Kumar Alok CIMP

Session 11Session 11

Organon Laboratories CaseOrganon Laboratories Case

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International HRMInternational HRM

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

----- (Schuler et al., 1993, p. ----- (Schuler et al., 1993, p. 270) 270)

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Domestic HRM vs. International HRMDomestic HRM vs. International HRM

ParameterParameter Domestic HRMDomestic HRM International HRMInternational HRM

Functional Functional areasareas

Traditional HR Traditional HR areas areas

Traditional HR areasTraditional HR areas Taxation, currencies and exchange rate and Taxation, currencies and exchange rate and compensation plancompensation plan Direct involvement with employees’ families Direct involvement with employees’ families

Involvement in Involvement in personal lives personal lives of employeesof employees

Limited and Limited and occasional occasional

Assisting in housing in host countryAssisting in housing in host country Assisting in selling/leasing domestic Assisting in selling/leasing domestic accommodationaccommodation Locating recreational and cultural activities Locating recreational and cultural activities Arranging and paying for schoolArranging and paying for school Locating and securing domestic help Locating and securing domestic help

GeographyGeography No need for geo-No need for geo-adaptive HR systemsadaptive HR systems

Geo-adaptive HR systems are required Geo-adaptive HR systems are required

External External constituencies constituencies

Less complex Less complex More complex like foreign governments, More complex like foreign governments, political, religious and activist groups etc.political, religious and activist groups etc.

Exposure to Exposure to riskrisk

Relatively lessRelatively less High risk caused by terrorism, AIDS etc. High risk caused by terrorism, AIDS etc.

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Holland, UK & China: CultureHolland, UK & China: Culture

Culture characteristics as per GLOBE studiesCulture characteristics as per GLOBE studies

CountryCountry CultureCulture Characteristics Characteristics

HollandHolland Germanic Germanic EuropeEurope

Competitive, aggressive, result-oriented, Competitive, aggressive, result-oriented, value planning and rules value planning and rules

UKUK AngloAnglo Competitive, result-oriented, less attached Competitive, result-oriented, less attached to families or other groups to families or other groups

ChinaChina Confucian Confucian Asia Asia

Result-driven, encourage group working, Result-driven, encourage group working, loyal to families loyal to families

Can you figure out their business environment?

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Organon Laboratories Ltd.Organon Laboratories Ltd.

83 year old company with more than 60 subsidiaries 83 year old company with more than 60 subsidiaries around the worldaround the world

Now a part of Schering-PloughNow a part of Schering-Plough A major pharmaceutical player A major pharmaceutical player Over 55000 employees worldwideOver 55000 employees worldwide Business in more than 140 countries Business in more than 140 countries Net sales: $12.7 billion; R & D investment (2007): $2.9 billion Net sales: $12.7 billion; R & D investment (2007): $2.9 billion Merk and Schering-Plough merged to create the world’s Merk and Schering-Plough merged to create the world’s

second largest pharma company by market sharesecond largest pharma company by market share Innovation driven: Core therapeutic areasInnovation driven: Core therapeutic areas

Gynecology, fertility, neuroscience and anesthesia Gynecology, fertility, neuroscience and anesthesia

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International business strategies International business strategies

Global Transnational

Multinational

International

Local Responsiveness

Eff

icie

ncy

Innovation

Adapted from “Information Technology for Management”, Henry C. Lucas, Jr., TMH, 7th Edition, P. 129

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Approaches of IHRMApproaches of IHRM

Aspect of Aspect of EnterpriseEnterprise

OrientationOrientation

EthnocentricEthnocentric PolycentricPolycentric RegiocentricRegiocentric GeocentricGeocentric

Standard Standard setting, setting, evaluation and evaluation and controlcontrol

By home By home country HQcountry HQ

By local By local subsidiary subsidiary managementmanagement

Coordination Coordination across across countries in the countries in the regionregion

Global as well Global as well as local as local standards of standards of controlcontrol

Communication Communication and and coordinationcoordination

From HQ to From HQ to local subsidiarylocal subsidiary

Little among Little among subsidiaries, subsidiaries, little between little between subsidiary and subsidiary and HQHQ

Little between Little between subsidiary and subsidiary and HQ, medium to HQ, medium to high among high among subsidiaries in subsidiaries in regionregion

Totally Totally connected connected network of network of subsidiaries subsidiaries and and subsidiaries subsidiaries with HQwith HQ

StaffingStaffing Home country Home country managesmanages

Host country Host country managersmanagers

Managers may Managers may come from come from nations within nations within the regionthe region

Best people Best people where they can where they can be best used be best used

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 410

Kumar Alok CIMP

““Organon aims at world-wide registration of its Organon aims at world-wide registration of its products. This requires that all Organon employees, products. This requires that all Organon employees, especially the 2,600 research and development staff especially the 2,600 research and development staff at seven centers world-wide, have a global vision. at seven centers world-wide, have a global vision. Together they form a single world-wide organisation, Together they form a single world-wide organisation, in which team spirit and a collaborative approach is in which team spirit and a collaborative approach is more important than location.”more important than location.”

What does that say about their strategy?

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““There are no team-based pay policies on There are no team-based pay policies on either Scottish or Dutch sites. The company either Scottish or Dutch sites. The company have individual-based reward and bonus.”have individual-based reward and bonus.”

Can you see a performance-reward congruence?

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SHRM Issues in international assignmentsSHRM Issues in international assignments

International Business Strategy

Local culture National culture Corporate culture

Strategic HR Issues

Purpose of Expatriation

Selection

• Employee

• Family

Orientation

• Employee & family

• Headquarter staff

Managing Expats

• Performance

• Compensation

• Labor relations

• Training

Repatriation

Level of Standardization

• Ethnocentric

• Polycentric

• Regiocentric

• Geocentric

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 407

Kumar Alok CIMP

““In general Organon do not like expatriation, it In general Organon do not like expatriation, it is too expensive. They send employees on is too expensive. They send employees on foreign assignments only when they need foreign assignments only when they need someone they can trust in a host site. They someone they can trust in a host site. They prefer to recruit local people when and where prefer to recruit local people when and where appropriate.”appropriate.”

What are the expenses involved in expatriation?

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Purpose of expatriationPurpose of expatriation

Purpose of the OrganisationPurpose of the Organisation Purpose of the Individual Purpose of the Individual

Business/Market developmentBusiness/Market development Skill developmentSkill development

Set-up/transfer/integration of ITSet-up/transfer/integration of IT Preparation for top Preparation for top managementmanagement

Manage autonomous subsidiaryManage autonomous subsidiary Follow dual-career Follow dual-career partner/spouse partner/spouse

Coordinate/integrate foreign Coordinate/integrate foreign operation with domestic operationsoperation with domestic operations

Fill vacant positions temporarily Fill vacant positions temporarily

Develop local management talentDevelop local management talent

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 408

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Compensating expats Compensating expats

Balance sheet approachBalance sheet approach Based on domestic payBased on domestic pay Additional expenses added Additional expenses added Suitable for short-term assignmentsSuitable for short-term assignments

Higher-of-home-or-host approachHigher-of-home-or-host approach Accounts for the higher cost of living in the host country Accounts for the higher cost of living in the host country Suitable assignments of indefinite durationSuitable assignments of indefinite duration

Localization approach Localization approach Salary converted to its host country equivalentSalary converted to its host country equivalent Suitable for permanent assignments Suitable for permanent assignments

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Issues with repatriationIssues with repatriation

Career IssuesCareer Issues Personal Issues Personal Issues

Career anxiety – current Career anxiety – current place, futureplace, future

LogisticsLogistics

Organization's reactionOrganization's reaction Personal readjustmentPersonal readjustment

Loss of autonomyLoss of autonomy

Family readjustment Family readjustment Adaptation to change Adaptation to change

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 411

Kumar Alok CIMP

““Schering-Plough and OBS have different key Schering-Plough and OBS have different key franchises, with Organon offering new franchises, with Organon offering new direction in the areas of women's health and direction in the areas of women's health and central nervous system medicines, but one of central nervous system medicines, but one of their shared complementary strengths is their their shared complementary strengths is their people.” people.”

Comment on the future of this acquisition.Comment on the future of this acquisition.

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Key takeaways from OrganonKey takeaways from Organon

Global business operation is as much about diverse Global business operation is as much about diverse markets as it is about diverse work-forcemarkets as it is about diverse work-force

Culture is not just a customer issue; it is a business issue Culture is not just a customer issue; it is a business issue

Culturally adaptive HR practices can lead to lasting Culturally adaptive HR practices can lead to lasting successsuccess

Staffing, T & D, performance and compensation systems must Staffing, T & D, performance and compensation systems must address the business needaddress the business need

Foreign assignments as business need and not just a fad Foreign assignments as business need and not just a fad

HR must be in sync with business strategyHR must be in sync with business strategy

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Thank you!