alike will not be surprised if we suggest here that we have not, as yet, a unify- ing theory of IHRM which drives questions such as those posed throughout this special issue. Ultimately it hangs on the theoretical underpinnings, which we address next. What Theory Drives a Multicultural Study of “Best Practices?” Huo, Huang, and Napier (in press) remind us that IHRM research is best described as pa- rochial, and this parochialism notwithstand- ing, has found its way into the mainstream even after its patrons were chastised. 1 Witness today just how much emphasis is on the costs and benefits of various HR practices for the entire Multinational Enterprise (MNE) rather than the core characteristics of the HR prac- tices in each country. In other words, we know a great deal about compensating the expatri- ate manager, and how expatriates fare in the U.S., Europe, and Japan. We know next to nothing about an international compensation theory, or properties of compensation systems in other countries (to which those expatriates are sent!) (Lowe, Milliman, De Cieri, & Dowling, in press) that can generalize with any degree of accuracy. That said, there has been scant research on “best IHRM practices” in different countries. Possibly this is just be- cause there is no IHRM theory that guides us, or helps to meaningfully inform practice. Why? There has been a long-standing debate in most of the literatures of the social sciences, from anthropology, psychology to organiza- tional science about the usefulness of work- ing intensively within one country to try to understand the issues purely pertinent to that culture (emic) versus those that believe work- ing across cultures can reveal universal gen- eralizations (etic) (Berry, 1990; Drost & Von Glinow, 1998; Teagarden & Von Glinow, 1997). However, all such a debate ultimately does is cloud the differences toward the means, and the argument reheats. It is in thatspirit that we have had debates around uni- versalism vs. particularism, or etic vs. emic, or convergence vs. divergence. It is not our purpose here to resolve that debate; however, it is our purpose to try to understand HR prac- tices uniquely within a culture (e.g., U.S.) and compare them to some other culture’s practices such that the overlap can be considered to be a “derived etic” (Berry, 1990), or a set of results that permit valid comparisons within the lim- ited set of cultures compared. Berry (1990, p. 92) notes: “If this procedure were to be ex- tended to all cultures and a derived etic thereby attained, then there would be a universal es- tablished. In other words, a universal is truly ‘universal to everyone’ while a derived etic is limited to that set of cultures for which it has been established.” Visually, it would look like Figure 1 (adapted from Berry, 1990). Several researchers have used this frame- work, or variations on it, to try to get clarity on cultural differences. We think it is useful for two reasons: One is our discussion of “best practices” across different cultures. Here we have painstakingly sought to compare HR practices derived in North America [i.e., the U.S. (emic A)], then diffused to another cul- ture, [i.e., Australia (imposed etic)] in an at- tempt to discover HR practices in Australia’s culture (emic B). This allows for possible com- parison of emic A and emic B, and where com- parison reveals overlaps between the two, we have our “derived etic.” This is to say, (1) if both the U.S. and Australia utilize the same IHRM practices, (2) there is understanding of the cultural context within which these IHRM practices are applied, and (3) there is evidence that these practices are effective in both coun- tries, then it can be stipulated that the over- lapping part of the Venn diagram represents a “best practice,” or a “derived etic.” The second reason we believe the “derived etic” discussion is relevant here is that it may structure our thinking about doing cross-cul- tural comparisons by allowing us to use a com- mon solution methodology as we aim for theory development in IHRM. Most of the work done within the field of IHRM generally tries to compare a few prac- tices across two countries. As a result, simi- larities and differences are assiduously reported, but there is little explanation given … it is our purpose to try to understand HR practices uniquely within a culture (e.g., U.S.) and compare them to some other culture’s practices such that the overlap can be considered to be a “derived etic” (Berry, 1990), or a set of results that permit valid comparisons within the limited set of cultures compared. Converging on IHRM Best Practices • 125 as to why and under what conditions the simi- larities and differences exist. 2 There is no at- tempt made to derive any “etics” or, for that matter, to determine whether the practices of the two countries are viewed from the same cultural lenses. Thus, context needs to be embedded into the discussion of “valid” ob- served similarities and differences in HR prac- tices, and it is to this methodological discussion we now turn our attention. Traditionally, the use of valid and reliable standardized measurement scales 3 is a prereq- uisite for publication within any good research outlet, thus the measurement scale becomes the driver, and not the research question. Let us leave aside the issue of relevance for the moment, but take for example a selection tech- nique common in France: graphology, or hand- writing analysis. Any “measurement” device that fails to assess this selection criterion may be “standard/reliable” but not at all useful to the French. No amount of statistical manipu- lation or sophistication in structural equation modeling will make it so either. And while the “derived etics” that may emerge when it comes to selection criteria in the U.S. and France can exist, they will undoubtedly be somewhat limited and more measurement-bound than descriptive of selection practices. This is to say that much of what we know about IHRM today has unfortunately been bounded by our measurement parochialism or dependency. There is an overtendency to rely on measure- ment precision in the reporting of differences to the exclusion of rich, thick contextual de-scriptions of cultures and their HR practices, and the extent to which they overlap with other countries. In other words, we have consider- able sophistication with respect to measure- ment devices, much like stomping out cockroaches with weapons of mass destruc- tion. Our intent here is not to criticize exist- ing measurement theory, nor use it as a ruse to obscure meaningful discussions as we at- tempt to devise theory on IHRM derived etics. Our intent here is to make meaningful cul- tural comparisons and not be held prisoner to our measurement guns in the interest of per- mitting valid comparisons—a highly unortho- dox research approach to be sure. As Geringer, Frayne, and Milliman (in press) more articulately note, we have a rather unusual research instrument: We do not use many standardized measurements. The LBDQ Short Form was the only one used. Single items (such as the graphology item discussed earlier) were used to assess the extent to which these practices are used now, and if the re- spondents thought they should be used more (or less) in the future. We looked at the rela- tionships between “is now” and “should be”— another taboo methodologically—as a proxy for ideological/within-culture gaps. So, al- though we tried to avoid comparing mean scores across nations, we looked very closely at the ideological gaps within a culture, since they do share a common frame of reference. Huo, Huang, and Napier (in press) note that it is conceivable that a country could have a large gap between “is now” and “should be” Figure 1. Visual Model of Understanding of HR Practices within a Culture 1. Begin research in one’s own culture. 2. Transport to another culture. 3. Discover other culture. 4. Compare the two cultures. 5. Comparisons not possible? 6. Comparisons possible. (Adapted from Berry, 1990) EMIC A IMPOSED ETIC EMIC B EMIC A vs EMIC B EMIC A ≠ EMIC B EMIC A EMIC B DERIVED ETIC 126 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 means, but have a relatively low “should be” mean score; thus, the “should-be” mean re- veals much about how indigenous people view IHRM practices. In addition, comparing “is- now” practices with responses to how these practices “should be” used in the future, may be of some use in determining whether cur- rent pervasive practices are likely to be an ef- fective source of added value for the firm in the long term (Jennings, Cyr, & Moore, 1995). Therefore, managerial attitudes about future practices may actually characterize the pref- erence functions that will be used to main- tain or adopt practices in organizations across cultures. In our data analysis among ten coun- tries/region, we have found the derived etics featured in Table I to be perceived as univer- sally important future IHRM practices. Further, random sampling was often re- jected, in favor of snowball, and convenience sampling as well as personal contacts. We aimed for functional equivalence, and could hope for nothing more when it came to “roughly equivalent items.” We did not get hard data on organizational performance be- cause it was impossible in many SOEs, and, in any case, we took other proxies for organi- zational effectiveness. We also asked everyone to comment as to whether the HR practices contributed to high performing employees, satisfied employees, and organizational effec- tiveness. We did this on the survey knowing about common method bias, and attempted to triangulate on these items in other mean- ingful ways. We sought insights on IHRM practices within cultural contexts, and, even more importantly, we used the overlap of prac- tices within those different cultural contexts to help us with our derived etic, or in our ter- minology, a best practice. Ultimately, we see this as a first-stage attempt at theory develop- ment of IHRM. The data analysis of the ten countries and one region is still limited with respect to the set of cultures upon which it is now established. However, this derived etic has allowed us to finally permit valid comparisons within the set of cultures compared. So, What Do We Know? The results of this preliminary but massive data collection effort permit one general ob-servation and three categorizations. The gen- eral observation demands that we address methodological and contextual issues in cross- cultural research much more carefully. It is no longer enough to simply enter a new cul- ture with the “extant” survey instrument de- veloped and implemented in North America. We were reminded of this years ago when Chris Brewster (Brewster, Hegewisch, Holden, & Lockhart, 1992) pummeled IHRM re- searchers with the indictment of America’s hegemony, 4 particularly as pertains to the use of measurements derived in the North Ameri- can context, and then generalized all over the world. The world in which we now live is much more complicated, and even the word “rigor- ous” must be questioned within this context. It is not our intent to raise the specter of the rigor vs. relevance argument here; our goal is to sensitize researchers to key dilemmas en- countered when rigor is pushed to its utmost in order to conduct competent, publishable research. We reported on some of the dilem- mas encountered on these methodological travels earlier (cf. Teagarden et al., 1995). However, we must now reinforce this with new and stronger cautions: Most of what cross-cul- tural and international research does is empha- size the imposed etic; from here on, we should be striving toward derived etics, and using con- structs that make sense within and across the cultures under study regardless of how it seems to those that would police such work. To use an example mentioned throughout, one can question the selection of a senior-level French employee without acknowledging the use of graphology. Can it be done? Of course. Should it? Probably not. And since there are no standardized instruments for assessing gra- phology, does this mean we should not ask the question in the first place? Our contention is no! On the contrary, we may be forced to vio- late some of the methodological tenets of “good” research in order to hone in on the right issues and to do it in such a way as to add value to our knowledge of IHRM. This is not to say the Best Practices Project has done this throughout. In some cases, we were lucky; in other cases, we were not as fortunate; how- ever, we must in the future consider our in- ternational methodological issues even more judiciously. We can ill afford to conduct re- It is no longer enough to simply enter a new culture with the “extant” survey instrument developed and implemented in North America. Converging on IHRM Best Practices • 127 search in the next millennium using the same “scientific approaches” we have perfected in the twentieth century. We have learned that the rig- orous execution of a research design and in- strument that masks the derived etic in favor of the imposed etic is simply error of the third kind or, solving the wrong problem well! We must embed context into the explanation of any uni- versals or derived etics; failure to do so will re- sult in marginal understandings of meaningful cross-cultural differences, or overly simplified explanations of similarities and differences in imposed etic HR practices. In addition to the general observations around methodology that pervades our think- ing, we also observed three general catego- ries, to which we now turn. These are Universal Practices, Regional Practices, and Country-Specific Practices for each of the IHRM practices we probed: compensation, selection, appraisal, training and development, and strategic orientation. These comparisons are vital for moving the field ahead, and es- tablishing a theory of IHRM Best Practices. However, this is not enough; it is necessary but not sufficient. After years of data collec- tion, and huge sums of research monies spent, we wanted more than what seemed “interest- ing” or even vital. What we discovered were many anomalies and counterintuitive findings that now empirically challenge much of what we think we know about HR practices and their generalizability. Let us examine each practice in turn, for universal, regional, or country-spe- cific practices and, in so doing, uncover some disturbing new twists. Compensation Based on what we know from the literature, our data provide some support, but more con- tradictory evidence about how national cul- ture might be expected to impact employee preferences for compensation practices. In terms of pay incentives, many countries within our sample do not currently use pay incentives very much. Of the ten countries/ region we surveyed, only Taiwan and the PRC indicated above-average scores on the use of incentives. That means individualis- tic countries like the U.S. and Canada sur- prisingly had low mean scores on payincentives (which seems remarkable in view of the incredible emphasis on pay for perfor- mance, merit pay, etc., in the literature as well as the popular press). However, it also means that Taiwan and China (both collec- tively oriented societies) whose compensa- tion systems have historically emphasized collectivism and egalitarianism, now ironi- cally prefer reward differentials “determined primarily according to individual contributions”(Zhao, 1995, p. 127). There is also greater acceptance of wider reward dis- parities based on individual performance (Aiello, 1991, Ding, Fields, & Akhtar, 1997). It is inevitable that compensation systems based on individual performance and indi- vidual incentives will become much more common and entrenched within the Chinese context, with further reforms on the horizon (Zhu, 1997). This is important because for China and Taiwan, much of the extant lit- erature speaks to the “iron rice bowl” con- cept. We have discovered just the reverse here in terms of pay incentives with an overarching emphasis on individual-level incentives! Equally provocative is the more Anglo-ori- ented countries’ (U.S./Canada/Australia) lack of emphasis on pay incentives, individual or otherwise! We expected from the literature here that these types of individualistic coun- tries would place a much higher emphasis on “incentives” as a means of differentiating em- ployees from each another, while more col- lectively oriented countries would deemphasize these incentives in order to pre- serve group harmony (Milliman, Nason, Zhu, & De Cieri, 1998; Schuler & Rogovsky, 1998). The results indicate a nearly universal agree- ment that incentives should comprise a lim- ited portion of the compensation package. The concept of “some, but not too much,” chal- lenges much of what we know from the merit pay and pay-for-performance literature. Per- haps this is because most employees are risk- averse, with cultural differences explaining degrees of risk aversion. Additionally, the data indicate some agree- ment among our diverse countries that there should be a larger emphasis placed on indi- vidual job performance goals than specifically on group or organizational goals. This also contradicts much of the way global organiza- That means individualistic countries like the U.S. and Canada surprisingly had low mean scores on pay incentives (which seems remarkable in view of the incredible emphasis on pay for performance, merit pay, etc., in the literature as well as the popular press). 128 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 tions are heading—via the use of teams rang- ing from globally distributed to co-located. Again, this may also reflect risk aversion to some extent, given that most employees see individual performance as more controllable than group performance; however, it does not bode well for global organizations making wide use of teams, whether virtual or traditional! Similarly, our study challenges the role that seniority plays in global organizations. Seniority is a bona-fide occupational qualifi- cation in the U.S. for many jobs, and is as- siduously protected under the law. As well, seniority has been prized in many parts of the world for centuries. In much of Asian culture, Confucian values emphasize the role of the senior family member. Similarly, in Mexico and much of Latin America, “el patron” is also held with high respect. Collectivist cultures are generally thought to emphasize seniority in HR decisions to a much larger extent than indi- vidualistic cultures (Milliman et al., 1998). Only three countries in our sample (Mexico, Korea, and the PRC) indicated that seniority should be emphasized more in the future, and, in a few cases, more individually oriented countries scored similarly to the collectively oriented countries. These findings may sug- gest that some type of social change is occur- ring, including a reduced emphasis on seniority in societies that traditionally have honored their elders (Stening & Ngan, 1997; Zhu et al., 1998). In terms of benefits, this was seen as uni- versally important to compensation. Almost all respondents indicated that it was not so much the generosity of the benefits package, but that benefits should be an important part of the total compensation package. Overall, the collectivist countries in our sample have only a slight, to moderately higher emphasis than the individualist coun- tries on seniority-based pay, pay based on group or organizational performance/goals, and pay based on future goals. Even though the pay systems between these various coun- tries do have a number of important differ- ences, they seem to share more similarities than we had anticipated. Our ideological difference analysis (differ- ence between “is-now” and “should-be” scores within a country) reveals that the countries inthe Americas had the largest gaps between current practices and desired future practice on pay policies. There were also large gaps on many of the pay practices items. It is puzzling as to why the gaps are greater in the Western- ized countries rather than the Asian countries, and we think it plausible that one reason is what Kluckhohn and Strodbeck (1961) re- ferred to as a culture’s “orientation toward time.” It is generally assumed that most coun- tries in Asia tend to share a time orientation that looks to the past—emphasizing the sta- tus quo, stability, and slow change. In con- trast, countries such as the U.S. tend to have a future time orientation, which emphasizes flexibility, and more change to meet the de- mands of the future (Milliman et al., 1998). Another explanation would relate to harmony; in this case the Asian countries seeking less change or departure from the past to ensure harmonious relations. What appear to be universal trends for the future include the use of benefits, the empha- sis on individual performance rather than group/team or organizational performance, and a reduced emphasis on seniority. Selection Our data revealed a significant number of cross-national differences in the recruiting criteria and the procedures used to select employees. By and large, the more individual- istic countries of the U.S., Australia, and Canada all considered the job interview, one’s technical skills, and work experience as the most important selection criteria. In fact, two of those items were universally rated high in all countries with one exception: China. The items that seemed to be high in almost all countries except China were the personal in- terview and technical requirements of the job. All of the other items seemed to have a high degree of culture-driven, contextual diver- gence. Indeed, there seems to be more diver- gence here than convergence in recruiting criteria with the earlier exception noted. There is some similarity between Japan, Taiwan, and Korea in selection criteria. However, this is limited to a person’s potential to do a good job and get along. What appears fascinating, how- ever, is the ideological gap analysis. This sug- What appear to be universal trends for the future include the use of benefits, the emphasis on individual performance rather than group/team or organizational performance, and a reduced emphasis on seniority. Converging on IHRM Best Practices • 129 gests that individualistic countries are deemphasizing the “proven work experience” in favor of “one’s ability to get along with oth- ers,” and “how well the person will fit the company’s values,” as part of the top three hiring criteria for future hiring. This dovetails with some more recent observations that a person’s past work experience is no longer as highly valued in the U.S. as it was in the past, while the person’s potential to become a com- petent employee in the future has become much more important (Munk, 1999). There is a striking similarity between Ja- pan and Taiwan in terms of their current and future selection practices. Some country-level differences warrant comment here. As was mentioned earlier, the French use of graphol- ogy is critical to the French, so is the person’s potential and ability to get along with others critical to the Japanese. Japanese placed a rela- tively low weight on job-related skills as a se- lection criterion. One can only surmise why this is so, and to what extent this need for harmony and potential over technical/work related skills has contributed to economic dif- ficulties at the country level over the last de- cade. The same could be said of Korea, which shares with Japan a similarity in their hiring practices with both deemphasizing proven work experience in favor of hiring new gradu- ates. However, the Koreans also favor use of employment tests, and, when it comes to those employment tests, many of the elements con- tained within speak to the issue of harmony and getting along with others. Taiwan is dif- ferent here—the Taiwanese favor the job in- terview, together with proven work experience as the key selection criteria. So, while there is some similarity at the country level there are many differences observed between the coun- tries in our sample. Overall, the results can suggest a slight movement toward convergence in global hiring practices in the future, but a strong country emphasis dominates the land- scape today. Huo, Huang, and Napier (in press) speculate that the globalization of busi- nesses, coupled with the communication and IT revolution, will undoubtedly affect how recruiting practices evolve toward the irresist- ible—global convergence! This finding is less controversial than our findings on compensa- tion, but raise important issues that will bediscussed in the final section. Overall, it can be said that future universal trends empha- size “West meets East.” There is some conver- gence in selection criteria away from the use of experience (emphasized in the West) to ability to get along with others and how well the person fits with the company’s values (em- phasized in the East). Performance Appraisal Just what are the purposes of performance appraisal? Worldwide, it has been stated in the (mostly North American) literature that ap- praisals have been used for several different purposes: (1) documentation (documenting a subordinate’s performance, evaluation of the subordinate’s strengths/weaknesses, etc.), (2) future development, (3) administrative pur- poses (for pay, salary, promotion decisions) and (4) allowing subordinates to express their views (Milliman, Nason, Zhu, & De Cieri, in press). However, our data reveal a mixed picture on the extent to which performance appraisals are used to accomplish these purposes. The good news is that virtually every country conducted performance appraisals for these purposes; however, the bad news is that this was only on a low-to-moderate basis. Why else would per- formance appraisals be practiced if not for the aforementioned purposes? Is it because it was expected on the part of someone, or a parent company? Is it because it just seems to be the right thing to do? Is it for fear of legal ramifications encountered by many MNEs? Furthermore, the is-now data contra- dict our predictions from the literature review on two of the purposes (documentation and development) in many of the countries. The current documentation scores were slightly lower than we expected in both the U.S. and Canada, very low in most other countries, but higher than expected for Japan. The U.S. case is intriguing, because most of the literature stems from U.S.-based studies, and the U.S. is-now scores were lower than what we had expected for pay and promotion purposes. It was also predicted that the development-re- lated items would be highly emphasized in many of the countries, but the data indicate these purposes are emphasized only to a small extent in most of the countries. Just what are the purposes of performance appraisal? 130 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 In terms of the ideological gaps, the should- be means were uniformly higher than the is- now means on every purpose in every country, suggesting that the purposes of appraisal are not implemented as satisfactorily as they were intended to be implemented across the board. Thus, it may be fair to say that the purposes of performance appraisal have fallen short not only in the U.S., but in every country we have sampled. This borders on a universal finding; however, it is surprisingly the reverse of what we would have predicted based solely upon the performance appraisal literature! Even though it is difficult to draw defi- nite conclusions relative to best practices with- out assessing the contextual factors, there are some interesting patterns that emerge region- ally, based on the ideological gap analysis. The countries of the Americas (Canada, the U.S., Mexico, and Latin America) in concert with Australia and Taiwan revealed large should-be means, on development and documentation appraisal purposes. In particular, recognizing the subordinate and evaluating the achieve- ment of the subordinate’s goals received the highest scores in documentation purposes, along with two development items focusing on improving performance. A similar pattern is noted on two subordinate expression items among the same countries with the exception of Taiwan. It is noteworthy here that these countries consider an important purpose of the performance appraisal is to allow subor- dinates’ freedon to express their thoughts, whereas the rest of the countries indicated a more moderate view of subordinate expression in appraisal reviews. Perhaps, as Milliman and his colleagues argue (1998), this is due to the high power distance orientation of most Asian countries which places less value on subordi- nate input and participation in the appraisal process (Huo, Huang, & Napier, in press). Similar findings were observed for the ad- ministrative purposes of pay and promotion, which received only moderate emphases across most of the countries. The exceptions were Mexico, Taiwan, and Latin America where it was generally seen that there should be more emphasis on discussing promotions rather than pay in appraisals. Perhaps the delicate if not tenuous balance between discussions of pay linked to appraisal is a dilemma worldwide.Taken as a whole, development and docu- mentation were viewed as more important than administration and subordinate expres- sion. But there are some important geographic similarities between the four countries in the American continent, Australia, and Taiwan, on the one hand, and the four Asian countries of Indonesia, Japan, Korea, and China, which grouped together, on the other hand. Inter- estingly, Taiwan follows much more closely the U.S. than it does China perhaps because of its strong market orientation and democratic norms. Equally important is the controversial nature of the performance appraisal process worldwide. Whether we discuss appraisal prac- tices as they are enacted now, or as they should be enacted, there is considerable controversy and contradiction based on what we could have expected from the existing literature on performance appraisal. Our ideological gap analysis reveals greater “should-be” scores on every purpose in every country, a stunning universal trend for performance appraisal. Training and Development No universal or common T&D practices across the countries and region examined were found; however, significant similarities in practices within country clusters were observed. The managers from the Asian countries stood out as the most consistently satisfied with their organizations’ training and development prac- tices. By contrast, the managers from Mexico and Latin America observed their organiza- tions’ training and development practices as largely inadequate and in need of improve- ment. The American, Canadian, and Austra- lian managers perceived what we observe to be “softer” T&D practices (team building, understanding business practices, and corpo- rate values) as well as the more “proactive” T&D practices (preparation for future assign- ment and cross-training) to be sadly lacking, and in need of substantial improvement. The common practices found within these three country clusters are strongly influenced by cultural values and type of industry, two im- portant contextual elements. Cultural Values. In Asia, the work culture has been characterized as collectivist. In col- lectivist societies, workers are integrated into Our ideological gap analysis reveals greater “should-be” scores on every purpose in every country, a stunning universal trend for performance appraisal. Converging on IHRM Best Practices • 131 strong, cohesive in-groups, which continue to protect them in exchange for unquestionable loyalty throughout their lives (Hofstede, 1991). Consistent with this philosophy is the commitment to training as well as develop- ment across the Asian countries evidenced by the small ideological gap between the is-now and should-be T&D practices. In contrast with T&D practices in the U.S. which deemphasize T&D in times of economic difficulties, many of the Asian countries in our sample have ex- perienced considerable economic difficulties and yet they still emphasize T&D practices. In the U.S., Canada, and Australia, work cultures have been characterized as individu- alistic in nature. In individualistic societies, the relationship between employer and em- ployee is utilitarian, or similar to a business transaction (Hofstede, 1991). Here, a worker acts to optimize his/her own needs, and the employer expects him/her to perform the job accordingly. Consistent with this philosophy is a nonproactive, reactive, and task-oriented approach to T&D practices in these Anglo countries. This is seen as a small ideological gap in technical training, and a large ideologi- cal gap in all of the future-oriented training practices, and the “softer” management prac- tices such as team building, understanding business practices and corporate values. Industry Differences. Our results indicate that T&D practices accommodate shifts in industry requirements and relate to needs for enhanced competitiveness. The Mexican and Latin American country cluster is character- ized by the continuous need to upgrade basic skills in labor-intensive industries, as seen in the large ideological gap in the “softer” man- agement practices such as team building, un- derstanding business practices and corporate values. This could imply that the Mexican and Latin organizations sampled were in a height- ened learning state with respect to modern management techniques, and in need of ap- propriate training and development. In the U.S., Canada, and Australia, where industry and technology tend to be more ser- vice-driven, worker productivity can be in- creased by resourceful T&D practices (Jennings, Cyr, & Moore, 1995). In such en- vironments, companies require different skill sets such as critical thinking, team skills, andlearning on the job. Another indication of the trends facing different industries, and the ideo- logical gaps in training is the pressure on com- panies to cut costs and outsource training. As training moves outside the organization, par- ticularly in the U.S., there are myriad prob- lems associated with its relevance. Witness the recent aphorisms “training du jour” or “pro- gram of the month” discussed in much of the more recent literature on training and HR ini- tiatives gone haywire (Kerr & Von Glinow, 1997; Salas, Cannon-Bowers, Rhodenizer, & Bowers, 1999). The obvious conclusion here is that employees perceive that training is nei- ther valued nor effective; hence the large ideo- logical gap between all T&D practices with the exception of technical training. In Asia, globalization and the expansion of trade have altered the structure of many industries. As a result, labor-intensive indus- tries will shift locations to reduce costs (Jennings, Cyr, & Moore, 1995). For example, Taiwan and South Korea have traditionally been the preferred low-cost sites for manu- facturing operations. However, as wages and other cost-related factors began to escalate in these countries, multinationals began to look toward Indonesia, Malaysia, and Thai- land for their manufacturing operations (Teagarden, Butler, & Von Glinow, 1992). Therefore, industries in Taiwan and Korea will, and have, become more capital-intensive and technology-driven, creating different training needs, as well as employee develop- ment needs. There are very few training needs assessments performed in the U.S. and else- where, raising new challenges. Despite the 1997–1999 economic crisis which high- lighted many training needs, the trend in T&D for Asian countries has remained surprisingly stable and effective. These results may reflect the collectivist mind-set of the Asian manag- ers, perhaps indicating an unwillingness to report inadequacies in their organizations’ training and development practices. Role and Status of HRM Departments: Is the HR Department Linked to Company Strategy? Bowen, Galang, and Pillai (in press) note that there are few differences in the status of HRM … industries in Taiwan and Korea will, and have, become more capital- intensive and technology- driven, creating different training needs, as well as employee development needs. 132 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 departments in this empirical investigation: All countries view the HR Department’s status as fairly high. Ironically, this is in direct contrast with the evidently “old” assumption in the U.S. of low status of the HR Department, and there is evidence now that there is a strategic focus for firms that see HRM status linked to orga- nizational capability as a source of competi- tive advantage (Becker & Gerhart, 1996). The focus on organizational capability implies that a company can develop a set of processes that are capable of sustaining competitive advan- tage. However, the HRM practices that were highly correlated with increased organizational capability in our study are somewhat surpris- ing: Both training and development, as well as performance appraisal practices, were viewed as contributing to enhanced organiza- tional capability. This is less surprising for T&D than for performance appraisal, in view of the finding on how poorly PA was imple- mented worldwide (Milliman, Nason, Zhu, & De Cieri, in press) as reported earlier in this special issue. In some sense, the proliferation of U.S.-based training models around the world, especially in the English-speaking cul- tures as well as widescale adoption of U.S. models of performance appraisal in these cul- tures (regardless of how poorly executed they might be) could account for these findings. It is more than intuitively appealing to suggest that an organization’s strategy depends upon certain contextual factors, as well as ef- fective HRM practices. The finding that there is a strong link between organizational capa- bility, the collective abilities that an organiza- tion needs to execute its business strategy, and HR practices in a number of countries, is worthy of further exploration. In companies trained to view human resources as a distinct source of competitive advantage, finding the right cocktail mix of people, culture, process, structure, and assets is an exercise in strength- ening their organizational capabilities (Turnbull, 1996). It is the sustainability of the competitive advantage at stake here, and the reason so many companies focus on organiza- tional capability and increasingly seek HR so- lutions to strategic goals. Specifically, the U.S., Australia, Canada, China, and Indonesia all see the importance of linking HR practices to strategy. Is this a passing fancy, or a findingthat can withstand the test of time? This is an empirical question, however, there is increas- ing theoretical and empirical support that aligning a firm’s strategy with its HR practices is critical to organizational performance (Becker & Gerhart, 1996; Bird & Beechler, 1995). One study focused on “bundles” of HR practices that included team-based work sys- tems, extensive training, and performance- based compensation systems rather than individual human resource practices, and sug- gested that the organization create mutually reinforcing conditions that support productiv- ity (Phipps, 1995). Our study finds a similar connection between strategy and effective HR practices and fuels future explorations as to how this linkage translates into productivity improvements. Bowen, Galang, and Pillai (in press) caution that countries embroiled in political turmoil, or that are lower on the in- dustrialization or globalization chain, or those that are moving from centrally planned toward more market-driven economies are all subject to dramatic shifts influencing the role and sta- tus of HR Departments. What is becoming abundantly clear is that rapid advances in com- munication and information technology, knowledge management, and global competi- tion for markets has made it imperative that companies of the future work toward adopt- ing best practices that have been documented within a polycontextual study, such as the one reported on here. In other words, those best practices that are truly universals are based on derived etics and not simply on imposed etics using North American standards. Implications for Theory, Research, and Practice Table I presents the trends we have high- lighted in this special issue. We have at- tempted to identify those trends that appear to have universal applicability, either now or in the future as a desired end state. Further- more, there are some clusters of countries or regions that appear to group together and not necessarily along immediately apparent clus- ter lines. For example, sometimes Taiwan aligns more with Australia and the U.S. than it does with China, and as such, may seem counterintuitive relative to the Asian region. The finding that there is a strong link between organizational capability, the collective abilities that an organization needs to execute its business strategy, and HR practices in a number of countries, is worthy of further exploration. Converging on IHRM Best Practices • 133 Practice COMPENSATION SELECTIONUniversals Derived ETICS “Best Practices” Pay incentives should not comprise too much of an employee’s compensation package. Compensation should be based on individual job performance. There should be a reduced emphasis on seniority. Benefits should comprise an important part of a compensation package. “Getting along with others”, and “Fit with the Corporate Values” signals a shift in selection from “West meets East.”Regional or Country Clusters Seniority-based pay, pay based on group/team or organiza- tional goals, and pay based on future goals—all are used to a larger extent in the Asian and Latin countries now. Selection practices were remarkably similar among the Anglo countries. Specifically, job interview, technical skill, and work experience are the most important selection criteria. How well the person fits the company’s values replaces work experience as one of the top selection criteria for future selection practices. Selection practices are quite similar in Korea, Japan, and Taiwan. Specifically, proven work experience is de- emphasized as a selection practice in these countries. In the Anglo and Latin American countries, allowing subordinates to express themselves is perceived as an important future appraisal practice.Country Specific U.S. and Canada had less use of pay incentives than expected. China and Taiwan had above-average use of pay incentives, and wanted more based on individual contributions. In Japan, a heavy emphasis is placed on a person’s potential (thus hiring new graduates) and his/her ability to get along with others. A relatively low weight was given to job- related skills, and experi- ence as a selection criterion. In Korea, employment tests are considered crucial and are used to a large extent as a selection tool, as well as hiring new graduates. Koreans de- emphasize experience. In Taiwan, the job interview is considered the most important criterion in the selection process. TABLE I Trends in International Human Resource Management Practices Across Selected Countries and Regions. However, Table I also attempts to identify country-specific findings that will be useful for IHRM researchers and practitioners alike, which have been highlighted throughout this special issue. Because our findings were puz- zling, counterintuitive, and contrary to what the research literature suggests on each of the HR practices in the ten countries/region, we have attempted to illustrate how the useof derived etics/universals/best practices can indeed add value to theory, research meth- odology as well as practice. Earlier, we indicated that we had no overarching theory of IHRM that would help to guide our thinking. Even worse, our meth- ods for conducting so-called traditional 5 cross- cultural research masked discovery of universal practices constituting a “derived (continued on next page) 134 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 etic.” Our discussion of just how derived etics might help us master this dilemma throws us squarely into the realm of what we call polycontextuality, or the embeddedness of multiple contextual elements. This in turn influences more how researchers think aboutuniversal best practices rather than what they think about them. In other words, culture re- searchers discuss national culture, strategy researchers discuss contingencies, and HRM researchers discuss specific HR practices; however, we submit that the way in which we Universals Derived ETICS “Best Practices” In all countries, the “should- be” scores were higher on every purpose, suggesting that the pur- poses of PA have fallen short in every country. All countries indicated that a greater emphasis be placed on development and documentation in future PA practices. In particular, recognizing subordinates, evaluating their goal achievement, planning their development activities, and (ways to) improving their performance are considered the most important appraisal practices for the future. In most countries, T&D practices are used to improve employees’ technical skills. There is a growing trend toward using T&D for team building and “soft manage- ment practices.”Regional or Country Clusters In contrast, in the Asian countries expression is used to a low extent, particularly in Korea. In the Latin American countries, the administrative purposes of performance appraisal are considered important in future practice. In the Anglo countries, the softer T&D practices such as team building, understanding business practices and corporate culture, and the pro-active T&D practices such as preparation for future assignment and cross-training are used moderately; however, a significant increase in these practices is desired. In the Latin countries, an increase in the extent to which all T&D practices are used is desired. In the Asian countries, most T&D practices are used moderately and are consis- tently considered satisfactory. Practice PERFORMANCE APPRAISAL T&D TABLE I (continued.) Country Specific In Taiwan, the administrative purposes of performance appraisal are considered important in future practice. In Mexico, T&D as a reward to employees is considered a highly desirable practice. In the U.S. and Korea, preparing employees for future job assignments is used to a lesser extent. U.S. is using outsourcing more. In Japan, remedying past performance is used to a small extent, however, a significant increase in this practice is desired. In Korea, team building is used extensively and emphasized in all T&D practices. (continued on next page) Converging on IHRM Best Practices • 135 should think about the embeddedness of mul- tiple contextual elements, or polycontextuality, is critical to understanding universality. We do not believe that much value can be added by examining single HR practices without exam- ining them within their multiple embedded contexts. Thus, it is imperative to seek derived etics where possible, and to do so with full understanding of specific practices within context. Let us revisit the French graphology discussion to elaborate this point. We now believe we have some universal best practices on selection criteria; those should be employed in France in concert with practices (graphol- ogy tests) made salient by the French context. This allows us to bring context into the equa- tion more openly. We are not suggesting a vari- ant on configurational approaches for IHRM theory building, but instead a strong empha- sis on embedding context into specific coun- try practices so that emic practices (graphology) can become embedded in etic theories (selection). Does this mean that we have universally derived etics on all aspects of selection? No; however, it does allow us to suggest a solution methodology to the research around global selection. Recall that a derived etic hinges on both cultures A and B using some of the same IHRM practices. However, recall also that there must be understandingof each culture’s context, and there must be some evidence of effectiveness in both A and B; then it can be stipulated that the overlap of A and B is the derived etic. This is not a solu- tion, but a solution methodology that allows us to finally permit valid comparisons within the set of cultures compared. Therefore, al- though we suspect we have not made head- way on a theory of IHRM with this large-scale study, we do think we have contributed to a solution methodology by which we can now examine derived etics, not just imposed etics, or emic practices, a common practice in IHRM research. After all, best practices, or universals do not exist independently of cul- tural context, and it may well be that best prac- tices or these derived etics we have been discussing may act in combination with one another for an even greater impact: The whole may indeed be greater than the sum of the parts. One noteworthy area is the debate re- ported on by Becker and Gerhart (1996) of what was termed “best practice-fit” which fo- cuses on a within-company levels of analysis argument. They discuss the overarching ru- bric within which best practice can be best discussed as the architecture of the system. Thus, a best practice effect might be attrib- uted to some overarching architecture, which Practice RELATION TO BUSINESS STRATEGY STATUS OF HRM FUNCTIONUniversals Derived ETICS “Best Practices” Across most countries, the HRM practices most closely linked to organiza- tional capability are training and development and performance appraisal.Regional or Country Clusters In the Asian countries, linkages were indi- cated between both low cost and differen- tiation strategies and HRM practices.Country Specific In Mexico, no linkages were indicated between organizational capabil- ity and HRM practices. In Japan and Taiwan few linkages were indicated between organizational capabil- ity and HRM practices. Status of HRM was highest in Australia and lowest in Indonesia. TABLE I (continued.) 136 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 would account for differences in practices. They focus on the strategic element of best practice in this argument, whereas we are at- tempting to derive etics, or best practices that have universally been endorsed at the level of practice taking polycontextuality into account. That said, we also believe that there are implications for practice as well here. Clearly the previous discussion suggests much greater attention to the multiple contexts within which international business is done. These local contextual issues should not be dismissed as irrelevant to the “corporate culture” of the parent company; in fact, they are critical and can influence, as we have seen, all HR prac- tices that are “imposed” on the local enter- prise, subsidiary or its indigenous peoples. We briefly highlight these implications now: Compensation. Overall, our research re- veals that, in the future, compensa- tion systems should be based more on individual level job performance, and not team or organizational perfor- mance. Global firms should also re- duce their reliance on seniority, and pay incentives should not comprise very much of the compensation pack- age at all. Benefits should continue to play an important role in all com- pany compensation packages. Does context matter in these findings? Of course! In some cultures, compensa- tion is set at the level of the “state” which mandates the conditions. If seniority were automatically dismissed in the U.S. where seniority can be a bona-fide occupational qualification, even though a finding here suggests worldwide movement away from se- niority-based systems, there could be debilitating labor relations problems encountered. Thus, any of these find- ings must examine the contexts within which these best practices emerge as universally endorsed. Selection. The universal/derived etics on selection reinforce a shift, which we term “West meets East.” For example, in most selection decisions, there was universal endorsement of how well the person “fits” with the corporate/com-pany values, and how well the person “gets along” with others in the corpo- ration. There were regional or coun- try-cluster findings showing striking similarities among Anglo countries. Specifically, the job interview, techni- cal skill proficiency, and work experi- ence were all seen as the most important selection criteria today; however, the shift toward the more Eastern notion of getting along with others and fit to company values was noted for the future. If these best prac- tice selection/recruiting practices vary only slightly all over the world, but, perhaps along critical context lines, the company could still encounter dif- ficulties. For example, if an American MNE goes into the Korean market vowing to select personnel by using a “fit to the corporate values” criterion along with their other top three crite- ria, using personal interviews and fail- ing to use employment tests can be just as disastrous as going into France without the graphology test. Unfortu- nately, a little knowledge can be a dan- gerous thing, and if American MNEs want to navigate the Korean terrain using American preferred selection criteria, and are inattentive to Korean contextual elements, it is no wonder that they encounter selection difficul- ties. Performance Appraisal. Given the ubiquity of U.S.-based performance appraisal instruments, and the presumed popu- larity of these devices to “change” per- formance, it was surprising to us just how poorly executed most perfor- mance appraisal events were in our entire sample. However, our research revealed that PA should be used to rec- ognize subordinates, evaluate subordinate’s goal achievement, plan subordinate’s development activities, and focus on ways to improve subordinate’s performance. Our sense here is that context-specific issues were not taken into consideration when executing a performance ap- praisal activity. For example, we have Overall, our research reveals that, in the future, compensation systems should be based more on individual level job performance, and not team or organizational performance. Converging on IHRM Best Practices • 137 generally operated under the fairly old assumption of “praise in public, criti- cize in private.” However, there are some cultural contexts wherein pub- lic praise presumes the employee could not perform the activity in the first instance, and thus praise can be seen as unintentionally demeaning. There are other cultures where criti- cism should not be delivered verbally; clearly context matters. Training and Development. Training and development activities globally seem to be moving toward team building and “soft management practices.” However, T&D continues to be used currently to improve employees’ tech- nical skills. Hence, a gap exists be- tween what employees have now, and what is desired in the future, particu- larly for Anglo and Latin American employees. Small gaps also exist in Asia, where T&D is highly valued. Ironically, for all countries, gaps exist despite an appalling lack of training “needs assessments” or training “evaluations.” In summary, we found some significant global or converging trends in IHRM practices across the cultures, industries, and organiza- tions we examined. These trends are derived etics and to some extent reflect the diffusion of HRM practices wherein traditional West- ern approaches are converging to more East- ern HRM practices and vice versa. We believe that we have made a significant contribution to the IHRM literature, particularly as regards the development of a shared methodology to unearth vexing issues such as universal bestpractices, and derived etics, and hone in on IHRM practices that seem to withstand the “test of time.” In so doing, we have a height- ened awareness of the polycontextuality that surrounds all of our IHRM practices. Similarly, we also believe we have some- thing very important to say to practitioners, HR professionals, and those concerned with managing globally distributed teams. We be- lieve that what we have discovered global managers desire more (or less) of (compared to what they have presently) reflects their per- ception of effective practices in the future. This might be construed as a preference func- tion for how selection, training and develop- ment, compensation, and performance appraisal should be done for an organization to increase their capabilities for enhanced competitiveness in tomorrow’s pressure- packed global environment. These global man- agers have been quite clear on this as important universal “best practices” which can enhance a firm’s capability. Our gap analysis reveals some universal “best practices” that may well contribute to sustainable competi- tive advantage. Although sustainability (from a resource-based view) is based on inimitable practices, understanding the polycontextuality of an IHRM practice might just provide the organization with the inimitability of such a practice, ultimately resulting in its competi- tive advantage. We strongly believe that this ten-country/nation study has been able to con- tribute to our overall understanding of how context affects IHRM practices. 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Previously at USC, she was the 1994–1995 President of the Academy of Management. She has written nine books, many articles, serves on 11 editorial review boards, and several international panels. Dr. Von Glinow consults and teaches in Latin America, Asia, the U.S., and Europe. Her work on IHRM as head of the “Best Practices” consortium won an award from the American Society for Competitiveness. In 2001, she received an NSF grant on globally distributed software development projects. She serves on the boards of Fielding Gradu- ate Institute, Friends of Bay Oaks, and Animal Alliance, and won the Humanitarian Award of the Year from Miami’s Adopt-a-Pet. Ellen A. Drost is a visiting professor at American University, where she teaches inter- national business. She was previously on the faculty of Thunderbird and San Diego State University. Ellen has authored numerous articles, manuscripts, and conference papers in international strategic human resource management and cross-cultural lead- ership. Her most recent research focuses on strategic decision-making and entrepre- neurship. Ellen is a principal researcher in an international research consortium, which investigates best international human resource management practices. She has col- laborated as a consultant, benchmarked organizations in Mexico, and given lecture tours in Mexico. Ellen received her doctorate degree in international business and man- agement from Florida International University. She received her management experi- ence in Amsterdam and Brussels with the International Gold Corporation, an international marketing organization. Ellen was born in the Netherlands and speaks, reads, and writes Dutch, English, and French, fluently. Mary B. Teagarden is Professor of Global Strategy at Thunderbird, The American Graduate School of International Management, where she teaches Global Strategy and Strategic Human Resource Management. Her research interest focuses on com- petitiveness, strategic alignment, and capability building with an emphasis on the management of technology-intensive firms, off-shore manufacturing, high technol- ogy transfer, and strategic human resource management in the People’s Republic of China and Mexico. Her current research focuses on the localization of leadership development for transformation and strategic alignment in the telecommunications industry in China. She received her Ph.D. in strategy implementation from the Uni- versity of Southern California. Converging on IHRM Best Practices • 139 M. (in press). Benchmarking training and devel- opment practices: A multi-country comparative analysis. Human Resource Management. 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NY: Simon & Schuster. Kerr, S., & Von Glinow, M.A. (1997) The future of human resources: Plus ça change, plus c’est la même chose. In D. Ulrich, M. Losey, & G. Lake (Eds.), Tomorrow’s HR management (pp. 175– 181). New York: John Wiley & Sons, Inc. Kluckhohn, C., & Strodtbeck, F.L. (1961). Variations in value orientations. Evanston, IL: Row, Peterson & Company. Lowe, K.B., Milliman, J., De Cieri, H., & Dowling, P.J. (in press). International compensation prac- tices: A ten-country comparative analysis. Human Resource Management. Milliman, J.F., Nason, S., Gallagher, E., Huo, Y.P., Von Glinow, M.A., & Lowe, K.B. (1998). The impact of national culture on human resource manage- ment practices: The case of performance ap- praisal. In G.R. Ferris & K.M. Rowland (Eds.), Research in personnel and human resources management: Supplement 2 (pp. 201–219). Greenwich, CT: JAI Press. Milliman, J.F., Nason, S., Zhu, C., & De Cieri, H. (in press). An exploratory assessment of the purposes of performance appraisals in North and Central America and the Pacific Rim. Human Resource Management. Munk, N (1999, February 1). Finished at forty. For- tune, 139(2), 50–66. Phipps, P.A. (1995) Firm productivity and competi- tiveness. Monthly Labor Review, 118 (5), 64–74. Salas, E., Cannon-Bowers, J.A., Rhodenizer, L., & Bowers, C. (1999). Training in organizations: Myths, misconceptions and mistaken assump- tions. Research in Personnel and Human Re- sources Management, 17, 123–161.Schuler, R.S., & Rogovsky, N (1998). Understanding compensation practice variations across firms: The impact of national culture. Journal of Inter- national Business Studies, 29(1), 159–177. Stening,. B.W., & Ngan, E.F. (1997). The cultural context of human resource management in East Asia. Asia Pacific Journal of Human Resources, 35(2), 3–15. Teagarden, M.B., Butler, M., & Von Glinow, M.A. (1992). Mexico’s maquiladora industry: Where strategic human resource management makes a difference. Organizational Dynamics, 20(3) (Winter), 34–47. Teagarden, M.B., & Von Glinow, M.A. (1997). Hu- man resource management in cross-cultural con- texts: Emic practices vs. etic philosophies. Management International Review, 37, 7–20. Teagarden, M.B., Von Glinow, M.A., Bowen, D., Frayne, C., Nason, S., Huo, P., Milliman, J., Arias, M., Butler, M., Kim, N., Scullion, H., & Lowe, K. (1995). Toward building a theory of comparative management research methodol- ogy: An idiographic case study of the best inter- national human resources management project. Academy of Management Journal, 38(5), 1261– 1287. Turnbull, A.M. (1996) Redesigning the organization and making it work with people strategy. Cana- dian Management Accounting, 70, 19–20. Von Glinow, M.A. (1993). Disgnosing “best practice” in human resource management practices. In J.B. Shaw, P.S. Kirkbridge, K.M. Rowland (Eds.), Research in perosnnel and human resource man- agement, Supplement 3. International Human Resources Management. Greenwich, CT: JAT Press. Zhao, Y. (1995). Chinese motivation theory and ap- plication in China: An overview. In H.S.R. Kao, D. Sinha, & S.H. Ng (Eds.), Effective organisations and social values (p. 127). New Delhi: Sage. Zhu, C.J. (1997). Human resource development in China during the transition to a new economic system. Asia Pacific Journal of Human Resources, 35(3), 19–44. ENDNOTES 1. The indictment of IHRM as atheoretical could well be applied to many fields of research; how- ever, for illustrative purposes, we discuss this in the context of IHRM. 2. In traditional SHRM research, the discussion might revolve around horizontal or vertical fit, or alignment of HR practices with internal or external factors; however, fit has dominated the landscape. In practice most research has been focused on a simple interaction between two vari- ables at a time, i.e., pay and business strategy (Becker & Gerhart, 1996). 140 • H UMAN RESOURCE M ANAGEMENT , Spring 2002 3. While it is true that valid and reliable measures are a necessary condition for comparison be- tween groups, validity must be established only once, and this is generally established using measures developed in North America on North American populations. If the reliability coeffi- cients are less than desirable, or less than ideal, researchers fall back on the validity reported elsewhere. This gives rise to the “one way fits all” modality in most international research ini- tiatives, and this is what we wish to challenge in the ensuing argument.4. Brewster’s contention was that most research on IHRM automatically assumed that what- ever practices were in place, they must have been invented in the U.S. and were therefore ubiquitous. He challenged this with his Cranfield project, which suggested that not all IHRM practices were in fact invented in the U.S.! 5. “Traditional” here defined as using standardized instruments developed in the North American context, and examining a few select “HR prac- tices” in two or three countries.
for magz64 help, from Tina Li
Balancing individual and organizational goals in global talent management: A mutual-benefits perspective Elaine Farndale a,b, * , Avinash Pai c, Paul Sparrow d,1 , Hugh Scullion e,2 aSchool of Labor & Employment Relations, Pennsylvania State University, 506e Keller, University Park, PA 16802, USA bDepartment of Human Resource Studies, Tilburg University, The Netherlands cAlumnus of the School of Labor & Employment Relations, Pennsylvania State University, 506 Keller, University Park, PA 16802, USA dLancaster University Management School, Bailrigg, Lancaster LA1 4YX, UK eDepartment of Management, J.E. Cairnes School of Business & Public Policy, NUI Galway, University Road, Galway, Ireland 1. Introduction In today’s global economy, multinational corporations (MNCs) are increasingly reliant on their ability to manage their interna- tional operations effectively, realizing the need to develop key talent into future leaders (Mendenhall, Reiche, Bird, & Osland, 2012). As such, MNCs develop global talent management (GTM) strategies, concentrating on the movement of talent around the organization through expatriate assignments (McDonnell, Scul- lion, & Lavelle, 2013). This not only enables the company to perform services in the global market (Neal & Cavallaro, 2007), but also serves as a tool for developing managers with the global competencies and mindset to lead the MNCs of the future (Javidan, Teagarden, & Bowen, 2010). As a result, GTM has emerged as a field of study from the strategic international human resource management and talent management literatures (Tarique & Schuler, 2010). Despite the growing awareness of the importance of effective GTM to the success of global operations (Tarique & Schuler, 2010), MNCs faceconsiderable challenges in implementing their GTM strategies (McDonnell, Lamare, Gunnigle, & Lavelle, 2010; Scullion & Collings, 2011). This article explores GTM strategies, focusing on how organizational-level talent management policy is balanced against individual-level motives for expatriation assignments. While the advantages of GTM to the organization are apparent, expatriation assignments potentially also provide a unique opportunity for the individual, setting him or her on a path of career development with global mobility opportunities (Baruch, Dickmann, Altman, & Bournois, 2013). The approach to GTM taken in MNCs is driven by a range of organizational goals, including business control and client demands, moderated by cost considerations (Li & Scullion, 2010; Suutari & Brewster, 2001). From the individual employee’s perspective, there is an equal but different variety of goals, extending from personal and career development, to a desire to follow family members to another country or a longing to experience the challenges of working overseas (Andresen, Biemann, & Pattie, 2013). The aim of this study is to explore how these two sets of goals might be balanced in what we term a ‘mutual-benefits approach’ to GTM. In doing so, we reconcile two emergent bodies of literature: whilst the growing body of GTM literature focuses on leveraging internal talent to address organizational goals, it pays little attention specifically to expatriation assignments, which has emerged as an independent (though related) field of study on global mobility. Observations from two pilot qualitative studies are set against psychological Journal of World Business 49 (2014) 204–214 A R T I C L E I N F O Article history: Available online 11 December 2013 Keywords: Global talent management Global mobility Organization-assigned expatriation Self-initiated expatriation Psychological contract theory A B S T R A C T Drawing from the talent management and global mobility literatures, there is simultaneous pressure to address both organizational goals to place talent internationally, and individual goals of self-initiated expatriation. This raises important questions for the future of global talent management (GTM): how might individual and organizational goals be balanced to the mutual benefit of both parties? Qualitative data from pilot studies in multinational corporations demonstrate a largely financially driven balancing act between self-initiated and organization-assigned expatriate assignments. Building primarily from psychological contract theory, this study builds propositions for future research, and explores the implications for global talent management practice. 2013 Elsevier Inc. All rights reserved. * Corresponding author at: School of Labor & Employment Relations, Pennsylva- nia State University, 506e Keller, University Park, PA 16802, USA. Tel.: +1 814 867 3320; fax: +1 814 863 3578. E-mail addresses: [email protected] (E. Farndale), [email protected] (A. Pai), [email protected] (P. Sparrow), [email protected] (H. Scullion). 1Tel.: +44 1524 510911; fax: +44 1524 381454. 2Tel.: +353 91 493079; fax: +353 91 494510. Contents lists available at ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb 1090-9516/$ – see front matter 2013 Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.jwb.2013.11.004 contract theory in order to understand the implications for GTM strategy and to identify important research questions, resulting in the development of propositions for future research and practice in this field. 2. Contrasting organization-assigned versus self-initiated expatriation goals and challenges The talent management literature defines GTM as: ‘‘the strategic integration of resourcing and development at the international level that involves the proactive identification, development and strategic deployment of high-performing and high-potential strategic employees on a global scale’’ Collings and Scullion (2007, p. 102). Concurrently, the global mobility literature focuses on the importance of expatriation assignments for MNCs: addressing a lack of availability of management and technical skills in certain locations; controlling and coordinating operations locally; developing future managers and leaders; and maintaining trust in key foreign businesses, or serving representational purposes (Collings & Scullion, 2012; Li & Scullion, 2010). Additionally, some of the GTM literature highlights the potential importance of expatriation assignments for future business development from a talent perspective: producing leaders who understand the business context and global strategy, and equipping top talent to become future leaders (Gakovic & Yardley, 2007); ensuring future leaders have competencies to handle globally spread operations (McDonnell et al., 2010); helping assignees and the receiving country understand the networks that will provide the assignee with the connectivity to build architectural knowledge around the business model (Sparrow, 2012); and building a diverse, high-performing business team to drive innovation and growth (Neal & Cavallaro, 2007). Despite these obvious benefits of expatriation, a major issue facing MNCs is expatriation’s high cost (Suutari & Brewster, 2001). In addition to the already substantial direct costs of the initial expatriation, should the assignment fail (due to a range of issues, including family difficulties and cultural adjustment, well- documented in the global mobility literature), there are indirect costs due to failure in the local business (Harzing, 1995; Harvey & Moeller, 2009). These high costs are particularly associated with the use of traditional, long-term, organization-assigned expatri- ates (AEs), i.e. employees assigned to go on overseas for a defined period within the organization. To address this, two trends have seen a gradual reduction in the use of AEs in recent years. Firstly, the growing importance of alternative forms of international assignment (for example, short-term, commuter, and international frequent flyers: Collings, McDonnell, Gunnigle, & Lavelle, 2010; Collings, Scullion, & Morley, 2007; Mayrhofer, Reichel, & Sparrow, 2012). Secondly, a rise in the number of self-initiated expatriates (SIEs). These are individuals who relocate voluntarily to a foreign country, without assistance, and are hired under a local, host- country contract (Al Ariss & Crowley-Henry, 2013; Andresen, Al Ariss, & Walther, 2013; Biemann & Andresen, 2010; Vaiman, Scullion, & Collings, 2012). Significant differences exist however between AEs and SIEs with respect to their motivations for undertaking an overseas assignment and the value to their careers (Andresen, Biemann, et al., 2013). The challenge for policy is to match new sets of organization and individual goals. SIEs are often activists who take control of their own careers in a highly proactive manner and operate with a high degree of personal agency (Altman & Baruch, 2013; Mayrhofer et al., 2012). In the same way that AEs are sent overseas for different reasons, SIEs likewise have different and perhaps a broader set of motivations. These may include personal development, career development, family connections, explora- tion, seeing other cultures, and escaping from existing ways ofliving (Cerdin, 2013; Inkson, Arthur, Pringle, & Barry, 1997; Shaffer, Kraimer, Chen, & Bolino, 2012). Personal and professional development is seen as important given diminished job security in many lines of work (Cerdin, 2013; Stahl, Miller, & Tung, 2002). Organizations need to consider SIEs as a special case, partly because they have higher organizational mobility than traditional AEs (Biemann & Andresen, 2010), and because of distinctive GTM challenges that arise when seeking to manage SIEs effectively (Haslberger & Vaiman, 2013; Howe-Walsh & Schyns, 2010). Both SIEs and AEs are generally willing to overcome the personal hardship of an expatriate assignment, as both groups believe that it will help them get ahead in their career (Jokinen, Brewster, & Suutari, 2008). Nevertheless, many expatriates are not promoted when they return home, at least in the short-term, as rationalization and restructuring makes it hard for MNCs to give expatriates post-assignment employment guarantees (Pate & Scullion, 2010). This creates a disconnect for those successful assignees between their learning about the overseas market and cultural leadership skills and their actual career prospects (Bolino, 2007; Suutari, 2003). This raises questions for the future of expatriation regarding the alignment of goals of both AEs and SIEs, which may be expected to change in line with changed and more realistic expectations of the experience. Recent research finds that both AEs and SIEs appear to have similar boundaryless career ambitions (Andresen, Biemann, et al., 2013) and similar career anchors (Cerdin, 2013). We might conclude therefore that both AEs and SIEs see expatriation as a potential career-development tool. SIEs also perceive overseas experience as a means of self-development or to achieve personal rather than corporate goals, whereas AEs primarily seek to achieve company goals in order to benefit from the career progression and the increased opportunities that are offered on their return (Andresen, Biemann, et al., 2013). There are therefore multiple and contrasting goals at stake in expatriate assignments. The extent to which these goals are complementary or competing and can be balanced is a primary focus of this paper. From a theoretical perspective, contingency theory explains the use of expatriation by MNCs: corporate strategy is aimed at growing the business, which, when lead by global clients or new overseas markets, necessitates the movement of key individuals to foreign locations to facilitate this expansion. In other words, this is an ‘outside-in’ approach, whereby strategic decisions based on the external environment influence corporate actions (Baden-Fuller & Stopford, 1994). Expatriation is a tool used by MNCs to facilitate global expansion and the future growth of the firm, leading to the phenomenon recognized as AEs. This contingency approach however does not take into consideration the individual perspective, especially for those employees who might not be prepared to limit their ambitions to the sole pursuit of an internal career. For example, increasing numbers of employees, particularly young graduates, are looking for overseas experiences to develop their careers as SIEs (McDonnell, 2011). This employee group may not be the first choice for an MNC to send overseas as an AE due to their lack of experience, which may augment the risk that they may be prepared to switch jobs to another firm to augment their international experience. An alternative and more fruitful theoretical framework (psychological contract theory) can help to balance the ‘outside- in’ approach to developing a GTM strategy: there are corporate gains to be had by focusing on the evolving needs of talent inside the organization – in developing an internally driven GTM strategy (an ‘inside-out’ approach) – rather than relying on external market forces to define this. Meeting individual employee needs is more likely to result in an engaged and productive workforce (Rousseau, Ho, & Greenberg, 2006). This is based on the psychological contract E. Farndale et al. / Journal of World Business 49 (2014) 204–214 205 notion of reciprocity: ‘‘the belief that a promise has been made and a consideration offered in exchange for it, binding the parties to some set of reciprocal obligations’’ (Rousseau, 1989, p. 123). Focusing on employee needs and the psychological contract means paying greater attention to self-initiated expatriation, which in turn requires increased flexibility in GTM policy in MNCs. SIEs are effectively volunteers, and are a means for organizations to form an international workforce beyond the more common process of assigning employees to transfer between subsidiaries (Fee & Karsaklian, 2013). Alongside consideration of the need to address corporate strategies and individual goals, the internal GTM strategy must be supported by an appropriate set of systems and structures – usually assigned to a human resources (HR) or global mobility (GM) function. Given financial and reputational costs, no firm will just send volunteers on assignments – they still need to match expectations and assess capability. The challenge remains both to move beyond more exclusive and centrally defined talent pools, and to understand the financial implications of volunteer- style assignment and career control mechanisms. In general, firms underestimate the complexities involved here (Suutari & Brewster, 2001), with failure to complete an assignment successfully often being attributed to poor management of the assignees (Scullion & Brewster, 2001). Largely as a result of cost and co-ordination considerations, MNCs have tended to shift to a more centralized HR/GM function to oversee expatriate assignments (Sparrow, 2012). Centraliza- tion and standardization have the advantage of creating ‘one-size- fits-all’ programs for AEs, reducing costs, and increasing transparency. Alongside this centralization, however, a more nuanced set of policies have also emerged, introducing some necessary flexibility to enable business divisions to customize, and individuals to personalize, the implemented policy. This is due to a variety of factors, such as cultural differences across markets, different types of assignments being undertaken, as well as each expatriate’s individual circumstances. Sparrow (2012) notes that, in an attempt to better reconcile the complementary or competing goals of the GTM systems and individual goals, GM functions have been pursuing a three-stage evolution in their philosophy to assignment flexibility: moving from limited exceptions to a globally standardized policy, through more customized flexibility based on a variety of set policy types, and potentially into an individualized approach to flexibility. In other words, there is variance emerging in MNC responses to GTM challenges, demonstrating the need to balance appropriately both standardization and flexibility to achieve GTM goals at both the organization and individual levels. As we have argued, the shaping of expatriation strategy by MNCs by external market demands, and development of an over- arching GTM strategy on this ‘outside-in’ basis, can be explained by contingency theory. The broadened population of AEs and SIEs now managed as part of a GTM strategy suggests it is important to extend our frame of reference and incorporate an understanding of individual needs and goals. Career theory shows that the employee segments who now avail themselves of the opportunity for expatriation assignments have more complex and differentiated motivations (Baruch et al., 2013). The way in which GTM systems accomplish the balance between organizational cost and co- ordination considerations and individual career goals creates a new set of promissory signals. A more useful approach, therefore, is to apply psychological contract theory. This focuses on the need for reciprocity in promises made, and to show the value of building an ‘inside-out’ approach, i.e. an internally driven mutual benefits GTM strategy. Social exchange theories advocate that relationships exist between individuals to result in the maximization of benefits for each party. Rousseau (1989, p. 123) introduced a more narrow definition of thepsychological contract, conceptualizing it at the level of the individual, and as a cognitive-perceptual entity: ‘‘the psychological contract is an individual’s belief in the terms and conditions of a reciprocal exchange agreement between the focal person and another party. A psychological contract emerges when one party believes that a promise of future returns has been made, a contribution has been given, and thus, an obligation has been created to provide future benefits’’. This perception – driven by a demand to reciprocate – is subjective, differs between individuals; dynamic (changes over time during the relationship between employer and employee); and concerns mutual obligations (a commitment to some future action), based on given promises. It is underwritten by trust that the other party will fairly discharge their obligations. Exchange partners in the relationship will strive for balance and will attempt to restore balance if an imbalance occurs. Organizations do not have psychological contracts – but their agents do – and the HR/GM policy designers are one set of agents. Both parties (expatriates and policy designers) have beliefs regarding the terms and conditions of a reciprocal exchange agreement between the focal person (expatriates) and another party (the organization, with the HR/GM function having to design policy in ways that ensure this match). We are not attempting to identify the promissory exchanges between expatriates and (the more remote) policy agents, but rather use psychological contract theory to interpret why we see the mutual actions that we do. In order both to understand the research issues involved, and guide how such changes in practice might be made, we examine two research questions: (1) how are organizational and individual goals in expatriate assignments either complementary or con- flicting, and can they be balanced more appropriately to improve GTM effectiveness (as supported by psychological contract theory); and (2) are organizational GTM systems and structures being developed in ways that would support both sets of goals simultaneously? 3. Methodology As there has been little research to date addressing both individual and organizational goals of expatriate assignments in single studies and to support the literature review presented here, qualitative data were gathered in two small-scale pilot studies. The data collected is not intended to deliver generalizable conclusions but to develop an evidence base to assist further theorizing in this field. Qualitative data collection was deemed most appropriate to explore the experiences of the actors involved as GTM policy- makers, managers, and expatriates to understand the context in which GTM activities are being implemented. Both studies were carried out in the services sector, in which highly specialized employee knowledge facilitates the increasingly complex config- uration and operation of global production networks (Dicken, 2011). These firms create value through their selection, develop- ment, and use of human capital, and are expected to be particularly sensitive to the individual needs and expectations of talent. Study 1 is conducted within a single case study: a professional- services firm headquartered in the U.S., referred to further as ProfServ1. ProfServ1 has 180,000 employees in more than 150 countries globally. Interviews which lasted on average 1.5 h were held with 10 GM/HR specialists and 6 expatriates (3 assigned by the organization, 3 who volunteered for the assignment), asking them to comment on their firm’s GTM goals and challenges at both the organizational and individual levels. These were recorded and transcribed. Questions to the GM/HR specialists covered the following areas: the organization’s current talent supply and demand factors; how expatriates are identified; how expatriate E. Farndale et al. / Journal of World Business 49 (2014) 204–214 206 assignments are managed; how GTM strategy is created, and the main challenges faced in implementing the strategy. The expatriates were asked about the process of identification for the assignment, the support provided related to the assignment, the extent to which the expatriate experience is intended to be standardized, and the challenges faced during the assignment and how these are handled and by whom. Policy-makers do not operate in a vacuum. The decisions they make about any one element (such as meeting individual goals in GTM through greater flexibility) are made in the context of, and with consideration to, the broader strategic domain. In order to understand how the conflicts and complementarities identified by Study 1 are handled by GTM decision-makers, we draw upon a second independent dataset in Study 2. This included 12 inter- views with a broader range of most senior global mobility managers from a sample of 8 global-brand financial (FinServ1– 8) and 4 professional service MNCs (ProfServ2–5) (see Table 1). The interviews which lasted on average 1 h and were recorded and transcribed were semi-structured, based on a schedule that included probing questions covering policies for flexibility in GTM programs, the opportunities and risks associated with individualized flexibility, and the support systems used. Also changes in expatriate behavior talent-assessment and career- management issues were also covered. For the purpose of empirical observation, the transcripts from both sets of interviews were coded based on an iterative process of comparing themes from the literature with themes emerging from the data. This process was carried out first by one of the members of the research team for each study and then discussed with the other authors to determine the final coding structure. 4. Findings: Study 1 Exploring first the cited goals of ProfServ1’s GTM strategy, from an organization perspective, four primary themes emerged: serving client needs (following global clients), building thebusiness overseas (new business opportunities; using in-house skills to deal with problems overseas), investing in top talent (selecting only the top performers for important, visible assign- ments), and developing future leaders: ‘‘as we start to think about grooming this next generation of talent and the future CEOs, you’re going to want to have them have international experience’’ (Global HR Director). From an individual perspective, personal needs center primarily on wanting to follow a spouse moving overseas, or to return to family overseas, alongside more skill or career development-oriented reasons: ‘‘there are a myriad of reasons why we send people. You know, personally driven, organizationally driven, and more often than a not, a lot of what we’re doing now comes up because of personal-driven situations’’ (Business GM Leader 2). Secondly, we explored the perceived challenges to achieving these GTM goals. From an organization perspective, these focused on: prohibitive levels of cost, particularly affecting the ability to send people out for purely developmental purposes: ‘‘if anything prevents us from increased global movement, you know, it’s just the cost of assignments’’ (Country GM Director); the importance of getting the repatriation process right to retain talent; and the difficulties of encouraging global mobility, persuading business managers to let go of their top talent: ‘‘you might think that you’re saving this guy now, but if that opportunity isn’t there for him next year, he’s going to be very upset. . .and he’s going to go somewhere else’’ (Business GM Leader 1). Individual GTM challenges centered around: how an expatriate assignment can hinder career progression due to being ‘out-of-sight, out-of-mind’, the loss of networks and connections with colleagues and clients in the home country, and the assignment experience being affected by a lack of preparation before departure: ‘‘somebody’s really engaged in their career and committed and has these specific clients, and they feel that they will risk losing that network and those prime engagements if they go overseas’’ (Country GM Leader). Regarding the systems and structure that ProfServ1 has in place to support these goals and challenges, the most frequently Table 1 Study 2 interviewees. Interviewee job title Country of origin Organization profile Group International Mobility Manager France FinServ1: Financial services company property-casualty insurance, life and savings, and asset management. Revenues s90 billion. Operates in 57 countries with 163,000 employees Head, International Mobility United Kingdom FinServ2: Personal, private and retail banking. 80% of income from Africa, Middle East and Asia. 1700 branches in 68 countries. 89,000 employees Regional Head – EMEA, International Assignment Mobility Switzerland FinServ3: Wealth and investment banking. Revenues CHF 25 billion. Operates in 62 countries. 62,000 employees Senior International Mobility Manager United Kingdom FinServ4: Retail, commercial, private and global banking services. Revenues $56,700 billion. 267,000 employees. 6600 offices in 80 countries Executive Director, International Assignments United States of America FinServ5: Global investment banking services. Revenues $28 billion. 32,000 employees Director – International Assignment & Comp & Ben France FinServ6: Retail banking, Investment banking and global investment services. Revenue s26 billion. Operates in 77 countries. 160,000 employees Global Head of International Mobility Germany FinServ7: Global universal bank with retail. Corporate, asset and wealth management and global transaction services. Revenues s32 million. 100,000 employees in 70 countries VP Human Resources United States of America FinServ8: Global wealth and asset management and institutional financial services. Revenues $32 billion. 58,000 employees, in 1200 offices in 53 countries Head of Mobility United States of America ProfServ2: Multinational media and information firm. Revenues $13 billion. Operates in 100 countries with 60,000 employees Director of Global Relocation United States of America ProfServ3: Multinational software solutions corporation. Revenues $74 billion. 97,000 employees HR Consultant Global Mobility Germany ProfServ4: Global IT and enterprise software multinational. Revenues s16 billion. 115 country subsidiaries with 61,000 employees Executive Director, Human Resources Strategy United Kingdom ProfServ5: Professional Services 93 member firm network, assurance, tax and advisory services. Revenues $4 billion. 28,000 employees across 490 offices in 100 countries E. Farndale et al. / Journal of World Business 49 (2014) 204–214 207 mentioned organization response is a push for centralization of GTM activities to create standardized programs which can be implemented firm-wide: ‘‘[GM] has created templates and forms and checklists and best practices [. . .] to try to really take a lot of the noise out of the experience so that it really is about living and working in that country’’ (Global GM Director). Interviewees also focused on the importance of aligning the firm’s HR system with GTM goals to encourage a culture of mobility: ‘‘sharing success stories of expats who’ve been out and how they’ve returned to have a significant impact on clients’’ (Country GM Director). From an individual perspective, two different systems to support self- identification were highlighted: individual opportunities for being able to self-nominate for expatriate assignments (by checking a box on the annual performance appraisal form), and an increasing emphasis on the individual’s own responsibility to manage their career: ‘‘there’s a huge emphasis on career development but it’s sort of up to you to drive a lot of that stuff’’ (Expatriate 6). Interviewees also mentioned the importance of at least some flexibility in the GTM program reflecting local circumstances: ‘‘I believe it’s very personalized and very much dependent on the assignment and actually really just depending on the country that you’re going to, because the firm in reality operates very differently in each country’’ (Expatriate 2). In contrast to the focus on centralization, there was a clear recognition of the need for this to be balanced by a degree of flexibility: ‘‘the firm believes that these opportunities are important to our people, and so they want to open up those opportunities to our people, and people can express interest, and that’s why the majority [of mobility assignments] are self-initiated’’ (Country GM Director). The remaining set of findings explores the benefits and challenges of adopting this more flexible approach to GTM. As noted, ProfServ1 has an open system for people to self- nominate as candidates for an expatriate assignment, from which the high performers are selected for assignments. In practice, this process is most akin to the volunteer SIE model of expatriation – individuals seek overseas assignments, and often transfer on a local employment basis, albeit sometimes with enhancements, to another member firm within the global partnership structure. According to interviewees, this level of flexibility holds numerous advantages for the organization: a positive employer reputation, an expanded talent pool, and the potential to reduce costs (by not offering the same enhanced package to volunteer SIEs as to initiated AEs): ‘‘a true [volunteer] is that that person will probably take a pay cut. We’ve built the program so we can be as cheap as possible’’ (Business GM Leader 1). From an individual perspective, the main advantage men- tioned was that opportunities were available to a wider range of people (a more inclusive GTM approach). In addition, there were also many comments on the mutual benefits of this flexible, inclusive GTM approach, the primary one being the ability to balance client and personal needs (matching an individual’s request with an identified business need): ‘‘we understand the importance of global mobility from an employee development perspective. We understand the importance of it from a leadership perspective. We see that our clients are demanding it so I think that there are a variety of things that are coming together at the same time that are pushing us in that direction’’ (Global HR Director). Both the organization and individuals, however, face challenges from this individualized flexibility. For the organization, more flexibility naturally means less standardization, which in turn results in less transparency of the GTM program across the business: ‘‘if we send somebody out for a talent-driven reason and we’re trying to accommodate their needs or what have you, we might not get as much of a business bang for our buck back’’ (Business GM Leader 2). For traditional AE assignments, flexibilityraised two other challenges: the more individualized the experi- ence, the more unique and complex the support for such a system; and if parts of the business saw that there was flexibility available, they would push hard for this flexibility to work in their favor. From the individual perspective, interviewees noted how non- standard practices decrease perceptions of fairness: ‘‘he was upset that the firm found those people jobs and not his wife a job’’ (Expatriate 4); and that more flexibility through volunteering transferred a greater amount of responsibility to the individual making the move (rather than the organization taking this on, as for an AE). Due to the pressures of cost and diverse business needs, in addition to people being able to self-nominate, ProfServ1 was also shifting to alternative forms of global mobility, particularly short-term, international projects. In general, comments regarding these projects were positive. These highlighted the broader range of international experiences open to individuals, as well as the projects more closely matching what employees were requesting: ‘‘what we’re hearing from our people and certainly the newer people that are coming to [the firm] is they’re less interested in going someplace for a long period of time and they’re much more interested in having shorter-term experiences’’ (Global HR Manager). Because of the generally shorter duration of these projects, this also meant that both the individual and the organization were taking less risk (lower levels of investment and less change and loss of networks being incurred): ‘‘if it [an international project] doesn’t work out [. . .] you haven’t put so much at stake right, for the organization and for the person’’ (GM Projects Leader). However, there can also be a number of disadvantages associated with short-term international assignments: when projects are anticipated to be of short duration, less preparation and support is given for the international experience, although they can actually end up rolling on for a number of years. In addition, managers on short- term assignments may have regular travel commitments to many countries which puts pressure on family and work commitments at home. 5. Findings: Study 2 The aim of Study 2 was to examine more generally the drivers that have created the organizational response of a flexible GTM policy. To maintain anonymity, quotes are assigned to the sector the firm is in rather than to the specific organization. Across FinServ1–8 and ProfServ2-5, there were three parallel forces driving policy redesign (similarly observed in Study 1): Increasing control: with more centralized oversight over mobility, regularizing the governance arrangements, and stan- dardizing policies; Reducing delivery costs: with various program offerings that enabled what were termed ‘expatriate lite’ arrangements; Increasing program flexibility on multiple levels. Policy designed at better matching organizational goals and individual needs was generally embedded within a range of parallel strategic considerations. It was also typically subsumed within a broader HR strategy: ‘‘. . .In 2006 the organization adopted a global strategy and essentially that global strategy became the road map in principle for all of our future activities. [. . .] The driver was to be able to match talent and get resources from A to B in an efficient, effective manner, so the driver was creating a common culture across the organization by sharing knowledge and filling capability gaps’’ (ProfServ). E. Farndale et al. / Journal of World Business 49 (2014) 204–214 208 The majority of organizations in Study 2 had moved to the second stage (Sparrow, 2012) of customized flexibility based on a variety of set policy types. They established high levels of policy standardization, based on a strategy of centrally managed flexibility. This enabled customization of this policy to a greater variety of different mobility populations. The interviews showed that the number of policy options deemed sufficient by inter- viewees had increased, with several organizations now offering policies tailored to multiple international employee populations. In most cases, there were still rudimentary differentiations – between full-benefit expatriation, short-term assignments, or business commuters – but in some instances either the organiza- tion or the individual motivation for mobility was given more emphasis. Table 2 presents two examples of the most sophisticated variations in mobility policy categories. Another way in which more flexibility in mobility policy might be enabled – what Sparrow (2012) identifies as a third stage – was to allow a move toward managed individualized flexibility, through negotiation and bargaining on the basis of previously learned and established mobility principles and protocols. The findings show that this approach is still rare, but is forming the basis of policy experimentation. Only three out of the 12 organizations interviewed had either implemented a stage-three flexible approach or were in the process of doing so. Another two were in the process of actively analyzing the implications of individualized flexibility with an intention to adopt the policy. Three had either actively rejected the option, or had decided not to give it consideration. Four considered themselves not yet to be at a stage of evolution to even raise the issue. Interestingly, the ProfServ organizations were, in general, far less sophisticated, or at much earlier stages in the journey than the FinServ organizations. Within the FinServ organizations alone, there were clearly different positions that were taken, reflecting a series of important internal contingencies. For those organizations that had considered but not adopted an individualized approach to mobility, a range of factors were thought to make this more advanced form of flexibility unattrac- tive or unworkable (see Table 3). For example, there was the perceived sense of danger of overly powerful business units acting in a limited-interest manner if they were given this degree of freedom. In other scenarios, it was felt that the homogeneous demographics of the expatriate population reduced demand for variation in policy. There were also concerns about the current level of maturity of other stakeholders in the organization to manage the flexibility, and the variable quality of knowledge andinsights into international management issues involved amongst the HR Business Partners. Additionally, there were fears that a person-based rather than assignment-based approach to business value would be detrimental to the organization’s culture. In contrast, the main drivers for considering individualized flexibility were: changes in the nature of assignee-roles, forcing more flexible consideration of program elements; increased demands for flexibility from business units; more employee- driven requests for flexibility; and increased cost considerations. Where organizations were pursuing individualized flexibility, it was clear that the policy had very significant impacts for the sorts of governance arrangements that had to be put in place. Organizations had to be very clear about the ways in which they wished to differentiate benefits, which might be on the basis of hierarchy, geography, demographic segment and associated individual needs, or the type of transfer or assignment. Where firms were moving toward a stage-3 level of evolution (enabling high levels of individualization in the arrangements), three main management considerations were identified: new management arrangements needed to mitigate the welfare and corporate responsibility considerations that were triggered by the flexibility; the need for alignment of the mobility program offerings with the underlying organizational rewards philosophy; and the need for the establishment of a link between more individualized entitlement to flexible mobility and benefits, with the need for an organizationally determined talent assessment. The interview quotes (see Table 4) highlight a clear set of policy considerations that were inherent in increased individualization that concerned welfare dilemmas. Depending on the pattern and type of mobility, there were organizational concerns about what benefits should be made flexible or not, which aspects of mobility and assignment operation should be under the discretion of the individual assignees, or of HR Business Partners, or local line managers. These levels of discretion and choice, in turn, rested on implicit judgments as to whether the individuals seeking more flexible mobility have the ability or not to make ‘wise’ decisions. The first area was the need for mobility decision-makers to understand the greater family-unit need. For less experienced managers, the concern was that if individualized flexibility were granted when business units faced an environment where host sites were under pressure to cut costs, individuals might not have the maturity or wisdom to make the right choice for themselves and their family in terms of the mobility conditions they accepted or not. The second set of behaviors to guard against concerned security and assignment productivity, such as housing Table 2 The operationalization of different categories of AE or SIE mobility variants. ProfServ mobility policy categories FinServ fes Employee-requested moves (SIE) supported by compliance-related benefits such as tax preparation, immigration assistance, airfare, some small amounts of cash for relocation, a home country pension scheme, social security and a right to return Assignee policy for the traditional long-term fully loaded expatriate package (AE) Professional development moves (SIE) initiated by people wanting to broaden their own capabilities through more complex jobs Explorer policy for long-term but more developmental moves for more junior staff (AE) Career development moves (AE) initiated by the business for longer-term talent and future leaders, where the organization wants the employee to have experiences that are motivational Short-term assignee policy for 3–12 month assignments (AE) International careerist arrangements (AE) for business units that had posts that needed to be staffed by sequential and successive assignments, but where professional moves did not need a high level of personal support Developmental, short-term assignee policy, moves usually for international graduates (SIE) Important business-need moves (AE) used to extend the business into certain areas but were dependent upon skills not found in-country, and where the individual demonstrated they were the strongest talent for the position Employee-requested policy, where an individual does not receive many benefits, as the employee wants to go somewhere, the organization wants to send him or her, but expects him or her to return within 5 years (SIE) Critical business-need moves (AE) defined for moves that required a specific individual to become mobile, involving a high degree of incentive and the triggering of a maximum level benefits Permanent transfers from a local contract to another local contract (could be either AE or SIE) Note: Each type of move is classified as either organization-assigned (AE) or self-initiated (SIE) based on who is considered to benefit most from the type of move. E. Farndale et al. / Journal of World Business 49 (2014) 204–214 209 considerations, especially in hardship locations. Organizations could not allow individuals to self-initiate such choices. Managers new to a market might seek to choose a cheap apartment out-of town, only to realize later in the assignment that it is detrimental to performance. Housing location also impacted the level of security and aspects of the quality of non-working life, including levels of rest and recreation. Because the adoption of individualized flexibility was often associated with an option for those items that were not included in the package to be exchanged for cash, those organizations that had formalized policy were forced to become more explicit about their underlying rewards principles. Individualized flexibility created concerns about leveling – or the consequence of not leveling – received or foregone benefits and cash payments. Interviewees also signaled the need for policy to try to ensure that work-lifebalance issues were given consideration very early on in the resourcing process. Finally, regarding talent assessment, two developments were highlighted: the education of key stakeholders; and the need to provide greater information. One organization provided e-enabled and self-service support, especially at the earlier stage of the resourcing process. Another used e-tools to enable the develop- ment of strategic resourcing plans (examining potential talent across businesses, geographies and grades), posting of interna- tional vacancies to facilitate self-initiated moves, and the signaling of high-level selection criteria. A final risk identified (but also an opportunity) was that attention needs to be given to the link between the level of mobility-policy flexibility afforded to the individual, and whether those assignees afforded access to individualized approaches are truly seen as ‘key talent’ or not. Table 4 New considerations created by individualized flexibility within mobility policy. Welfare issues ‘‘. . .We need to ensure that we are able to protect employees for their own good. This is connected to the level of maturity in our markets and management teams, and their ability to make the right decisions’’ (FinServ) ‘‘. . .From a business perspective, we need to stop people from choosing a blend that makes it more likely for the assignment to fail. . . [We know that] accommodation and schooling are important because if they are cut back on too much, assignments tend to fail’’ (FinServ) ‘‘. . .Welfare is very important and it comes back to us being an employer of choice. . . One of the current debates is that the policy only stipulates core benefits, but I believe that optional benefits should be highlighted as potential, for debate, and not be hidden from people’’ (FinServ) Reward issues ‘‘. . .To have flexibility in hiring people for a particular role is useful, particularly for locations where it’s difficult to find resources to go in. . . .There is a risk of the perception of inequity by employees but there is also a risk to the business if you can’t get someone to go in’’ (FinServ) ‘‘. . .If you have enthusiastic people in their mid-twenties to thirties, in their early careers and wanting the experience and you throw the full package at them, they become spoiled and difficult to mobilize further along the line. The ‘‘full balance sheet’’ is not necessary for key talent – it’s more for someone with a family and all the baggage, in later career, with a set of skills and influence that are desperately needed to fill a gap in a location which needs to be set up or run. That’s where the balance sheet policy is needed. We need to help the business understand where to spend the money i.e. not just on key talent, but on the right talent’’. (FinServ) ‘‘. . .We hold a line where we don’t allow people to encash or trade-off benefits. They’re to be provided for a purpose and if they’re not needed, they’re not needed. There’s a moral argument about giving a person a big house and schooling when he’s on an income to afford it himself if he’s back home’’ (FinServ) Talent assessment issues ‘‘. . . There’s already pressure to reduce the short-term policy for graduate rotation moves. The trouble is that although you can have principles for how something is used, it can quickly become the cheap alternative and it suddenly won’t be just for graduates. My concern is that if you start to dissolve the criteria, the flexibility makes it into a bit of an open season for who can shout the loudest and negotiate the most. It puts a lot of pressure on the business. They prefer to be given guidelines, because then they can blame HR and say ‘‘my hands are tied!’’ (FinServ) ‘‘. . .One of the dynamics that we have to think about from a corporate legal perspective, is that statistically white men are better negotiators [of flexible terms]. . . we have to be so careful. . . In an effort to be sure that we are not discriminatory in our approach, we don’t approve of [individualized bargaining]. . . it could have unintended consequences back to the organization as we know’’ (ProfServ) Table 3 Rationales for creating or avoiding individualized flexibility within mobility policy. ‘‘. . .I think that the reason for that [trading off flexibility] is that we have member firms at differing, very disparate stages of alignment. . . we talk about the way we’ll administer, we’ll give freedom to the degree that it doesn’t hurt the integrity of the process’’ (ProfServ) ‘‘. . .Probably 85–90% of our assignments today are reactionary without any strategic forward thinking on the actual talent management component. . . if we were to develop an approach and a philosophy regarding flexibility principles that were too restrictive, our client groups will not use this, they’ll just go figure something else out’’ (ProfServ) ‘‘. . .We offer a number of variations of policy and handle flexibility by allowing between these. . . we come up with different scenarios depending on what the customer is willing to pay’’ (ProfServ) ‘‘. . .With the current environment we are concentrating on improving the organization and administration of the program rather than meeting the particular wishes and desires of different international assignees’’ (FinServ) ‘‘. . .We could be driven to more flexibility by the business and cost, or we could have more flexible packages for employees to suit their circumstances to improve productivity. Our organizational preference is the latter’’ (FinServ) ‘‘. . .The risk with too much flexibility is that it dissolves the value-add of the international assignment function in its knowledge and expertise’’(FinServ) ‘‘. . .We take a ‘core plus’ approach for the business, so most entities must offer the core benefits and then have the option around structuring other benefits. Core plus is for the business, not for employees as such’’ (FinServ) ‘‘. . .we gave flexibility to line managers to negotiate certain parts of the package. . . so that we would be able to meet the two goals. . . a number of duty of care items, mainly tax and healthcare, were non-negotiable, but everything else, including area allowances, mobility premiums, flights home, accommodation, and children’s education, were up for negotiation’’ (FinServ) ‘‘. . .The flipside with flexibility is whether it diminishes the support that should be in place and creates too much of a dilemma for the business in trying to choose what to give. . . Looking at flexibility allows us to assess the reasons behind a particular move’’ (FinServ) ‘‘. . .We have global standard policies at the moment and we’re not comfortable that we are able to run these difficult global processes really well so we’re not ready to open up to a level of flexibility that would be more difficult to manage’’ (FinServ) ‘‘. . . With everything being negotiable, nothing was a policy exception. Only healthcare and tax needed approval. Policy exception requests for these were very rare. Also, flexibility means that there’s no cap, so items can be negotiated up as well as down. We started to see a bit of this at the very highest levels on things like education’’ (FinServ) ‘‘. . .When you take the structure away, it reduces the formal decision process. . . [but] it slows down the decision-making process as costings and [contract] terms need to be agreed and signed off before getting. . . agreement to the assignment’’ (FinServ) E. Farndale et al. / Journal of World Business 49 (2014) 204–214 210 6. Discussion and future research We have addressed the need to explore how MNCs attempt to balance individual and organizational goals through what we have termed a mutual-benefits approach. We now develop propositions for future research around these themes. From Study 1 it was seen that ProfServ1’s organizational GTM goals are clearly consistent with the global mobility literature (e.g. to follow clients or develop new markets, and invest in future leaders of the firm). Similarly, the drivers for individuals to go on expatriation assignments are not unfamiliar: a desire to improve skills, gain experience, and further their careers (Suutari, Brewster, & Tornikoski, 2013). However, Study 1 also highlighted the importance for employees of meeting personal needs, such as moving overseas to be with family. Given this is a professional- services firm staffed by highly educated, ambitious knowledge workers, both human capital theory (Bolino, 2007) and the ‘i-deals’ literature (Rousseau et al., 2006), suggests that that this should be an increasing trend in organizations. Psychological contract theory requires there to be evidence that the ‘deal’ is subjective and differs between individuals and employee segments. This was clearly the case. Study 1 highlighted the category of expatriate which to date has received little attention in academic research: self-initiated organization expatriates, i.e. employees who freely volunteer to go on expatriate assignments, making personal and career sacrifices to do so, but remaining with their current employer. Study 2’s examination of the broader cross-sector GTM policy also evidenced the increasing range and variety of global mobility policy types (Haslberger & Vaiman, 2013). It is therefore evident that research needs to expand the accepted definitional elements of SIE in particular. Currently these definitions are as being ‘without assistance’ and having ‘local contract’ arrangements (Andresen, Al Ariss, et al., 2013; Vaiman et al., 2012). Recent variation of policy options now captures employees who have self-initiated motivations, but who move within their existing employer and are afforded assistance and financial arrangements, though these are less generous than an AE-move. Al Ariss and Crowley-Henry (2013) have highlighted that SIEs are assumed to be able to choose freely where and when to go and return on assignment, but research has not considered influence factors such as organizations or economic drivers potentially forcing such decisions (Dickmann & Docherty, 2010). Policy-makers are delineating important sub-categories within AE and SIE popula- tions, reflecting the observation in the literature that both AEs and SIEs have different sets of motives for assignments (Altman & Baruch, 2013; Cerdin, 2013). This leads to our first proposition for future research: Research Proposition 1. Future research should distinguish between the motives behind two types of expatriation within MNCs: organiza- tion-assigned expatriates and self-initiated organization expatriates. The adoption of a mutual-benefits perspective may be a more fruitful way of segmenting mobility populations. Ways of linking employees and organizations through notions of partnership can lead to benefits for both parties (Inkson, 2008). As Study 1 shows, if an assignment is viewed as an opportunity for both organizations and individuals to improve their long-term situation (e.g. through global expansion and career development respectively), this highlights complementarities in the system. However, when the short-term challenges to achieving these goals are compared – cost and process issues for the organization, and personal sacrifices of short-term career progression and networks for individuals – this is where conflict might arise. In other words, although goals may be shared, the realities of the challenges of the process for both parties differ. The HR/GM function needs to address both sets ofchallenges successfully for the shared long-term goals to be achieved. Focusing on career progression, if individuals are prepared to make sacrifices, including a lack of guarantee of a good position in the home country to which to return, what are individuals seeking in return for mobility? One explanation might be the emergence of a new expatriate psychological contract where individuals are seeking to maximize rewards for taking the assignment, and who see the main benefit of the assignment not in internal promotion but increasingly looking to the external labor market (Pate & Scullion, 2010). Alternatively, it may be that the personal needs are greater than any career goals, perhaps supporting the ‘i-deals’ notion (Rousseau et al., 2006): whilst volunteers focus more on expatriation for self-development or to achieve personal rather than corporate goals, assigned expatriates primarily seek to achieve company goals in order to benefit from the career progression. In the domain of global mobility, it will be interesting to explore this further beyond the contexts of the empirical studies presented here: Research Proposition 2. Future research should explore whether the ‘i-dealization’ of expatriation is occurring on a broader scale beyond the financial and professional services sectors. Given the diversity of goals and challenges from both the organization and individual perspectives, we have to ask whether the benefits of expatriation can actually be realized for both the organization and the individual simultaneously? Study 1 illustrat- ed both a stronger business imperative requiring a short-term return on investment from assignments (i.e. direct added-value of the assignment itself), and increasingly more idealistic and uncertain long-term returns (i.e. much less use of AEs for developmental purposes). Potentially this means that the organi- zation benefits in the short-term whilst the person is overseas, but the individual relies on a successful return for their career to benefit (a much more uncertain, long-term investment). Research Proposition 3. Future research should focus on how the balance between short and long-term returns on investment by the organization in expatriate assignments impacts individual career capital. Given the enthusiasm for the system of self-initiated nomina- tions for expatriate assignments in ProfServ1, we might conclude that individuals are prepared to take on the additional responsi- bilities of managing the expatriation process with the longer-term goal of this enhancing their career, supporting Andresen, Biemann, et al. (2013). From an organization perspective, ProfServ1 appears to be balancing the contingency-theory approach of being driven by external client needs to globalize (Baden-Fuller & Stopford, 1994), with the ‘inside-out’ approach by focusing on the psychological contract needs of its knowledge-worker population (Rousseau et al., 2006). However, as evidenced in Study 2, in order to both accommodate and mutualize greater individualization, policy-makers have to design and evolve more complex manage- rial arrangements. Reflecting the ‘deal’ language in the ‘i-deal’ label, they have to create a market around the management of talent and global mobility. This leads to the fourth proposition for future research: Research Proposition 4. Future research should explore the extent to which responsibility for expatriation assignments being delegated in MNCs to the individual as part of a more flexible approach to GTM is welcomed by individuals. Psychological contract theory argues that contracts are dynamic in response to emergent behaviors. Again, this is clearly evident from the studies presented here. From an organizational-challenge E. Farndale et al. / Journal of World Business 49 (2014) 204–214 211 perspective, one of the most prominent GTM issues is cost (Suutari & Brewster, 2001); this played out at a number of levels in ProfServ1. Firstly, expatriation had to be seen as an investment in order to gain business support. Secondly, the firm was using less assigned expatriation (AEs) in favor of allowing people to volunteer themselves (as SIEs). This reduced costs for the firm, but simultaneously restricted the number of AE opportunities for purely development goals. Thirdly, the firm was introducing different types of ‘international experience’ to reduce cost, including increasing the use of short-term international projects. However, the findings from Study 2 showed that when seen through the eyes of corporate policy-makers, the growth of more flexible forms of global mobility is managed in an embedded strategic context, the three driving forces being: increasing centralized control; reducing mobility delivery costs; and increasing program flexibility. HR/GM functions had to align these three strategic drivers, and this alignment varied across organizations. We draw three conclusions from this for exploration in future research. First, HR/GM functions do not – and cannot – manage mobility-program flexibility as a single strategic challenge: program flexibility needs to be aligned with other strategic changes taking place around assignment delivery. Second, despite our observations about the increased importance of self-initiated mobility, for the majority of organizations it is seen as just one development given the emergence of a range of more differentiated international talent pools whose needs must be met. Third, a number of stakeholders are involved in the global-mobility process, i.e. line management, corporate HR functions, HR Business Partners, the GM function policy designers, and the expatriates themselves: each has a different line-of-sight of (or may be blinded to) the GTM issues involved. We summarize these three conclusions in the following statement for future research: Research Proposition 5. Future research should explore the extent to which global mobility approaches need to be embedded in an appro- priate and reinforcing broader GTM strategy that supports multiple stakeholders in order to be effective. When analyzed through the lens of senior HR/GM policy- makers, it becomes clear that many of the GTM strategies related to increased flexibility and individualization are based on a number of untested assumptions – these expectations, obligations and promissory beliefs might prove to be inaccurate. The following four assumptions that can be derived from our interview accounts should now be examined and tested. The first assumption is that the overall costs of assignments can be reduced through a policy of negotiating certain policy benefits, rather than having a philosophy based on universal entitlement. This counters the argument supporting standardization of GTM (Sparrow, 2012). Second, if a more decentralized and business-driven choice process over the elements to be included in a mobility decision is introduced, it produces a better fit between individual and organizational goals (based on psychological contract theory reasoning, focusing on meeting individuals needs to determine mobility decisions rather than external drivers: Rousseau et al., 2006). Third, by allowing decisions to be more self-managed, the reduced time that HR/GM staff need to devote to each negotiation means that central mobility resources can be freed up to focus on more strategic concerns – a well-rehearsed discussion in the strategic human resource management literature (e.g. Ulrich, 1997). And fourth, that the design of policy entitlement based around employees selecting and trading items to meet their personal circumstances will improve levels of engagement with global mobility, providing a better return on investment (based in the ‘i-deals’ notion: Rousseau et al., 2006). Research Proposition 6. Future research should explore the extent to which a mutual-benefits approach to GTM is defined by: reduced assignment costs (through negotiation-based policies); alignment with both individual and organizational goals (through local decision-making); operational efficiency (through a self-managed approach); effectiveness in creating assignment engagement (through indi- vidualization). There are clearly opportunities, but also considerable risks, associated with individualized flexibility, and the ability for both parties to meet their promissory beliefs and mutual obligations. Developments in program flexibility often mean that the HR/GM function is transferring responsibility to the expatriate, who selects a set of benefits or pursues a particular form of flexibility. Three types of welfare risk were identified in the empirical studies – to the individual, to assignment performance, and to corporate reputation – and the impact of these should now be explored. These risks may be mitigated by introducing strong governance arrangements, but some potentially desirable mobility options may be rejected if the expatriate population has inappropriate expectations, or cost pressures on local businesses are likely to produce dysfunctional behaviors. When considering levels of flexibility, HR/GM functions need to be explicit about their key principles relating to the underlying philosophy of mobility entitlements, the relative importance of individual and organiza- tional goals, and the need to demonstrate cost or operational benefits. This leads to our final research proposition: Research Proposition 7. Future research should explore the hidden welfare considerations in mutual-benefit approaches to GTM (where people who are given more sway over budget or mobility decisions may seek options which are not necessarily in their, or their family’s, best interests). 7. Conclusions and managerial relevance From both a theory and a practice perspective, it is evident that the effective adoption of a mutual-benefits perspective to GTM is challenging. If implemented effectively, this may be a useful source of competitive advantage in terms of sourcing the most appropri- ate talent into expatriate assignments. Both empirical studies presented here highlight that there are two necessary conditions before a mutual-benefits perspective can be formalized: a corporate culture that favors individualization; and the need for baseline sophistication in the way that existing (more standard- ized) levels of flexibility are managed. The HR/GM function should be clear about a number of key strategies to make flexibility successful: aligning flexibilities with the general strategic and cultural context; targeting the gover- nance challenges; having an underlying corporate philosophy about mobility entitlements and assumed consequences of flexibility; creating opportunities for the various stakeholders in mobility decisions; and limiting flexibility to when it makes sense. Clarity is also needed regarding the relative importance and balance between individual needs, work-life balance issues, and welfare considerations. Where decisions were made to change the current level of flexibility, they were based on complex political assessments about the level of power that the HR/GM function had, the additional resources the new approach would entail, but also the risks and consequences of maintaining the current status quo. Both empirical studies showed that the implementation challenges associated with introducing more individualized flexi- bility in policies should not be understated. Once self-initiation E. Farndale et al. / Journal of World Business 49 (2014) 204–214 212 of mobility moves away from being an informal and undetected process, into a more formalized and managed form of GTM around which policies need to be established, it is evident that the pursuit of individualized flexibility is both complex and operationally challenging to manage. Although it might be assumed that a mutual-benefits approach automatically creates benefits, early adopters found there was a slowing-down of decision-making, rather than an assumed speeding-up. This is because allowing more self-initiation involves more idiosyncratic consideration of factors, and a higher level of skill and judgment to be applied to each decision. It also entails an increased volume in cost estimates to be carried out, greater variation in policy, and a significant need to invest in training to educate people involved in the process about how the system works. Why is it important to understand how individual and organization goals might be balanced to the mutual benefit of both parties and to build propositions for future research? We have argued that psychological contract theory, and the need to understand the new reciprocities that exist in the perceived promises being made, shows the value of building an ‘inside-out’ approach, i.e. an internally driven GTM strategy. It also helps us understand what is going on and to predict how these strategies must evolve. As we have noted, many of the GTM strategies related to increased flexibility and individualization are based on a number of untested assumptions. We have highlighted a range of future research propositions which will help to explore some of these assumptions. Our study has contributed to knowledge in a number of areas. First, we have identified and examined the issues that face organizations when seeking to use a mutual-benefits approach to achieve more effective GTM programs. As new GTM policies and structures are established to support both individual and organiza- tional goals, and as flexibility increases, the pressures on GTM structures increase. There is a greater need to provide individualized support throughout the process due to variations from any standard formula for expatriation. Considering the HR/GM function, its primary goal has to be to support organizational goals; however, it is in the position of equally having to pay attention to the needs of individuals on assignment. We have highlighted that these personal needs appear to be playing a substantial role in the identification of expatriates. 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Cross Cultural Management: An International Journal From an ethnocentric to a geocentric approach to IHRM: The case of a French multinational company Maral Muratbekova-Touron Article information: To cite this document:Maral Muratbekova-Touron , (2008),”From an ethnocentric to a geocentric approach to IHRM”, Cross Cultural Management: An International Journal, Vol. 15 Iss 4 pp. 335 – 352 Permanent link to this document:http://dx.doi.org/10.1108/13527600810914139 Downloaded on: 12 February 2015, At: 23:26 (PT) References: this document contains references to 29 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 7397 times since 2008* Users who downloaded this article also downloaded: Shannon L.L. Lloyd, Charmine E.J. 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Härtel, (2003),”Cross-cultural effectiveness of Western expatriate-Thai client interactions: lessons learned for IHRM research and theory”, Cross Cultural Management: AnInternational Journal, Vol. 10 Iss 4 pp. 4-28 http://dx.doi.org/10.1108/13527600310797667 Access to this document was granted through an Emerald subscription provided by 327772 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald forAuthors service information about how to choose which publication to write for and submission guidelinesare available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The companymanages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well asproviding an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committeeon Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archivepreservation. *Related content and download information correct at time of download.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 335 Cross Cultural Management: An International Journal Vol. 15 No. 4, 2008 pp. 335-352 #Emerald Group Publishing Limited 1352-7606 DOI 10.1108/13527600810914139 From an ethnocentric to a geocentric approach to IHRM The case of a French multinational company Maral Muratbekova-Touron Institut Supe´ rieur de Gestion, Paris, France Abstract Purpose– The purpose of this paper is to study the case of one French multinational company which has undergone a process of radical restructuring and ‘‘internationalization’’ because of acquisitions of Anglo-Saxon multinational companies. It examines how the organizational changes influenced the company’s approach to the international human resource management (IHRM). Design/methodology/approach– The methodology of this research is the single case study. Sources of evidences are direct participation and observation, interviews with top managers, and documentation. Findings– The results show that the ethnocentric model, when French managers were placed on the top of the foreign subsidiaries, becomes non-efficient in the company which doubled its size and the geographical spread of its activities. It is argued that the forces of globalization constrained this multinational company to change from an ethnocentric approach to a geocentric approach to its IHRM. Originality/value– The case demonstrates that national and organizational cultures are important contextual factors which influence the company’s approach to its IHRM. The paper outlines the interconnectedness of globalization and the geocentric approach to the IHRM. KeywordsFrance, National cultures, International business, Human resource management, Multinational companies, Ethnocentrism Paper typeCase study Introduction Globalization processes during the past decades has led to the development of the large multinational companies expanding their activities across countries and continents. One of the main issues facing the development of the global companies has always been to find the right balance between the local autonomy between subsidiaries and the control of the corporate headquarters. The objective of this paper is to show how the acquisitions made by a multinational company influenced its approach to human resource management. This paper studies the case of one French industrial multinational company which is under an obligation to change the way in which it deals with global integration – local adaptation dilemma. For the sake of confidentiality a pseudo-name of Lemma is chosen for this enterprise. The Lemma group, a world leader in its domain, has expanded rapidly over the past several years due to its growth-by-acquisition strategy. The group doubled its size, workforce, sales, and net income as a result of the acquisition of the Anglo-Saxon multinational companies in the late 1990s and in the beginning of 2000s. Thus, it added 30 new countries to its operating base. The Group underwent major restructuring in the end of the 1990s. The organization of the company by Divisions broke away from a highly centralized approach to authority and established a decentralized structure headed by the Corporate Centre. The ethnocentric model, when French managers were placed on the top of the foreign subsidiaries, becomes non-efficient in the organization which doubled its size and the geographical spread of its activities. The current issue and full text archive of this journal is available at www.emeraldinsight.com/1352-7606.htmDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 336 Research propositions According to the scholars (Schuleret al., 2002; Sparrowet al., 2004), in order to comprehend the international human resource management (IHRM), one should avoid its contextual isolation. IHRM policies and practices are influenced by the company’s structure and strategy; its institutional and cultural environments (Ngoet al., 1998; Schuler and Rogovsky, 1998; Schuleret al., 2002; Sparrowet al., 2004). National culture and the country of origin of the MNE influence HRM policies and practices (Ngoet al., 1998). Under the assumption of a strong link between national and organizational cultures developed by different scholars (Laurent, 1983; Hofstede, 1991; Adler and Bartholomew, 1992 and others), the propositions regarding the organizational culture of Lemma should be formulated taking into account dimensions proper to the French business culture. These research propositions on the Lemma culture will help to develop the proposition related to the IHRM approach. Cultural categorization studies have been largely criticized for being simplistic and methodologically limited (e.g. D’Iribarne, 1996-1997; McSweeney, 2002; Brock, 2005). However, some cultural dimensions proved to be useful since they are easy to communicate, they show validity, ‘‘they are at the right level between generality and detail; they establish a link among individual, organizational, and societal phenomena’’ (Aycan, 2005, p. 1085). In the absence of a better way, the scholars continue to use Hofstede dimensions to compare cultures which remain the most complete comparative empirical research with at least some dimensions found to have predictive ability (e.g. Brock, 2005). Famous research by D’Iribarne (1989) describes ‘‘the logic of honor’’ or ‘‘the rationale of honor’’ that reigns in French society. The principle of the logic of honor is based on status or rank. The fact of belonging to one’s rank is determined by tradition rather than imposed by the group. Thus, honor is defined by tradition, neither by law nor by reason. It is tradition that defines what kind of work should be done by different social groups. Concerning the dimension of hierarchy, France is considered as a large ‘‘power distance’’ country, where there is considerable dependence of subordinates on bosses. According to Hofstede’s (1991) conclusions, France has a rather high Power Distance Index. D’Iribarne (1989) writes about traditional existing images of French hierarchy: centralization and a respected distance between superior and subordinate. Barsoux and Lawrence (1991) assert that France has a long tradition of hierarchical rigidity, respect for authority, and centralization. According to them, French companies are highly hierarchical with thePre´ sident-Directeur-Ge´ ne´ ral(PDG) at the head. According to Hall and Hall (1990), French managers have a reputation to be tough bosses with a tendency toward autocratic behavior. They are preoccupied with status, rank, and formality, and they are indifferent to the needs of their employees. Laurent (1986) observes that French managers perceive the organization as an authority network (p. 96): the hierarchical position gives power to its holder. Thus, mastering the power relationships is crucial for managers. Hofstede’s (1991) findings concerning masculinity and femininity place France on 35/36 position (among 53 countries). Thus, France has a rather moderate feminine culture where tender, non-aggressive behavior for both women and men is appreciated. Compromise and negotiation, rather than a good fight or even physical violence, are the methods for conflict resolution. As far as uncertainty avoidance is concerned, French culture is found to be rather strongly oriented toward the high level of uncertainty avoidance (Hofstede, 1991).Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 337 It means that French culture is characterized by the existence of many rules regulating the duties and rights of workers. Hofstede’s findings concerning the dimension of masculinity/femininity and uncertainty avoidance are contested by D’Iribarne (1996-1997). The questionnaire characteristics and the way it is interpreted are criticized by the partisan of ethnographic research. France could be considered as a particularistic (comparing to Anglo-Saxon) culture where task prevails over relationships. There is a specific network of graduates from theGrandes Ecoleswhich plays a significant role in the government and business structure of France. People at the top levels are mostly people of this elite group of graduates who maintain school ties after graduation (Hall and Hall, 1990). Roussillon and Bournois (2002, p. 52) argue in the same vein: ‘‘The French social system is characterized by the importance that it attaches to its elite…’’ Therefore, when speaking about French culture, one has to keep in mind its particularistic nature. Personal contacts are extremely important in doing business. In addition, Hall and Hall (1990), in their comparative study of French, German, and American cultures, mention the importance of not only professional, but social connections also: they point out that it is possible to find a general director of a company who obtained his position through marriage or connections. D’Iribarne (1989) highlights the fact that informal relations hold a significant place in French management practice. It is very important for people to ‘‘have contacts’’. To achieve a high level of professional cooperation, one needs positive relations. The importance of connections extends to the close long-term relationships between salespeople and their customers, for example (Hall and Hall, 1990). In comparison with the German and American business cultures, France is considered as high-context (Hall and Hall, 1990). It is a high-context culture because information does not flow freely; subordinates often do not have all the necessary information from their bosses. Implicit rather than explicit communication is valued in French organizations (Hall and Hall, 1990). D’Iribarne (1991) also emphasizes this characteristic of French organizations by referring to their ‘‘opacity’’. As stated by the scholar, the life of French enterprises is concerned by a significant difference between ‘‘official’’ and ‘‘officious’’ (D’Iribarne, 1991, p. 100). Franck (2000), in his comparison of American and French styles of management, states that the way meetings are conducted is linked to the context creation and information exchange for French managers. And they are the place of concrete confrontation and decision taking for Americans. Thus, French business culture can be considered as a high-context culture. Thus, the main features of the French business culture, which are examined and confirmed by different scholars, are: . high respect for authority (Laurent, 1986; Hall and Hall, 1990; Barsoux and Lawrence, 1991; Hofstede, 1991); . particularism (D’Iribarne, 1989; Hall and Hall, 1990; Roussillon and Bournois, 2002); and . high-context (Hall and Hall, 1990; D’Iribarne, 1991). Before the acquisition of two Anglo-Saxon companies, the organizational culture of Lemma, which was strongly influenced by the French national culture, could be described as particularistic and high-context, with a high respect for authority. In this perspective, the following research propositions are formulated as following.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 338 P1a.The Lemma organizational culture is characterized by a high respect for authority. P1b.The Lemma organizational culture is a particularistic culture. P1c.The Lemma organizational culture is a high-context culture. Setting up the context of the organizational culture of Lemma makes it possible to develop the research proposition regarding the company’s IHRM approach and the way in which it deals with global integration – the local adaptation dilemma. According to Ferner and Quintanilla (1998), French enterprises underwent major restructuring in the 1990s because of globalization processes. As the company’s strategy and structure influence its approach to IHRM (Dowling and Schuler, 1990), the restructured multinational enterprises are under an obligation to change their approach to their IHRM. It is claimed that the acquisitions of two Anglo-Saxon multinational companies influenced the organization and structure of the Lemma group, and therefore its IHRM approach. Taking into consideration high-context and the particularistic nature of the Lemma culture postulated above, the socialization methods of the company correspond to the ethnocentric approach to its IHRM. Before the acquisitions Lemma had a highly centralized organization with French managers occupying the key positions of the company. It is argued that this ethnocentric approach does not correspond to its modified needs anymore. In view of the significant increase in size, the company will not have enough expatriates to staff foreign subsidiaries. The reorganization into divisions changes the orientation: the global integration favored in the ethnocentric approach has to be balanced by local responsiveness. Another consequence of the acquisitions regards the origins of integrated companies. According to Bartlett and Ghoshal (1989), the Anglo-Saxon enterprises prefer formalization as a process to manage global integration – the local adaptation dilemma. The formal systems and policies play the role of the common language shared by all managers. The scholars also argue that European companies favor socialization as a way of coordination (Bartlett and Ghoshal, 1989). Socialization is based on the managers’ understanding of the company’s objectives and solid personal relationships. It was assumed above that Lemma has particularistic and high-context culture, which is in concordance with the arguments of Bartlett and Ghoshal (1989). Therefore, it is hypothesized that by integrating the Anglo-Saxon companies, Lemma faces the necessity of choosing more formalized procedures and rules that are legitimate in all subsidiaries. Thus, Lemma deals with the dilemma of how to think globally and act locally. A geocentric approach to IHRM is considered to be the best way to deal with global integration – local adaptation dilemma by different scholars (Bartlett and Ghoshal, 1988; Adler and Bartholomew, 1992; Kamoche, 1996). According to Caligiuri and Stroh (1995), this approach makes it possible to balance between the conflicting priorities of global integration and local responsiveness. Thus, it is argued that the acquisitions of Anglo-Saxon companies by Lemma necessitate the choice of a geocentric approach to its IHRM in order to manage the dilemma. This discussion leads to the development of the following proposition. P2.The forces of globalization (the acquisitions) constrain Lemma to change from an ethnocentric approach to a geocentric approach to its IHRM.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 339 Methodology The methodology of this research is based on the single case study (Yin, 1993). The most important source of evidence for this research is direct participation and observation. I served as a part-time employee of Lemma for three years. While working for the group, any member of the organization has his/her own perception of the management culture. This close proximity could be considered as a shortcoming or a bias for the researcher; however, it allowed me to have a deeper understanding of the processes occurring in the organization. Working for Lemma also allowed me to follow its rituals, traditions, and everyday habits. Participating in informal organizational events and talking to employees is the informal aspect of direct observation. And the most important part is the job itself: my everyday tasks regarded different HR projects. Interviews, which are another significant source of case study evidence of this research, were conducted with the help of an adaptation of the ‘‘critical incident technique’’ developed by Flanagan (1954). Critical incidents are characteristics of the Lemma organizational culture considered as typical or fundamental by the interviewed managers. In other words, a critical incident is an event or behavior described by managers that helps to define the cultural dimensions of the Group. Where applicable, critical incidents are categorized into the existing cultural dimensions developed by Adler (1986), Hall and Hall (1990), Hofstede (1991), Trompenaars and Hampden-Turner (1998), and others. All items are inserted in table, which lists each category (cultural dimension). By defining the largest critical incident categories, the method allows determining the key cultural dimensions of Lemma. The levels of frequency of critical incidents’ emerging or the sizes of each category are classified following the quarterly percent interval. The intervals and their coding are presented in Table I. In total, 24 semi-structured interviews were conducted with managers of Lemma, which were chosen from the list of 700 top managers. In addition, one interview was conducted with an external consultant who contributed to the development of the competency-based leadership model at Lemma. Interviews lasted from 40 min to 2 h. The interviews were conducted in French and English. I have tried to provide diversity regarding the functional positions and nationalities of managers taking into account geographical constraints that reduced the possibility to speak to managers locating in countries other than France and who could not come to Paris for the interviews. Nevertheless, three interviews were conducted by telephone with the managers working for business units locating in Turkey, Chili, and Greece. Table I. Level of critical incidents frequency Interval (%) Frequency of emerging Coding 0-24 Low The cultural dimension is insignificant for the Lemma managers 25-49 Moderate The cultural dimension is moderately significant for the Lemma managers 50-74 High The cultural dimension is significant for the Lemma managers 75-100 Very high The cultural dimension is highly significant for the Lemma managersDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 340 With no surprise, ten of the interviewed managers are French as Lemma preferred to send French expatriates to foreign business units recent time. Other interviewed managers are from European countries (Belgium, Germany, Italy, and England), Canada, and theUSA. Half of the interviewed managers are from Human Resources Departments; other departments include General Management, Strategy, Finance, and Performance. For the sake of confidentiality and managers’ feeling of protection, anonymity of all interviews is provided. While quoting interviewed managers, only their function is mentioned in order to preserve the anonymity. Consulting company is not named for the same reasons. Divisions and corporate headquarters were referenced as divisions followed by the numbers. Table II gives some details on the profile of the interviewees. Documentation was also used as a source of case study evidence. The archival documents including the letters of the CEO, annual reports, and HR brochures were helpful to understand the HR policies and procedures developed by the organization in the past. Before going deeper into discussions about the organizational and cultural changes within the group, it would be worth describing the origins of the Lemma culture and its main characteristics prior to the major acquisitions. Organizational culture of Lemma prior to acquisitions The critical incidents regarding the cultural dimensions of Lemma were gathered during a series of interviews with the group’s organizational managers. As described in Table II. Profile of the interviewees Number Function DivisionSeniority in the companyInterview method 1 HR Division 5 Less than 3 years Direct 2 HR Division 5 More than 10 years Direct 3 General Division 2 More than 10 years Direct 4 HR Director Group More than 10 years Direct 5 General Division 2 More than 10 years Direct 6 HR Division 3 5-10 years Direct 7 General Division 1 Less than 3 years Direct 8 Strategy Division 2 More than 10 years Direct 9 HR North American activities More than 10 years Direct 10 Country Manager Division 1 More than 10 years Telephone 11 Finance Division 5 More than 10 years Direct 12 Marketing Division 5 5-10 years Direct 13 Consultant Consulting company Direct 14 Country Manager Division 1 More than 10 years Telephone 15 General Manager Division 1 Less than 3 years Direct 16 Country Manager Division 1 More than 10 yeas Telephone 17 HR Division 5 3-5 years Direct 18 Performance Manager Division 2 More than 10 years Direct 19 Performance Manager Division 2 More than 10 years Direct 20 HR Division 5 5-10 years Direct 21 General Manager Division 2 More than 10 years Direct 22 HR Division 1 More than 10 years Direct 23 HR Division 5 3-5 years Direct 24 HR Division 5 More than 10 years Direct 25 HR Division 2 More than 10 years DirectDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 341 the methodology section of this paper, critical incidents are features of the Lemma organizational culture considered as typical or fundamental by the interviewed managers. For example, the following quotation of one of the interviewees was classified as an incident related to the particularistic nature of the Lemma culture. It is a ‘‘personal’’ culture. Interpersonal relations are more important than organization. They look for personal arrangements; problems are solved only through direct contacts (Strategy Manager, Division 2). Numerous incidents described by the same manager but relating to one cultural dimension are counted as one critical incident. The critical incidents are summarized in Table III. Four categories – ‘‘dominance of French’’, ‘‘consensus’’, ‘‘Christian culture’’, and ‘‘weak human resource management’’ – are by no means new cultural dimensions. These categories are developed during the collection of data. They are separated into distinct columns because they were judged as necessary in order to give a more complete picture of the organizational culture of Lemma prior to the acquisitions made. According to the results obtained, the cultural dimensions ‘‘particularism/ universalism’’, ‘‘femininity/masculinity’’, ‘‘hierarchy’’, and ‘‘high/low context’’ have a high or very high level of frequency. In relation to the gathered data, one can describe Lemma’s culture as a particularistic, feminine and high-context culture with a high respect for authority. Thus, propositions1a,1b, and1care corroborated. Another proposition concerning the femininity/masculinity dimension can be made because the size of this category is the highest among all categories (88 per cent). The critical incidents related to this dimension (‘‘humanism’’, ‘‘respect for people’’, ‘‘exceptional quality of relationships in the company’’, ‘‘family relationships’’, etc.) will be described in the course of this paper. The absolute majority of the managers interviewed emphasized the ‘‘humanistic’’ nature of the Lemma culture. One can state that the Lemma organizational culture is a feminine culture. The proposition is therefore formulated as follows. P1d.The Lemma organizational culture is a feminine culture. But before delving deeper into the description of these dimensions, I propose to pay closer attention to the French origins of Lemma, which are extremely important in understanding its culture. Despite the moderate level of frequency emerging for the ‘‘importance of the French language’’ and the ‘‘dominance of French managers’’, these two issues will be briefly described in the following part of this paper in order to better comprehend the group’s organizational procedures. French origins The origins of the Lemma culture are perceived as lying deeply in French culture. The French language and culture are still the key building blocks of the internal reality of Lemma. According to the Lemma managers, the Frenchness of Lemma is represented by two factors: the predominance of French among executives and the use of French as the company’s official language. The first factor concerns the top management of Lemma which is dominated by French managers. Lemma culture is still French culture. What does it mean? First of all, it means – managed by French…(General Manager, Division 1).Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 342 Table III. Critical incidents: dimensions of the Lemma organizational culture Number allocated to manager/ Cultural dimensionUncertainty avoidance AscriptionNature of reality and truth Particularism FemininityHierarchy (paternalistic) IndividualismSpecific/ DiffuseLanguage (importance of French) HighDominance of French ConsensusChristian cultureWe a k HRM 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Freq. 0 6 015 22 14407139757 % 0 24 060 88 5616 0 285236 28 20 28 Level of frequencyLowHigh Very highHighLow ModerateHighModerate Moderate Low ModerateDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 343 While French employees represent only 12 per cent of Lemma’s workforce, they occupy 45 per cent of the top management positions. And the members of executive committee (as the interviewee points out below) are almost all French. Lemma culture is really French. Today it is even more French than ever. The best way to see it is to look at the executives. 90 per cent of them are French…The only way to change it is to change the executives. They have to do it by representation. For example, one-third of the group is North American. Therefore, about one third of executives should be North American (General Manager, Division 2). Adler and Bartholomew (1992) argue that in order for a transnational human resource system to be effective, one of its characteristics should be transnational representation. This means a multinational composition of the managers and executives of the organization: ‘‘the firm’s portfolio of key executives and managers should be as multinational as its world-wide distribution of production, finance, sales and profits’’ (Adler and Bartholomew, 1992, p. 55). Obviously, transnational representation is not yet the case at Lemma. The absolute majority of the Executive Committee is made up of French or French-speaking (French as native language) executives. The second aspect of Frenchness at Lemma is the use of the French language. The fact that the French language remains one of the official languages of the company communicates to all organizational members the importance accorded to the company’s French origins. It also means that those managers who do not master the French language are not admitted to the highest executive positions as they are not able to participate in team decision making. This willingness to keep French language as one of the official languages of the Group is not always welcomed by new arrivals. Two official languages cost a lot. Translation, verification of coherence – it is highly costly. In addition, if you work in Paris, you have to make efforts to speak French. The organization is not international yet (General Manager, Division 5). Thus, it is argued that the Lemma organizational culture is considered by the managers as being based in French culture. Despite the moderate level of frequency emerging regarding this issue, it is an important characteristic to be taken into consideration in trying to fully understand the Lemma culture. The following parts of this paper are devoted to the description of the cultural dimensions which are significant for the interviewed managers. Femininity This cultural dimension, related to the ‘‘femininity vs masculinity’’ dimension developed by Hofstede (1991), has the highest level of frequency of critical incidents: 88 per cent of the interviewed managers highlight the ‘‘humanistic’’ side of the organizational culture. What does this mean for them? ‘‘Humanism’’ is deciphered as ‘‘respect for people’’ at Lemma. Respect for people is still a reality at Lemma. The quality of relationships is exceptional (HR Manager, Division 5). The Lemma managers appreciate the human atmosphere of their group; for them it is a company where people want to work.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 344 At Lemma…it is a softer approach than in US companies. Advantages of such culture are the ability to call for help and mutual support. If you need help in different countries in different divisions, usually it is OK (General Manager, Division 3). The organization with its exceptional ‘‘humanistic’’ culture is known for a low turnover: employees remain within the Group a long time. Some managers describe their company in words more fitting family relations. One enters Lemma as one used to enter a convent: one comes and never leaves Lemma. It was like this in industries also: it was the business from father to son with family attachments (Country Manager, Division 1). Another aspect of the femininity of Lemma culture is certainly management by consensus. As stated by Hofstede (1991), the members of feminine cultures prefer a compromise to a confrontation; they prefer pleasant methods of conflict resolving. The tendency of the Lemma managers to come to a decision through consensus demonstrates the feminine nature of the organization. We really worked by consensus before…we did not move without consensus (Country Manager, Division 1). High respect for authority According to the gathered data, the ‘‘hierarchy’’ dimension is significant for Lemma managers. Fifty-six per cent of the interviewees state that the Lemma organizational culture is characterized by a high respect for authority. Managers of the company describe its culture as a culture where the distance between superior and subordinates is well maintained and authority is respected. It is an autocratic culture…There is a high respect for authority. People dispute authority more in North America. Somebody who comes from North America gets a cultural shock in France. For example, if you do not understand or do not agree with a decision taken by your boss, you question it. In France, you follow…(General Manager, Division 2). Particularism The Lemma managers consider the organizational culture of their company as being particularistic. Sixty per cent of the interviewees emphasize the importance of this dimension at Lemma. Before acquiring two Anglo-Saxon multinational companies, it was a company where managers gave their priorities to interpersonal relationships in the construction of their careers. In the past, new arrivals were put in contact with existing staff. That’s how they learned about Lemma behavior (Country Manager, Division 1). The interviewed managers state that ‘‘everything is built on the system of networking’’ (General Manager, Division 1). It was and still is the force of Lemma: Lemma works by creating networks of people. The high level of manager rotation across the different business units in different countries contributes to the reinforcement of the network. However, networking has its negative sides. It is extremely difficult for managers who areout of seraglioto join the organization. The following statements of the interviewed managers show a common unease among newcomers: If you are not French and not an existing Lemma staff member, it is difficult for new arrivals to enter the circle of confidence. It is the characteristic of the French culture. It is more difficultDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 345 to fire an existing Lemma manager than somebody in foreign parts of Lemma (General Manager, Division 5). Today, homogeneity is very strong in the Group. It is close to ‘‘consanguinity’’. Of course, they try to recruit people with different profiles; however, they do not care to make efforts to integrate them in the Group (General Manager, Division 1). The informal mechanisms of networking rule the selection processes. These mechanisms are implicit, difficult to identify and therefore extremely frustrating for new comers. High-context According to the gathered data, the high-context nature of the organizational culture is significant for Lemma managers. Fifty-two per cent of the interviewed managers refer to the importance of this dimension: It is a culture based on a failure of expression (non-dit) at Lemma. Little is formalized (HR Manager, Division 5). At Lemma, we do not like formal procedures, formal organization. It is difficult to understand the organization. We need to simplify things; we should not read between lines. We should clarify a lot (Strategy Manager, Division 2). Franck (2000) states that American managers experience great difficulties in understanding the functioning of French enterprises. For them, the relationships mechanisms and decisions processes are less transparent in France than in North America. We have seen that this affirmation may be easily generalized to individuals with Anglo-Saxon values. They would prefer to have a more formalized method of communication. While being expatriated to work at the Corporate Center in Paris, they often feel uncomfortable with this unwrittende´ brouillez-vous(sort it out yourself) rule that reigns at Lemma. I spent hours in meetings without any agenda. I know from others that it was frustrating for them also…In American companies, it is quick to understand organization: who decides what. Lemma has a confusing structure and unnecessarily complicated and slow decision making (HR Manager, Division 3). Thus, one can describe the Lemma culture before acquisitions as high-context, where there were failures to express things and where communication processes were implicit and not formalized. The Lemma paradigm prior to acquisitions According to Schein (1992), the essence of culture or its paradigm can only be understood if the basic cultural dimensions and their interrelationships are deciphered and explained. While analyzing the Lemma organizational culture, I have attempted to discover these basic underlying assumptions and the interrelationships that they could have. Figure 1 presents the Lemma paradigm before the acquisitions. It is not argued that this paradigm covers all subtleties of such a complex phenomenon as an organizational culture; any schematic representation of organizational culture is reductive in nature. However, it is believed that it helps us to understand the essential aspects of the Lemma culture. It is incontestable that Lemma had a remarkable organizational culture valued by the former company managers.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 346 Changes in the Lemma organizational culture Two major acquisitions of Anglo-Saxon multinational companies have significantly influenced Lemma. The critical incidents regarding the changes in the company’s culture and gathered during the interviews are summarized in the Table IV. Three categories have a high level of frequency emerging: efficiency values, formalization, and size. This level of frequency allows us to confirm the arguments developed in the theoretical part of this paper. First, it was supposed that the increase in size as a consequence of the acquisitions would induce changes in the organizational culture of Lemma, and therefore in the IHRM approach of the company. Second, it was argued that the Anglo-Saxon origin of the acquired companies would play a significant role in the choice of the IHRM and in the way in which the dilemma of global integration and local adaptation would be managed. It was supposed that Lemma, which had a high-context and particularistic culture, would be under an obligation to choose more formalized methods of management to fit the preferences of Anglo-Saxon companies. During the data collection, it was seen that another aspect of the Anglo-Saxon way of management – efficiency values – is an important change factor taken into consideration by Lemma managers. The other two categories presented in the table concern critical incidents on the ‘‘appearance of the new profile managers’’ and ‘‘time’’ issues. The percentage of frequency of the ‘‘time’’ category (44 per cent) being close to the threshold of 50 per cent is judged significant for Lemma managers. The category ‘‘appearance of the new profile managers’’ is explained to facilitate better comprehension of the changes occurring in the company. The results of the collected data allow a validation ofP2stating that Lemma is under the obligation to change its approach to IHRM from an ethnocentric to a geocentric one. The proposition is schematized in Figure 2. ‘‘Time’’ category is framed by a dotted line because the moderate level of frequency emerging does not allow formal deduction. However, taking into account its proximity to the high level, the category is presented in the figure. Figure 1. The pre-acquisition Lemma paradigmDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 347 Thus, acquisitions lead to three different kinds of pressure on the Lemma organizational culture: Anglo-Saxon influence – formalization and efficiency values; the changed size of the company; and time problematic. They are described below in order to better understand Figure 2. Anglo-Saxon values Efficiency values As described by the interviewed managers, the Lemma culture had the traits of a heavy industry culture: long time, priorities given to cost management and strategic planning, the market and the client being secondary. The acquisitions have brought Anglo-Saxon values of short-term efficiency to Lemma. Sixty per cent of the interviewed managers indicate the appearance of new efficiency values at Lemma. The Lemma system has implicitly favored the informal mechanisms of managers’ selection due to a strong network. The new arrivals, the Anglo-Saxon managers, criticize such a ‘‘social’’ performance as they call it. They believe that results are not taken into account when managers’ promotions are being decided. This is why they claim the importance of economic performance indicators. For the ‘‘outsiders’’, it is the only chance to break a wall protecting a strong network and to be promoted. Apparently, new points of reference become important for Lemma: result- and performance-orientations. Ta bl e I V. Critical incidents: changes in the Lemma organizational culture Number allocated to manager/change factorsAppearance of new profile leaders Efficiency values Formalization Size Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Frequency 815 15 1411 %3260 60 5644 Level of frequency ModerateHigh High HighModerateDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 348 Now, Lemma is changing…It is a more performance-oriented culture…the former culture has to change from just being nice and intelligent: it is not enough to run the business (HR Manager, North American activities). These efficiency values considered by the interviewed managers as Anglo-Saxon values influence the organizational culture of the company. Another Anglo-Saxon value – formalization, which also has an effect on the Lemma culture, is described further. Formalization According to the frequency percentage of critical incidents (60 per cent), the formalization matter is significant for Lemma managers. The interviewed managers recognize the necessity to formalize in order to cope with structural changes in the organization. The ‘‘ancient’’ managers understand that the company’s high-context and particularistic culture, despite its highly appreciated advantages, has the significant disadvantage of being ambiguous. Lemma is experiencing a cultural evolution. Yesterday, the way in which it functioned varied according to each small group. A disadvantage of this method is that it was vague, not clear (HR Manager, Division 5). The willingness to formalize is clearly expressed by Lemma managers. Thus, the high level of critical incidents’ frequency emerging allows us to argue that the acquisitions induced the need for formalization at Lemma. Another aspect of changes generated by the acquisitions concerns the appearance of new profile managers. Figure 2. Necessity to change the IHRM approachDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 349 Appearance of new profile managers Even though the level of frequency emerging for this category is moderate, it is necessary to describe what Lemma managers think about the changes regarding the particularistic dimension of their culture. According to 32 per cent of the interviewed managers, Lemma is making efforts to open its networks. The process of ‘‘Anglo-Saxonization’’, meaning the process of searching for more internationalized companies from the Anglo-Saxon world (Ferner and Quintanilla, 1998), brings constraints to the way in which management used to be practiced by Lemma. To lead the ‘‘internationalization’’ process, managers who do not conform to the stereotype of the Lemma manager – French engineer from a ‘‘Grande Ecole’’ – are beginning to be recruited and appointed to key roles in the Corporate Center and senior posts in operations abroad. One can notice changes in staffing policies of Lemma. Now, overall, the Lemma culture is result-oriented and performance-oriented. If you achieve results, the Group takes notes of that. I am an example of that. I worked in different countries, I changed different jobs, different businesses. This year they appointed me as CEO of a country. Lemma has been in my country for 11-12 years. This is the first time a local manager has been head. They never trusted us before, they always sent French expatriates. My case proves that Lemma is changing. The appointment of a non-French manager at the head of a business unit outside France was not possible ten years ago. Today, I am at the top and I am very glad that my qualities were recognized (Country Manager, Division 1). The acquisition of Anglo-Saxon multinationals brings different cultural values to the company. With acquisitions, we have another profile of leaders. They are active: they do not ask permission to proceed. They are efficient, they show results. They come from another culture, the culture of factual demonstration (HR Manager, Division 5). Thus, one can observe a tendency toward a universalistic approach in the organizational culture of Lemma. This tendency is reinforced by the increase in the company’s size. Size Another important factor influencing the culture of Lemma is obviously size. A significant increase in size obliges the company to change its previous style of managing by network. Fifty-six per cent of the interviewed managers emphasize the weight of this factor in the organizational culture of Lemma. ‘‘Size changes culture’’ – this comment by a HR manager (North American activities) describes the process of changes in the Group. Lemma’s operational methods were adapted to a small-sized company: managing by network. However, with an important increase in the company’s size, it became impossible to continue a close follow-up of managers. The particularistic nature of the Lemma culture causes difficulties with the shift to the new dimensions of the group. Size says…it cannot allow informal relations of such a scale. It is impossible to follow more than one thousand people personally (HR Manager, North America). The geometry of the Group is increasing. It is not easy to develop networks. And if you have no network, you are stuck (Country Manager, Division 1). Changes in size bring difficulties in staffing also. There is a need for more contribution from potential leaders.Downloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) CCM 15,4 350 It was good when you are small and you have a fantastic management team, but if the company becomes larger, middle management has to be more involved (General Manager, Division 1). Time Taking into account the particularistic and high-context nature of the Lemma culture, it is not surprising that managers needed time in order to create their network and gain the confidence of the ‘‘ancient’’ Lemma managers. Functional and geographical mobility contributed a lot to such socialization processes, which need time to be efficient. You spend more time building relationships at Lemma than in companies of Anglo-Saxon culture. In American companies, you can be introduced to people during meetings and you may immediately discuss and take decisions without knowing people. At Lemma, you have to invest time in building a network; business comes later (HR Manager, Division 3). With the arrival of newcomers, the time issue emerges. Managers of acquired entities should understand the group’s operational methods as quickly as possible. Time becomes precious for the integration of newcomers. Lemma was always excellent in the development of its leaders using international and functional mobility. As we know that people learn 80% of what they know on the job, moving managers from one position to another was an ideal means for their career development. But now, in the world today, we need to develop more formal training that allows people to learn faster. Of course, we will keep our former methods as well. New arrivals do not have the same notion of time as us…we do not have 5 or 10 years to integrate people (HR Director of the Group). The time issue is judged as an important aspect of change regardless of the impossibility of formally validating this statement. However, as was argued before, the frequency percentage of this category (44 per cent) illustrates its relative significance. Conclusions The Lemma Group underwent a process of radical restructuring and ‘‘internationalization’’ in the last decade of the previous century. The ethnocentric model, when French managers were placed on the top of the foreign subsidiaries, became non-efficient. While increasing the size and the geographical spread of its activities, Lemma faces all the problems of ‘‘internationalization’’. The new arrivals bring new assumptions to the organization. The Lemma organizational culture prior to the acquisitions had features associated with the French way of management: high respect for authority, high-context, and particularism. Certain cultural dimensions proper to the Anglo-Saxon business culture are of an opposing nature: low context (more explicit and formalized) and universalism. Thus, by acquiring Anglo-Saxon companies, Lemma challenges the organizational changes due to integration issues. The case of the Lemma group demonstrated that national culture influences the organizational culture of the company. It has also been explained that the organizational culture, in turn, determines the way in which IHRM is organized. Thus, the organizational culture of the multinational company is an important contextual factor influencing its IHRM approach. It has been demonstrated that the high-context and particularistic culture of Lemma prior to the acquisitions favored an ethnocentric approach to IHRM: French expatriates constituted a strong informal network. It hasDownloaded by UNIVERSITY OF GLASGOW At 23:26 12 February 2015 (PT) Geocentric approach to IHRM 351 been argued that the organizational culture of Lemma is experiencing changes. These change factors necessitate more formalized and standardized practices regarding leadership development, global recruitment, and uniform selection which correspond to a geocentric approach to IHRM. The case studied in this paper outlines the interconnectedness of globalization and the geocentric approach to the IHRM. It provides an empirical confirmation of the proposal that geocentric approach to IHRM is the best way to deal with the global integration – local adaptation dilemma (Bartlett and Ghoshal, 1988; Adler and Bartholomew, 1992; Kamoche, 1996; Caligiuri and Stroh, 1995). However, the study has its limitations in that it was assumed and demonstrated that the origins of the acquired and acquiring companies (French and Anglo-Saxon in the present study) influence the way how the acquired company copes with the dilemma. 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Global talent management and global talent challenges: Strategic opportunities for IHRM Randall S. Schuler a,b, * , Susan E. Jackson a,b,1 , Ibraiz Tarique c,2 aRutgers University, 94 Rockafeller Rd; Piscataway, NJ 08854, Switzerland bLorange Institute of Business Zurich, Hirsackerstrasse 46, Horgen, Switzerland cPace University, New York, NY 10038, United States 1. Introduction In describing the competitiveness of nation in relationship to each other, Porter (1990) conceptualized four key attributes that are often referred to as ‘‘Porter’s Diamond,’’ Briefly, the four include: strategy, structure and rivalry; demand conditions; supply networks; and factor endowments. Factor endowments refer to a country’s productive capabilities, including the qualities and characteristics of its workforce, its natural resources and infrastructure. Increasingly, these factor endowments, particularly the workforces of countries around the world, have received extensive discussion for several reasons. One is that workforces around the world have expanded, both quantitatively and qualitatively. A second one is the expansion of economies and businesses globally, thus increasing the need for larger workforces. A third is that the compensation levels of these workforces vary dramatically across countries, even for comparably skilled work- ers. The fourth reason is, and following from the previous three, is that firms see that they are able to gain and sustain a globalcompetitive advantage when they manage their workforces effectively (Bryan, 2010; Gupta & Govindarajan, 2001; Porter, 1990). To do so successfully, we propose that these firms must confront the reality of several global talent challenges and develop global talent management initiatives to address these challenges. 1.1. Talent becomes important Beginning in the late 1990s, firms around the world were confronted with a major threat to doing business: a demand for talented employees that far surpassed the supply, thus creating a global talent shortage (Chambers, Foulon, Handfield-Jones, Hank- lin, & Michaels, 1998; Michaels, Handfield-Jones, & Axelrod, 2001). As a consequence, ‘‘talent acquisition, retention and management’’ became a key expression (challenge) in global business (Guthridge, Komm, & Lawson, 2008). The interest in this challenge came to be embraced with the label of ‘‘global talent management’’ or GTM (Beechler & Woodward, 2009). Reflecting the wide acceptance of GTM after the seminal book entitled The War for Talent (Michaels et al., 2001), several special issues of academic journals such at the Journal of World Business (Scullion, Collings, & Caliguri, 2010) and the Asia Pacific Journal of Human Resource Management (McDonnell, Collings, & Burgess, in press) and books such as Global Talent Management by Scullion and Collings (2011), Strategy-Driven Talent Management (Silzer & Dowell, 2010) and Talent Management of Knowledge Employees (Vaiman, 2010) were published. The major Journal of World Business 46 (2011) 506–516 A R T I C L E I N F O Article history: Available online 10 November 2010 Keywords: Talent Challenges Global talent challenges (GTCs) Global talent management (GTM) A B S T R A C T The need for multinational firms to be as competitive in the global marketplace as possible has increased dramatically over the past twenty years. For international human resource management this has meant many strategic opportunities to international human resource management. An excellent example of such an opportunity is that which exists regarding the management of talent. This opportunity began to develop in the late 1990s with the advent of the challenge of ‘‘global talent management.’’ During the past few years this opportunity has expanded to include challenges dealing with talent shortages, talent surpluses, locating and relocating talent, and compensation levels of talent. Together, these conditions are all ‘‘global talent challenges’’. In this article we describe these several global talent challenges and the strategic opportunities they present to firms and propose the implications of these for firms and for the field of international human resource management. 2010 Elsevier Inc. All rights reserved. * Corresponding author at: Rutgers University, 94 Rockafeller Rd; Piscataway, NJ 08854, Switzerland. Tel.: +1 732 445 5827. E-mail addresses: [email protected] (R.S. Schuler), [email protected] (S.E. Jackson), ita[email protected] (I. Tarique). 1Tel.: +1 732 445 4447. 2Tel.: +1 212 618 6583. Contents lists available at ScienceDirect Journal of World Business jo u r nal h o mep age: w ww.els evier .co m/lo c ate/jwb 1090-9516/$ – see front matter 2010 Elsevier Inc. All rights reserved. doi:10.1016/j.jwb.2010.10.011 focus of these works was on corporations obtaining and managing a sufficient number of highly talented individuals (also known as ‘‘valuable contributors’’ including high level executives, those with high managerial potential, and those with rare technical skills) to deal with the challenge of the global talent shortage (Beechler & Woodward, 2009; Guthridge et al., 2008). While the global talent shortage remains a significant human resource talent challenge for global firms, equally significant global talent challenges have emerged. These include those associated with the need to: (a) reduce and remove talent in order to lower the costs of operations; (b) locate and relocate of operations around the world; and (c) obtain equally competent talent anywhere in the world at lower wages (Guthridge et al., 2008; Lohr, 2010). Collectively, these challenges have become significant because of their strategic value and impact to the success of global firms (Guthridge et al., 2008; Lohr, 2010). Because of their common association with global talent, they have come to be known as ‘‘global talent challenges (GTCs).’’ These deal with through human resource policies and practices that have their roots in global talent management. When these policies and practices are systematically focused on these global talent challenges, they can be referred to as ‘‘global talent management initiatives (GTMs)’’ (Schuler, Jackson, & Tarique, 2011). The traditional treatment of ‘‘global talent management’’ is being expanded here to encompass additional global talent challenges. This work is built upon the suggestions of Scullion and Collings (2011), Tarique and Schuler (2010), and is consistent with some of the work on the traditional discussion of GTM (Guthridge et al. (2008). This article begins by describing these global talent challenges and global talent management, as well as by describing some of the events that have produced this expanded treatment of ‘‘global talent management.’’ As such, some of our discussion reflects conditions that were present during recent economic and financial boom times (i.e., the years leading up to 2008), when worker shortages were a primary concern. Economic expansion is likely to return, so labor shortages are likely to be of continuing concern, particularly in the rapidly emerging economies, such as China, India and Brazil (Jorek, Gott, & Battat, 2009). Regardless of the size of the gap between the available and desired pool of talent globally, however, human resource location and relocation, and cost reduction through lower compensation levels are likely to become major global talent challenges over the next several years (The Economist, 2010a; The Economist, 2010a,b). 2. Global talent challenges and global talent management In today’s rapidly moving, extremely uncertain, and highly competitive global environment, firms worldwide are encoun- tering numerous global talent challenges. Global talent challenges are significant (strategic and high impact) HR-embedded business issues that focus on managing a firm to ensure just the right amount of the right talent and motivation, at the right place, at the right price, during all economic and financial ups and downs in a very competitive world for the purposes of balancing the workforce with the needs of the firm in the short term, and positioning the firm to have the workforce needed in the long term (Schuler et al., 2011). Global talent challenges emerge in the context of a dynamic environment. Among the many factors that shape the specific challenges and responses of particular firms are: (a) globaliza- tion, (b) changing demographics, (c) demand for workers with needed competencies and motivation, and (d) the supply of those needed competencies and motivation (Beechler & Woodward, 2009; Scullion & Collings, 2011). To provide support for the emergence of the global talent challenges presented, we describe these forces and shapers in more detail in the following paragraphs.To successfully address global talent challenges, firms can and must take advantage of a wide variety of HR policies and practices (and an expanded number from those associated with the traditional approach to GTM (Scullion & Collings, 2011)). Conceptualized broadly, global talent management refers to the systematic use of specific HR policies and practices to manage the several global talent challenges that a firm confronts. These include specific aspects of HR policies and practices related to location and relocation management, planning and forecasting, staffing (to include attracting, selecting, retaining, reducing and removing), training and developing, and evaluating employees consistent with a firm’s strategic directions while taking into account the evolving concerns of the workforce and regulatory requirements. 3. Major forces and shapers of the global talent challenges In the discussion and conceptualization of global talent challenges, context is extremely important. Fig. 1 depicts the framework of the major contextual forces and shapers of GTCs and several HR policies and practices used in crafting global manage- ment talent initiatives to manage global talent challenges. We propose that an understanding of the realities and trends of these contextual forces and shapers is essential to identifying the GTCs and crafting the appropriate GTM initiatives. Thus we want to initiate that understanding here and identify sources of informa- tion that can be used to stay informed of the new realities and trends. 3.1. Globalization: world trade/wage differentials, competition, customers/markets, individuals Globalization is a concept that people use when referring to many different phenomena. Of particular relevance to our discussion are: expansion of world trade, intensified competition among firms, the potential to reach many more customers around the world, and the array of individuals worldwide who now comprise a global labor market. 3.1.1. World trade/wage differentials The value of world trade expanded from $89 billion in 1953 to more than $10 trillion in 2008 (UNCTAD, 2008). Although there was an economic contraction in 2009 it appears that the value of world trade is returning and that it may reach $27 trillion by 2030. Foreign direct investment (FDI) went from $59 billion in 1982 to more than $1 trillion in 2008 (UNCTAD, 2008). The formal labor market expanded from 2 billion workers in 1990 to more than 3.5 billion in 2008 (U.S. Department of Labor, 2010). The global economy (global GDP) is projected to expand to $75 trillion by 2030, up from $10 trillion in 1970 and $40 trillion in 2008 (A.T. Kearney, 2008; Stephenson & Pandit, 2008). While FDI and trade are expected to increase, wage differentials are likely to continue across nations (U.S. Department of Labor, 2010). Even though wages are increasing slightly in India and China, workers in the developed economies are likely to continue to enjoy salaries that are substantially greater than those in developing countries in Asia, Eastern Europe and Latin America (Barboza, 2010; Bradsher & Barboza, 2010). These differentials, as much as ten to one, along with the desire to produce products that satisfy domestic market growth, are likely to further the decision by firms to locate operations in the developing economies (Galvin et al., 2010; Tabuchi, 2010; Timmons, 2010; Bradsher, 2010). 3.1.2. Competition Competition is intense and multifaceted: it is fast developing, complex, extremely widespread. It is also subject to the current global economic and financial crises (Carins & Sliwa, 2008; Hill, R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 507 2007; IBM, 2008; The Economist, 2009d). Global competition has forced many firms (e.g., P&G, IBM, and Infosys) to improve quality and strive for innovation (often based on rapidly developed and more sophisticated technology). Increasingly, global competition means that enhanced quality and innovation must be achieved while also keeping cost low (The Economist, 2010a; The Economist, 2010b; Timmons, 2010). At the same time the U.S. appears to keep falling behind in rate of change in innovation capacity. In 2009 the Information Technology and Innovation Foundation’s Atlantic Century report ranked the U.S. last in innovation improvements (Ezell, 2009). Meanwhile, developing economies are constantly seeking to expand the scope of their operations, and with quality and low cost, they are proving to be a real threat to developed economies (Ezell, 2009; Timmons, 2010). For example, India’s pharmaceutical industry has been growing at around 12% yearly and it is estimated that the costs of drug discovery are as much as ten times cheaper in India than in the developed economies (Timmons, 2010). Small and larger firms in almost every country are being forced to adapt and quickly respond as they compete with firms worldwide to gain and sustain global competitive advantage (Engardino & Weubtraub, 2008; Gupta & Govindarajan, 2001; IBM, 2008; Lohr, 2010; Palmisano, 2007; Porter, 1985; Schuler & Tarique, 2007; Stephenson & Pandit, 2008; The Economist, 2009d). Competition within and across nations has also resulted in increased compensation demands from local workers, as well as for workers who enjoy the benefits of being in a global labor market (Bradsher & Barboza, 2010).3.1.3. Customers/markets Customers in virtually all industries and all economies are demanding more features and product reliability, and often at a lower price. The telecom industry is migrating rapidly from traditional fixed-line phone service to mobile, smart phones. Companies like BT (British Telecom) and Apple are selling ‘‘experiences’’ more than smart phone ‘‘hardware.’’ Customers are demanding innovation and BT and Apple are responding by focusing on services and providing a social networking capability (Werdigier, 2008). This applies to customers the world over, with some differences reflecting unique characteristics of the countries (Zakaria, 2008). For many companies today, it is important to think and act global (Dickmann & Baruch, 2011; IBM, 2008; Mendenhall, Osland, Bird, Oddou, & Mazevski, 2008), which includes being where the customers are. Increasingly companies like Nokia, IBM, Tata, Caterpillar, and BT find that the growing customer base is in the BRIC countries (Brazil, Russia, India, and China) and in emerging economies throughout Asia, Latin America, and Eastern Europe (The Economist, 2010a,b). 3.1.4. Individuals Individuals have been entering into the labor market in increased numbers over the past fifteen years (Goldstone, 2010; Zakaria, 2008). It has been estimated that more than 1.5 billion people have entered the global labor market during the past fifteen years and that another one billion will enter over the next ten years. Friedman (2005) argued that the development and spread of inexpensive technologies has flattened the world and facilitated Framework for Gl obal T alent Challenges a nd Global Talent Mana gement Initiativ es Forces and Shapers Globalization Demographic s Demand for workers with competencies and motivation Supply of workers with competencies and motivation GTCs Right numbers Right location (position) Right competencies and motivatio n Right price HR Polices & Practice s for GTM Initiatives Location planning and mgmt Human resource planning Staffing: -Attraction – Select ion -Retention -Reduction -Rem oval Training and development Performance assessment Compensation Results Talent Positionin g and Ba lancing Righ t numbe rs Righ t locati on Righ t compe tencies and motivatio n Righ t pri ce Bench Str ength Competiti ve Advantage Multiple EVP s Attractive Employer Br anding Fig. 1. Framework for global talent challenges and global talent management initiatives. R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 508 the entry of all these workers into the workforce. One major consequence of both these trends is the ability of firms to employ workers in the developing economies of the world at much lower wages than is possible in the developed economies of the world. Weekly wages in the developed economies are equivalent to monthly and even yearly wages in developing economies (Gomez- Mejia & Werner, 2008; U.S. Department of Labor, 2010). The movement of work to an array of dispersed locations that may include both developed and developing economies is most likely to succeed when all employees have the needed the competencies and motivations to do the work, when the work of dispersed employees is effectively coordinated, and when a firm’s HR policies and practices are consistent with the full array of relevant employment regulations in every location (Hill, 2007; Palmisano, 2007; Porter, 1985; World Bank, 2008). 3.2. Demographics Worldwide demographics are another major forces and shaper of global talent challenges. In North America, Western Europe, Japan and Australia, the age of retirement is being ushered in by the Baby Boomer generation (Adecco, 2008). While this may be a relatively short term phenomenon in North America (due to current birth and immigration rates), population shrinkage is a longer term event in Western Europe and Japan (Strack, Baier, & Fahlander, 2008). The long term-term outlook is revealing: by 2025 the number of people aged 15-64 is projected to fall by 7% in Germany, 9% in Italy and 14% in Japan (Goldstone, 2010; The Economist, 2006; The Economist, 2010a; Wooldridge, 2007). While the populations of many developed economies are aging and shrinking in size, the populations of developing and emerging economies are expanding and getting younger (Strack et al., 2008). There are major variations in demographic characteristics by age and by region that multinational firms need to know and consider in locating and relocating their operations internationally (Gold- stone, 2010; Jorek et al., 2009). 3.3. Demand for workers with competencies and motivation New jobs are still being created that require higher levels of technical competencies. For existing jobs, there is a growing need for employees who are willing to do the job under new and changing conditions that require the development of additional competencies (Rich, 2010). For skilled jobs, for example, there is a need for increased competencies to operate more sophisticated machinery, to interact with more demanding customers and to use more advanced technology to perform the functions of the traditional skilled jobs (Cummings et al., 2010; National Commis- sion on Adult Literacy, 2008). It appears that these increased competencies are being associated with almost all jobs tradition- ally performed in multinational firms around the world today (Grove, 2010; Price & Turnbull, 2007). In addition to the increased need for basic skills and advanced skill levels for basic entry-level, frontline and skilled jobs, there are a rising number of jobs that involve ‘‘knowledge work.’’ There is increasing demand for so-called ‘‘knowledge workers’’(Grove, 2010). Knowledge workers include managers, leaders, technicians, researchers, accountants, information specialists, consultants, medical and pharmaceutical professionals. In multinational firms, knowledge workers often work together in teams that cross cultural and geographic borders: ‘‘In the 21st century knowledge creation, integration and the leveraging of such ‘‘new’’ knowledge are considered the raison d’etre of multinational firms’’ (Brannen, 2008). ‘‘The growing need for talented managers in China represents by far the biggest management challenge facing multinationals and locally owned businesses alike’’ (Lane &Pollner, 2008). Even if demand for managers and other knowledge workers has slowed recently, the need for highly- talented knowledge workers, especially in developing economies where wages are still lower, is likely to remain strong well into the future (Grove, 2010; Makinen, 2010a; Makinen, 2010b; Roach, 2009). The need for highly motivated employees is likely to remain strong as well. Motivated employees are those who are willing to be dedicated to working with focus and energy, and be highly productive (Timmons, 2010). Highly motivated or highly engaged employees, through their high levels of productivity, are able to contribute far more to the firm than those who are less motivated. Recent evidence suggests that perhaps only a minority of individuals are highly motivated (McKinsey, 2009). According to that McKinsey global study respondents indicated that only 29% of employees were ‘‘highly’’ motivated, while 62% were ‘‘moderately’’ motivated. 3.4. Supply of workers with competencies and motivation In developed economies, such as North America, Western Europe and Japan, there also is an expected shortage of managerial competencies especially as the economy recovers. According to a report from the U.S. National Commission on Adult Literacy (2008), between 80 and 90 million American adults do not have the basic communication (also called people or ‘‘soft’’) skills to function well in the global economy or to earn family-sustaining wages. Alone among other advanced industrial countries, American 25–35-year olds are not as well educated as their parents (U.S. National Commission on Adult Literacy, 2008). The Program for Interna- tional Student Assessment reported that among the 30 OECD nations using measure of applied learning and problem-solving ability, the US students ranked 24th (McKinsey, 2009). The lack of technical knowledge workers continues to drive companies, such as Microsoft, Cisco and Wipro, to plead with the U.S. Congress to expand the number of H-1B visa permits granted each year (Herbst, 2009; Preston, 2008; Wadhwa, 2009). Today the situation related to worker ‘‘shortages’’ is substan- tially different from the late 1990s–2008 period of time when ‘‘global talent management’’ became popular (The Economist, 2009a). Since the late 2008 firms have reduced their workforces because of a talent surplus. So, while the shortages described are likely to re-appear, in the near term, firms may find that there is a continued surplus of workers, at all levels of competency and motivation, worldwide. Competition among workers and countries is likely to result in more wage competition and more governmen- tal support to encourage firms to bring jobs to their country (Bradsher, 2010; McKinsey, 2009). Proposition 1. The success of firms today is dependent on how effectively they identify and manage the many global talent challenges they confront, and adapt to them as they evolve and develop. Proposition 2. In order to capture the strategic opportunities offered by the many global talent challenges facing firms today, in-depth knowledge and understanding of the major environmental forces and shapers of them is essential. 3.5. Global talent challenges and global talent management: summary These major forces and shapers pose several global talent challenges that firms need to manage as effectively as possible, including: too little talent (with the desired competency and motivation)is available (shortage) R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 509 too much talent (with the desired competency and motivation) is available (surplus) the talent (with the desired competency and motivation) is available in the wrong place (or position) the talent (with the desired competency and motivation) is available at the wrong price (too expensive) As a consequence of such conditions, firms may need to: (a) reduce/add workers and positions in their home country; (b) move to another country and establish new operations at lower cost levels and/or outsource existing operations; or (c) reduce/add workers even in other countries. In addition, firms may need to train and develop existing staff rather than hire new staff from the outside. They may also, on a regular basis, need to improve their training and development, performance management and com- pensation systems to ensure that the workers they have are as motivated and productive as they can be. Many firms, such as Novartis, IBM, LG, Asada, HSBC, Tesco and Google, as a part of their ‘‘global talent management’’ programs (e.g. see Gakovic & Yardley, 2007; Siegel, 2008) have instituted such programs. Proposition 3. Firms need to systematically select from the many HR policies and practices in order to: (a) manage through the current environment of economic and financial crises; (b) position themselves for the period of recovery after the crises; and (c) operate more competitively on a day-to-day basis in a highly competitive world. Proposition 4. Systematically selected and coordinated HR policies and practices taken to address these global talent challenges can enable a multinational firm to gain and sustain a global competitive advantage. This is the essence of global talent management. 4. HR policies and practices for GTM initiatives to address global talent challenges Due in part to the existence of many forces and shapers of the global talent challenges, there are many possible HR policies and practices that firms can use in their global talent management initiatives (Beechler & Woodward, 2009). Matching an accurate diagnosis of a firm’s strategy and talent management situation with possible HR policies and practices is a first step in gaining and sustaining a global competitive advantage that may result from the successful implementation of the appropriate HR policies and practices (Rioux, Bernthal, & Wellins, 2009; Strack et al., 2009). Specific aspects of some HR policies and practices that can be systematically selected and coordinated by multinational firms in their global talent management initiatives include: Location planning and relocation management HR planning and forecasting Staffing – Attraction and selection – Retention – Reduction, and – Removal Training and development Performance assessment, and Compensation While these HR policies and practices are described separately, GTM initiatives for most GTCs they are likely to be combined or ‘‘packaged’’ for maximum effectiveness. Systematic selection of the specific HR policies and practices in those packages will reflect the type of global talent challenge. We present some examples of HR policies and practices that have been and can be used to deal with some of the GTCs. These examples are meant to be illustrative, and are by no means exhaustive and thorough.4.1. Location planning and relocation management While relatively new areas of inquiry in the field of international human resource management, the actions associated with location planning and relocation management are salient. In location and relocation management decisions, firms must also consider other factors such as taxes, infrastructure, currency fluctuations, government incentives, political stability, culture, construction costs, competitors, suppliers, customers and energy/ water supplies. Human resource management concerns, however, are also vital (Friedman, 2010; Grove, 2010; Porter, 1990; Timmons, 2010). Consequently international human resource management is appropriately placed now to extend its linkage with the strategy and directions of the firm. Multinational firms have been rapidly expanding and relocating around the world (Daniels, Radebaugh, & Sullivan, 2007; Ewing, 2008; Hill, 2007; Porter, 1985). In a period of just past three years, IBM hired more than 90,000 people in Brazil, China and India (Hamm, 2008; Lohr, 2010). Firms, such as IBM, Intel, Dell, are moving to India. India is a country with its seemingly unlimited skilled labor supply was nearly fully employed by 2008. Companies thinking about moving operations to India need to develop talent management strategies in order to attract workers away from their existing employers, and then retain these same individuals. As the available supply of workers shrinks, decisions must be made about whether to locate elsewhere or perhaps develop training programs to train for the competencies that are needed, as Microsoft has done in China and Nokia did in Romania (Chen & Hoskin, 2007; McGregor & Hamm, 2008). To help ensure a supply of dependable and competent labor at the right price, when Chinese companies locate abroad, they also send many of their own employees (Miller, 2010; Wong, 2009). Of course firms are also moving operations abroad by outsourcing much of their production and assembly (Barboza, 2010; Bradsher, 2010; Grove, 2010). For example, some 250,000 of Foxconn’s 800,000 employees produce iMacs, IPods and iPhones for Apple in China. Meanwhile Apple in the U.S. has only about 25,000 employees (Barboza, 2010; Grove, 2010). Wipro and Infosys in India do much of the back office work for many of the largest firms in the U.S. (Friedman, 2005). Multinational firms that are now thinking of expanding or relocating operations, or deciding whether to outsource, confront a large number of questions that are the essence of location planning and relocation management, including: Why go? Why move at all from where we are right now? Should we rather just outsource part of our existing operations, or offshore part of our existing operations? Where go? What locations should we move to? Have we done country assessments on the country locations on such issues as: compensation levels, workforce skills availability, employment legislation, and culture compatibility? How go? Shall we expand our operations by ourselves? Should we outsource some of our existing operations to others? Should enter into a joint venture with a local partner? Should we use a merger or acquisition? When go? Do we need to go within a year? Do we have time to develop an image in a new country that will enable us to attract the best applicants (i.e., be perceived as ‘‘One of the Best Companies to Work for’’?). If we enter another country, will we need to develop new ways of manage the workforce? Will we have to change our practices of recruiting and training, for example, for the local employees? Will want to create a common set of HR policies and practices for all our locations? How link? How do we link employees in multiple international locations with each other so as to gain efficiencies and transfer knowledge effectively? R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 510 4.2. Human resource planning Besides addressing these questions associated with location and relocation management, multinational firms will likely need to also engage in more traditional human resource planning and forecasting. That is, making estimates of the numbers of individuals and skills that will be needed in their various locations, using existing attrition and retirement data of the current employees in conjunction with the business plans of the firm. Of course, even traditional planning tools may benefit from modifications that take into account the fact that the past is not always a good predictor of the future, especially in these more uncertain and dynamic times (Cappelli, 2008). Under conditions of great uncertainty, ‘‘scenario planning’’ might be more prudent that the use of more traditional forecasting techniques (e.g., judgmental and statistical forecasts) (Courtney, 2008; Dye et al., 2009; The Economist, 2009b). Informing the creation of various scenarios can be the information about the four sets of drivers and shapers in the environment shown in Fig. 1. This information can be vital in constructing scenarios relevant for the strategic directions and needs of the firm, thus human resource planning based on these same scenarios can be instrumental in aligning global talent management initiatives with the firm. Knowledge of these scenarios can also assist in making these human resource planning more proactive and anticipatory, and thus helping make the firm more prepared for the variety of scenarios the firm may confront. 4.3. Staffing 4.3.1. Attraction and selection Organizations are finding that they are having a challenging time finding the workers with the competencies they need to perform a wide variety of jobs at the wage rates offered, regardless of worldwide location (Huselid, Beatty, & Becker, 2009)). Workers at every level are more important than ever to multinationals that hope to be competitive, both globally and locally (Guthridge et al., 2008; Huselid et al., 2009). As a consequence. Firms have to make themselves more attractive. In doing so they are finding that they differentiate the pool of potential applicants and construct different approaches to making themselves attractive. In other words, they need to develop different ‘‘employee value proposi- tions’’ (EVPs). Guthridge et al. (2008) present various EVPs developed by companies such as Tesco in the UK. For example, the UK retailer Tesco develops separate recruiting and selection tactics for applicants for frontline clerks depending upon whether they are straight from school, are part-time or graduates wanting full-time work. There is a separate website whose materials and language are tailored to that group. Tactics used for different groups are based on what the firm will be most effective and valued by the applicants, not on the firm’s view that some applicants are more valuable than others (Beechler & Woodward, 2009). Of course firms can also utilize a strategy involving mergers and/or acquisitions to facilitate and enhance the identification and acquisition of key talent. This strategy can also reduce the need for the firm to provide training and development programs in order to develop the competencies needed from the key talent (Goedhart, Koller, & Wessels, 2010). 4.3.2. Retention Retaining talent is one of the biggest talent management challenges for global accountancy firms. Historically, annual turnover rates at these firms have been between 15 and 20 percent. In these global accountancy firms (e.g., Deloitte, Ernst & Young) a variety of factors contribute to high turnover rates among early-career employees, including long hours, pressure to studyduring off-hours in order to pass professional certification exams, and an ‘‘up or out’’ partnership model. Jim Wall, the managing director of human resources at Deloitte, estimated that every percentage-point drop in annual turnover rates equated to a savings of $400–$500 million for the firm (The Economist, 2007). To stem the turnover tide among early-career accountants, some firms have attempted to increase long-term commitment by providing data to employees. Employees who stay at least six years with their first employer are likely to earn higher pay at other firms when they do eventually leave (The Economist, 2007). Effective are retention strategies include characteristics are: (a) top manage- ment making a strong commitment that talent management is a priority for all employees; (b) assessing the efficacy of current recruiting sources; (c) expanding the list of recruiting sources; (d) sourcing talent globally; (e) constantly monitoring labor markets worldwide; (f) establishing diversity programs; (g) establishing accountability amongst managers for retention goals; and (h) rewarding managers for improving talent retention (Caye & Marten, 2008; Guthridge & Komm, 2008; Holland, 2008). 4.3.3. Reduction and removal If global economic and financial conditions continue to deteriorate, unemployment will likely spread dramatically (Powell, 2009; The Economist, 2009c; The Economist, 2009d). The International Labor Organization (ILO) estimated that more than 50 million jobs were lost globally in 2009, and perhaps again in 2010. Because hiring usually lags behind economic recovery, low employment levels were expected to persist until at least 2012. Thus challenge of managing under conditions of surplus talent is likely to be with us for the next few years. Accordingly, ‘‘reduction and removal’’ are likely to dominate the global talent management agenda of many firms. Reduction can involve the reduction of work hours, days, overtime, pay levels, pay increases, benefits, new hires and holidays, and also the increased use of attrition, unpaid leave, assignment for local volunteer work, sabbaticals, and contract employees and outsourcing (Boyle, 2009; Mirza, 2008). From these activities firms can reduce their costs and existing employees can retain their jobs. In contrast, removal refers to the use of layoffs or other measures that result in permanent job loss (Hansen, 2009). Firms have a great deal of choice in how they shrink their workforces, but their choices are not unlimited. For multinationals, decisions about which HR actions to use must reflect the concerns of various unions, governmental regulations, cultural norms and corporate values (Bloom & Reenen, 2010; Rioux et al., 2009). 4.3.4. Degree of inclusion in staffing Two philosophically distinct approaches in staffing talent are evident in the current literature. One approach assumes that some of a firm’s employees are more valuable than others. Huselid et al. (2009) capture this approach with the use of alpha terminology, e.g., Type ‘‘A’’ players, Type ‘‘B’’ players, and Type ‘‘C’’ players. They also assign these same letters to the positions in the firm. For positions, ‘‘A’’ indicates the most significant impact on the firm’s strategy and its key constituencies and positions that offer the greatest variability in performance. For players (the employees), ‘‘A’’ indicates those employees who perform at the highest level of performance variability and offer the highest level of impact. The result of this categorization is that firms then would devote the most, but certainly not all, of their resources in their global talent management efforts to ‘‘A’’–‘‘A’’ combinations. In contrast to what Huselid et al. (2009) refer to as their ‘‘differentiated workforce approach,’’ companies like the UK insurer Aviva and the UK grocer Tesco have developed global talent management initiatives that focus on managing the ‘‘vital many’’ rather than risk alienating the bulk of its workforce by focusing R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 511 exclusively on highfliers’’ (the ‘‘A’’-‘‘A’’ combinations). Both Tesco and Aviva act on the premise that all employees in their companies are vital to the success of their businesses. Consequently, all employees deserved to be and need to be recognized and offered development opportunities. In both companies, talent management initiatives are created for all categories of employees, from top management to the front-line employees (Guthridge et al., 2008). Although we have presented these two competing philosophies as if firms must choose one or the other, this is perhaps overly simplistic. Indeed, a better approach to thinking about who is included as ‘‘talent’’ may to recognize firms vary in their degree of inclusiveness, going from including everyone (high inclusiveness) to only the top 5% or so (low inclusiveness). This application of inclusiveness applies equally to training and development, performance assessment and compensation. 4.4. Training and development In locations where competencies fall short of what firms need, training and development programs can be used to improve the quality of talent available and at the same time increase a firm’s appeal as an employer. In China, Microsoft uses development and recognition programs that appeal to first time programmers. Development programs include a rotation to the U.S. and recognition programs include being selected as a ‘‘Silk Road Scholar.’’ This program, analogous in higher education to being designated a ‘‘Rhodes Scholar,’’ is named after the famous travel route that connected Europe to China and made famous by the trading of Marco Polo in the thirteenth century (Chen & Hoskin, 2007). Multinational firms like Microsoft and Schlumberger also offer attractive career management opportunities. Schlumberger makes it possible for engineers to achieve recognition and compensation equivalent to managers while remaining on their engineering career track (Schlumberger, 2007; Schlumberger, 2008; Schlum- berger, 2009). Applying this more broadly, multinational firms can be expected to emphasize internal markets even more (allowing employees to move around from job to job more freely), with rapid promotion for the superstars (Dickmann & Baruch, 2011; Scullion & Collings, 2011; Wooldridge, 2007). To address the need for leaders and managers with a global mindset that is broader than knowledge about the details of local country operations, many Chinese companies (e.g., Haier, Huawei, TCL) have begun sending their best managers to intensive management-training programs, such as those offered through a corporate university or business school. Others have filled the capability gap by looking for employees outside China. For example, Lenovo hired an American from Dell to lead the company where already 70% of its top managers are not Chinese nationals (Dietz et al., 2008). 4.5. Performance assessment Performance assessment can be a key ingredient in successful global talent management initiatives, especially to retain and motivate existing employees (Varma, Budhwar, & DeNisi, 2008). For example, the performance assessment system at Novartis (which is similar to many firms such as GE in the US and LG in Korea) is central to its global talent management initiatives (Siegel, 2008). At the heart of it is a system that grades employees on (a) business results (the ‘‘what’’) and (b) values and behaviors (the ‘‘how’’). While the business results are unique to each business area, the values and behaviors (e.g., being innovative and creative; exercising leadership) are common across the entire firm. Combining these two performance dimensions results in a nine- box matrix for assessing employee performance. This assessment process takes place within the context of the business performancecycle, which begins with the strategic plan for the firm and cascades down to define ‘‘what’’ each business unit is expected to accomplish. Novartis employees receive quarterly performance feedback, participate in self-assessments, engage in development planning and career discussions. Together, these practices are aimed at improving competencies, motivating talent, determining training needs and establishing a basis for performance-based pay (Siegel, 2008). Of course, not everything that is planned gets implemented and not everything that gets implemented is done correctly, in part due to such phenomena as the ‘‘knowing-doing gap’’ (Beechler & Woodward, 2009; Pfeffer & Sutton, 2006). 4.6. Compensation Compensation rates around the world reflect today’s dynamic economic and competitive business conditions, in some cases as much as they do of local conditions (Bryan, 2010; Gomez-Mejia & Werner, 2008; U.S. Department of Labor, 2010). In response to multinationals locating in their countries, local companies in China and India often must pay Western-level salaries to their high- valued contributors for whom the labor market is global (Banai & Harry, 2005; Bryan, 2010; Wooldridge, 2007). Demands for compensation and benefit increases have become popular in the Japanese auto factories of Nissan, Honda and Toyota in China (Barboza, 2010; Bradsher & Barboza, 2010; Tabuchi, 2010). Demands for compensation increases by local workers in China have also caused some multinationals (e.g., FedEx, TNT, and HSBC) to move and/or consider moving operations to Vietnam and Bangla- desh. These firms need to keep some of their operations in China, producing what is often referred to as ‘‘China plus one strategy’’ (Bradsher, 2008). Demands for compensation and benefit increases have become popular in the Japanese auto factories of Nissan, Honda and Toyota in China (Barboza, 2010; Bradsher & Barboza, 2010). At Novartis, pay-for- performance is an important component of their global talent management initiatives (Siegel, 2008). Using the results of an employee’s performance assessment in the nine- box performance matrix, a bonus payout is calculated that recognizes both the individual’s performance and the performance of their business unit. Because the market for employees in research and development is global, firms like Novartis set compensation rates at levels that reflect the global environment, even when that means paying salaries that are above the norm in some countries (Siegel, 2008). To help manage compensation costs, however, firms in this situation may locate their operations to second-tier (lower cost) cities (e.g., Sichuan, Qinghai and Hunan). Another tactic is to recruit talent that is currently under-employed (e.g., engineers who are temporarily working as taxi drivers because they have lost their jobs during the economic downturn). 4.7. Linking GTM initiatives to GTCs In general, as this brief description of possible GTM initiatives suggests, multinational firms have many possible HR policies and practices to utilize in confronting a variety of GTCs, or significant HR-embedded business issues that focus on managing a firm to ensure just the right amount of the right talent and motivation, at the right place, at the right price, during all economic and financial ups and downs in a very competitive world for the purposes of balancing the workforce with the needs of the firm in the short term and positioning the firm to have the workforce needed in the long term. Ideally, the GTM initiatives they select reflect both the specific GTC facing the firm currently and consideration of the future challenges that are likely to arise as economic conditions change over time. Although the recent economic downturn has slowed business globally, firms still need to hire and manage their talent in R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 512 anticipation of their future needs. Furthermore, the selection of appropriate HR policies and practices is likely to be most effective in firms that adopt a systematic approach in crafting global talent management initiatives. A general guideline in this process might be the matrix of possible GTM initiatives and GTCs shown in Fig. 2. In addition, HR policies and practices need to mutually supportive and internally consistent with each other. These also need to fit the specific GTC and firm characteristics, such as top management leadership, vision, values, strategy, size, culture and industry (Beechler & Woodward, 2009; Bloom & Reenen, 2010; Rioux et al., 2009; Scullion & Collings, 2011). More specifically, then, we would expect that firms, in their selection of the HR policies and practices to use would: First, identify the specific global talent challenge or challenges that are confronting them. Secondly, evaluate their level of rigor, sophistication and preparedness regarding each of the HR policies and practices suggested in Fig. 2 for the challenge or challenges identified. Thirdly, determine firm characteristics such as top management leadership and values that are likely to be more supportive of certain HR policies and practices than others (for most of the GTCs there are several that can be used, so short of using them all, use the ones that are most likely to be consistent with the firm’s characteristics). Fourth, continually monitor the drivers and shapers of the firm’s global talent challenges, making determinations as to the most appropriate HR policies and practices to select, and facilitating the changes needed to implement them. Proposition 5. Identification of a firm’s GTCs is the basis for the systematic composition of the appropriate HR policies and practices that will enable the firm to be successful in managing its global talent challenges. Proposition 6. The appropriateness of HR policies and practices depends on the nature of the GTCs and on numerous characteristics of the firm.5. Role of HR professionals In a classic study entitled The War for Talent (Michaels et al., 2001), it was found that HR professionals spent a great deal of their time formulating and managing the HR policies and practices, such as recruiting, selecting, training, performance appraisal and compensation in a more traditional, administrative manner. While this can be important in managing human resources generally, their effectiveness in managing global talent management initiatives results from being linked with the firm’s strategies and directions and with the firm’s talent strategy. ‘‘HR underper- forms in companies where its capabilities, competencies, and focus are not tightly aligned with the critical business priorities’’ (Rawlinson, McFarland, & Post, 2008: p. 23; see also Michaels et al., 2001; Guthridge et al., 2008). Thus HR professionals contribute more when the HR policies and practices are closely aligned with the firm through a thorough understanding of the strategy and direction of the firm. In addition to this strategic understanding of the firm, the follow-up study to the Michaels et al., Study (2001) concluded that most HR professionals can make a better contribution in a firm’s global talent management initiatives by measuring the impact of HR policies and practices using metrics that are aligned with business strategies: ‘‘Only HR can translate a business strategy into a detailed talent strategy: for instance, how many people does the company need in order to execute its business strategy, where does it need them, and what skills should they have’’ (Guthridge et al., 2008). Thus, for example, a firm might track the performance records of employees who have participated in global management training programs and compare them to those who have developed global skills on the job and/or compare them to people with no global exposure. Performance metrics that reflect desired strategic business outcomes may include revenue, profit targets or retention of direct reports (Farndale, Scullion, & Sparrow, 2010; Huselid et al., 2009). Proposition 7. HR Professionals need to know the strategic needs and directions of the firm and the important characteristics of the firm in order to craft a talent strategy, i.e., a strategy that identifies the Indicated Have the Mos t Potential Application (with Adjustment for Firm Characteristics) Shortage of Ta l e n t Surplus of Ta l e n tTalent at the Wrong Plac e Talent is at the Wrong Pric e HR Loca on and Re loc a on Managem ent HR Planning A rac on/Selec on Reten on Reduc on/Remov al Training and Dev elopmen t Performan ce Assessment Compensa on Fig. 2. Linking HR policies and practices with global talent challenges: those indicated have the most potential application (with adjustment for firm characteristics). R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 513 important global talent challenges and identifies the global talent management initiatives that will effectively manage them. 6. Results of effective HR policies and practices for GTM initiatives As shown in Fig. 1, there are several potential results that are likely to follow from HR policies and practices of GTM initiatives that successfully address a firm’s global talent challenges. In particular, we have argued that addressing the global talent challenges improves the firm’s success in having the right people at the right place at the right time with the needed competencies and motivation and at the right price at all levels and all locations (positions) of the firms (Guthridge et al., 2008; Lane & Pollner, 2008). In time, these effects accumulate and deepen the firm’s bench strength (or future positioning) for all positions the company, both anticipated and unanticipated, in all current and future locations around the world (Rawlinson et al., 2008). Also resulting are a variety of employee value propositions (EVPs) and an attractive employer brand image. In the short term, successful GTM initiatives may provide a firm with a temporary advantage over competitors. In the long term, as the firm’s global talent management capabilities develop and as learning about how to management global talent becomes embedded in organizational systems, it may be possible for the firm to establish a sustainable global competitive advantage. Sustainability of competitive advantage is never assured, because the forces and shapers of global talent challenges are likely to change as are the specific GTCs (Daniels et al., 2007; Porter, 1985). Nevertheless, as firms gain experience and begin to develop the competencies needed for global success, they simultaneously position themselves to adapt as changing conditions require in the future. Proposition 8. Firms that successfully develop and institutionalize their global talent management capabilities position themselves to attain many results in several aspects of talent positioning and balancing, bench strength, global competitive advantage, multiple EVPs and an attractive employer brand. 7. Barriers to global talent management initiatives It seems apparent that multinational firms have good reason to invest considerable resources in meeting the global talent challenges they face. The success in this endeavor, however, remains elusive. Based on the responses of more than 1300 executives worldwide, Guthridge et al. (2008) identified several barriers to the use of HR policies and practices for global talent management initiatives. Many of these barriers to successful GTM initiatives exist for domestic firms, but they become more complex and difficult to overcome in global firms. The barriers include: The fact that senior managers do not spend enough time on talent management, perhaps thinking that there are other more pressing things (e.g., finance, market share, product attributes) to be concerned with; Organizational structures, whether based regions, products, or functions, that inhibit collaboration and the sharing of resources across boundaries; Middle and front line managers who are not sufficiently involved in or responsible for employees’ careers, perhaps because they see these activities as less important than managing the business, and/ or because they require such a long-term perspective; Managers are uncomfortable and/or unwilling to acknowledge performance differences among employees—a step that is required in order to take actions to improve performance; Managers at all levels who are not sufficiently involved in the formulation of the firm’s talent management strategy, and therefore, have a limited sense of ownership and understanding of actions designed to help manage the firm’s global talent; HR departments that lack the competencies needed to address the global talent challenges effectively, and/or lack the respect of other executives whose cooperation is needed to implement appropriate HR policies and practices; and There exists a ‘‘knowledge-doing’’ gap that prevents from managers implementing actions, even though they might know that they are the right things to do (Pfeffer & Sutton, 2006). While there are many barriers to overcome, multinational firms such as IBM, HSBC, P&G, Novartis, ThyssenKrupp, and Schlum- berger have shown that success is possible with the commitment, leadership and involvement of the top management (Farndale et al., 2010; Lane & Pollner, 2008; Palmisano, 2007). Proposition 9. Firms that successfully develop and institutionalize their global talent management capabilities must also be able to overcome the many barriers that exist in implementing their global talent management initiatives. 8. Managerial relevance Many of the most pressing global challenges facing global firms today are directly associated with several significant global talent challenges. These global talent challenges arise due to the ever- changing drivers and shapers in the environment. In particular, among the major drivers and shapers are: enhanced globalization, evolving demographics, the need for more competencies and motivation, and the growing shortage/surplus of needed compe- tencies and motivation as depicted in Fig. 1. For firms throughout the world, the changing environment—particularly during volatile economic and financial periods of boom-and-bust such as those experienced in recent years—presents both global talent chal- lenges and an opportunity to gain a sustainable global competitive advantage. In addition to gaining competitive advantage, firms may also be able to expand their bench strength, develop an attractive employer brand and create several attractive employee value propositions that will help attract and retain valued employees. More importantly, effective management of GTCs will enable firms to balance their talent needs for the short term and position their needs for the longer term.As firms move to identify their global talent challenges they face many choices. These need to be linked with the needs and directions of a firm’s strategy and its talent strategy. A significant hurdle in doing this all effectively may simply be the need for firms to be relentless in their efforts to effectively manage global talent. When success is achieved in the short term, new HR policies and practices will soon be required simply to stay one step ahead of competitors. For the HR profession, an immediate challenge is to continually assess and to understand the forces and shapers that create global talent challenges, develop systems that are tailored to address a particular firm’s specific global talent challenges, and work in partnership with the senior management team ensure a close linkage between HR policies and practices for GTM initiatives and the strategic objectives of the GTCs and the firm. Acknowledgements The authors wish to express thanks for preparatory comments and suggestions to Dave Collings, Paul Sparrow, Mark Saxer, Hugh Scullion, John Slocum, Ken Smith, Rosalie Tung and Nadia Wicki de la Puente. Supported by a grant from the School of Management R.S. Schuler et al. / Journal of World Business 46 (2011) 506–516 514 and Labor Relations, Rutgers University. Based on our presenta- tions at the 11thIHRM Conference, Aston Business School, June 10, 2010 and the Lancaster University Management School, June 4, 2010. 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Journal of European Industrial Training Globalisation and IHRM: partners in comparative perspective? Stephen J. Perkins Article information: To cite this document:Stephen J. Perkins , (2003),”Globalisation and IHRM: partners in comparative perspective?”, Journal of European Industrial Training, Vol. 27 Iss 9 pp. 461 – 472 Permanent link to this document:http://dx.doi.org/10.1108/03090590310506478 Downloaded on: 12 February 2015, At: 08:34 (PT) References: this document contains references to 47 other documents. To copy this document: [email protected] The fulltext of this document has been downloaded 7759 times since 2006* Users who downloaded this article also downloaded: Shannon L.L. Lloyd, Charmine E.J. Härtel, (2004),”Predicting IHRM strategy and practice decisions: development ofthe IHRM orientation typology”, Cross Cultural Management: An International Journal, Vol. 11 Iss 4 pp. 60-76 http://dx.doi.org/10.1108/13527600410797882 Wesley A. Scroggins, Philip G. Benson, Wesley A. Scroggins, Philip G. Benson, (2010),”International humanresource management: diversity, issues and challenges”, Personnel Review, Vol. 39 Iss 4 pp. 409-413 http://dx.doi.org/10.1108/00483481011045380 Maral Muratbekova-Touron, (2008),”From an ethnocentric to a geocentric approach to IHRM: The case of a Frenchmultinational company”, Cross Cultural Management: An International Journal, Vol. 15 Iss 4 pp. 335-352 http://dx.doi.org/10.1108/13527600810914139 Access to this document was granted through an Emerald subscription provided by 327772 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors serviceinformation about how to choose which publication to write for and submission guidelines are available for all. Pleasevisit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. 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The organization is a partner of the Committee on PublicationEthics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download.Downloaded by UNIVERSITY OF GLASGOW At 08:34 12 February 2015 (PT) b f b b b b f b b f b b b b b b b b b b b b bb b b b b f f f b f b f fb f f f f f f f f f f f f b f f f f b f f b f !”””#$ % b b f f & ‘ f b f b f f ( f b f f $ ) & ‘ f f f f f * f + & b b b f f f f f ,& ‘# f b f bf b f f f f f f f f ) ) !””-#$ . f f f f b f f f b f f b b b f f b f / 0 b b b & ‘# f f 1 !”” $ !22#$ % f b f f f f f fb f f f * f f f f f f f f b f bf & ‘ + % f f f f f f f f & ‘ 3 2# f ( b f ) ) !””- 4 $ !””!# f5 f f ,& ‘ f f f f bb b + , f f & f fb f f * ( f f f fb b fbf f b f f f 1 $ !””! $ 6#+ ( f 7 !# f # f fb f f f & ‘ b f b f f f f b f b $5$ $ f f # f f f + ) b f f f f b f f f f b f fb b b ( fb b f b 8 f 5f 69 $ 6 f 4 5 !””! $ !!#$ ) b f f f f bf bb f f : b b b b f f f $ f f b b f f b f f f b 5 f b b 1 ; $ !””-# b fbf ( bf $ % f f f b f b f b f f f f f <f 9# = f f f b f f f f bf f f b f & ‘ b $ % f f b f f f f f f f : f b f b f f f f $ f f f f f f f b f * f f bf b b f f $ f f b f f b f b f f f f f fb f f f f > f f f b $ b f b b b b b f b b b b f bb f b b b b b f b b b ! b bf “#$% & !””- ‘ ()*+(#” , & ,44< “-“>”2” ‘ & [email protected], “$”AB”-“”2”-“2″C96A ‘ b – . / b – b b0 1 b 0 b f b b b1 0 b f f 0 f . b b b b b bb b f b b b 2 0 3 b 0 0 4 ! 0 b0 b b b b b 0 b f b 15 f . b 6 b + . b 0 f b b0 f b b b 4 1 6 0 b 3 f b b0 0 b 4 ! b0 f b b b 0 0 b b b b b 15 15 3 b b . . 0 b 2 0 b 4 ! f b7 0 0 7 b b f b f 6 0 b 0 6 b b b b bf b b 4Downloaded by UNIVERSITY OF GLASGOW At 08:34 12 February 2015 (PT) % % ? 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http://jom.sagepub.com/ Journal of Management http://jom.sagepub.com/content/39/2/366 The online version of this article can be found at:   DOI: 10.1177/0149206310365901 2013 39: 366 originally published online 8 April 2010 Journal of Management Rebecca R. Kehoe and Patrick M. Wright Attitudes and Behaviors The Impact of High-Performance Human Resource Practices on Employees’     Published by: http://www.sagepublications.com On behalf of:     Southern Management Association can be found at: Journal of Management Additional services and information for         http://jom.sagepub.com/cgi/alerts Email Alerts:   http://jom.sagepub.com/subscriptions Subscriptions:   http://www.sagepub.com/journalsReprints.nav Reprints:   http://www.sagepub.com/journalsPermissions.nav Permissions:   What is This?   – Apr 8, 2010 OnlineFirst Version of Record  – Jan 23, 2013 Version of Record >> at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 366 The Impact of High-Performance Human Resource Practices on Employees’ Attitudes and Behaviors Rebecca R. KehoePatrick M. Wright Cornell University Although strategic human resource (HR) management research has established a significant relationship between high-performance HR practices and firm-level financi al and market out- comes, few studies have considered the important role of employees’ perceptions of HR practice use or examined the more proximal outcomes of high-performance HR practices that may play mediating roles in the HR practice–performance relationship. To address recent calls in the literature for an investigation of this nature, this study examined the relationships between employees’ perceptions of high-performance HR practice use in their job groups and employee absenteeism, intent to remain with the organization, and organizational citizenship behavior, dedicating a focus to the possible mediating role of affective organizational commitment in these relationships. Data in this study were collected from surveys of employees at a large multiunit food service organization. The model was tested with CWC(M) mediation analysis (i.e. , centered within context with reintroduction of the subtracted means at Level 2), which accounted for the multilevel structure of the data. Results indicate that employees’ perceptions of high-perfor – mance HR practice use at the job group level positively related to all dependent variables and that affective organizational commitment partially mediated the relationship between HR prac- tice perceptions and organizational citizenship behavior and fully mediated the relationship Acknowledgments: This article was accepted under the editorship of Talya N. Bauer. We would like to thank the editor and two reviewers as well as Chris Collins for their comments on earlier versions of this article. Corresponding author: Rebecca R. Kehoe, Cornell University, ILR School, 309 Ives Hall, Ithaca, NY 14853 E-mail: [email protected] Journal of Management Vol. 39 No. 2, February 2013 366-391 DOI: 10.1177/0149206310365901 © 2010 Southern Management Association. Reprints and permission: http://www. sagepub.com/journalsPermissions.nav at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 367 between HR practice perceptions and intent to remain with the organization. The discussion reviews the implications of these results and suggests future directions for research in this vein. Keywords: strategic human resour ce management; commitment In recent years, scholars and practitioners have increasingly recognized the impor – tance of effective human capital management for organizational performance (Grant, 1996; Hitt, Biermant, Shimizu, & Kochhar, 2001). In particular, strategic human resource management (SHRM) scholars have suggested that organizations can use per – formance- and commitment-oriented human resource (HR) practices to dri ve organiza- tional effectiveness (Becker & Gerhart, 1996; Dyer & Reeves, 1995; Wright, Dunford, & Snell, 2001)—a claim now supported by a large body of field research (e.g., Delery & Doty, 1996; Huselid, 1995; MacDuffie, 1995), as well as subsequent confirmatory reviews and meta-analyses of this literature (e.g., Combs, Liu, Hall, & Ketchen, 2006; Wright, Gardner, Moynihan, & Allen, 2005). However, studies of the HR–performance relationship have provided limited in sight into the effects of high-performance HR systems on the more proximal employee outcomes that they are likely to affect most directly (Dyer & Reeves, 1995)—thereby leading to gaps in the field’s understanding of the mechanisms linking HR practices to performance an d resulting in calls in the SHRM literature for research attention in this area (e. g., Becker & Gerhart, 1996; Takeuchi, Chen, & Lepak, 2009; Wright & Gardner, 2003). Although a few recent empirical studies have provided support for the claim that high-performa nce HR practices work most immediately through employee attitudes and behaviors—such a s job satisfaction, affective commitment (Gong, Law, Chang, & Xin, 2009; Takeuchi et al., 2009), service- oriented citizenship behaviors, turnover (Sun, Aryee, & Law, 2007), and social exchange (Takeuchi, Lepak, Wang, & Takeuchi, 2007)—recent theoretical work on the HR–performance causal chain suggest that these studies may oversimplify the relationships between HR prac- tices and employee outcomes (e.g., Bowen & Ostroff, 2004; Nishii & Wright, 2008). In particular, some SHRM scholars have argued that HR practices are likely to have desired consequences on employees’ attitudes and behaviors only to the extent that they are consis- tently experienced and perceived by employees in intended ways (Bowen & Ostroff, 2004). Furthermore, empirical work has demonstrated that employees’ perceptions of HR practices significantly vary from managerial reports of the HR practices in use (Liao, Toya, Lepak, & Hong, 2009). Thus, whereas recent empirical studies linking managerial reports of high- performance HR practices to employee outcomes are methodologically consistent with previous SHRM research and valuable for their contribution to our understanding of the beginning steps of the HR–performance causal chain, additional work i s still needed assess- ing the role of employees’ perceptions of HR practices in determining their attitudinal and behavioral outcomes (Nishii & Wright, 2008; for a recent empirical article examining out- comes of employees’ attributions of HR practices, see Nishii, Lepak, & Schneider, 2008). Such an investigation would allow us to determine whether employees’ collective subjective experiences with HR practices are a critical mechanism through which an HR system affects outcomes of interest. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 368 Journal of Management / February 2013 In light of these extant research needs, the purpose of the present arti cle is threefold: first, to propose a model explicating the effects of employees’ collective perceptions of high- performance HR system use within their job groups on important employee attitudinal and behavioral outcomes; second, to provide theoretical and empirical ration ales for aggregating employees’ HR practice perceptions to the job group level; and, third, to present results from a multilevel mediation analysis in which relationships at the job group and individual levels are computed separately but simultaneously in a single empirical model. We propose that support for our model would point to the theoretical and practical importance of employees’ reflections on their job groups’ collective experiences with HR practices—thereby suggest- ing a need to extend the SHRM focus beyond HR system design, to consiste ncy and effec- tiveness in HR practice employment. We begin by briefly examining the SHRM approach; we then proceed to underscore the need for research on the relationship between employees’ perceptions of high-performance HR practice use and attitudinal and beha vioral outcomes (highlighting, as key outcomes of interest, affective organizational commitment, organiza- tional citizenship behavior, intent to remain with the organization, and absenteeism); and, finally, we discuss the significance of considering employees’ perceptions of HR practices in use at the job group level. From here, we present our theoretical model, discuss the employed methodology in testing our predictions, and report our empirical results . We conclude by discussing the implications of our findings and by proposing possible di rections for future research in this vein. Background and Hypotheses The SHRM Approach to HR Practices Two key themes characterize the SHRM literature and dominate the focus of work in this area: First, coherent systems of mutually reinforcing HR practices are l ikely to better support sustainable performance outcomes than are any individual practices (Del ery & Shaw, 2001; Dyer & Reeves, 1995); second, all HR systems are not equally effective (Arthur, 1994; MacDuffie, 1995). Thus, substantial research in the SHRM realm has sought to pinpoint characteristics of an optimal HR system for attaining competitive advant age, with support for a high-performance approach to HR management emerging from this stream. Although the specific HR practices included in high-performance HR syste ms have var – ied across studies, a commonality across practices in any high-performan ce approach is a focus on promoting workforce ability, motivation, and opportunity (see Applebaum, Bailey, Berg, & Kalleberg, 2000; Combs et al., 2006) to perform behaviors consistent with organi- zational goals. Given these commonalities and our review of HR practices examined in previ- ous research in this area, we constructed a list of 15 HR practices reflec ting a high-performance HR approach for this study. In particular, we included ability-enhancing practices, such as formal selection tests, structured interviews, hiring selectivity, high pay, and training oppor – tunities; motivation-enhancing practices, such as rewards based on individual and group performance outcomes, formal performance evaluation mechanisms, and meri t-based pro- motion systems; and opportunity-enhancing practices, such as formal participation processes, at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 369 regular communication and information-sharing efforts, and autonomy in work-related deci- sion making.(e.g., Combs et al., 2006; Delery & Shaw, 2001; Huselid, 1995; Sun et al., 2007; Way, 2002). Studying Employees’ Perceptions of HR Practices and Assessing Proximal Outcomes Dyer and Reeves (1995) posited four sequential levels of impact of HR practices—HR (or employee), organizational, financial, and market—suggesting that HR practices are likely to work outward (and upward) through these levels and hence, most immediately, through their effects on employee attitudes and behaviors. Similarly, Becker, Huselid, Pinckus, and Spratt (1997) suggested that HR practices influence the behaviors of employee s, which then affect operational, financial, and share price performance outcomes. Thus, both sets of authors suggested that a thorough understanding of the relationships between HR practices and employee outcomes is critical to our ability to draw logical inferences concerning the HR– performance causal chain as a whole. We seek to make our primary contribution in this area. In particular, as noted above, employees’ attitudinal and behavioral responses to an HR system depend on the HR practices that employees perceive to exist in their work context (Bowen & Ostroff, 2004). Because employees’ perceptions of HR practices necessarily fol- low managers’ HR practice implementation (Nishii & Wright, 2008), employees’ HR prac- tice perceptions are temporally closer to, and consequently likely to be more predictive of, their attitudinal and behavioral outcomes than are HR practice ratings a s provided by manag- ers. Furthermore, as we discuss, employees’ perceptions of HR practices are likely to influence and be influenced by the experiences and perceptions of their coworkers. Thus, in this article, we consider the proximal effects of employees’ perceptions of HR practice use in the aggregate (at the job group level). Although recent studies have considered various employee attitudi- nal and behavioral outcomes of high-performance HR systems, research rem ains scarce explicitly examining, in the same study, the impact of HR practices on both these outcomes. Thus, the causal sequence by which high-performance HR practices are likely to affect key employee attitudes and then employee behaviors (likely then, as we argue) requires further theoretical and empirical attention, which we provide. Specifically, we consider the attitudinal outcome of affective organizational commitment and the behavioral (or behavior-oriented) outcomes of organizational citizenship behavior, intent to remain with the organization, and absenteeism, for a number of reasons—namely, their relevance, importance, and generaliz- ability. First, high-performance HR systems rely on the creation of a mutual in vestment- based employment relationship, wherein an organization invests in workforce skills and opportunities and, in turn, expects employees to be qualified and motiva ted to make valuable work-related investments in the organization (Huselid, 1995). Affective commitment reflects a likely attitudinal consequence of this type of positive mutual social exchange from the per – spective of an employee. Organizational citizenship behavior, intent to remain with the organization, and attendance at work (the opposite of absenteeism) likely represent behavioral manifestations of employees’ affective commitment to the organization, thereby suggesting relevance of these outcomes to a high-performance HR approach. Second, t hese behavioral at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 370 Journal of Management / February 2013 outcomes have been linked to harder measures of performance at higher or ganizational levels— for example, organizational citizenship behavior (for a review, see Podsakoff, MacKensie, Paine, & Bachrach, 2000), intent to remain and turnover (Shaw, Gupta, & Delery, 2005), and absenteeism (Mason & Griffin, 2003)—thereby suggesting their importance and value in organizations, beyond the individual employee level. Finally, these outcomes represent employee behaviors that are likely to affect performance across a variety of organizational settings; that is, high levels of employee engagement in extra-role beha viors, regular employee attendance, and low voluntary turnover intentions based on affective commitment to an organization are likely to benefit performance outcomes across industries, business strate- gies, and cultures—all of which points to the generalizability of the se outcomes in terms of importance and relevance across many contexts.Although perceptions are formed and necessarily assessed at the individu al level, we focus our theoretical predictions and empirical analyses on the impact o f aggregated percep- tions of HR practice use throughout a job group on employees’ attitudinal and behavioral outcomes, for several reasons. First, some level of consensus in percept ions of HR practices in a collective (e.g., a job group) is likely to reflect a common set of beliefs concerning the nature of the exchange relationship and the cause-and-effect principles governing that col- lective and is thus likely to be important in eliciting desired outcomes in employees working within that context (Bowen & Ostroff, 2004). Furthermore, the concern in SHRM theory and research with higher-level performance outcomes requires some consistency in employees’ perceptions of and reactions to HR practices at a group level; otherwise , aggregate perfor – mance effects of any significance would fail to emerge. Second, given the assessment of perceptions, attitudes, and behaviors at the employee level, a strictly individual-level analy- sis could lead to a risk of common method variance and thus potentially result in artificially inflated observed relationships among variables; aggregating HR practice perceptions to the job group level using a split-sample analytical approach mitigates this concern (Gerhart, 2008; Ostroff, Kinicki, & Clark, 2002). Finally, employee perceptions of HR practices are likely to vary at the job gro up level as a result of job group–level variance in intended, actual, and perceiv ed HR practice employ- ment (Nishii & Wright, 2008). Nishii and Wright (2008) argued that intended HR policy is likely to exist at the job group level—reflecting the selection of di fferent HR practices for implementation across job groups (Wright et al., 2001); for example, an upper-level manager might determine that salespeople, but not administrative staff, should receive performance- based compensation. Then, given intended HR policy, supervisors who manage at the job group level are likely to differ in whether and how they implement intended practices— thereby reflecting variation in actual HR practice employment (Nishii & Wright, 2008); that is, supervisors may fail to implement intended practices or may employ intended practices in a manner that is inconsistent with the intent of the underlying polic y. Finally, employees are likely to differ in how they experience and interpret the HR practices with which the y and their coworkers are managed (Nishii et al., 2008), thereby reflect ing variance in per – ceived HR practice employment. Although individual employees form these practice perceptions, a social information–processing approach suggests that work-relate d percep- tions of this nature are filtered through the contextual influences and collective sense-making efforts of the group of employees with whom an individual most often works and interacts at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 371 (Bowen & Ostroff, 2004; Jacofsky & Slocum, 1988), which is more likely to include employees in the individual’s immediate job group than employees in other job groups or employees who work in other areas of the organization or unit (Salancik & Pfeffer, 1978; Schneider & Reichers, 1983). Furthermore, in cases in which employees have not had or cannot recall personal experiences with a particular practice, they are likely to rely on the apparent experiences of their coworkers in forming judgments concerning that aspect of their employment relationship. Thus, we focus on the relationships between employees’ aggregated perceptions of the extent of high-performance HR practice use in their job groups and individual employee outcomes, while assessing deviations in individu als’ attitudinal and behavioral outcomes from job group means in the same model.As noted, we focus on the employee outcomes of affective commitment, organizational citizenship behavior, intent to remain with the organization, and absenteeism. Specifically, given the principles of social exchange theory (Blau, 1983), we propose a model in which affective commitment mediates the relationships between employees’ perceptions of high- performance HR practice use and employees’ organizational citizenship behavior, intent to remain with the organization, and absenteeism. Although managers may have multiple approaches to HR management from which to choose, we are interested here in employees’ perceptions of the use of high-performance HR practices across job group s in an organiza- tion, given our interest in the present outcomes and our belief that hig h-performance HR practices are likely to be effective in eliciting these responses from employees; that is, an interest in a different set of employee outcomes would have led us to consider employees’ perceptions of other HR approaches as appropriate. Thus, as with approaches in previous research assessing HR practice use (e.g., MacDuffie, 1995; Youndt, Snell, Dean, & Lepak, 1996), we operationalize HR practice perceptions along a continuum, and we present and test predictions indicating that the employee outcomes of interest will vary with the extent to which employees perceive that high-performance HR practices are emplo yed in their job groups. High-Performance HR Practices and Affective Commitment Allen and Meyer’s three-component model of organizational commitment (1990) con- ceptualizes commitment as consisting of three dimensions: affective, normative, and con – tinuance commitment. The model has been supported by factor analyses and by research confirming that the three components relate differently to various antecedents and conse- quences (cf. Meyer, Stanley, Herscovitch, & Topolnytsky, 2002). In this study, we focus on affective commitment—or positive affection toward the organization, as reflected in a desire to see the organization succeed in its goals and a feeling of pride at being part of the organization (Cohen, 2003)—and we do so for several reasons. First, a ffective com- mitment has been shown to be affected by employees’ work and organizational experiences (e.g., HR practices; Meyer et al., 2002). Second, affective commitment has been demon- strated to relate strongly and consistently to desired work outcomes, su ch as low absentee- ism and organizational citizenship behaviors (Meyer et al., 2002), and its role as a key linking mechanism between high-performance HR practices and higher level performance at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 372 Journal of Management / February 2013 outcomes has been supported by previous research, pointing to its establ ished importance for the SHRM approach (e.g., Gong et al., 2009).Specifically, social exchange theory suggests that individuals are drawn to particip ate and invest in rewarding relationships, after which they become bound to retu rn benefits or favors to their partners in exchange (Blau, 1983). High-performance HR practi ces, if implemented effectively, are likely to cause employees to perceive that their exchange relation ship with the organization is characterized by a supportive environment based on investm ents in employee skills, regular unbiased performance feedback, availability of fair and attractive rewards for performance—including compensation and advancement opportunities—and mutual efforts toward meaningful goals (which employees may have helped in devel oping; Wright, Gardner, & Moynihan, 2003). In return, employees are likely to feel an obligat ion to the organization’s goals and so develop an affective bond with the organization itself— which may be expressed as affective commitment (Cohen, 2003). Hypothesis 1: Employees’ perceptions of high-performance HR practice use will be positively rela ted to affective commitment. The Mediated Effect of High-Performance HR Practices on Behavioral Outcomes We suggest that employees who perceive to be managed with high-performanc e HR practices are likely to express increased affective commitment toward the organization based on a sort of obligatory reciprocation in their exchange relationship (s ocial exchange theory); employees’ increased levels of commitment are then likely to affect important work behav- iors, for at least two reasons. First, the attitudinal response of increased affective commit- ment alone is not likely to provide a balance in the benefits received b y each party in the exchange relationship (i.e., the employees and the organization). Some further contribution on the part of employees would be required to level the field, given the relatively large orga- nizational investment and great number of employee benefits associated w ith a high-perfor – mance HR system. Second, employees who are committed to an organization are likely to more naturally behave in ways that reflect this affective bond. In particular, affectively com – mitted employees are likely to act in ways that are in the best interest of the employer—spe- cifically, through demonstrating, in their work behaviors, a personal connection and devotion to the organization’s activities and goals (Mayer & Schoorman, 1992; Mowday, Porter, & Steers, 1982). Organizational citizenship behavior. Organizational citizenship behavior has been defined as “individual behavior that is discretionary, not directly or explicitly recognized by the formal reward system, and in the aggregate promotes the efficient and effective functioning of the organization” (Organ, 1988, p. 4). This is distinguished from employees’ task performance in that it reflects work activities that do not fall within the realm of formal job requirements (Mayer & Schoorman, 1992) and are not performed on the basis of a moti vation to obtain immediate rewards or avoid punishment (Shore & Wayne, 1993). Thus, whereas previous at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 373 research has linked high-performance HR practices and organizational citizenship behavior (e.g., Sun et al., 2007), this relationship likely relies on some inte rvening attitudinal explanation that does not directly depend on immediate rewards from the organization—such as high- performance HR practices (e.g., extensive training, performance-based i ncentives)—to increase extra-role behavior. In particular, a high-performance HR–organizational citizenship behavior linkage is likely better explained indirectly, through the impact of high-performance HR practices on employees’ affective commitment predicted by social exchange theory. Specifically, as Scholl (1981) suggested, commitment serves to maintain behavioral d irection in the absence of rewards. Thus, employees who are committed to the organization are likely to be eager to contribute to the organization’s goals and are more likely than others to extend their efforts beyond their required task performance to further the effectiveness of the organization, even if they do not expect to be directly rewarded for this behavior on the b asis of formal HR practices. Organizational citizenship behaviors provide a straightforward means for c ommitted employees to make such optional contributions to the firm. For these rea sons—in addition to support from previous research demonstrating a positive relationship bet ween affective commitment and organizational citizenship behavior (for a review, see Podsakoff et al., 2000)—we make the following prediction: Hypothesis 2a: Affective commitment will mediate the positive relationship between high-p erfor- mance HR practice perceptions and organizational citizenship behavior. Intent to remain with the organization. Sun et al. (2007) noted that although high- performance HR practices have been empirically linked to retention and turnove r (e.g., Batt, 2002; Guthrie, 2001; Huselid, 1995), the underlying mechanisms of this relationship remain uncertain. Sun et al., relying on social exchange theory, examined service-oriented organi- zational citizenship behavior as a mediator of the high-performance HR–turnove r relationship. However, the authors’ explanation relied less on the organizational citizenship behaviors per se and more on employees’ affective attachments that led to these behaviors. Thus, relying again on the social exchange perspective, we argue that affective commitment better explains (indirectly) the relationship between high-performance HR practices and employees’ intent to remain with the organization. Given that affectively committed employees under a high-performance HR system are likely to hold deep bonds with the organization and feel both eager and obliged to contribute to organizational goals (Blau, 1983; Cohen, 2003), they are likely to expre ss an intent to remain that is greater than that of less committed employees, for a few reasons . First, employees can contribute to organizational effectiveness only as they continue their employment relation- ship; so, a desire to help achieve organizational goals aligns with an intent to remain with the organization. Second, employees are likely to choose to leave an organization when they think that incentives to stay no longer match the contributions they make (March & Simon, 1958). The desire to leave thus represents a form of withdrawal (Sheridan, 1985) and lik ely reflects a lack of emotional attachment to the organization and its goals. Thus, we make the following prediction based on the perceived obligations and affective attachments of commit- ted employees in the high-performance HR context, in addition to empirical support for a sig- nificant relationship between affective commitment and both intent to remain and turnover at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 374 Journal of Management / February 2013 (e.g., Angle & Perry, 1981; Mayer & Schoorman, 1992; Ostroff, 1992; for a related meta- analysis, see Harter, Schmidt, & Hayes, 2002): Hypothesis 2b: Affective commitment will mediate the positive relationship between high-p erfor- mance HR practice perceptions and intent to remain with the organization. Absenteeism. Similar to turnover, absenteeism has been proposed as a form of withdrawal behavior (Sheridan, 1985). Whereas individual HR practices, such as bonuses for perfect attendance, might directly affect absenteeism, a system of high-performance HR practices more likely influences absenteeism indirectly through affective commitment. For instance, under a high-performance HR system, extremely high levels of absenteeism may directly affect the benefits that employees obtain, but employees who are absent to a moderate extent will still likely be eligible to participate in decision making, complet e required tasks, attend available training, and enjoy other benefits of high-performance HR prac tices. Thus, the immediate rewards provided by a high-performance HR system are not likel y to directly account for significant reductions in absenteeism (other than perhaps a t extreme levels). Instead, as consistent with the affective bonds and perceived obligations predicted by the social exchange perspective, increased affective commitment is more likely to account for lower absenteeism in high-performance HR contexts. Specifically, employees can contribute to organizational goals only when they are present at work. Furthermore, they can provide their organization benefits (which are likely to be perceived as owed; Blau, 19 83) only through their activities on the job. Thus, affectively committed employees’ perceived obligations and desires to work toward organizational goals in the high-performance HR context lead us to the following prediction: Hypothesis 2c: Affective commitment will mediate the negative relationship between high- performance HR practice perceptions and reported absences in the previou s year. Method Sample and Research Procedures Data were collected in a large food service organization from employees working in each of 56 self-contained business units, which consisted of up to 10 jo b categories: administrative, day warehouse, drivers, marketing, marketing associates, merchandising, night warehouse, administrative supervisors, operational supervisors, an d sales supervi- sors. HR directors were asked to administer surveys to a randomly select ed group of 20% or more of the employees in their unit. The corporation from which the sample was drawn provides the opportunity for considerable variance with regard to actual HR practice implementation across job groups and business units based on its “ear ned autonomy” principle, which allows managers within each business unit to manage the ir various employees as they deem most appropriate. Consequently, employees who work in the same job category but in different business units may be managed with different HR at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 375 practices, as may those who are working in different job categories in the same business unit. Measures High-performance HR practice perceptions. We assessed employees’ perceptions of high- performance HR practices using 15 items compiled from previous empirical research in the SHRM literature aimed at improving employees’ KSAs (knowledge, skills, and abilities) and motivation and opportunity to perform. Specifically, we tapped into perceptions concerning selectivity in staffing procedures by asking employees about the use of formal selection te sts (Huselid, 1995; Way, 2001), the use of structured employment interviews (Huselid, 1995), and the general quality of selected job candidates (Combs et al., 2006) for employees in their jobs, given that selectivity in staffing is likely to increase the average level of knowledge and skills held by employees. We assessed opportunities for employee participation by asking about the extent to which employees perceived the existence of formal participation pro- cesses (Sun et al., 2007), implementation of changes based on employee suggestions, fair complaint procedures, and employee autonomy in job design modifications (Huselid, 1995), namely, because employees who believe that their voice counts in the organization and that they can make a difference with their work are likely to perceive greater opportunity and motivation to make meaningful contributions in the employment context. We measured the use of high-performance compensation practices by asking employees to ra te the availability of bonuses based on group and individual performance outcomes (Sun et al., 2007), merit- based pay raises, and overall high-pay levels for the type of work completed in their jobs (Way, 2001) because (a) high pay is likely to attract competent employees and (b) performance- based rewards are likely to increase motivation to perform. Additional practices that we assessed included formal performance evaluations (to increase motivatio n and aid in develop – ment; Huselid, 1995), regular information-sharing communication (to in crease employees’ sense of involvement and importance with respect to organizational issues; Combs et al., 2006), merit-based promotion opportunities (to increase motivation to perform; Huselid, 1995; Sun et al., 2007), and extensive formal training (to improve skills and ab ilities and to demonstrate the commitment of the organization to its employees; Combs et al., 2006; Huselid, 1995). Twelve items required yes/no responses and asked whether or not each practice existed in an employee’s job group (e.g., “Pay raises for associates in this job are based on job perfor – mance”); three additional questions were recoded for consistency wit h this format. A com- plete list of items used for each measure appears in the appendix. We created an additive index of HR practice items, resulting in a continu ous measure reflecting each employee’s perceptions that particular practices from a high-performance HR system were used to manage employees in his or her job group. Then, as noted, we aggregated individuals’ HR practice perception indices to the split job group level; that is, w e computed the mean of these indices for half the employees in each job group. The use of an additive index is consistent with previous research (e.g., MacDuffie, 1995; Youndt et al., 1996) and with our conceptual arguments regarding the additive nature of the effects of the high-performance HR system (Delery, 1998). In particular, we contend that each high-performance HR practice at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 376 Journal of Management / February 2013 is likely to uniquely contribute to the facilitation of a supportive mut ual investment-based exchange relationship between a group of employees and their organization. For example, regarding the multiple effects of high-performance compensation practices, an organization’s provision of high pay is likely to enhance the skill levels of its workforce, but the provision of pay based on group performance outcomes is likely to improve cooperation in the workplace— thus reflecting two unique contributions of pay practices to a supportiv e exchange relationship.We employed a referent–shift composition model for the HR practice per ception measure, for two reasons. First, we expected HR practice implementation to occur at the job group level rather than the individual level, thereby making the job group (as opposed to the individual) the appropriate referent of the HR construct (Chen, Mathieu, & Bliese, 2004). Relatedly, in cases in which an employee does not recall a personal experience with a particular HR practice, he or she is likely to rely on the apparent experiences of his or her coworkers when making inferences related to th at aspect of the employment relationship. Second, this composition model and the correspo nding mea- surement technique allowed us to test our expectation that employees in a job group share consistent perceptions of HR practice employment (Kozlowski & Kle in, 2000). The HR practice perception index showed good internal consistency reliability (a = .80). Thus, a high score on the HR practice perception index indicates employee percep- tions of extensive use of high-performance HR practices. We calculated intraclass cor – relation coefficients (ICCs) for high-performance HR practice perceptions at the split job group level, given that this was the level to which we sought to agg regate the data. ICCs for the HR practice perception index (ICC 1 = .30, ICC 2 = .86) provided support for our aggregation of employee responses to the split job group level. Affective commitment. We measured affective commitment using five items that were consistent with items used in previous research (e.g., Meyer & Allen, 1997; Porter, Steers, Mowday, & Boulean, 1974). Sample items include “I feel a strong sense of belonging to this organization” and “I am willing to work harder to help this company succeed.” All the affec- tive commitment items appear in the appendix. Employees were asked to re port, on a 5-point scale, the extent to which they agreed with each commitment statement; w e then computed a mean commitment scale for each individual by averaging the individual’ s responses to the five commitment items. Support for combining the commitment items into a single scale is evident in the high level of internal consistency reliability (a = .89). Organizational citizenship behavior. Six items, which appear in the appendix, were used to assess organizational citizenship behavior. These items were drawn from a large number of potential organizational citizenship behavior items (Podsakoff et al., 2000) based on col- laboration on the employee survey between the researchers and the organization. Sample items included “I ‘touch-base’ with my coworkers before initiating actions that might affect them” and “I willingly share my expertise with my coworkers.” Employees were asked to indicate, on a scale from 1 to 5, the extent to which they agreed with e ach statement. Again, individual scales for organizational citizenship behavior were computed with each employ- ee’s mean score on the six organizational citizenship behavior items, as supported by good internal consistency reliability (a = .79). at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 377 Intent to remain with the organization. We relied on employees’ reported intentions to remain with the organization. Although we realize this is not a true behavioral outcome measure, it does measure an intention to engage in a behavior. In addition, intentions to turnover (or, in this case, the inverse) have been shown to be a strong predictor of act ual turnover (Van Breukelen, Van der Vlist, & Steensma, 2004). Employee respondents were asked to indicate, on a scale of 1 to 5, the extent to which they agreed with four statements regarding their intent to remain with t he organization. Sample representative items included “I plan to spend my career at [t his organization]” and “I intend to stay at [this organization] for at least the next 12 months.” Item scores were again averaged at the individual level to calculate a single “intent to remain” scale, which was again supported by high internal consistency reliability (a = .83). The four items for this scale appear in the appendix. Absenteeism. To assess absenteeism, we asked employee respondents to report the number of days they had missed work in the last calendar year. Control variables. Because different types of jobs vary in their relative desirability and likelihood of attracting committed, motivated, and diligent employees, w e controlled for job category as a fixed effect in our analyses, with sales supervisors as the baseline category. Note that employees are grouped and supervised on the basis of their job categories in this organization such that an employee’s job group includes all the employees in his or her job category who also work in his or her business unit. We included business unit and job group as random covariates in our analy ses to account for unmeasured influences on the dependent variables that may be present at those levels. Analyses and Results Table 1 presents means, standard deviations, intercorrelations, and alpha s among all the variables examined. Given recent recommendations made by Zhang, Zyphur, and Preacher (2009), we tested our model using CWC(M) mediation analysis—that is, centered within context with reintroduction of the subtracted means at Level 2 (Kreft & de Leeuw, 1998)— based on a 2–1–1 model. Specifically, we accounted for the multilevel nature of our data and model using a group mean–centering approach (as opposed to a grand m ean–centering approach) in which group-level means are included in the estimation of the between-group components of the relationships between variables; note that the group-l evel means are removed from the centered variables that reflect lower-level (individual-level) deviations from group means. The 2–1–1 specification reflects the group-level nature of the ind epen- dent variable (i.e., aggregated HR practice perceptions) and the indiv idual-level nature of the mediator and dependent variables. We refer readers to Zhang et al. (2009) for a thorough explanation of the CWC(M) approach, including its details and advantag es. Briefly, though, a primary benefit of this analysis over grand mean centering is that the CWC(M) method provides unique estimates for the within- and between-group coefficients of the mediator (i.e., the effects), whereas grand mean centering holds these two coefficients equal, thus at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 378 Journal of Management / February 2013 reflecting an unnecessary constraint and yielding confounded estimates of the mediator’s effect on the dependent variable (Zhang et al., 2009).Figure 1 depicts the general CWC(M) 2–1–1 model (ignoring, for the moment, the As and the B above the boxes). In the present study, Level 2 represents the job group level, and Level 1 represents the individual level. As Zhang et al. (2009) noted, because variance in the inde- pendent variable exists solely at Level 2 in a 2–1–1 model, the in dependent variable can account only for between-group variation in the mediator; thus, we can meaningfully focus on only the between-group mediation effect (i.e., the extent to which job group–level percep- tions of high-performance HR practices create variation across job group s in the behavioral and behavior-oriented outcomes of individual employees, through their effect on affective commitment). Note, however, that it is still important to estimate the within-group effect of the mediator on the dependent variables to ensure precision of the overa ll model estimation (Zhang et al., 2009). Empirical support for this model would indicate that the Level 2 compone nt of affective commitment mediates the relationship between the Level 2 independent var iable (i.e., HR practice perceptions) and the Level 1 dependent variable, even after th e effect of the Level 1 component of affective commitment is taken into account. The A and B designations above the boxes in Figure 1 reflect the split-sample analytical approach that we employed to mitigate concerns associated with common method bias. In particular, boxes designated A reflect variables that we drew from employees in one half of each job group, and boxes designated B reflect variables that we drew from employees in the other half of the job group. We chose this pattern of sample splitting to stack the odds against finding support for our predicted mediated model. Specifically, by drawing the group-centered mediator from the same half of each job group as the dependent variable while drawing the Level 2 mean of the mediator from the other half of each job group, we m aximized the variation in the dependent variable likely to be explained by group-cent ered commitment while minimizing the proportion of variance likely to be explained by th e job group mean of commitment (i.e., the operational mediator in this study), thus provid ing a conservative test of the predicted mediation effect. Table 1 Means, Standard Deviations, Reliabilities, and Correlations Variables M SD 1 2 3 4 1. HR practice perceptions 0.57 0.16 (.80) 2. Affective commitment 4.20 0.41 .62** (.89) 3. Organizational citizenship behavior 3.97 0.54 .23** .26** (.79) 4. Intent to remain 3.80 0.84 .33** .36** .43** 5. Absenteeism 2.16 4.88 –.22 ** –.20 ** –.07 ** –.13 ** Notes: Scale reliabilities are reported on the diagonal. HR (human resource) practice perceptions and affective commitment descriptives and the correlations between them were computed at the job group level; all other descrip- tives and correlations were computed at the individual level. Consistent with subsequent analyses, affective com- mitment values for the computation of descriptives and correlations were drawn from employees in Split B; values for all other variables were drawn from employees in Split A. *p < .05. **p < .01. ***p < .001. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 379 Hypothesis 1 predicted that employees’ perceptions of high-performance HR practices would be positively related to affective commitment. The bivariate correlation in Table 1 shows a correlation of .62 between HR and commitment in the A-B analysis. Table 2 dis- plays the results of the mixed-model analyses in which affective commitment is the depen- dent variable. The baseline model, Model 1, includes only the job category controls and the job group and business unit covariates. High-performance HR practice per ceptions were included as a fixed effect in Model 2. Consistent with the bivariate correlation between high- performance HR practices and affective commitment, high-performance HR practice per – ceptions were a significant predictor of affective commitment (b = 0.40, p < .001), thereby providing strong support for Hypothesis 1. Hypotheses 2a and 2b predicted that affective commitment would mediate the positive relationships between high-performance HR practice perceptions and (a) organizational citizenship behavior and (b) intent to remain with the organization, respectively. To test these hypotheses, we used the method suggested by Baron and Kenny (1987), wh o suggested that if the independent variable (HR practices) exhibits (a) a significan t coefficient when the mediator (affective commitment) is not included in the equation and (b) a nonsignificant coefficient after controlling for the mediator, then full mediation exists. If the regression coefficient maintains significance but is reliably reduced (reduction of th e coefficient can be tested with the Sobel [1982] test), then a partial mediating relationsh ip exists. We used a mixed-model analysis to test Hypotheses 2 and 3, including only job category controls and job group and business unit covariates in Model 1, adding i n high-performance HR practice perceptions in Model 2, and estimating the full model with these predictors as well as the Level 2 mean of affective commitment and group mean centered affective com- mitment in Model 3. As displayed in Tables 3 and 4, Model 2 presents results of the tests of the relationships between high-performance HR practice perceptions and b oth organizational Figure 1 CWC(M) Mediation Analysis Based on a 2–1–1 Estimated Model Independent Va riable Mean of Mediator at Level 2 Group-centered Mediator Dependent Variable Le vel 2 Le vel 1 AA AB Note: CWC(M) = centered within context with reintroduction of the subtracted means at Level 2. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 380 Journal of Management / February 2013 citizenship behavior and intent to remain with the organization, respectively. As can be seen in the tables, significant variance in both these variables is explained by high-performance HR practice perceptions (b = 0.24, p < .001; β = 0.28, p < .001, respectively), thus satisfying the first requirement for mediation for these two dependent variables. As already noted, high-performance HR practice perceptions were significantly related to a ffective commit- ment, satisfying the mediation requirement that the independent variable predict the mediator. In Tables 3 and 4, Model 3 presents the results of the final step of our med iation analysis. As reflected by the significance of the HR practice perception coefficient in Model 3 in Table 3 (b = 0.05, p < .05), affective commitment does not completely mediate the relationship between HR practice perceptions and organizational citizenship behavior. However, a Sobel test demonstrates that partial mediation does occur (t = 6.81, p < .001), with affective com- mitment mediating 68% of the total effect of HR practice perceptions on organizational citi- zenship behavior, thus reflecting partial support for Hypothesis 2a. As the lack of significance in the HR practice perception coefficient (b = 0.00) in Model 3 of Table 4 demonstrates, affec- tive commitment completely mediates the relationship between HR practice perceptions and intent to remain with the organization, thus providing full support for Hypothesis 2b. Hypothesis 2c predicted that affective commitment would mediate the negative relationship between HR practice perceptions and absenteeism. Because absenteeism was an overdispersed count variable, we employed negative binomial regression with a log link to test predictions concerning this outcome. To test Hypothesis 2c, we included job category controls, in addition to job group and business unit as subject identifiers (clustering), to account for the multilevel Table 2 Results of Mixed-Model Analyses Predicting Affective Commitment Model 1 Model 2 Parameter Estimate 95% CI Estimate 95% CI Estimates of fixed effects Intercept 1.06 *** (0.12) 0.81 1.30 0.58 *** (0.12) 0.34 0.82 Job Category 1 –1.00 *** (0.15) –1.28 –0.71 –0.21 (0.17) –0.54 0.13 Job Category 2 –2.01 *** (0.15) –2.30 –1.72 –1.13 *** (0.18) –1.48 –0.79 Job Category 3 –1.33 *** (0.15) –1.63 –1.04 –0.61 *** (0.17) –0.94 –0.28 Job Category 4 –0.46 ** (0.15) –0.76 –0.16 –0.18 (0.15) –0.48 0.12 Job Category 5 –0.53 *** (0.15) –0.82 –0.24 –0.43 ** (0.14) –0.71 –0.15 Job Category 6 –0.71 *** (0.15) –1.00 –0.42 –0.19 (0.16) –0.49 0.12 Job Category 7 –1.87 *** (0.15) –2.16 –1.58 –1.20 *** (0.16) –1.52 –0.88 Job Category 8 –0.24 (0.17) –0.57 0.08 0.08 (0.16) –0.25 0.40 Job Category 9 –0.28 (0.15) –0.57 0.02 –0.05 (0.15) –0.35 0.24 Human resource practice perceptions 0.40 *** (0.05) 0.30 0.49 Estimates of covariance parameters Residual 0.55 *** (0.04) 0.48 0.63 0.52 *** (0.04) 0.45 0.59 Business unit 0.23 *** (0.06) 0.14 0.38 0.10 (0.03) 0.05 0.20 Model fit statistics Schwarz’s Bayesian criterion 1,218.66 1,163.05 Notes: Standardized coefficients are reported (standard errors in parentheses). CI = confidence interval; HR = human resource. *p < .05. **p < .01. ***p < .001. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 381 Table 3 Results of Mixed Models Analyses Predicting Organizational Citizenship Behavior Model 1 Model 2 Model 3 Parameter Estimate 95% CI Estimate 95% CI Estimate 95% CI Estimates of fixed effects Intercept 0.51 *** (0.06) 0.39 0.63 0.22 *** (0.06) 0.10 0.34 0.19 ** (0.06) 0.08 0.30 Job Category 1 –0.42 *** (0.07) –0.57 –0.28 0.07 (0.08) –0.09 0.23 –0.05 (0.07) –0.19 0.09 Job Category 2 –0.77 *** (0.08) –0.93 –0.62 –0.25 ** (0.09) –0.41 –0.08 –0.12 (0.08) –0.28 0.03 Job Category 3 –0.61 *** (0.07) –0.74 –0.47 –0.19 * (0.07) –0.33 –0.04 –0.19 ** (0.07) –0.32 –0.06 Job Category 4 –0.23 * (0.09) –0.41 –0.05 –0.02 (0.09) –0.19 0.16 –0.06 (0.08) –0.21 0.10 Job Category 5 –0.40 *** (0.07) –0.54 –0.27 –0.35 *** (0.06) –0.48 –0.23 –0.29 *** (0.06) –0.40 –0.18 Job Category 6 –0.58 *** (0.08) –0.75 –0.42 –0.25 ** (0.08) –0.42 –0.08 –0.29 *** (0.08) –0.44 –0.14 Job Category 7 –0.83 *** (0.07) –0.97 –0.69 –0.44 *** (0.08) –0.59 –0.29 –0.25 *** (0.07) –0.39 –0.11 Job Category 8 –0.01 (0.10) –0.21 0.19 0.18 (0.10) –0.02 0.37 0.12 (0.09) –0.05 0.30 Job Category 9 0.01 (0.09) –0.16 0.18 0.15 (0.08) –0.01 0.31 0.11 (0.08) –0.03 0.26 Human resource practice perceptions 0.24 *** (0.02) 0.22 0.28 0.05 * (0.02) 0.01 0.10 Level 2 affective commitment 0.26 *** (0.02) 0.22 0.29 Group-centered affective commitment 0.42 *** (0.01) 0.40 0.44 Estimates of covariance parameters Residual 0.90 *** (0.02) 0.88 0.93 0.89 *** (0.02) 0.86 0.92 0.71 *** (0.01) 0.69 0.74 Business unit 0.02 ** (0.01) 0.01 0.04 0.01 (0.00) 0.00 0.02 0.00 (0.00) 0.00 0.01 Job group 0.02 *** (0.01) 0.02 0.04 0.01 ** (0.00) 0.01 0.03 0.01 ** (0.01) 0.01 0.02 Model fit statistics Schwarz’s Bayesian criterion 19,509.05 19,009.67 17,481.83 Notes: Standardized coefficients are reported (standard errors in parentheses). CI = confidence interval. *p < .05. **p < .01. ***p < .001. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 382 Table 4 Results of Mixed Models Analyses Predicting Intent to Remain with the Organization Model 1 Model 2 Model 3 Parameter Estimate 95% CI Estimate 95% CI Estimate 95% CI Estimates of fixed effects Intercept 0.54 *** (0.07) 0.41 0.67 0.22 ** (0.07) 0.09 0.35 0.16 *** (0.04) 0.07 0.25 Job Category 1 –0.65 *** (0.08) –0.80 –0.50 –0.10 (0.08) –0.26 0.07 –0.27 *** (0.06) –0.38 –0.16 Job Category 2 –0.81 *** (0.08) –0.96 –0.66 –0.21 * (0.09) –0.39 –0.04 –0.02 (0.06) –0.14 0.11 Job Category 3 –0.60 *** (0.07) –0.75 –0.46 –0.12 (0.08) –0.27 0.03 –0.10 * (0.05) –0.21 0.00 Job Category 4 –0.26 ** (0.09) –0.44 –0.08 –0.06 (0.09) –0.24 0.11 –0.12 (0.06) –0.24 0.00 Job Category 5 –0.26 *** (0.07) –0.40 –0.13 –0.21 ** (0.07) –0.33 –0.08 –0.11 * (0.04) –0.20 –0.02 Job Category 6 –0.50 *** (0.08) –0.67 –0.34 –0.12 (0.09) –0.29 0.04 –0.18 ** (0.06) –0.29 –0.06 Job Category 7 –1.07 *** (0.07) –1.21 –0.93 –0.62 *** (0.08) –0.78 –0.47 –0.32 *** (0.06) –0.43 –0.21 Job Category 8 –0.12 (0.10) –0.31 0.08 0.10 (0.10) –0.09 0.29 0.02 (0.07) –0.11 0.16 Job Category 9 –0.16 (0.09) –0.33 0.02 0.00 (0.08) –0.16 0.17 –0.05 (0.06) –0.16 0.07 Human resource practice perceptions 0.28 *** (0.02) 0.23 0.33 0.00 (0.02) –0.04 0.03 Level 2 affective commitment 0.39 *** (0.02) 0.36 0.42 Group-centered affective commitment 0.63 ** (0.01) 0.62 0.65 Estimates of covariance parameters Residual 0.82 *** (0.01) 0.79 0.85 0.82 *** (0.01) 0.79 0.85 0.41 *** (0.01) 0.4 0.43 Business unit 0.05 *** (0.01) 0.03 0.08 0.02 ** (0.01) 0.01 0.04 0.01 ** (0.00) 0 0.01 Job group 0.04 *** (0.01) 0.03 0.06 0.02 *** (0.01) 0.02 0.04 0.01 ** (0.00) 0 0.02 Model fit statistics Schwarz’s Bayesian criterion 18,909.34 18,497.29 13,733.47 Notes: Standardized coefficients are reported (standard errors in parentheses). CI = confidence interval. *p < .05. **p < .01. ***p < .001. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 383 data structure in our baseline model (Model 1); we also included HR pr actice perceptions as a predictor in Model 2, and we added Level 2 affective commitment means and group mean– centered affective commitment in Model 3. The results for these analyses appear in Table 5. As can be seen in Models 2 and 3 in this table, HR practice perceptions are a significant predic- tor of absenteeism both before and after affective commitment is included in the estimated model (b = –0.19, p < .001; b = –0.13, p < .05, respectively), reflecting a lack of support for full mediation of HR perception–absenteeism relationship. Furthermore , affective commitment is not a significant predictor of absenteeism in Model 3 (i.e., when included in the model with HR practice perceptions), thereby suggesting that partial mediation doe s not occur. Thus, we find no support for Hypothesis 2c. Discussion The primary purpose of this study was to explore the relationship betwee n employees’ perceptions of the use of high-performance HR practices at the job group level and important attitudinal and behavioral employee outcomes. Specifically, substantial evidence based on previous empirical work in the SHRM realm supports the relationship betw een high- performance HR practices and organizational performance, and a smaller amount of evi- dence based on more recent studies has begun to point to a link between high-performance HR practices and employee outcomes; however, both these streams of work have largely depended on the use of managerial reports of HR practice use. As discussed earlier, a variety of reasons explain why managers’ reported HR practice use may not relate in expected ways to desired employee outcomes (Bowen & Ostroff, 2004; Nishii & Wright, 2008). As such, an examination of the role of employees’ collective perceptions of HR practice use in determin- ing positive outcomes represented an important need in the SHRM literatu re and, thus, a key contribution of the present study. To address this need, as well as recent calls in the literature, for studies assessing outcomes of employees’ HR practice perceptions and for additional empirical work assessing the proximal outcomes of high-performance HR practices, we developed and tested a model based on social exchange theory in which af fective commit- ment mediates the relationship between employees’ collective perceptions of high-perfor – mance HR practice use and organizational citizenship behavior, intent to remain with the organization, and absenteeism. In general, our findings support our predictions: Employees’ collective perceptions of high-performance HR practice use are positively related to affective commitment, organiza- tional citizenship behavior, and intent to remain with the organization and negatively related to absenteeism. Furthermore, affective commitment partially mediates the relationship between high-performance HR practice perceptions and organizational citizenship behavior, and it completely mediates the relationship between high-performance HR practic e perceptions and intent to remain with the organization. Contrary to our expectations, affective commit- ment does not mediate the HR practice perception–absenteeism relation ship, nor is it a sig- nificant predictor of absenteeism when HR practice perceptions are inclu ded in the model. In addition, the empirical support for our model reflects the importance of employees’ aggregated perceptions of HR practices as they are employed throughout a job group above and beyond the individual-level mechanisms through which HR practices ma y affect at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 384 Table 5 Results of Negative Binomial Regression Analyses Predicting Absenteeism Model 1 Model 2 Model 3 Parameter Estimate 95% CI Estimate 95% CI Estimate 95% CI Estimates of fixed effects Intercept –0.13 (0.21) –0.53 0.27 0.08 (0.21) –0.34 0.50 0.10 (0.21) –0.32 0.52 Job Category 1 1.23 *** (0.22) 0.80 1.66 0.86 ** (0.25) 0.37 1.35 0.89 *** (0.25) 0.40 1.38 Job Category 2 1.36 *** (0.23) 0.91 1.80 0.92 *** (0.25) 0.43 1.41 0.86 ** (0.25) 0.37 1.36 Job Category 3 1.07 *** (0.23) 0.62 1.51 0.73 ** (0.24) 0.26 1.20 0.72 ** (0.24) 0.25 1.19 Job Category 4 0.70 ** (0.24) 0.22 1.17 0.57 * (0.24) 0.10 1.04 0.57 * (0.24) 0.11 1.04 Job Category 5 –0.15 (0.24) –0.62 0.32 –0.18 (0.24) –0.64 0.29 –0.20 (0.23) –0.66 0.26 Job Category 6 0.79 ** (0.26) 0.28 1.29 0.54 * (0.27) 0.01 1.06 0.56 * (0.27) 0.03 1.08 Job Category 7 1.53 *** (0.22) 1.10 1.95 1.21 *** (0.23) 0.75 1.67 1.13 *** (0.23) 0.67 1.59 Job Category 8 0.93 *** (0.27) 0.41 1.45 0.75 ** (0.27) 0.23 1.27 0.77 ** (0.26) 0.25 1.29 Job Category 9 0.38 (0.25) –0.10 0.87 0.31 (0.25) –0.19 0.80 0.32 (0.25) –0.17 0.82 Human resource practice perceptions –0.19 *** (0.05) –0.29 –0.09 –0.13 * (0.06) –0.25 –0.01 Level 2 affective commitment –0.10 (0.05) –0.2 –0.01 Group-centered affective commitment –0.04 (0.03) –0.1 0.02 Model fit statistics: Quasi-likelihood under the independence 8,531.99 8,368.41 8,355.45 model criterion Notes: Predictors were standardized to allow for comparison, but the dependent variable was not standardized, given the need for positive integers in negative binomial regression analysis. Standard errors are in parentheses. CI = confidence interval. *p < .05. **p < .01. ***p < .001. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 385 individuals’ outcomes. In particular, aggregate affective commitment mediates the impact of aggregate HR practice perceptions on individual-level organizational citizenship behavior and intent to remain with the organization—even after the effects of individual-level devia- tions in affective commitment on these dependent variables are taken into account, thus pointing to important implications for research and practice.From a theoretical perspective, our findings represent a departure from most existing SHRM research in this vein. Specifically, empirical work in this area has tended to treat the employee outcomes of HR practices as employees’ responses to consistently implemented, predetermined management techniques (for an exception, see Liao et al., 2009). However, the current findings suggest that employees’ perceptions of and reactions to HR practices may in fact be influenced by the perceptions and apparent experiences of their coworkers as well—thereby pointing to a need for SHRM scholars to focus on employe es’ aggregate per – ceptions of HR practice use throughout a job group. Consequently, whereas a reader of tra- ditional SHRM research might conclude that effective HR policy is essential in eliciting desired aggregate outcomes, the current findings suggest that a group of employees’ indi- vidual outcomes are likely affected by the way that the individuals in the group perceive the group to be managed as a whole. From a practical standpoint, our findings point to the need for organizations to move beyond a focus on the effective design or selection of an HR system, to include an emphasis on consistent implementation of and communication about HR practices. The results of our study indicate that employees’ perceptions about the management of their job group likely affect individual-level attitudinal and behavioral outcomes, thereby sugge sting that to maxi- mize the positive effects of an HR system, managers should employ HR practices consis- tently across a job group and ensure that all employees are aware of the practices in use. Several strengths of our study enhance the contribution of this research to SHRM literature and practice. First, we included attitudinal and behavioral outcomes of high-performance HR practice perceptions in a single model. This component of our study extends the SHRM literature in two ways. First, the examination of these employee outcome s addresses recent calls in the literature for additional empirical work on more proximal relationships in the HR–performance chain (e.g., Becker & Gerhart, 1996; Takeuchi et al., 2009; Wright & Gardner, 2003). In particular, we demonstrated significant relationships between employees’ HR practice perceptions and affective commitment, as well as three important behavioral outcomes—namely, organizational citizenship behavior, intent to remain with the organiza- tion, and absenteeism—which are likely to have important performance implications across a variety of organizational contexts. Second, by examining the relationships between at titu- dinal and behavioral outcomes, our study informs the field’s understanding of the causal chain by which high-performance HR practices are likely to have an impact. Bas ed on a sequence consistent with social exchange theory, our findings suggest that employees’ perceptions of high-performance HR practice use likely affect employees’ behaviors to at least some extent through their effect on an important attitudinal outcome—that is, affective commitment. This is significant: Whereas previous work in this area has acknowledged the importance of social exchange processes in the sequence by which HR practices affect employee behaviors, to date, little if any work has theoretically and empirically addressed the role of attitudes in creating the context necessary for desirable behaviors to consistently e merge from the implementation of a high-performance HR system. at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 386 Journal of Management / February 2013 In light of this consideration, our findings point to an interesting que stion with regard to organizational citizenship behavior and absenteeism. As noted, affective commitment par – tially mediated the relationship between HR practice perceptions and organizational citizen- ship behavior, although it mediated a large portion of this relationship (68%); it did not mediate the relationship between HR practice perceptions and absenteeism . Thus, it is likely that one or more alternative explanations, independent of social exchang e theory, provide the basis for a portion of the influence of HR practice perceptions on organizational citizenship behavior and for the entire impact of HR practice perceptions on employe es’ absenteeism. Although employees’ perceptions that high-performance HR practices are in use could trans- late directly into beliefs that performing extra-role behaviors and limi ting absences from work will lead to better rewards, an interesting avenue for future resea rch would be to inves- tigate whether this is the case or if perceptions of HR practices work more indirectly, through some other attitudinal mechanisms (other than affective commitment) to affect organiza- tional citizenship behavior and absenteeism. Attitudes can be conceived as having cognitive, affective, and intentional components, and it may be that the cognitive mechanisms account for variance beyond the affective components. For example, practices such as gain sharing (which we could not measure) may not increase affective commitment, but they still might incent employees to exhibit citizenship behavior. In addition, bonuses for attendance could similarly affect attendance behavior without doing so through commitment. The importance of this question is based on the rationale that prompted this study: tha t attitudes are likely to precede and predict behaviors (Ajzen & Fishbien, 1980), thereby sugges ting that behaviors’ attitudinal antecedents are important points of focus and measurement. Another critical strength of the present study was the use of a multilev el approach with consideration of relationships at the job group and individual levels. S pecifically, by consid- ering HR practice perceptions at the job group level, we captured import ant variance in this variable based on a relevant organizational boundary that acknowledged the contextual influences affecting the formation of perceptions at the individual level. Furthermor e, by considering proximal outcomes of employees’ aggregate HR perceptions, we were able to demonstrate the following: Although individuals develop their own exchange relationships with an organization, choosing and enacting their work behaviors accordingly, they develop these relationships and enact these behaviors in the presence of coworke rs with whom they are likely to share frequent experiences and interactions—thus, the interpretations, attitudes, and decisions among employees in the same job group are likely shaped by similar influ- ences and thus exhibit some level of consistency. Our findings reflected this logic: Although individuals’ differences in affective commitment significantly predicted their behavioral outcomes, the job group mean of affective commitment fully mediated the relationship between aggregate HR perceptions and both individual organizational citizenship behavior and intent to remain with the organization, even after accounting for these effects—thus demonstrating the importance of identifying and accounting for the appropriate contextual effects in the study of HR practices and outcomes. As with most research, the results of this study should be interpreted w ith consideration of several limitations. First, the cross-sectional nature of the study d oes not allow for any conclusions regarding causal relationships. Employees were asked to report their percep- tions of current HR practices and present levels of affective commitment, intent to remain with the organization, and organizational citizenship behavior. Absenteeism measures were at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from Kehoe, Wright / Impact of High-Performance Human Resource Practices 387 based on employees’ self-reported number of missed workdays in the previous calendar year. Although the analyses show that our proposed relationships exist with th e cross-sectional data set, we are not able to claim a causal relationship from these resu lts. Future research would benefit from testing the present study’s model within a longitudinal design.Second, the study relied on employee self-reports of employee outcomes. More accurate reports of organizational citizenship behavior and absenteeism might have been obtain ed through departmental records or managers; however, we were unable to obtain departmental or managerial reports for these variables. Third, we did not empirically examine the antecedents of variability in employees’ per – ceptions of HR practices. Although we emphasize the likely importance of consistent and effective HR practice implementation in shaping employees’ HR practice perceptions, empirical work is needed examining the relative significance of potentia l antecedents. Finally, the high-performance HR practices that we included in the study were n ot entirely representative of previously studied high-performance HR systems. For ex ample, because of restrictions imposed by the organization, we were unable to question employee respondents about gain sharing or profit sharing, given that such questions could prime employees to later question why such practices did not exist within the organization. However, as previously noted, the HR practices that we did include were consistent with the cor e elements underly- ing a high-performance HR system and with our review of previous researc h in this area. Overall, we believe that this study’s strengths and contribution to the SHRM literature and practice outweigh its limitations. First, we demonstrated the importance of employees’ per – ceptions of the HR practices used to manage their job groups in predicti ng attitudinal and behavioral outcomes—an oversight in the majority of previous SHRM res earch. Second, we shed light on the relationships between attitudinal and behavioral outcomes in the high-performance HR context—a set of relationships that previous work in this area had left vague or unspeci- fied. Third, we presented findings that suggest a variety of fruitful areas fo r future research in the SHRM realm, including the controllable and uncontrollable determinan ts of employees’ HR practice perceptions, the affective mechanisms by which high-performance HR practices affect absenteeism, and other attitudinal and behavioral outcomes potentia lly affected by HR practice perceptions and important to higher-level organizational performance outcomes. We are hopeful that future SHRM inquiry will acknowledge and attempt to inf orm the gaps between organizations’ HR policies and employees’ HR practice experiences and perceptions; employees cannot willfully respond to practices they do not perceive. Appendix: Items Used for All Examined Variables High-Performance Human Resource Practice Perceptions 1. Applicants for this job take formal tests (paper and pencil or work sam ple) before being hired. 2. Applicants for this job undergo structured interviews (job related questions, same questions asked for all applicants) before being hired. 3. Associates in this job are involved in formal participation processes su ch as quality improve- ment groups, problem solving groups, or roundtable discussions. (continued) at Glasgow University Library on August 19, 2013 jom.sagepub.com Downloaded from 388 Journal of Management / February 2013 4. Associates in this job have a reasonable and fair complaint process. 5. Associates in this job have the opportunity to earn group bonuses for pr oductivity, perfor- mance, or other group performance outcomes. 6. Associates in this job have the opportunity to earn individual bonuses (or commissions) for productivity, performance, or other individual performance outcomes. 7. At least once a year associates in this job receive a formal evaluation of their performance. 8. Associates in this job regularly receive formal communication regarding company goals and objectives. 9. In the last 4 months, the company has made a change in how work is compl eted in my depart- ment based on the suggestion(s) of an associate or group of associates . 10. Pay raises for associates in this job are based on job performance. 11. Qualified associates in this job have the opportunity to be promoted to positions of greater pay and/or responsibility within the company. 12. Associates in this job are allowed to make important work related decisi ons such as how the work is done or implement new ideas. 13. The company hires only the very best people for this job. 14. Total pay for this job is the highest for the type of work in the area. 15. On average, how many hours of formal training do associates in this job receive each year? Affective Commitment 1. I am willing to work harder to help this company succeed. 2. I am proud to work for [this organization]. 3. I feel a strong sense of belonging to this organization. 4. I would refer a friend to come work at [this organization]. 5. Overall, I am satisfied working at [this organization]. Organizational Citizenship Behavior 1. I provide constructive suggestions about how my department can improve i ts effectiveness. 2. For issues that may have serious consequences, I express my opinions hon estly even when others may disagree. 3. I “touch-base” with my coworkers before initiating actions that mi ght affect them. 4. I encourage others to try new and effective ways of doing their job. 5. I help others who have large amounts of work. 6. I willingly share my expertise with my coworkers. Intention to Remain With the Organization 1. I would turn down a job with more pay in order to stay with [this organization]. 2. I plan to spend my career at [this organization]. 3. I intend to stay at [this organization] for at least the next 12 months. 4. 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International HRM Day 1 – IHRM, Setting the Scene Monday 13 th February 2017 Paul Hunter Email: [email protected] Why IHRM?  Today it is important for multi -national organisations to remain competitive, responsive, flexible & adaptable of transferring knowledge and learning across global offices.  International Human Resource Management (IHRM) is a new, complex and rapidly chang ing area of practice due to the major challenges facing multi -national organisations in the management of human resources.  This course provides you with up -to -date, research -based knowledge concerning the implementation and impact of IHRM practices within multi -national organisations. Learning Outcomes 1. Understand the key academic models, theories and controversies surrounding the role and influence of IHRM; 2. Recognise the importance of culture & cross -cultural management; 3. Understand the need to transfer employment practices across borders through recognised frameworks; 4. Describe the needs of change, training and knowledge management in multinational firms; 5. Understand the processes of global performance management, global talent management & the dark side of international employment. IHRM Timetable Day 1 – IHRM, Setting the Scene Monday 13 th February, 09.00 -12.00 Day 2 – IHRM Academic Models, Theories and Debates Wednesday 15 th February: 09.00 -12.00 Day 3 – The Cultural Approach Thursday 16 th February – 09.00 -12.00 Day 4 – Global Staffing International Assignments Monday 20th February – 09.00 -12.00 Day 5 – Managing Change & Knowledge Wednesday 22nd February – 09.00 -12.00 Day 6 – Dark Side of International Employment & Assignment Thursday 23rd February – 09.00 -12.00 Core Text Books Further Resources • Crawley, Swailes and Walsh (2013). Introduction to International Human Resource Management. Oxford University Press. • Harzing and Pinnington (2015). International Human Resource Management (fourth edition). Sage . Moodle • Slides and journals have been posted on to the IHRM Moodle page. Assignment  There will be a choice of two assignment questions (2500 words).  Assignment details will be released via Moodle in due course .  The assignment deadline will be: Friday 17 th March at 12pm. Day 1 IHRM – Setting the Scene HRM Review “HRM is the development of policies, and management of processes and activities undertaken by a Human Resource Department for an organisation. It is usually studied in the context of one country ” “SHRM ensures that all policies, processes and activities are focussed on supporting the Strategic objectives of the organisation. ” (Crawley, Swailes & Walsh 2013) The Emergence of HRM  Developments in HRM have been driven by large scale changes within businesses due to the competitive global economic environment. “In the past two decades, a company’s workforce has become increasingly important to business success – so much so that most senior executives now view people and workforce -rela ted issues as a critical competitive differentiator and one of their top agenda items’. Attracting and retaining skilled staff and finding and developing talented leaders were cited by executives as critical factors in achieving high performance” (Accent ure, 2006) Definitions of HRM  The study of Human Resource Management is concerned with the nature and regulation of the employment relationship (economic asset). “HRM includes anything and everything associated with the management of employment relationships in the firm” (Boxall and Purcell, 2003) “A strategic approach to managing employment relations which emphasises that leveraging people’s capabilities is critical to achieving sustained competitive advantage, this being achiev ed through a distinctive set of integrated employment policies, programmes and practices ” (Bratton & Gold, 2007) HRM Functions  All about People – acquiring their services, developing their skills, motivating them to higher levels of per formance.  Ensuring that they continue to work effectively in the organisation is what constitutes the process of HRM.  In other words, the activities associated with people management in work organisations.  It is suggested that the impact of HRM on an organisation is of great value – interrelated to an enterprise’s success and performance. HRM Activities  HRM covers areas of work and employment inc: • Staffing; • Job analysis, recruitment & selection; • Training and development; • Rewards & Motivation; • Employee relationships; • Health, safety and employee well -being; • Performance management; • Diversity and Equality management; • Change management; • Employer branding; Covered in CIHRM Course The HRM Model (Storey, 2007) Beliefs & Assumptions • Gives competitive edge • Not about rules, but employee commitment • Employees should be carefully selected and developed Strategic Qualities • HR decisions are of strategic importance to the business • Management involvement is necessary • HR policies should be integrated into business (stemming from and contributing) Critical Role of Managers • Not just about HR specialists – due to core activities of the business • Managers are closely involved as enablers and drivers of HR policies • More attention is made to the management of managers Key Levers • Culture is very important • Integrated action on selection, communication, training, reward and development • Restructuring and job redesign to allow developed responsibility and empowerment. HRM – Developing Role of Managers  With the development of HRM, the increasing role of HR managers and specialists has driven a need for increased skills: • increased responsibility placed upon it to deliver improvements in worker performance; • the HR function in some organisations has shifted from a predominant emphasis on operational issues to a more strategic focus; • as a result, bigger shift towards the need for SHRM skills. Planning, Organising, Directing & Controlling HR Meanings – Global Considerations  Of all management topics HRM is most subject to local influences (Rosenzweig and Nohria, 1994).  Different countries have different views about: • what HRM means (role and scope of the HRM department); • whose responsibility it is (specialists/line, trade unions); • what the aims of it are (maximum short -term profit, preparation for the long -term, care of employees). The Universalist Paradigm  A major problem for those who study and practise HRM is that much of our understanding and most of our knowledge about the topic comes from the USA and are assumed to apply universally.  The fact that some of the richest countries in the world manage their HRM in different ways, and that there are world -beating MNCs from an ever -increasing number of countries, reminds us that ‘different’ does not mean ‘worse’. International HRM “International HRM (IHRM) is about the worldwide management of human resources” (Schuler & Tarique 2007: 717 -18) “IHRM is concerned with the human resource problems of multi -national firms in foreign subsidiaries with the unfolding of HR issues that are associated with the various stages of the interna tionalisation process ” (Boxall, 1995) IHRM – An Extension of HRM  International businesses must effectively manage people both at their head quarters and their foreign offices.  IHRM refers to an extension of HRM – i.e. trying to develop global policies and manage people working overseas either as expatriates or local workers.  Why is this important? • Many organisations now operate across a number of different countries across the world; • All their subsidiaries have to be managed and opera ted.  There is an imperative need to understand the organisation and its global environment. Challenges within IHRM – Group Exercise  Considering the knowledge you have gained in CIHRM to date: a) What do you believe are the main differences between IHRM and HRM? b) What skills do you believe are required to be effective at managing an IHRM department? c) Do you believe SHRM is an important factor for IHRM? d) What do you believe are the main challenges of IHRM? IH RM – Initial Drivers  Organisations developing internationalisation typically need to consider the following: • What are the drivers for becoming an international firm, e.g.? • Shareholder value & increased profit? • Forging strategic partnerships. • Building global presence and developing new markets. • What type of managers/staff will we need to be successful? Qualities required, i.e.: • Understanding of worldwide business & cultures and adapt. • Enjoys working with many different types of people. • Cultural awarene ss. Global Megatrends and Business Trends VIDEO  Productivity impacts: fewer people needed to develop products and services, replaced by technology.  Businesses becoming more powerful than governments: deploying mobility, moving resources and plants easier now. Government concessions arise.  Changing Demographics: Population aging/stabilising globally, however developing countries with higher birth rates. Volatility more evident in countries with high birth rates.  Credit System: Unknown impacts of rising public debt.  Resources & Global Warming: Environmental impacts, commodity price rises, drought, extreme impact weather Global Megatrends – Impact on HR?  With continual global change, it is important that IHRM professionals consider worst case scenarios, however unlikely they may seem.  As a result there is a need to think bigger.  Many organisations have suffered setbacks, or even foundered, because they didn’t consider such events e.g: • Iceland: earthquake – the effect of the volcanic ash on the airline industry and staff productivity; • Japan: the earthquake followed by a tsunami and its effect; • Europe: recent impact of terrorist attacks; • Globally: impact of global warm THE WO RLD IS CHANGING F AST! THIS YEAR WE HA VE EXPERIENCED THE BREXIT VOTE, DONALD TRUMP ’S ELECTION VICTORY AND A (SUDDEN?) SHIFT TO OSTENSIBLY LESS TOLERANT POLITICAL ATTITUDES. WHAT ’S NEXT? FURTHER DISCUSSION QUESTIONS How should bu siness leaders respo nd t o Brexit? How will business leaders re spond to t he rise of political populism in other Western democracies ? For example, France, The Netherlands, USA. What impact might this have on levels of immigration? PESTLE Factor Example Organisation Implications Political e.g.: • Government stability, policies and attitudes • Terrorism • Rise of kidnapping • Implications for creating an office in risky countries • Government volatility effect on the organisation in terms of policy changes, attitudes towards foreign companies. Economic e.g.: • Exchange rates • Cost of materials, Trade tariffs • Unemployment/Recession Social e.g.: • Aging populations, retirement age, demographic shifts & religion • Remote working increases • Healthcare costs, increases in illness • Turbulence in economies can have negative effects on exchange rates or inflation • Recession may drive layoffs and downsizing • Fiscal implications re tax, exchange rates • Implications for pension administration • Healthcare plans • Religious differences affecting policies PESTLE Factor Example Organisation Implications Technological e.g.: • Technology breakthroughs, rise of social networking, mobile phones • Increase in hacking and data leaks Legal e.g.: • Increased employee protection in the West • Immigration laws – tightening • Industry specific regulations Environmental e.g.: • Natural disasters and climate change • Disposal of waste laws • Ethical concerns • Implications for hiring workers remotely • Data security and backup • Change management due to adoption of new technology • Tightening of immigration may have impact on a company’s ability to hire workers • Increasing regulation in the West tempting more companies to locate in developing countries • Health and safety laws • Disaster planning policies to include both data and business continuity and employee safety • Travel policies • Corporate Social Responsibility IHRM – A Global Mind -set  IHRM professionals need to: • take an interest in international affairs, travel and different cultures; • understand the implications for the organisation based on worldwide trends and changes; • manage and communicate with different cultures and understand local customs, values and norms; • understand the local recruitment market and how to recruit; • adapt to coaching and mentoring skills across different cultures; • link the organisations strategy and objectives with HR practices. SHRM to IHRM – Delivering Success Globally  Develop a competitive strategy throughout the world with an understanding of global competitors;  Provide policies, practices and services to a diverse set of employees located in potentially very different locations and operating environments;  Being locally responsive in each regional location;  Ensure flexibility and adaptability;  Adequate transfer of knowledge. Cultural Differences  IHRM is intrinsically international and multi -cultural , contributing to making culture a frequent component of issues managers deal with in their work.  Differences can often be identified between cultures and between local contexts in: • The values and commitment people have and consider fundamental; • How people experience and interpret behaviours and events; • Extent of influence of powerful individuals and groups. The Challenge of Expatriates  Expatriates are employees who go to work in another country.  They can either work for the organisation already in their home country or can be recruited externally.  Their assignments can vary in length – weeks/months or years.  Important to develop pre -expatriate training to support the employee to adapt to a new culture and country as well as a new job.  Need to consider the expatriates reporting structures, performance management, long distance support and how to deal with problems. Institutional Differences  Background differences: • geography; climate; wealth; technological development; and education system;  Labour market differences;  Language & role of religion, e.g. prayer, taboos, holidays.  Regulatory differences: • legal system a nd laws; employment legislation; trade unions; pressure groups;  Risk – kidnapping & robbery. IHRM – Initial Questions to Consider  How can I find out about the way that HRM is conducted in other countries: the laws, trade unions, labour market, expectations, etc?  What will be the impact of local cultural norms on our home -based ways of working? Can we use all or any of them in other countries?  How will we choose whether to send expatriates or use local employees?  How do we manage international moves if we choose to send some people out from this country?  How do we manage knowledge across geographical and cultural distance? Day 2 IHRM – Academic Models, Theories and Debates
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International HRM Day 2 Wednesday 15 th February 2017 Paul Hunter Email: [email protected]  Understanding of HRM Functions & Activities.  Emergence of HRM  need for critical competitive differentiators.  Growing importance of IHRM.  The need to understand the ‘mega environment’ and ‘host country environment’ – PESTEL.  Need for HR Managers to develop a global mind -set.  Demographic changes, cultural differences and institutional differences. Day 1 Review Day 2 IHRM – Academic Models, Theories and Debates  Storey (1989, 1992) suggests that the key theories and values of HRM also relate to IHRM: 1. The belief that human capability and commitment is a distinguishable factor. 2. HRM is of strategic importance and needs to link to corporate plan & business strategy. 3. HRM has long term implications and is integral to core performance of the organisation inc training, reward and job design. A key differences include the relationship between headquarters and subsidiaries HRM and IHRM Similarities Structural Forms of International Organisations Bartlett and Ghosal (1989)  Multinational (multi -domestic) • Organisation is responsive to local needs. • Little control from the centre and subsidiaries are largely autonomous  Global • Centralised decision making and HQ tries to replicate their practices abroad • Limited responsiveness to local needs.  International • Organisation adapts parent company expertise worldwide. • Local tastes, suitability is catered for.  Transnational • No hierarchy between HQ and subsidiary but control is dispersed through a network (unit is are highly interdependent) ) Structural Forms of International Organisations Examples  Multinational  Global  International The Configuration of the IHRM Function Recap on the definition of IHRM • “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). Integrative Framework for IHRM  Many different models of IHRM many of which have common threads of external and internal factors togethger with IHRM functions and MNC goals (see Bjorkman and Welch, 2014)  T he most cited and holistic is Schuler et al’s (1993) integrative framework of IHRM  They suggest that strategic MNE components, exogenous factors and endogenous factors influence on HRM and affect:  The orientation of policies – centralised or decentralised  The amount of financial and time resources committed to the development of international managers  Where activities are located – HQ or subsidiary A Useful Integrative Framework for IHRM? (Schuler et al, 1993 thru Crawley et al, 2013) Group Exercise Considering Schuler et al’s framework reflect upon the role of the HRM function at the headquarters and the subsidiary level. • In what ways might the HQ versus the subsidary differ in terms of the scope of their activities, the types of employees they support and the competencies need by HR professions? • W ould you expect the subsidiary level HRM function to be a replica of the HQ HRM function? Evaluation of the Model • Strengths: – Holistic – Provides an overview of IHRM process • W eaknesses – Doesn’t explain the micro -political process between HQ and subsidiary – Tendency to focus on management employees rather than really all employees Recent Attempts to Define IHRM • Bjorkman and W elch (2015) attempted to redefine IHRM. See page 138 of their article “Framing the field of international human resource management research”. • Assesses different levels of analysis (macro, MNC, unit and individual) • W hat do you make of this model?  Assumption is that there is one best way to manage organisations and US MNE’s will spread this practice across the globe.  It is suggested this perspective is linked to an environment where freedom is given in the approach to managing people.  Trade unions have little power in the USA  High road approach? ‘Welfare capitalism’ (non unionised and strong mutual commitment between employee and employer)  Low road approach? ‘Traditional unitarism ’ (work intensification, low wages and de -skill labour)  American philosophy linked to purpose of HRM being strategic. The American Perspective on IHRM  Is there a such a thing as a European approach? Europe is made up of a very diverse set of nations.  Certain shared features do exist in terms of higher rules and regulations for organisations and dominance of trade unions  part of a wider environment?  Recognises importance of external factors, more likely to criticise management practices and considers the consequences for the community as well as the organisation. The European Perspective on IHRM Do MNCs have a Common Philosophy for IHRM?  Brewster et al (2005) suggests that the field of IHRM and the need for a strategic mind -set is changing significantly : • Central HR Philosophy: There is a need for common philosophy and coherent practice across countries and workforces. i.e. developing a suitable culture across the world in terms of product and work culture.  A push towards uniformity, transferring best practices, cost effective and the search for ‘optimal management practices’  Assumes there is one best way…  Internationally operating organisations need to continuously balance central co -ordination and control with the need to adapt to the local context .  For MNCs key questions are: • How much do they want to develop policies that will apply across the world? • How much can they develop policies that will apply across the world? • How much do they need to tailor policies and practices to suit local conditions?  The interpretation and global v local balance varies IHRM Dilemma: Integration/Differentiation Paradox  Convergence: the coming together of a set of HR management policies and practices around a Western (capitalistic) model .  ‘Globalisation ’ (a hot debate); the role of MNCs in convergence ?  Global strategies encourage greater homogenisation to create greater efficiency.  Best practice: spreading learning; consistency; efficiency; and fairness…Best practice = HQ practice? Convergence Strategies It is suggested that Convergence is more suitable if: • the organisation has a strong organisational culture which gives it competitive advantage worldwide – i.e. MacDonald’s, Apple and Starbucks; and • wants to build a global presence; and • is bound by regional regulations and restrictions – more likely to need a common set of policies. Convergence Strategies  Divergence: the separation of HR policies and practices according to country or differences in culture.  The influence of local contexts on HRM?  Policies and actions that fit locally are often most efficient;  Best fit to cultural and institutional context; Divergence Strategies  Background differences: • geography; climate; wealth; personal values; technological development; and education system ;  Labour market differences;  Language;  Role & prominence of religion, e.g. prayer, taboos, holidays;  Regulatory differences: • legal system and laws; employment legislation; power of trade unions & pressure groups; Institutional Differences Diverse Industrial Relations Systems (Harzing & Pinnington , 2015 )  Countries provide very different levels of statutory healthcare, unemployment benefits, pensions, sick pay, paid maternity and paternity leave.  Varying obligations on employers to pay social security contributions may influence their choice of employment contracts.  Where welfare provision is limited, MNCs may fill the gap by providing company pensions or health insurance (e.g. United States), but this may reduce worker mobility between firms.  In some countries employers may be expected to organize working time to fit expectations of shared family leisure time.  MNCs need to be responsive to country differences in employment rates of mothers and rights to return to work after maternity leave. Diverse Welfare, Family & Gender Systems It is suggested Divergence is more likely if there are strong differences evident in: • labour markets • cultures • economic and legal rules e.g. Walmart and McDonald’s have to adapt to local needs/cultures and amend their IHRM policies to suit. Divergence Strategies Does It Have to be All or Nothing? • Is global versus local IHRM strategies a dichotomy? So is it a case of either convergence or divergence? • Recent evidence that there are elements of hybridization (for example see Chung et al, 2014). • Their study of 9 MNC in Korea suggested that: – Some HR practices had globally standardised practices while other practices were devolved to the subsidiary to be adapted to the local context – Typically performance management metrics were global (for benchmarking purposes) while the scope of job specifications for example were local • A need for a more nuanced analysis to IHRM Strategy?  Some MNCs gain consistency from developing corporate values that guide the development of local policies leaving local HR departments to develop locally relevant processes .  But still a problem as previous research has shown that misunderstandings may surface from the way subsidiary employees read corporate messages, particularly if institutional and social distances between corporate headquarters (HQs) and subsidiaries are wide .  So realising a consistent and coherent corporate values that are socially legitimate at a local level is easier said than done. A Different Take on Hybridisation: Employer Branding? A Different Take on Hybridisation: Employer Branding?  Some recent research by Al Taj, Pate and Martin ( 2016), under review in the International Journal of HRM. • Employer branding is ‘a generalized recognition for being known among key stakeholders for providing a high quality employment experience and a distinctive organizational identity which employees value, engage with and feel confident and happy to promote to others ’ Martin et al. (2011, pp. 3618 -3619). • A qualitative study of 2 MNC: – Organisation 1: HQ in Sweden and the subsidiary was in Pakistan – Organisation 2: HQ in UAE and the subsidiary was also in Pakistan A Different Take on Hybridisation: Employer Branding? • Given the distaste of universal practices and hostility to Western cultural imperialism in Pakistan, such cultural and religious sensitivities take on greater meaning in this setting • Findings suggest that the process is all important and giving expression to the local voice. • Corporate values and mission was initially created by HQ • Given to subsidiary senior managers for comment (they tended to agree with HQ – is there a corporatisation of senior managers going on here? • Vital element was given front line employees a voice and also to actively amend the corporate message and values – this is the only way to actively gain local social legitimacy HSBC in East Asia Case Study Review Day 3 Cultural Approaches & Perspectives
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International HRM Day 3 – The Cultural Approach Thursday 16 th February 2017 Paul Hunter Email: [email protected] Day 2 Review  Structural forms of international organisations and the decision making differences.  Integrated Framework for IHRM and associated advantages and disadvantages of this model.  The American and European perspective on IHRM.  Convergence & divergence strategies, when best to apply and use.  Institutional differences i.e. labour market and regulatory Day 3 The Cultural Approach Culture – Distinguishes Human Groups From One Another ‘Culture is the collective programming of the human mind that distinguishes members of one human group from those of another. Culture in this sense is a system of collectively held values’ (Hofstede, 1984:51)  HSBC Cultural Advertisements https://www.youtube.com/watch?v=GOHvMz7dl2A  Important to remember that different does not mean worse. We should be considering ‘what can we learn?’ Cultural Differences  Diff erences can often be identified between cultures and between local contexts in: • The values people have and consider fundamental; • How people experience and interpret behaviours and events ; • Extent of influence of powerful individuals & groups .  Culture differences are a frequent component of issues managers now deal with in their work.  It is suggested it is one of the main reasons why a MNC experiences difficulties internationally due to the culture differences evident within the organisation. Cultural Effects on Business and Managing  Trompenaars & Hampden -Turner (2004) researched the impact of people’s cultural differences on business and managing.  They found that people from different countries expressed their emotions di fferently .  Suggested that in general: • British, Northern Europeans & Chinese = More reserved. • Spanish, Italian, Central & Southern America = More openly expressive.  What impacts would this have from a MNE perspective? National Cultural Dimensions  Researchers have tried to understand the dimension of national culture: a. Relationships and control of nature; b. Relationships with each other; c. Extent of whether people are distinctive; d. How they express their feelings; e. Attitudes to time; f. Long term plans and the impact on their behaviours. (Crawley et al, 2013) Cultural Communication – Body Language & Gestures  It is important for IHRM professionals to understand the impact of communication on global staffing.  Body language & gestures can contribute to communication of a message with very different meanings within different cultures.  Feelings of negativity are rarely shown in the UK and Asia. In Spain and America people tend to show their negative feelings much more openly.  In Asia it is usual for people to have lengthy introductions or acknowledgements of rank before beginning with official meetings. Transferring Culture & Stereotyping  It is important for HR to remember that not all members of the host countries culture will be the same. “Individuals in any society may not display the same characteristics or behaviours as the majority of their socio -economic background, education and exposure to economic and political events” (Fischer, 2009:27)  Awareness of education is an important factor which shapes the development of personal cult ural behaviours.  Consider here your international student experiences. Culture – National/Regional  Hofstede (2001) analysed the following: • Regional Spheres • Different Industrial Sectors recruit in different ways • Understand the nature of diversity • Impact on/of religion.  Important need for sensitivity. Culture – Organisations  A good starting point to understand culture is the following definition: ‘the way we do things around here’ (Deal & Kennedy 1982:4)  In organisations the basis of culture is based on the mission statement which describes the organisations values and goals. ‘Organisation culture is the collection of relatively uniform and enduring values, beliefs, traditions and practices, shared by the or ganisations members, learning by new recruits and transmitted from one generation of employees to the next’ (Buchanan & Huczynski (2010:643) Cultural Impacts for Organisations “Cultural considerations also inform staffing decisions and the choice of managers and executives from the parent company developing countries or the host country to work in subsidiaries” Colakoglu et al (2009: 1293)  Harry and Nakajima (2007) suggest that MNE’s are still trying to implement cultural policies from overseas that are different from the host countries culture.  Hofstede (1994) developed a framework to understand the patterns of global workplace behaviour looking at: • Power Distance • Uncertain Avoidance • Masculinity • Long or Short Term Orientation https://www.youtube.com/watch?v=DqAJclwfyCw Hofstede on Power Distance https://www.youtube.com/watch?v=fZF6LyGne7Q Hofstede on Uncertainty Avoidance Power Distance Index The degree to which inequality is accepted in society . Power Distance Countries High Power Distance Smaller Middle Class, Larger Lower Class Low Individualism • Russia, most Asian, Arab and South American Countries • France & Italy Low Power Distance Larger Middle Class, Smaller Lower Class High Individualism • Scandinavian Countries • USA, UK, Australia, Germany & Denmark Impact for HR Management? Uncertainty Avoidance  The extent to which the members of culture and national society feel threated by unknown situations/uncertainty (Hofstede, 2015). Uncertainty avoidance societies Russia, France, Mexico, Italy, Arab nations , Japan • Feel threats & differences must be fought. • Have more stress and anxiety. • A need for rules and regulation. • Wealthy perceived as being more corrupt. • Require more facts. Uncertainty accepting societies Netherlands, Australia, Germany, UK, India, Nordic countries • See uncertainty as being normal. • Less stress and anxiety. • Difference develops curiosity. • Not accepting of rules and a need for less regulation. • More tolerant of people who are different. • Can delegate to staff more. • Less corru pt countries. • Are attracted by convenience & ready made products. HR Awareness – Link Between PDI and UA Societies Thoughts on Organisations Low Power Distance & Uncertainty Acceptance Organisations are market places where people interact, nothing is fixed for ever. Low Power Distance & Uncertainty Avoidance People imagine organisations as a machine, which operates by itself well. Hierarchical instruction not needed all the time. High Power Distance & Uncertainty Avoidance People imagine an organisation to be very hierarchical, this is how it will functional effectively. High Power Distance & Uncertainty Acceptance The organisation is like a family. Many family owned organisations employ family members. i.e. India & China IHRM Practices (Crawley et al, 2013) Analysing Hofstede’s Views – Group Exercise 1. Do you agree with Hofstede’s views on Power Distance and Uncertainty Avoidance? 2. Is this a framework we can utilise effectively in IHRM management or do other factors come into play as well, i.e. the impact of mass migration in Europe on this framework? 3. Taking into consideration the increasingly multicultural workforce in the UK, is cultural awareness not just a topic for IHRM but also for HRM? National Culture – Expatriates  National culture awareness is important for IHRM due to MNE’s transferring their employee(s) to their oversea offices.  Employees who are transfer red to oversea’s offices are called Expatriates .  Increasing volume of expatriates assignments evident over the past couple of years.  Short term assignments or assignments for a couple of years.  Seen as adding value to organisation i.e. transferring knowledge (two way), technical and soft skills development, adding cultural diversity (two way). National Culture – Expatriates  Expatriates success in settling in to a new country and culture will determine their success or failur e.  Expatriates normally take family members with them.  Puck et al (2008:2183) suggests that: ‘expatriate adjustment is the degree psychological adjustment experienced by the individual within a new society or the degree of psychological comfort and familiarity perceived within a new environment’ Expatriate – Processes of Adjustment  Referred to as the U -curve – this drives a period of:  Fascination, excitement and honeymoon  Disillusionment  Frustration  Culture Shock  Humour  Adaption Expatriate – Processes of Adjustment  But not all expatriates reach the adaption stage as they cannot accept the host culture .  Gabel et al (2005) suggests this could be linked to Emotional Intelligence (EI). “Emotional Intelligence links strongly with concepts of love and spirituality: bringing compassion and humanity to work” (Goleman, 1995)  Language is a key link to the process – linked to social identity. Day 4 Global Staffing
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International HRM Day 4: Global Staffing Monday 20 th February 2017 Paul Hunter  Culture has a number of impacts on IHRM policy. Differences globally evident with people’s values, behaviours, interpretation of events etc.  Important to identify national and regional culture. Consideration required of cultural dimensions that exists, i.e. power distance and individualism.  Body Language and gestures big factor on global communication.  Understanding national culture is key for IHRM – reason expatriates deployed overseas. However psychological adjustment must be monitored. Day 3 Recap Locating Global Staffing in IHRM • Collings et al (2009) defined global staffing as filling key positions in head quarters and subsidiaries. • Issues include – Understanding how selection occurs in different countries – Selection for international assignments – Getting the right person in the right job at a local and global level – Succession planning Integrative Framework for IHRM (Schuler et al, 1993 cited in Crawley et al, 2013) Why is global staffing critical? • R ecognition that employees create strategic value and underpin organisational success e.g. as MNCs move into new markets • Global staffing is more complex than at the domestic level • Expatriate performance is often problematic • Shortage of international management talent (dual career families inhibit international mobility) • The need to develop talent e.g. inpatriation where foreign employees go to HQ for education and training) (Collings and Scullion, 2006) MNC Staffing Policies  There are 3 different staffing policies normally deployed by MNC’s: • ethnocentric staffing policy: appoint mostly parent country nationals to top positions at their subsidiaries; • polycentric staffing policy: appoint mostly host country nationals; • geocentric staffing policy: appoint the best person, regardless of his/her nationality.  These are not mutually exclusive and may be used together but there is often one dominant mode International Assignments: The Corporate Rationale • To fill positions – concerns the transfer of technical and managerial knowledge. • Management development – international experience • Coordination and control. a) socialisation of both expatriate and local managers into the corporate culture; b) creation of a verbal information network that links subsidiaries and HQ. Expatriates and their Role as Knowledge Agents  Research has increasingly highlighted the role of expatriates as knowledge agents between their home and host units.  Expatriates acquire: • an understanding of the company’s global organisation and the corporate culture at the HQ ; • factual knowledge about the assignment culture, and culture – specific behaviours .  Expatriates also share relevant knowledge that helps to streamline cross -unit processes, creates common corporate practices and routines, or increases the chances of subsidiary survival. Forms of Global Work (Shaffer et al, 2012; Baruch et al, 2013) • An increasing range of forms of international work has emerged including: – Traditional expatriate: employee transfers to one foreign location for one year or more and the family frequently relocate – Short term assignments: an overseas assignment between 3 -12 months to one location and the family tend not to relocate – Flexpatriates : international assignments up to 3 months to multiple international locations without the family – Commuting: international trips from a few days to a week duration on a regular basis Trends in Expatriate Assignments • January 2016 Trends (3 mins ) • https://www.youtube.com/watch?v=h9QR -FI2Upg The Expatriate Employment Relationship • Consider traditional expatriate and flexpatriates • Psychological contract – “An individual’s belief regarding terms and conditions of a reciprocal exchange agreement between the focal person and another party. The key issue here is the belief that a promise has been made and a consideration offered in exchange of it, binding the parties to some set of reciprocal obligation (Rousseau, 1989:123). – “The perceptions of both parties to the employment relationship – the organisation and individual – of the reciprocal promises and obligations implied in that relationship” (Heriot and Pemberton, 1997:22) The Psychological Contract Issues • Subjective: how I interpret the deal • Fluid and can change over time • Implicit where actors may ‘fill in the blank’s of the employment relationship based on observation and inference where an apparent agreement may be assumed without the knowledge of the other party • Can be ambiguity of who represents the ‘employer’ – Is it senior managers? Is it line managers? What about HR managers? Are there mixed messages among all these agents? Traditional Expatriates • The management of traditional expatriates… at least in principle – Sophisticated recruitment and selection – Cross -cultural training often including the family (cultural adjustment is a key issue) – Enhance remuneration package including higher salary, housing, healthcare travel allowances for all the family to travel home a few times a year and possible private schooling for children – On -going organisational support Richard Debenham in Vienna Case Study Review Traditional Expatriate Psychological Contract  The employee view: realities… (extracts from Pate &Scullion, 2009)  Pre -departure  “The company was highlighting that international experience would be very good for your promotion chances and for your career development”  “They had no idea at all, clueless! They had no idea or information on locations to live, cost of living or visas!”  Terms and conditions  “There has been a lot of looking at what we are offered in terms of the expat deal, cutting back on certain benefits. They have but it back from the days when I was first an expat”. Traditional Expatriate Psychological Contract  Repatriation  “You have come back having set up factories, given the company a record increase in production, an appraisal that is second to none and they still say there’s no job for you!”  “You don’t get exposure to the right people and I still feel that I haven’t go the contacts that I would have had if I had stayed in [HQ] which potentially has a bearing on future career opportunities within the organisation ” Traditional Expatriate Psychological Contract  The employer view: Some of the realities… (extracts from Pate and Scullion, 2009) Managers comments  “Despite enjoying the expat benefits while abroad, some expats feel that the company still owes them because they worked abroad and their expectations of a new job in terms of status and salary are unrealistic”  “In the past an international assignment was closely linked to career development, the focus was the long term. Currently, the focus is more short term. The expatriates push to maximise what they can get out of the situation before they accept the assignment” Traditional Expatriate Psychological Contract • Experience of one expatriate…not good (11 mins ) • https://www.youtube.com/watch?v= COQgJyCpU4A • What do you think? What did you learn for HRM practices from this? Corporate Expatriates and Self -initiated Assignees  A growing number of assignees make their own arrangements to find work abroad.  Self -initiated assignments are facilitated by the introduction of free movement of labour – evident in the European Union and other economic regions.  In contrast to corporate expatriates, self -initiated assignees are employed on local work contracts and differ in a number of characteristics from corporate expatriates. Flexpatriate Psychological Contract • Share some thoughts from Pate and Scullion (2016) from the International Journal of HRM • Corporate rationale for the increase of flexpatriates – Easier to fill these posts than traditional expatriates – Flexibility – Maintain global networks on a face to face basis – Transfer knowledge – Reduced costs: can fulfil corporate goals without the costly commitment of long term expatriate employees Flexpatriate Psychological Contract What is expected of flexpatriates ? • International assignments for up to 3 months • Travel to multiple locations – some are career enhancing while others seem ‘dead end’ • Different mix of assignments e.g. regular repetitive journeys to the same locations or lots of new and novel destinations ( Wickman and Vecchi (2009) • Travel at short notice • Family stay at home • In short Shaffer et al (2012) argues flexpatriates are the only form of global work that scores high on physical mobility, cognitive flexibility (flexible and adapt to multiple locations) and non -work disruption Flexpatriate Psychological Contract Group exercise: You are considering becoming a flexpatriate employee and there are a lot of demands on you (see previous slide). In the ‘give and take’ of the psychological contract. Write down what you expect in return and what do you think the employers obligations are in terms of: • The process of selection • Training and development • Remuneration • Career prospects Flexpatriate Psychological Contract • The reality is surprising in terms of formal HR policies such as recruitment, training and pay plus the level of HR managers intervention vis -à -vis the line manager (Mayerhofer et al, 2004; McKenna and Richardson, 2007; Welch et al, 2007) Group discussion • How does this compare to the traditional expatriates’ deal? • What do you think are the repercussions? How would you feel? Summary • Locating global staffing within IHRM • Forms of global staffing • Psychological contract of traditional expatriates • Psychological contract of flexpatriates
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International HRM Day 5 – Managing Change & Knowledge Wednesday 22nd February 2017 Paul Hunter Email: [email protected] Day 4 Recap  Critical need for global staffing – creation of strategic value, however can be a complex and problematic process.  MNC staffing policies – ethnocentric, polycentric and geocentric.  Expatriates and their role as knowledge agents – management of relationships, psychological contract issues. Experiences associated with being an expatriate.  Role of flexpatriate – shorter assignments, up to 3 months, short notice travel. Managing Change & Knowledge IHRM Considerations “Management and change are synonymous; it is impossible to undertake a journey, for in many respects that is what change is, without first addressing the purpose of the trip, the route you wish to travel and with whom. Managing change is about handling the complexities of travel. It is about evaluating, planning and implementing operational, tactical and strategic journeys” (Paton et al, 2008)  Change: There Will Always Be Change…. – is not new – will not go away – is a challenge – can be managed – should be a way of life – should be welcomed (Paton, 2008)  Within most organisations, change is inevitable, particularly for those organisations who want to compete in a dynamic global business environment.  Change can occur internally within organisations re structures, processes or practice reviews or they are governed externally i.e. by regulator or technological changes. (Beech & MacIntosh, 20 12) Change Failure  Organisational change is increasingly the norm, yet the high levels of failure indicate that effective management of these changes is an issue.  Do HR and organisations anticipate and understand the concepts of change? • A poll by Prosci in 2012, showed that 80% of organisations experienced confusion about the concepts of change and change management. • In 1996, John Kotter published ‘Leading Change’. His research revealed that only 30 percent of change programs succeed. (M cKinsey, 2009) Key Drivers of Change  Consider your MSc learning to date, what are the key drivers of change within an organisation today?  Characteristics which are key for IHRM: Organisational Perspectives Management Perspectives Globalisation People Technology Skills & Performance Competition Resources Government & Legal Design & Operation Working patterns Rate of change Cultural & Lifestyle Typical Internal/Strategic Change Initiatives Leadership changes Merger or Acquisition Organisation structure changes Strategic changes Technology changes Cultural changes Global expansion Preconditions for Change  Organisations need to ensure that they understand the reasons behind the change: • Why are we undertaking this change, what do we plan to achieve/get out if it? • What will happen if we don’t? • What current problems will it and won’t it solve? • What potential new problems could it create? • Why is now the right time for this change? • What are the risks involved?  inhibiting factor Group Exercise In your teams discuss scenarios in which you, personally, have experienced change. For example, during your time in Scotland, have you felt the pressure to “change”, or “adapt” your values, attitudes and/or behaviours? Why? Have you found the experience p ositive? Challenging? Stressful? Upsetting? Why? How have you responded to this change? PERSONAL DEVELOPMENT AND SELF -IMPRO VEMENT MAY INVOLVE CHANGE THAT REQUIRES A REASSESSMENT AND RECONFIGURATION OF PRE -EXISTING VALUES AND BELIEFS, WHICH CAN BE STRESSFUL. AS POTENTIAL HR PROFESSIONALS YOU MUST REALISE THAT CHANGE INITIATIVES MUST BE DESIGNED AND IMPLEMENTED SENSITIVELY, CONSTRUCTIVELY AND COLLABORATIVELY. People’s Resistance To Change  HR need to be aware of ‘people’s resist ance to change’. Some typical reasons for this: • Self interest (human needs?) i.e. unwillingness to let go; • Concern over skills and training; • Lack of confidence/lack of understanding & knowledge. • Awareness from Hofstede’s ‘Power Distance’ and ‘Uncertain Avoidance’ theories. • John Kotter discusses how to deal with resistance to change. Do you agree with his views? The Change Curve TIME Completion Change Point Denial Application Blames self/others Development Confusion Acceptance Immobilisation The Change Curve Change Point Description Immobilisation People need time to get used to the new situation, support and understanding this is a natural response Denial People need patience, clear directions and allowance to explore their own approach to things Frustration Tolerance, encouragement to think Acceptance Acceptance, reassurance that it is ok to do things their way Development Support and encouragement that they can succeed Application Encouragement to take responsibility Completion People are now competent – good management practice Reaction Behaviour Shock, Disengagement (withdrawn)  Taking the path of least resistance  Believe the change won’t happen or at least won’t affect them Denial, Disorientation (confusion)  Have lost sight of where they fit in  Know what they are but don’t know what the organisation has become High Emotions: Anger/Disenchantment  Outwardly display anger which maybe masked feelings  Blocked and energy goes into preserving the block Sadness/Anxiety  Exposed and vulnerable  Feel something they identify with has been taken away  Put in the time but not the energy  Keep a low profile  Don’t ask questions  Refuse to be drawn into conversation about the change  Asks lots of questions  Unsure  Focus on details  Do not prioritise  Don’t understand the goals or direction  Communicate the negative  Enlist support against the change  Refuse to talk about it  Blaming others  Sulking  Reminiscing and dwelling on the past  Go back to how things were  “its not fair” or “it won’t work” HR – The Change Advisor  Normally the remit of the HR Director, particularly in the case of a large organisation change.  Has the ability to influence all key stakeholders within an organisation.  Will work with internal stakeholders (particularly the change agent), through the process of designing and implementing change, challenging and guiding them to get it right.  Ensures that issues e.g. organisation redesign/restructure and due process are appropriate and effective through and after change. Change Management is seen by some to be a core skill requirement for HR. HR Benefits of Successful Change Management  If change is successfully implemented there can be many benefits and a reduced impact of risk :  Organisation performance & productivity improvements;  Rise in engagement and morale;  Better team working;  Increased reputation. HR Issues of Unsuccessful Change Management  However if change is not implemented properly, a number of areas might be damaged and therefore increased risk occurs : • Reputation; • Morale; • Resource(s) alignment issues. HR Questions • Do senior management understand the full potential, impact and effect on their long term strategy? • Impact of the needs, skills and culture of the organisation and it’s people? • Which aspects of our culture will help support/hinder the change? • What has our history of change been; do we tend to embrace or resist it, where or when does change tend to get stuck and why? • What are other threats to success – how can we mitigate them? HR Need to Respond to the Emotional Journey  Need to understand what local and international staff might experience and consider: • How are people reacting to the changes/resultant implications for them? Are the reactions different in foreign offices? • What do staff believe they are losing and what do they believe they might gain? • How clear is it to them what will change and when? • How and when will they start the transition to the new role/tasks they might have to do? How can we support them? • Will the change work globally? If not, what other options do we have? HR – Understanding System Implications  HR need to ensure that, dependent on the scale of changes, they understand and review how this effects existing HR policies, systems, processes and structure.  Questions to consider: • Have we got the structure right? • Are our HR processes fit for future purpose? • Will our HR systems deliver what is needed? • When realigned of HR processes and fit occurs, will it achieve the goals of the change? • Above all, do our people understand what they and others have to do in the changed environment? HR – Champions of Change  HR must ensure they have the skill, knowledge and credibility within the organisation to act as “ champions of change ”.  A long term sustainability of a change, through effective design and delivery of learning initiatives, is required.  The key for HR is to build credible relationships throughout the organisation which enable them to anticipate change and be involved from the very beginning.  A ‘Communication Plan’ is vital. HR – Champions of Change  HR must ensure that they are involved at the initial stage of change and do the following: • advise senior management of the current skills within the organisation; • assess the impact of change in one area/department/site on another part of the organisation – develop requirements for training; • are being used to communicate and negotiate change, engaging with various stakeholders, understanding their concerns; • help pe ople cope with change; • develop/implement a change management toolkit. Managing Change & Knowledge Importance of Knowledge Management from an IHRM perspective Importance of Knowledge Management  Effective knowledge management is important both to exploit existing capabilities on a global scale and to explore new ideas that can be developed into new product and service offerings.  Companies easily fall into the trap of not managing knowledge or focusing too much on one aspect of operation at the expense of the other.  Implemented HR practices can enhance knowledge sharing. Includes developing processes for exploiting existing knowledge and exploring new knowledge.  Will help the development of change within organisations. Knowledge Sharing in MNCs  Knowledge sharing in MNCs is facilitated by cross -unit social capital, organisational values of collaboration and sharing, and global mindsets.  MNCs need to establish effective ways of accessing and retaining external knowledge.  Both explicit and tacit knowledge are important to MNCs. Explicit & Tacit Knowledge  Explicit knowledge: • knowledge that individuals and organisations know they have – i.e incorporated in texts and manuals (organisation documentation) , and relatively easy to pass on to others. • most knowledge stored in IT databases and systems is explicit.  Tacit knowledge : • personal, context specific and hard to formalise and communicate. Individuals may even not be conscious of it. • Tacit knowledge often underlies complex skills and is fundamental to the intuitive feel acquired through experience. Tacit Knowledge – Make It Explicit  Invest in making tacit knowledge explicit, (Nonaka, 1994). • Individuals explain tacit concepts that are otherwise difficult to articulate by conveying ‘intui tive images’ that people can understand. • But must know the type of knowledge that is accorded high value and how it will be made accessible. Assessing the Effectiveness of Knowledge Sharing  Knowledge sharing in MNCs is often influenced by: • the ability/understanding and willingness of the source to share knowledge (sender); • the ability and willingness of the receiving unit to absorb knowledge (receiver); • the characteristics of the relationship between the sending and receiving units. • Consideration of personal threats imply impact of knowledge sharing. Stimulating Knowledge Sharing  MNCs can make knowledge sharing effective, efficient and fast by: • disseminating information about superior performance and knowledge; • selecting expatriates/flexpatriates with knowledge sharing in mind; • designing appropriate structural mechanisms; • building a conducive social architecture. HRM Practices to Motivate & Absorb/Share Knowledge  Developing appropriate HR pra ctices i.e. recruiting people with required skills and knowledge who can communicate/coach others.  Investments in training & development of employees can also contribute, as training enhances the quality of human capital needed to achieve the knowledge go als of an organisation.  Performance management systems – feedback and direction for enhancing their competencies to meet the organisation’s knowledge needs. Gaining Access to External Knowledge  Turning new knowledge that has been acquired from outside the corporation into a commercially viable innovation involves capabilities in assimilating and recombining that new knowledge.  The levers that MNCs have at their disposal to enhance cross – border knowledge sharing are also relevant for external knowledge acquisition.  However, firms may use additional approaches to access knowledge from the outside: • scanning or tapping into the lo cal knowledge base; • partnering or merging with other firms; • playing the virtual market. Global Knowledge Management Case Study Review Global Knowledge Management – Case Study Review 1. Evaluate P&G’s approach to managing knowledge and innovation. 2. What are the barriers that a multinational organisation has to overcome to harness the potential of a Connect + Develop model? What are the implications for HR? Day 6 – Thursday 23rd February The Dark Side of International Employment IHRM Assignment Question
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International HRM Day 6 – The Dark Side of International Employment Thursday 23rd February 2017 Paul Hunter Email: [email protected] Day 5 Recap  The need for change, the key drivers of change and why change can fail.  People’s resistance to change – understanding the change curve.  HR’s role as the ‘Change Advisor’ and the questions HR need to investigate and manage.  Importance of Knowledge Management  explicit and tacit knowledge.  Benefits of knowledge sharing in MNCs, both internal and from external sources. The Dark Side of International Employment The Dark Side of International Employment  The growth in migrant labour in both western and developing economies is becoming a hot topic within IHRM.  The ‘dark side’ refers to the exploitation and ill -treatment of employees, particularly migrant workers which is evident across the world.  It is suggested the exploitation mainly occurs in low -skill jobs i.e. agriculture, construction, care and manufacturing.  There are a number of similarities in the challenges facing migrant l abour and the managers and HR managers employing them. Immigration & Economic Migration  Over the past 10 years we have witnessed large movement of people – which has impacted on population growth in developed countries.  China provided 1 in 10 immigrants to developed countries in 2006. Poland 1 in 20 immigrants.  In Europe in 2009, there were 31 million migrants living and working in Europe. (The Economist, 2014)  The largest recent migration, within a country, occurred in China. Millions of workers from poorer regions within China moved to prosperous cities to take up low -skills jobs. (Scheinson, 2009).  Immigrants often earn less than ‘local’ workers and it is suggested that this has pressured managers into utilising illegal immi grants. In effect the ‘dark side of international employment’. Case Study 14.1 UK’s New Europeans UK’s New Europeans (Crawley et al, 2015) According to Sumption and Somerville (201O) ‘UK’s New Europeans’, this group of East European immigrants is unlike previous groups who have settled in Britain, for a number of reasons. They receive low wages, are employed in unskilled occupations despite having high levels of education ,and often have precarious housing arrangements. They lack support networks and they are vulnerable to exploitation. Compared with the UK population they are relatively young and receive lower wages than their counterparts, despite being more highly qualified. Unlike previous groups of migrants who have come from further away. these migrants appear to make ‘circular’ visits to the UK and may be employed on short, seasonal contracts. There is considerable uncertainty about the duration of their stay. Statis ics show that the number of immigrants tends o increase in the summer when there is seasonal work in agriculture and tourism. In terms of finding work, these immigrants have had to rely on their own social networks (partly because of poor English skills) and often depend on specific agencies for finding employment, which has determined where they have found work. Research by Eade et al. (2006} suggests that the these new immigrants are a heterogeneous group in terms of immigration strategy and intentions; some of whom come to work for short periods of two to six months, such as students; others stay longer, perhaps o earn income for a project at home; others are ambitious and wish to progress, so come with the intention to stay; while others come with an open mind, willing to look for career opportunities in either country, the largest group. This group of immigrants may be disadvantaged by utilizing private agencies to search for work. Agency work in the UK is often temporary and agencies are typically used by low -skill industries in which there is little opportunity for upward mobility. While agency work does allow the opportunity to change jobs, it does not improve the long -term prospects of a much better job. These workers are often exploited by employers or agents who fail to pay wages, fail to pay the minimum wage, or make disproportiona te deductions for housing (Sumption and Somerville, 201O}. However, these immigrants have reportedly integrated successfully into the UK job market but into low -skill jobs .Adapted from : Sumption and Somerville (2010) Are There Benefits?  The Global Commission on International Migration (GCIM) suggested that: ‘immigration fills gaps in the labour market and brings social and cultural developments to the societies they live in……..also helping the eco nomy of countries they have left behind’ (GCIM, 2005:23) ‘The brain drain can help poor countries since the prospect of migration spurs people in poor countries to acquire marketable skills’ (Goldin et al, 2011) Public Discomfort  The presence of large number of migrant workers is causing social unrest in some countries, with claims that: • Wages are reduced; • Foreign workers given preference for jobs; • Job opportunities are denied for local staff.  Dilemma for governments and organisations exist as a result of this. Fears  Macdonald (2009), who reviewed the reality of rights when business operates beyond the borders, examined the salary levels and working conditions among Bangladeshi garment workers and found that there was: • A general lack of representation of the workers; • No opportunity to protest; • Poor working conditions; • Fear of lo sing their jobs. Workers Exploitation – News Review  Worker exploitation is evident across the world: Some students may find some scenes distressing. • Migrant workers exploited in German meat industry https://www.youtube.com/watch?v=RrNtRaa_nWI • Exploited Migrant Workers in Asia https://www.youtube.com/watch?v=48xZG0nqXY4 • Apple accused of failing to protect workers in China https://www.youtube.com/watch?v=kSvT02q4h40 Case Study 14 .2 Care workers in the UK Care Workers in the UK (Crawley et al,20 15) Recent research by Oxfam has revealed ‘clear indications of the exploitation of workers by gangmasters in the care, hospitality, arid construction sectors’. As a result, further calls have been made for the protection of workers, particularly of workers from overseas, in social care, who according to Oxfam are being similarly exploited (Poinasamy with Fooks, 2009). As the population of Western Europe ages, increasing numbers of carers will be required for the elderly in care homes or in their own homes. Accordi ng to Poinasamy with Fooks (2009), there are already 1.5 million workers in the adult social care workforce in the UK. Much of this work has been privatized by local authorities to private care agencies. The jobs of care workers are associated with low pay and low status, so that it is difficult to attract UK workers. As a resul t, nearly one -fifth of workers in this sector are migrants, recruited by gangmasters and agencies .The research indicates that these care workers experienced significant abuse and exploitation at work. According to Poinasamy with Fooks {2009 :2),the experience of care workers typically involves : excessive hours, extreme pressure to work overtime, an expectation that the worker will be constantly on call, spurious deductions take from pay for petrol and other expenses, and non -payment of holiday and sick pay -all whilst workers are being paid no more than the minimum wage. These findings are supported by Kelayaan,which also researched the treatment of migrant workers in domestic care (Gordolan and Lalani, 2009: 8). This research found that migrant domestic workers : frequently suffer from abuse (sexual, physical, and emotiona l), discrimination, low pay (or none). exceptionally long working hours, social isolation. and men al health problems arising from the extreme conditions of their employment. Many experience very poor working conditions, such as having to sleep on floors and not being provided with bedrooms, and being given no time off. sick pay or access to healthcare . The exploitation of migrant workers in care homes has often come abou t as a result of ‘collusion between overseas recruitment agencies and contract and tra ining agencies in the UK and the care home’ (Poinasamy with Fooks, 2009: 6). The principal violations of employment rights included coercion and in timid at ion, exc ess iv e hou rs and pressure to work overtime, problems with wages, denial of holidays or si ck pay, accom mo dat ion issues, contract and self -employment problems, and deception regarding th e term s of rec uitm ent. The Migrant Labour Discussion  OECD (2009) states that governments and organisations need to develop a policy to protect migrant workers as globalisation has driven the need for low -skilled labour across the world.  Governments favour and develop policy for high -skilled workers but not low -skills workers.  It is suggested that the ‘recent’ rece ssion saw governments do little to adjust immigration policies therefore illegal immigration took place to fill low skill occupations and sectorial jobs facing shortages. Expatriate v Migrant Worker  There are a number of differences b etween expatriate and migrant workers: • Migrant workers do not have the security of a job at assignment end. • Receive little benefits based on their employment contract, i.e. accommodation, terms & conditions. • Seen to fill a role, no consideration of adjustment to culture. • Little chance of long term move to the country. • Family rarely permitted to the country. IHRM and Migrant Workers  In IHRM literature, to date, there is little discussion on migrant workers.  Suggested reason given ‘ Expatriate workers are clearly the responsibility of the organisation HQ whilst migrant workers, at the local or subsidiary site are generally of local concern, left to be managed by local HR managers ’ (Crawley et al, 2015:331).  Evidence suggests that the re maybe racist attitudes to migrant workers. (Sumption and Somerville, 2010).  Therefore there is a need for IHRM to be aware and ensure malpractice is not followed. IHRM and Migrant Workers  The role and responsibility of multinationals is being closely scrutinised.  Recently new bodies have been setup to monitor workers practices, i.e the Fair Labor Association (FLA), Gangmasters Licensing Authority (GLA) and establishment of the Codes of Conduct.  More HR monitoring of the activities of multinational is imperative to ensure an humane approach is operating in their global subsidiaries.  IHRM cannot continue to ignore the management of ALL international employees. (Crawley et al, 2015) Course Review IHRM, Setting the Scene IHRM Academic Models, Theories and Debates The Cultural Approach Global Staffing International Assignments Managing Change & Knowledge Dark Side of International Employment Assignment Review Assignment Question (subject to external examiner appro val ) Answer 1 question only 1. Critically evaluate the staffing policies that multinational corporations (MNCs) may deploy. Illustrate your answer with examples. 2. Critically evaluate the challenges HR executives face managing change across international boundaries. Illustrate your answer with examples. (2500 words). Deadline for submission is Friday 17 th March at 12pm. Assignment Question 1 Critically evaluate the staffing policies that multinational corporations (MNCs) may deploy. Illustrate your answer with examples. Some suggestions • Reflect upon, and evaluate, the choices MNCs face. Should they train and develop local staff? Send expatriates overseas to participate in long -term assignments? Send flexpatriates overseas to participate in short -term assignments? What challenges and diffi culties might these options present? How might they be overcome? • Consider the context – level of countries’ talent availability. Skills shortages. Political, economic and socio -cultural environment. Industry sector. Are you tailoring products and services to meet local consumers’ needs? Assignment Question 2 Critically evaluate the challenges HR executives face managing change across international boundaries. Illustrate your answer with examples. Some suggestions • What does change mean at the organizational and individual level? What are the challenges faced? How might HR tackle these difficulties? • What opportunities does change potentially generate? How will HR encourage and harness these opportunities? • How should change be managed in different cultures? How might HR manage change in a constructive and sensitive manner? Should change be standardized throughout all business units? Or should local contexts mediate change initiatives? Assignment Structure Example Intro duction • Explain your topic area, give a background to the theories to date, with references . • Explain the content/discussion which will appear the main body of your assignment Assignment Structure Example Main body • Structure your paragraphs around themes identified from the literature. Compare, contrast and evaluate researchers ’ competing viewpoints. • What suggested controversies are apparent? • Why is this the case ? • What does research say about how your topic area could be improved? What implications does this have? • Ensure that you give depth to points raised and give examples, not just discuss briefly what a source stated. Remember ‘why’ & ‘how ’. Assignment Structure Example Conclusion • What are the implications of your analysis? What are the key issues that you have discovered? • What are the limitations with your analysis? What important issues do you believe you have been unable to tackle? • What recommendations can you offer practitioners and researchers? Assignment – General Points • Ensure you undertake adequate research. • Review the articles on Moodle – check the references they have used as a pointer for you to develop your research further! • Buy the core text book! • Look back at the slides! • Consider layout, use of fonts. • Reference correctly. • Print on one side of the paper only. Assignment Tips • Ensure you reference all facts in your assignment. • Use up to date literature. • Explain and define terminologies used. • Develop a focus, do not try and cover too many areas as this can impact on your analysis. • Ensure logical flow. • Be creative! Thank You
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Question: Critically evaluate the challenges HR executives face managing change across international boundaries. Illustrate your answer with examples. (2500 words) Requirement: Using examples to show the evidence Please use text-in reference to show where the sentences come from The structure below should be an examples, the overall layout does not need to be limited to this structure. As long as you speak it logically is enough. The reference and the PPT can be help to you, but beside the information you must refer other information and show your understanding by either refer them or taking them as examples. The reference must above 15 articles. Some suggestions What does change mean at the organizational and individual level? What are the challenges faced? How might HR tackle these difficulties? What opportunities does change potentially generate? How will HR encourage and harness these opportunities? How should change be managed in different cultures? How might HR manage change in a constructive and sensitive manner? Should change be standardized throughout all business units? Or should local contexts mediate change initiatives? (layout the structure by yourself please) Introduction Assignment Structure Example Explain your topic area, give a background to the theories to date, with references. Explain the content/discussion which will appear the main body of your assignment Main body Assignment Structure Example • Structure your paragraphs around themes identified from the literature. Compare, contrast and evaluate researchers’ competing viewpoints. What suggested controversies are apparent? Why is this the case? What does research say about how your topic area could be improved? What implications does this have? Ensure that you give depth to points raised and give examples, not just discuss briefly what a source stated. Remember ‘why’ & ‘how’. Conclusion Assignment Structure Example What are the implications of your analysis? What are the key issues that you have discovered? What are the limitations with your analysis? What important issues do you believe you have been unable to tackle? What recommendations can you offer practitioners and researchers? Assignment Tips Ensure you reference all facts in your assignment. Use up to date literature. Explain and define terminologies used. Develop a focus, do not try and cover too many areas as this can impact on your analysis. Ensure logical flow. Be creative!