HRM in The Host Country Context

Dony Eko Prasetyo, S.IP.

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Subsidiary issues

• Approach to subsidiary management a function of:– The nature of the relationship between units and

‘parent’– The level of equity involved– Factors within host-country environments that

facilitate or constrain the transfer of global management practices and business processes

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Standardization of work practices

• Depends on – Receptivity of local workforce to adhere to

corporate norms of behaviour– Effectiveness of expatriates as agents of

socialization – Whether localization is timely (not just prompted

by cost considerations)– Appropriateness to the local environment

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Factors influencing standardization

• Host-country culture and workplace environment

• Mode of operation involved• Size and maturity of the firm• Relative importance of the subsidiary

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Host-country culture

• Work behaviour is culturally determined• Whether corporate culture supersedes or

supplants other ‘cultures’ is a subject of much debate

• Often, what is meant by corporate culture translates into universal work behaviours – standardisation of work practices

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The linkage between culture and behaviour

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Mode of operation

• Choice of mode of operation important in determining standardization of work practices

• Ownership and control important factors – wholly owned subsidiaries provide greater opportunities for transferring work practices than in IJVs

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Factors influencing standardization of work practices

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Work standardization

• The size of the firm, maturity and international experience also important

• Motorola in China a case in point:– Large size– Wealth of international experience– Management could draw on these aspects when

entering China

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Subsidiary mandate

• The position a subsidiary holds within the global ‘family’ is an important aspect when discussing the transfer of work practices

• Transferring knowledge and competence is difficult as subsidiary initiatives are often not seen as relevant (corporate immune system)

• Staff movements can assist here

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Global or local work practices?

• Not a case of ‘either-or’ • As Huo et al conclude:

“While the recruiting practices used in different countries are inching toward global convergence, we expect national cultures to continue affecting the hiring practices. …

The best IHRM practices ought to be the ones best adapted to cultural and national differences”

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Retaining local staff

• The paradox – ‘expense of cheap labour’• Poaching of key subsidiary staff• Access to skilled labour as important as unit

cost (eg. attraction of India for the IT industry)• The amount and quality of training is an

important consideration

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Developing staff

• Investing in human capital• Providing training and career development

can assist in retaining good local staff• A fair environment and good management

practices play an important role in countries such as China

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Retrenching staff

• The reverse of the employment ‘coin’• Strategic decisions regarding foreign

operations have HR implications, including retrenchment

• Not confined to subsidiary operations but may affect home base - eg. transferring call centres from UK and US to India

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HR implications of language standardization

• Adopting a common corporate language puts pressure on employees to become competent in the corporate language

• Affects– Promotion– Ability to attend corporate programs and meetings– Availability for international assignments

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HR implications of language standardization

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Shadow structure of KONE based on

language

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Monitoring host country subcontractors

• Outsourcing activities to host-country subcontracting firms requires some monitoring of HR practices

• Vocal groups have accused multinationals of condoning work practices that would not be permitted in their home countries

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HR’s role• Drawing up and reviewing codes of conduct• Conducting a cost-benefit analysis to justify an

expatriate as a monitor• Championing local operators as monitors• Being a member of the team who conducts

periodic ‘checking’ visits• Overseeing external monitors and auditors where

used• Checking rewards and performance systems take

compliance into consideration