Chapter Copyright© 2007 Thomson Learning All rights reserved 12 HRM in the Local Context: Knowing...

Chapter

Copyright© 2007 Thomson Learning All rights reserved

12HRM in the Local Context:

Knowing When and How to Adapt

Copyright© 2007 South-Western/Thomson Learning All rights reserved

Learning Objectives

• Understanding how the national context affects HRM practices

• Identify how recruitment and selection practices differ in various national contexts

• Identify possible host adaptations in recruitment and selection practices

• Understanding how the national context affects HRM practices

• Identify how recruitment and selection practices differ in various national contexts

• Identify possible host adaptations in recruitment and selection practices


Learning Objectives

• Identify how training and development techniques are used in different countries

• Identify sources of high-quality workers in different nations

• Understand how training must be adapted to host country workers

• Identify how performance evaluation and compensation practices differ in various national contexts

• Identify how training and development techniques are used in different countries

• Identify sources of high-quality workers in different nations

• Understand how training must be adapted to host country workers

• Identify how performance evaluation and compensation practices differ in various national contexts


Learning Objectives

• Identify possible host country adaptations in performance evaluation and compensation practices for a multinational company

• Understand how labor costs vary • Have an appreciation of how the national context and

historical conditions affect the relationship of management and labor

• Identify possible host country adaptations in performance evaluation and compensation practices for a multinational company

• Understand how labor costs vary • Have an appreciation of how the national context and

historical conditions affect the relationship of management and labor


Key Questions Regarding Local Employees

• How can we identify talented local employees?• How can we attract these employees to apply for jobs?• Can we use our home country’s training methods with

local employees?• What types of appraisal methods are customary?

• How can we identify talented local employees?• How can we attract these employees to apply for jobs?• Can we use our home country’s training methods with

local employees?• What types of appraisal methods are customary?


Key Questions Regarding Local Employees (cont.)

• What types of rewards do local people value?• How can we retain and develop employees with a high

potential as future managers?• Do any local laws affect staffing, compensation, and

training decisions?

• What types of rewards do local people value?• How can we retain and develop employees with a high

potential as future managers?• Do any local laws affect staffing, compensation, and

training decisions?


Why Do Nations Differ in HRM?

• Because of the national context - National culture and social institutions influence how

managers make decisions regarding strategies • Countries vary widely with regards to social institutions

and national culture- Multinationals must select and implement practices

that meet national context

• Because of the national context - National culture and social institutions influence how

managers make decisions regarding strategies • Countries vary widely with regards to social institutions

and national culture- Multinationals must select and implement practices

that meet national context


Exhibit 12.1: How the National Context Leads to National Differences in Local HRM Practices



• Resource pool: all the human and physical resources available in a country - Both from natural and induced factor conditions- Include quality of labor, availability of scientific

laboratories

• Resource pool: all the human and physical resources available in a country - Both from natural and induced factor conditions- Include quality of labor, availability of scientific

laboratories


Key Factors that Influence the Resource Pool

• The quality, quantity, and accessibility of raw material• The quantity, quality, and cost of personnel available• The scientific, technical, and market-related knowledge

available to firms

• The quality, quantity, and accessibility of raw material• The quantity, quality, and cost of personnel available• The scientific, technical, and market-related knowledge

available to firms


Resource Pool

• The cost and amount of capital available to firms for operations and expansion

• The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation

• The cost and amount of capital available to firms for operations and expansion

• The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation



• Natural factor conditions: national resources that occur naturally- E.g., abundant water supply

• Induced-factor conditions: national resources created by a nation- E.g., superior educational system

• Natural factor conditions: national resources that occur naturally- E.g., abundant water supply

• Induced-factor conditions: national resources created by a nation- E.g., superior educational system


Characteristics of the National Context That Affect HRM

• Education and training of the labor pool• Laws and cultural expectations for selection practices• Types of jobs favored by applicants• Laws and cultural expectations regarding fair wages

and promotion criteria• Laws and traditions regarding labor practices

• Education and training of the labor pool• Laws and cultural expectations for selection practices• Types of jobs favored by applicants• Laws and cultural expectations regarding fair wages

and promotion criteria• Laws and traditions regarding labor practices


Recruitment

• The major steps in recruitment1. Managers determine that jobs are available2. Employers determine the types of people and

skills that are necessary for the job3. Employers generate a pool of applicants for the

job

• The major steps in recruitment1. Managers determine that jobs are available2. Employers determine the types of people and

skills that are necessary for the job3. Employers generate a pool of applicants for the

job


Exhibit 12.2: Steps in the Recruiting Process


Recruitment Strategies

• Walk-ins or unsolicited applications• Newspaper or Internet advertisement • Company Web site job posting• Internal job postings• Public and private personnel agencies• Placement services of educational institutions• Current employee recommendations

• Walk-ins or unsolicited applications• Newspaper or Internet advertisement • Company Web site job posting• Internal job postings• Public and private personnel agencies• Placement services of educational institutions• Current employee recommendations


Recruitment in the U.S.

• U.S. managers tend to see newspapers as one of the most effective recruitment methods.

• Fear that recruitment by personal contacts may result in bias against some groups.

• U.S. value open and public advertisements as a reflection of individualistic culture.

• U.S. managers tend to see newspapers as one of the most effective recruitment methods.

• Fear that recruitment by personal contacts may result in bias against some groups.

• U.S. value open and public advertisements as a reflection of individualistic culture.


Exhibit 12.3: Most Effective Recruiting Sources for U.S. Companies


Recruitment in Korea

• Backdoor recruitment: prospective employees are friends or relatives of those already employed

• Managers are recruited from prestigious universities

• Backdoor recruitment: prospective employees are friends or relatives of those already employed

• Managers are recruited from prestigious universities


Recruitment Around the World

• Individuals around the world have preferred way to find jobs

• International Social Survey Program data was analyzed

• Looking for jobs through public vs. private agencies- Individuals in former communist and socialist

societies were more likely to rely on public agencies

• Individuals around the world have preferred way to find jobs

• International Social Survey Program data was analyzed

• Looking for jobs through public vs. private agencies- Individuals in former communist and socialist

societies were more likely to rely on public agencies


Recruitment Around the World (cont.)

• Advertising in newspapers and responding to newspaper ads- Both very public forms of recruitment- Individualistic societies have higher preference for

such forms• Apply directly versus asking friends/relatives for job

- Individualistic and high femininity societies more likely to favor direct application

- Socialist societies rely on asking friends/relatives

• Advertising in newspapers and responding to newspaper ads- Both very public forms of recruitment- Individualistic societies have higher preference for

such forms• Apply directly versus asking friends/relatives for job

- Individualistic and high femininity societies more likely to favor direct application

- Socialist societies rely on asking friends/relatives


Exhibit 12.4: Preferred Ways to Look for a New Job—Public vs. Private Agency


Exhibit 12.5: Preferred Ways to Look for a New Job


Exhibit 12.6: Preferred Ways to Look for a New Job


Selection in the U.S.

• Job qualifications• Match skills and job requirements• Individual achievements• Prohibitions against nepotism—the hiring of relatives• Forbidding managers to supervise family members

• Job qualifications• Match skills and job requirements• Individual achievements• Prohibitions against nepotism—the hiring of relatives• Forbidding managers to supervise family members


Exhibit 12.7: Typical Steps in U.S. Personnel Selection


Selection in Collectivist Cultures

• Based on the in-group• Preference for family• Value potential trustworthiness, reliability, and loyalty

over performance-related background• High school and university ties substitute for family

membership

• Based on the in-group• Preference for family• Value potential trustworthiness, reliability, and loyalty

over performance-related background• High school and university ties substitute for family

membership


Selection Around the World

• A comparison of current selection practices in 13 countries- Common selection criterion

• A person’s ability to perform technical aspects of the job

• Personal interviews are the best screening tool to gauge a candidate’s social skills

• A comparison of current selection practices in 13 countries- Common selection criterion

• A person’s ability to perform technical aspects of the job

• Personal interviews are the best screening tool to gauge a candidate’s social skills


Selection Around the World

- Differences in selection• Developed countries are more likely to view past

work experience as the best way to infer evidence of technical skills

• Asian societies tend to prefer that candidates take actual employment tests to demonstrate technical skills

- Differences in selection• Developed countries are more likely to view past

work experience as the best way to infer evidence of technical skills

• Asian societies tend to prefer that candidates take actual employment tests to demonstrate technical skills


Implications for the Multinational: Recruitment and Selection

• Managers must follow local norms to get best workers• Often a tradeoff between home practices and costs of

following local traditions

• Managers must follow local norms to get best workers• Often a tradeoff between home practices and costs of

following local traditions


Training and Development

• Need for training and development varies by country• Differences in training and development due to

- Differences in educational systems- Values regarding educational credentials- Cultural values regarding other personnel practices

• Need for training and development varies by country• Differences in training and development due to

- Differences in educational systems- Values regarding educational credentials- Cultural values regarding other personnel practices


Exhibit 12.8: The Various Models and Emphasis on Various Human Resources Issues Including Training


Exhibit 12.9: Training Systems around the World


Exhibit 12.10: Key Specific Training and Development Characteristics of Selected Countries


Training and Development in the U.S.

• Companies with over 100 employees invest more than $60 billion in training costs.

• Management development and computer skills are the most popular.

• There is growing pressure for training as the U.S. shifts to the service sectors.

• Companies with over 100 employees invest more than $60 billion in training costs.

• Management development and computer skills are the most popular.

• There is growing pressure for training as the U.S. shifts to the service sectors.


Exhibit 12.11: Skills Taught by U.S. Organization


Training and Vocational Education in Germany

• Two major forms of vocational education• General and specialized vocational schools and

professional and technical colleges• Dual system: combination of in-house apprenticeship

training with part-time vocational-school training, and leads to a skilled certificate- Meister: a master technician

• Two major forms of vocational education• General and specialized vocational schools and

professional and technical colleges• Dual system: combination of in-house apprenticeship

training with part-time vocational-school training, and leads to a skilled certificate- Meister: a master technician


German Dual System

• Stems from collaboration among employers, unions, and the state

• Costs shared between companies and state• Employers have obligation to release employees for

training

• Stems from collaboration among employers, unions, and the state

• Costs shared between companies and state• Employers have obligation to release employees for

training


Exhibit 12.12: The System of Vocational Education In Germany


Exhibit 12.13: Germany’s Apprenticeship Program under Pressure


Management Development in the United States

• Senior level managers often identify managerial potential

• Appraisals of managerial readiness based on- Assessment centers- Mentoring- “Fast track” careers

• Remains the responsibility of the individual

• Senior level managers often identify managerial potential

• Appraisals of managerial readiness based on- Assessment centers- Mentoring- “Fast track” careers

• Remains the responsibility of the individual


Management Development in Japan

• Permanent employment• Recruitment directly from universities• Join the company as a group• Selected on personal qualities that fit the corporate

culture• Similar pay and promotion for first ten years—age

seniority• Informal recognition of those high performing

managers

• Permanent employment• Recruitment directly from universities• Join the company as a group• Selected on personal qualities that fit the corporate

culture• Similar pay and promotion for first ten years—age

seniority• Informal recognition of those high performing

managers


Management Development in Japan

• Shifting social institutions: pressures for change- Asahi ties promotions to evaluations- Matsushita uses merit pay for managers- Honda is phasing out seniority

• Shifting social institutions: pressures for change- Asahi ties promotions to evaluations- Matsushita uses merit pay for managers- Honda is phasing out seniority


Implications for the Multinational: Training and Development

• Examine feasibility of exporting training• IHRM orientation affects training needs of local

managers• Locations advantages

• Examine feasibility of exporting training• IHRM orientation affects training needs of local

managers• Locations advantages


Performance Appraisal

• Identifying people to reward, promote, demote, develop and improve, retain, or fire

• Not everyone can climb the corporate ladder• Need to assess how employees perform

• Identifying people to reward, promote, demote, develop and improve, retain, or fire

• Not everyone can climb the corporate ladder• Need to assess how employees perform


U.S. Performance Appraisal

• U.S. legal requirements regulate performance evaluation practices to ensure their fairness

• Performance evaluations must relate clearly to the job and performance

• Performance standards must be provided in writing• Supervisors must be able to measure the behaviors

they rate

• U.S. legal requirements regulate performance evaluation practices to ensure their fairness

• Performance evaluations must relate clearly to the job and performance

• Performance standards must be provided in writing• Supervisors must be able to measure the behaviors

they rate


U.S. Performance Appraisal(cont.)

• Supervisors must be trained to use evaluation measures

• Supervisors and subordinates must discuss appraisals openly

• Appeals procedures must be in place

• Supervisors must be trained to use evaluation measures

• Supervisors and subordinates must discuss appraisals openly

• Appeals procedures must be in place


Exhibit 12.14: Cross-National Differences in Purposes of Performance Appraisals


Performance Appraisal Around the World

• Australia, Canada and the United States- Among the top five countries for all performance-appraisal

purposes- Very high on individualism where there is heavy emphasis on

the individual development of the employee - Performance appraisals are the most effective method to

gauge how well an employee is doing and how that person’s performance can be improved

• Australia, Canada and the United States- Among the top five countries for all performance-appraisal

purposes- Very high on individualism where there is heavy emphasis on

the individual development of the employee - Performance appraisals are the most effective method to

gauge how well an employee is doing and how that person’s performance can be improved



• Taiwan and Latin America- Figure prominently on the list- Possible explanations through the effects of social

institutions such as the government and the trade agreements

- Emulating Western-based systems through a desire to satisfy trade agreements and other competitiveness requirements

• Taiwan and Latin America- Figure prominently on the list- Possible explanations through the effects of social

institutions such as the government and the trade agreements

- Emulating Western-based systems through a desire to satisfy trade agreements and other competitiveness requirements



• Collectivist Societies (e.g., China, Japan, Korea, Indonesia)- Unlikely to be among the top five countries for each

performance-appraisal purpose- Age and in-group memberships provide a large component

of the psychological contract with the organization- Human resource decisions should take into account personal

background characteristics more than achievement- Managers work indirectly to sanction poor performance- Often avoid direct performance appraisal feedback

• Collectivist Societies (e.g., China, Japan, Korea, Indonesia)- Unlikely to be among the top five countries for each

performance-appraisal purpose- Age and in-group memberships provide a large component

of the psychological contract with the organization- Human resource decisions should take into account personal

background characteristics more than achievement- Managers work indirectly to sanction poor performance- Often avoid direct performance appraisal feedback


Compensation

• Wages and salaries, incentives such as bonuses, and benefits such as retirement contributions

• Wide variations on how to compensate workers

• Wages and salaries, incentives such as bonuses, and benefits such as retirement contributions

• Wide variations on how to compensate workers


Compensation in the U.S.

• Wages and salaries differ based on two major factors- External: include local and national wage rates,

government legislation, and collective bargaining- Internal: include the importance of the job to the

organization, its ability to pay, and the employee’s relative worth to the business

• Wages and salaries differ based on two major factors- External: include local and national wage rates,

government legislation, and collective bargaining- Internal: include the importance of the job to the

organization, its ability to pay, and the employee’s relative worth to the business


Compensation Around the World

• Nine compensation practices- Pay incentives should be important- Pay should be contingent on group performance- Pay should be contingent on organizational performance- Incentives should be a significant amount of pay- Job performances should be the basis of pay raises- Benefits should be important- Benefits should be more generous- Pay should be based on long-term results- Using seniority as a determinant of pay decision

• Nine compensation practices- Pay incentives should be important- Pay should be contingent on group performance- Pay should be contingent on organizational performance- Incentives should be a significant amount of pay- Job performances should be the basis of pay raises- Benefits should be important- Benefits should be more generous- Pay should be based on long-term results- Using seniority as a determinant of pay decision


Compensation Around the World

• Based on 10 countries (Australia, Canada, China, Indonesia, Japan, Korea, Latin America, Mexico, Taiwan, and the Unite States)- Managers of all countries and regions felt that it was

necessary that all but one (seniority as a determinant of pay decisions) of the nine compensation practices be used more in the future

• Based on 10 countries (Australia, Canada, China, Indonesia, Japan, Korea, Latin America, Mexico, Taiwan, and the Unite States)- Managers of all countries and regions felt that it was

necessary that all but one (seniority as a determinant of pay decisions) of the nine compensation practices be used more in the future


Compensation: Japan

• Traditional approach- Base salaries on positions- Skill and educational requirements - Age- Marital status and family size may count- Bonus system: employees often receive up to 30%

of their base salary during traditional gift-giving seasons

• Traditional approach- Base salaries on positions- Skill and educational requirements - Age- Marital status and family size may count- Bonus system: employees often receive up to 30%

of their base salary during traditional gift-giving seasons


New Merit (Japanese style)

• Can affect pay raises to a greater degree than traditional position/seniority system

• Nenpo system: based on yearly performance evaluations that emphasize goals - Although goals are not always the same as in

Western companies• Stresses attitudes as much as performance

• Can affect pay raises to a greater degree than traditional position/seniority system

• Nenpo system: based on yearly performance evaluations that emphasize goals - Although goals are not always the same as in

Western companies• Stresses attitudes as much as performance


Exhibit 12.15: The Japanese Pay Raise Formula: Changing the Balance


Implications for the Multinational: Performance Evaluation and Compensation

• Match HRM orientation• Seek location advantages in wages

• Match HRM orientation• Seek location advantages in wages


Exhibit 12.16: Labor Costs and Hours Worked Per Week in Selected Countries


A Comparative View of Labor Relations

• Patterns of labor relations depend on:- Historical factors- Ideology reasons- Management views of unions

• Patterns of labor relations depend on:- Historical factors- Ideology reasons- Management views of unions


Union-Membership Density

• Proportion of workers in a country who belong to unions- Germany: estimated 40% belonged to trade unions- U.S.: 14.2% of nonagricultural workforce - Denmark: over 80% unionized- Great Britain: approximate 50% unionized

• Proportion of workers in a country who belong to unions- Germany: estimated 40% belonged to trade unions- U.S.: 14.2% of nonagricultural workforce - Denmark: over 80% unionized- Great Britain: approximate 50% unionized


Exhibit 12.17: Union Density in Selected Countries


Historical and Institutional Differences: Germany

• Germany- Formalized, legalistic, and low-conflict bargaining

between unions and large corporations• French

- Militant/strong ideologies• U.S.

- “Bread and butter” issues: wages, benefits, and working conditions

• Germany- Formalized, legalistic, and low-conflict bargaining

between unions and large corporations• French

- Militant/strong ideologies• U.S.

- “Bread and butter” issues: wages, benefits, and working conditions


Union Structures

• Enterprise union: represents all people in one organization, regardless of occupation or location

• Craft union: represents people from one occupational group, such as plumbers

• Industrial union: represents all people in a particular industry, regardless of occupational type

• Enterprise union: represents all people in one organization, regardless of occupation or location

• Craft union: represents people from one occupational group, such as plumbers

• Industrial union: represents all people in a particular industry, regardless of occupational type


Union Structures (cont.)

• Local union: represents one occupational group in one company

• Ideological union: represents all types of workers based on some particular ideology or religious orientation

• White collar or professional union: represents particular occupational group, similar to craft union

• Local union: represents one occupational group in one company

• Ideological union: represents all types of workers based on some particular ideology or religious orientation

• White collar or professional union: represents particular occupational group, similar to craft union


Exhibit 12.18: Popular Form of Unions in Selected Countries


Implications for the Multinational: The Search for Harmony

• Must deal with local labor practices• A factor in location choice

• Must deal with local labor practices• A factor in location choice


Exhibit 12.19: Who Gets Along?


Conclusion

• Chapter highlighted fundamental national differences in the various HRM functions

• Chapter discussed how national context affects HRM• Chapter compared the U.S. with many other countries

on recruitment, selection, training, performance appraisal and compensation

• Chapter also dealt with differences in labor relations

• Chapter highlighted fundamental national differences in the various HRM functions

• Chapter discussed how national context affects HRM• Chapter compared the U.S. with many other countries

on recruitment, selection, training, performance appraisal and compensation

• Chapter also dealt with differences in labor relations

Chapter Copyright© 2007 Thomson Learning All rights reserved 12 HRM in the Local Context: Knowing...

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