MMPH-009

International Human
Resource Management
School of Management Studies

BLOCK 1
INTERNATIONAL HUMAN RESOURCE
MANAGEMENT : AN OVERVIEW 5
BLOCK 2
HRM PRACTICES IN INTERNATIONAL CONTEXT 69
BLOCK 3
BEHAVIOURAL DYNAMICS OF IHRM 149
BLOCK 4
ISSUES AND CHALLENGES 179
COURSE DESIGN AND PREPARATION TEAM
Prof. K Ravi Sankar, Prof. A.M. Sarma* Prof P Jyothi
Director, SOMS, Professor (Retd.) School of Management Studies,
IGNOU, New Delhi TISS, Mumbai University of Hyderabad,
Hyderabad

Prof. B.D. Singh * Prof. Sita Prof. Nayantara Padhi

Asia Pacific Institute of School of Management Studies, SOMS,IGNOU,
Management University of Hyderabad, New Delhi
NOIDA, U.P. Hyderabad

Prof. Sasmita Palo Prof Shalini Garg Prof. Sumita Misra

TISS, Mumbai SOMS, I.P. University KSOM, KIIT University
New Delhi Bhubneshwar

Dr. Sarala Rao Prof. Mamta Mohapatra Course Coordinator and

Associate Professor, International Management Editor:
School of Management and Institute, Prof. Srilatha
Labour Studies, New Delhi SOMS,IGNOU,
TISS Mumbai New Delhi
Acknowledgement: Parts of this course is adapted from the earlier MS-29: International Human
Resource Management and MS-2: Managing Men courses. The persons marked with (*) were the
original contributors and the profiles are as it was in that material.

MATERIAL PRODUCTION
Mr. Tilak Raj
Assistant Registrar
MPDD, IGNOU, New Delhi
January, 2023
© Indira Gandhi National Open University, 2023
ISBN: 978-93-5568-728-9
All rights reserved. No part of this work may be reproduced in any form, by mimeograph or any other
means, without permission in writing from the Indira Gandhi National Open University. Further
Information on the Indira Gandhi National Open University course may be obtained from the
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 CONTENT

BLOCK 1 INTERNATIONAL HUMAN RESOURCE

MANAGEMENT : AN OVERVIEW 5

Unit 1 Introduction to International HRM 7

Unit 2 Social and Cultural Context of IHRM 23

Unit 3 Cross Cultural Diversity 42

Unit 4 Strategic Human Resource Management in 54

International Context

BLOCK 2 HRM PRACTICES IN INTERNATIONAL

CONTEXT 69

Unit 5 Staffing for International Assignments 71

Unit 6 Training and Development in International Context 84

Unit 7 International Performance Management 102

Unit 8 International Compensation Management 120

Unit 9 Internal Career Management 130

BLOCK 3 BEHAVIOURAL DYNAMICS OF IHRM 149

Unit 10 Leadership and Motivation in a Global Context 151

Unit 11 High Performance Work Systems 167

BLOCK 4 ISSUES AND CHALLENGES 179

Unit 12 International Employee Relations 181

Unit 13 IHRM Trends and Challenges 204

COURSE INTRODUCTION
International human resource Management (IHRM) is an important concept
in the present day context as more multinationals are growing and the
scenario of work has become more global in nature. There is tremendous
growth in mergers and acquisitions of companies. In order to effectively
manage their human resources, staffing, training, development and retaining
people have become very important.
Therefore, this course gives you a detail understanding about different
aspects and practices of IHRM. With the help of this course the learners will
be in a position to widen their understanding about Human Resource
Management from International context.
The first block deals with giving an overview about the difference between
domestic and International Human Resource Management. It also deals with
cultural diversity management and the strategies to manage HRM from
international context.
The Second block explains about HR practices like staffing, training and
development, performance management, compensation management and
internal career management from international perspective.

The third block, deals with how leaders play an important role in motivating
the employees who work in other countries and also explains how to manage
high performance work systems.
The final block explains about employee relations from international
perspective and how to deal with present trends and challenges happening
from global perspective.
 BLOCK 1
INTERNATIONAL HUMAN RESOURCE
MANAGEMENT: AN OVERVIEW
 Introduction to
UNIT 1 INTRODUCTION TO International HRM

INTERNATIONAL HRM

Structure
1.1 Introduction to International Human Resource Management
1.2 Definition of Human Resource Management
1.3 Differences between Domestic Human Resource Management and
International Human Resource Management
1.4 Approaches to International Human Resource Management
1.5 Activities under International Human Resource Management
1.6 Understanding Culture
1.7 Culture and its impact on HRM Policies
1.8 Summary
1.9 Self- Assessment Questions
1.10 Further Readings/ References

1.1 INTRODUCTION TO INTERNATIONAL

HUMAN RESOURCE MANAGEMENT
Jack Welch, a notable former CEO of GE, is often quoted saying,
‘Organization must either globalize or die.’ When it comes to International
Human Resource Management (IHRM), there arises a lot of confusion about
what exactly it means and the difference from HRM. So, it is better to know
and understand the importance of basic IHRM terminology.
Multinational Corporation (MNC): Organization operating in multiple
countries other than their home country

Transnational Corporation (TNC): An organization that produces, trades,

funds, and operates worldwide.

Home Country/Parent Country: Central command of the parent company

where the MNC/TNC is based.

Host Country: A subsidiary/branch of the MNC/TNC is operated or located

Parent County Nationals / Home Country Nationals: Resident of the

MNC/TNC's home country/parent country
Host Country Nationals (HCNs): A national of the host country is an
employee of an affiliate/branch of an MCN/TCN who is a resident of the
country in which the affiliate/branch of the MNC/TNC is functional.
Third Country Nationals (TCNs): Employee of a multinational
corporation/multinational corporation or its subsidiary/branch and a citizen of
a country other than the home/host country of the multinational corporation.

7
International
Human Resource 1.2 DEFINITION OF INTERNATIONAL HUMAN
Management : An
Overview
RESOURCE MANAGEMENT
International Human Resources Management is not a new conception; it is as
aged as the advent of globalization. Due to different cultural diversities, it is
not the same with the management. It is one of the reasons why it is so
significant, widespread, and complex with the ongoing globalization
movement. The fundamental objective of IHRM is to acquire the upper hand
or competitive advantage through recruiting and expanding the employee's
abilities, effectiveness, and efficiency. This is executed through a strategic
approach of sourcing, distributing, relegating, imparting training and
development, performance assessment, and rewards for the ideal utilization
of HR in a global climate. The end goal for any organization is customer
satisfaction and a market leader position while effectively utilizing its
resources. With the help of IHRM, organizations can create the scope for
themselves to attain the status of market leaders.
As per Subba Rao Pulapa (2007), “IHRM can perform HRM and its
connected activities and sort out for related and essential cultural and
migration facilities for future and current employees by the firm working in
domestic and overseas countries.”
In addition to the HRM functions and activities, the IHRM only deals with
expatriate functions. It also includes additional features such as dispute
resolution between domestic and foreign employees, cross-cultural
management at different levels, and cooperation between domestic and
foreign employees.
Mark Mendenhall (2000) attempted to create criteria for defining IHRM.
Here are the requirements:
 HRM activities address matters carried out cross-border or at locations
other than headquarters in the home country.
 IHRM addresses the linkages and synergies between the organization's
HRM activities and the foreign environment in which it operates.
 IHRM is allusive of HRM studies. In other words, there are differences
in how companies in different countries carry out HR activities.

IHRM carries out HRM and related activities and arranges the necessary
cultural and immigration facilities for organizations operating nationally and
internationally for potential and current employees.

1.3 DIFFERENCES BETWEEN DOMESTIC HRM

AND INTERNATIONAL HRM
Domestic and international companies are working on synergies, but there
are decisive differences between how the two companies operate. While,
Differences can be found in foreign exchange, quotas, tariffs, government
regulations, and significant cultural differences. Six fundamental aspects
distinguish IHRM from Domestic Human Resource Management (DHRM).
8
 Major nationalities of employees are involved Introduction to
International HRM
 Various functions performed
 Impact on the international environment
 More expansive and deeper relationships
 Contrasting approaches to domestic functions
 Tenacious difficulties of domestic human resource management
activities

Wider
Nationalites

Different Broader
approaches Relationship
for the and
functions Complexities

International
Human
Resource
Management

Variety of Influence of
International
Functions Environment

Enduring
Complexities
of HRM
activities

1. Wider Nationalities: IHRM deals with people of different nationalities,

which is entirely different from DHRM, where employees are primarily
from one race. Various cultures, values, racial and linguistic
interpretations, religious beliefs, and so on come with different
nationalities; it’s not the same with people of the same race.
Organizations can recruit people from other countries to work in another
country based on their business requirements. So MNCs operating
globally have a vast pool of talent to recruit from. Samsung, a South
Korean organization, catering to the market in the US, can hire a
marketing manager from the EU to fulfill its organizational objectives.
2. Broader Relations and Complexities: The information sought by the
organization is on border aspects of employees and their family
members. There is a contrasting difference while recruiting and selecting
employees of different nationalities. The elements can range from age,
health, educational qualification, driving skills, and criminal records of
employees and their family members since organizations are responsible
for arranging work permits, visas, and resident permits for them/ and
their family members. Due to differences in culture, employees and
family members are expected to get sensitized to the country’s culture
and traditions, so various workshops and community programs are
conducted to get them acquitted to the culture and traditions of the
country.
9
International Employees must put additional effort into understanding others’ cultures,
Human Resource
Management : An habits, behavior, language, body language, and verbal and non-verbal
Overview cues as they differ from what they’re familiar with. This leads to
understanding each other on wider and broader issues. While in many
countries, maintaining eye contact can be associated with the individual
paying attention to the conversation, in Japan, it can be considered an act
of aggression or rudeness.
3. Influence of International Environment: The international
environment significantly influences globalization. People are aware and
have become accepting of the differences that arise due to the culture and
tradition of people of different nationalities. The international
environment is complex, dynamic, vibrant, intertwined, and
interdependent. This is mainly due to globalization. With globalization
and advancement in technology, people are more connected to people
across different places across the globe. This awareness has sensitized
them and made them more accommodating to the diverse cultures and
traditions of people of different nationalities.
Social and cultural norms vary from country to country, and every
country has a different way of following those norms. An international
environment like economic, political, and technology widens the scope
of IHRM activities. This leads to using and implementing different
methods and practices of IHRM. While on the other hand, DHRM is
influenced by the domestic economic, political, and technological
environment, thus narrowing the scope of HRM activities. When the
Lehman Brothers declared bankruptcy, there was a reduction in liquidity
in the international market.
4. Enduring complexities of IHRM activities: IHRM mainly deals with
expatriates, i.e., nationals of their home country, host country, and third-
country citizens. The host country must follow specific rules and
regulations as these expatriates work in different countries. While on the
other hand, DHRM deals with only nationals of the same country. So
HRM activities are limited to domestic laws and regulations of the
country. Organizations recruiting foreign nationals follow different HRM
practices for their residents and expatriates. E.g., The pay structure is
different for the citizens and in the case of expatriates. This creates
friction between domestic and foreign employees due to the difference in
the pay gap. The performance appraisal parameters are also different for
nationals and expatriates. This might lead to a feeling of injustice among
the national employees.
5. Variety of functions: Many functions do not fall under the scope of
DHRM that need to be fulfilled by IHRM to fulfill the rules and
regulations laid down by the applicant country. Some of the functions
covered under this scope are:
a. Additional details of employees: MNCs ask for additional
information such as culture, ethnic origin, health status, and family
members to understand if the prospective candidate would be
suitable for the country they are recruiting for.
10
 b. Additional Recruitment Techniques: Various unique techniques, Introduction to
International HRM
such as the culture of the country, natural beauty of the country,
currency exchange value, exchange stability, repatriation percentage
comparison to home country, medical facilities, work-life balance,
etc., are used to attract and inspire the prospective candidate.
c. Checking of criminal records: Checking for past criminal or
terrorist records with foreign countries to understand if the
prospective candidate is no threat to the applicant country. This
process became necessary after the terrorist attack in the US, UK,
and Asian countries.
d. Online selection: The organization’s recruitment and selection
process are cost-effective. Face-to-face interviews can become cost
intensive in the case of international recruitment, so most
organizations follow up on the online recruitment and selection
process.
e. Employee Details: Information about the financial status, income
tax rates, social conditions, health conditions, and economic
conditions of the place of employment.
f. Immigration information: Financial status, health status, etc., to
the applicant’s country.
g. Fulfilling immigration formalities: Filing the details with the
immigration department of the county, applying such
straightforward visa formalities.
h. Logistic arrangement: Providing logistics like airport pickup, a
place to stay, airline tickets, etc., must be taken care of by the
organization.
i. Language workshop: Providing training for the local language if
the country is a non-native English speaker so that the candidate is
comfortable interacting with the country’s locals.
j. Special training: Providing special training to acquaint the
employee with the social and cultural norms of the country.
k. Transition facilities: Organizations have to provide a temporary
place of accommodation to the employees when they shift to the
new country till they can find a permanent place for their
accommodation.
6. Different approaches to domestic HRM functions: Domestic
organizations perform the following HRM functions
a. Recruitment, selection, induction, and placements.
b. Training and development
c. Salary administration and benefits
d. Retention management and maintenance
International Human Resource Managers perform the same functions, but the
scope of activities is widened from the point of host country nationals, home
11
International country nationals, and third-country nationals. They have an additional
Human Resource
Management : An remuneration function that needs to be attended to. Exchange rate
Overview neutralization, international market allowance, and tax adjustment are some
of the HRM activities.

Domestic Human Resource International Human Resource

Management Management
Deals with employees from one Agreements with employees from
country or a single race. different countries and multiple races
As it deals with people from a single As it deals with employees from
country, the employer doesn’t have different countries, the employer
to make much effort to understand must proactively understand the
the employee’s culture. employee’s culture.
DHRM only deals with a single IHRM has to deal with the internal
country’s internal environment environment of multiple countries
Only has to deal with nationals of Has to deal with people from
one country. different nationalities and expatriates
The scope of HRM activities is The range of HRM activities is
limited widened
The approach of HRM functions is The approach of HRM functions is
limited as it only involves activities widened as it involves activities
carried out in one country. carried out in multiple countries.

1.4 APPROACHES TO IHRM

There is a contrasting similarity in the stages of internationalization or
globalization. Douglas Wind and Perlmutter (1969) advocated four
approaches to international business.
 Ethnocentric Approach
 Polycentric Approach
 Regio-centric Approach
 Geocentric Approach

1. Ethnocentric Approach
Domestic companies formulate their strategies, product design, and
operations toward national markets, customers and competitors. In
excessive production, the company can choose to export to foreign
countries. The new foreign market is considered as an extension / new
region. This approach is suitable during the early days of
internationalization and for smaller companies.

12
 Introduction to
Managing International HRM
Director

Manager Manager Manager Human Manager

Manager R&D
Finance Productions Resources Marketing

Assitant
Manager North
India

Assistant
Manager South
India

Assitant
Manager Exprots

Figure 1 Organizational structure of Ethnocentric Organization

Advantages:
 Better coordination between host and parent country
 Effective control by the head branch over all the subsidies in different
parts of the world.
 Facilitates efficient transfer of technical knowledge
 Parent company can watch over activities of all the subsidiaries
 Avoids the need for having a well-developed labor market at the
international level
 Promotes effective communication between parent and host country
 Easy transfer of parent company culture to the subsidiaries.

Disadvantages:
 Difficult to train or guide employees of the subsidiaries at a different
place from the parent country
 Employees from the parent country might find difficulty in adjusting to
the culture of the host country
 Cultural clashes amongst employees from the parent country and host
country
 Government in host countries can impose strict restrictions on
subsidiaries severely affecting their business
 Opportunities to hire the best talent from the host country are missed
 Expatriates of the parent country are more expensive in comparison to
the employee in the host country
 Rate of failure is high

13
International 2. Polycentric Approach
Human Resource
Management : An
Overview Domestic companies exporting to foreign countries know that foreign
markets need an altogether different approach.

Thus, a foreign subsidiary company is established to decentralize the

operations and delegate decision-making authorities to its management.
Organizations appoint key personnel from the home country, and the
host country’s people fill all other vacancies. All the product designs,
strategies, and policies are drafted by the subsidiary’s management based
on the host country’s environment and the preferences of local
customers. The polycentric approach focuses on the conditions of the
host country in policy formulation, strategy implementation, and
operations.

Managing
Director

CEO Foreign
Subsidiary

Manager Manager Manager Human Marketing

Manager R&D
FInance Production Resources Manager

Figure 2 Organization structure of Polycentric Organization

Advantages:
 Difficulty in the adjustment of expatriates from parent country is
eliminated
 Local hiring is comparatively less expensive
 Local staff morale is high
 Better productivity due to better knowledge of the local market
 Career opportunities for nationals of the host country increase
 Better government support
 Chances of success are high

Disadvantages:
 Lack of coordination between host and parent company
 Lack of effective communication between employees of host and parent
country due to the language barrier
 Difficult to exercise control over the subsidiary
 Lack of local market knowledge
 Conflict may arise due to different thinking processes between the
employees of the host and parent company

14
3. Regio-Centric Approach Introduction to
International HRM
After operating successfully in the foreign country, the company expands
the exporting operation to the neighboring countries of the host country.
The foreign subsidiary considers the regional environment for
formulating policies and strategies., Still, it exports more or less the same
product design to other countries in this region but with different
marketing strategies.

Managing
Director

CEO Subsidiary

Marketing
Country 1

Marketing
Country 2

Marketing
Country 3

Manager
Manager Manager Manager
Manager R&D Human
Finance Production Marketing
Resources

Figure 3 Organizational structure for Regio-Centric organization

Advantages:
 Cultural fit employees as they are recruited from the same region as that
of the host country
 Less cost is incurred when hiring the nationals of the host country
 Employees work well in all the neighboring countries within the
geographic region
 The nationals of the host country can better influence the decision of the
managers at headquarters concerning the entire region

Disadvantages:
 Communication gap due to employees not understanding the viewpoint
of the employees of the parent company
 Communication barrier due to language
 Employees from the different regions may lack international experience
 Might create confusion between regional and global objectives

4. Geocentric Approach
The entire world is treated as one single country for the company.
Employees are selected from the whole globe and operate with several
15
International subsidiaries. Headquarters coordinate the activities of the subsidiaries.
Human Resource
Management : An Each subsidiary functions as an independent and autonomous company,
Overview formulating its policies, strategies, and product designs. Subsidiaries
must select the entry mode into foreign countries to engage in
international business. Factors such as the size of the company,
environmental factors influence the attractiveness of a foreign market,
potential costs and benefits, and market risk factors.
Different modes of entry into foreign markets include

 Direct Exporting
 Indirect Exporting
 Licensing arrangements with foreign companies
 Franchising arrangements with foreign companies
 Contract Manufacturing
 Management contracts
 Turn Key projects
 Direct investments
 Joint venture
 Mergers and acquisitions
Managing
Director

Human
Operation Finance Marketing
Resources

Region 1 Region 2 Region 3

Country 1

Country 2

Country 3

Human
Operation Finance Marketing Resources

Figure 4 Organizational structure of a geocentric organization

Advantages:
 Help in developing a pool of talents with international experiences and
contact across borders
 Employee expertise can be used for achieving organizational objectives
 Reduction in resentment
 Shared learning as employees learn based on experiences of others

16
Disadvantages: Introduction to
International HRM
 Cost of training, compensation, and relocation of employees is too high
 Highly centralized control of staffing is required
 Proper scrutiny by HR during recruitment, making it a time-consuming
process
 Approach is costly since recruitment agencies or consultants are required
to hire for the global search for eligible candidates.

1.5 ACTIVITIES UNDER IHRM

IHRM performs the same activities that DHRM performs, but the scope of
these activities is broad due to the global context. IHR Managers perform the
following actions:
 HR Planning: HR planning is complex and challenging internationally
because of its global context. HR Planning is not confined to one country
regarding an international organization. The planning extends beyond
one country and collaborates with other units and subsidiaries in other
countries where the MNCs are already operating or planning to expand
their operation. Also, it isn’t easy to maintain consistency, as every
country has different socio-cultural regulations for the organizational
processes. The host country’s culture also influences it as it differs from
country to country. Different perceptions are also responsible for directly
impacting the HR planning process.
 International Recruitment and selection policy: A proper recruitment
and selection policy aim to recruit the right kind of employee for the
organization at the right time. It’s the second stage after HR planning.
The recruitment and selection process starts after the organization plans
to hire new people in the existing or new positions. IHR Managers hire
candidates not only based on the required skillset for the job but also on
the ability to adopt a different culture. HR Managers can employ from
the parent country, host country, or a third country, depending upon the
organizational requirement.
 Training and Development: After the recruitment and selection process
is over and finding a suitable candidate for the role, the organization
trains and develops their employee. In the context of IHRM, it varies
significantly. It involves providing training and development to ex-pats
going to the host country. So pre-departure training is conducted to
familiarize the expatriate with the host country’s environment. It
involves cultural training, local language training, and practical training.
 Expat Remuneration: IHR managers must pay attention when
designing expatriate remuneration packages. The managers have to
consider the cost of living, tax structure, and rules and regulations of the
host country. Remuneration packages are different when it comes to
IHRM and DHRM
 Performance Appraisal of Expatriates: Performance Appraisal can
play a significant role in keeping the expatriates motivated for better
17
International performance. Performance appraisals are to be conducted because the
Human Resource
Management : An employee works in different countries, so the domestic performance
Overview parameters cannot be applicable. Performance appraisal is a complex
task as there is the active involvement of the home country supervisor
and host country supervisor.
 Repatriation: The process of returning expatriates from the host country
to their home country. Re-entry into the home country can be a complex
process. Returning expatriates can go through re-entry and reverse
cultural shock after spending much time on international assignments.

1.6 UNDERSTANDING CULTURE

Multinational companies face many problems while conducting their
business in different countries due to the cultural differences that arise while
operating in a foreign country. Even though cultural variables play a vital
role in determining Human Resource policies, their effectiveness also
depends on the managers. It is the role of the HR manager to successfully
implement a strategy to maximize the output of the employees. HR policies
play a pivotal role in maximizing employee output. Globalization has led to
conducting business overseas and requires proper management between the
home country, the host country, and a third country. But managers have to
consider the culture present and how it differs from country to country.
Culture and associated theories will be discussed in the subsequent chapters.
Culture: Coverage and determinants
People learn from the environment through social, technological, economic,
political, international, and natural environments. Thus, culture is learned
from environment and interaction in the workplace, sharing and exchange
between two or more people, transferred from one generation to another,
individual adapting to the culture of other people or societies, and ascriptive
as it defines boundaries between groups. Chinese people eating insects in
their food is considered gross in the UK as it is not common to eat insects in
the UK, but acceptable in the Chinese culture.

Cultural Factors
Cultural factors influence culture formation leading to the formation of
behavior. The factors responsible are:
 Knowledge: Knowledge is gained from the influence of environmental
factors and interaction with the environment. Books, journals,
magazines, and newspapers are other ways to gain knowledge
 Beliefs: Is a cognitive representation of a relevant environment
 Value: An enduring belief that a specific mode of conduct or end state of
existence is personally or socially preferable to an opposite or converse
mode of conduct or end state of existence. Values are categorized in the
following hierarchy:
o Level 1: Reactive: People react only to basic physiological needs
o Level 2: Tribalistic: People are strongly influenced by tradition and
18
 dependent on others Introduction to
International HRM
o Level 3: Egocentrism: People are aggressive, selfish, and power
responsive
o Level 4: Conformity: These people can’t tolerate ambiguity and are
uncomfortable with people possessing values that are different from
others
o Level 5: Manipulative: These people prefer materialistic gains, seek
status and manipulate others.
o Level 6: Socio metric: These people prefer to go along with others
rather than differently from others
o Level 7: Existential: These people tolerate ambiguity and people
with different values than those they possess. To a greater extent,
they prefer flexible policies.
 Attitude: This is a learned predisposition to respond in a consistently
favorable or unfavorable manner. They evaluate statements and reflect
on how one feels about something. Components of attitude are:
o Cognitive: Is the opinion or self-belief
o Affective: Emotional or feeling segment
o Behavioural: Intention to behave in a certain way to someone or
something
 Behaviour: Knowledge leads to beliefs, values, and attitudes. Belief
influences values and values influence attitudes. These factors combine
form culture, leading to the cultural diversity of people.

1.7 CULTURE AND ITS IMPACT ON HRM

POLICIES
Culture has a significant impact on HRM policies and practices. It also plays
a vital role in the structure of the organization. Some of the cultural effects
are discussed below:

 Impact of culture on HRM policies and practices: As employees work

in different cultures, cultural differences arise. Employees are selected
based on their experience of working internationally, ability to speak
various languages, handle stress, experiences with diverse cultures, and
personalities. An ideal candidate is a person with managerial competence
and a willingness to get trained in other cultures and languages in the
organization's organization.
 Impact of Training: Training is provided to employees about the
cultural components of the business. The general purpose is to train
employees to get acquainted with the new culture while taking overseas
assignments. Employees are trained in language, culture, goal setting,
managing family, and stress. Cultural training is essential for the
organization’s success; if the managers are not aware, the product or
policy implemented can fail, causing enormous losses for the
organization.
19
International  Impact on compensation and rewards: Organizations prefer paying in
Human Resource
Management : An a standard method in the means of payment, no matter which country an
Overview employee works in. But sometimes, the strategy might fail due to the
cost of living being different in a different country. So, organizations pay
through a banding system to keep the salary band standardized
throughout the global organization.
 Impact on performance evaluation: There is always a debate about
who should rate the home country employees. Cultural differences make
the evaluation process ineffective as the host country managers might
harshly judge or place the home country employees.

 Impact on HR Priorities: Culture has an influential impact on HR

priorities. The priorities for IHR Managers might shift from employee
retention to leadership development. In a global environment, managers
are not concerned about employee retention; instead, they develop
leaders who can survive in a new culture and train their workforce to
operate effectively in a global environment.

Case Study: Asian Paints: Acquisition

Asian Paints acquired 51% of Berger, a Singapore-based company, in 2002.
The vice chairman & MD Dani was always clear that the company would be
choosy in its operations and not operate all the ten subsidiaries of Berger.
Four years after the acquisition, Asian Paints sold three subsidiaries in Malta,
the Philippines, and Myanmar. The motive was to be only present in the
emerging markets and in the markets that generate cash flows. Dani quoted,
‘Surrey cultural issues play an essential role in the acquisition. To handle it,
we spent time with the employees and worked as a team to trash out the
synergies such that the acquisition generated value.
Critical size helps you spread with the fixed cost, but one must also be
prepared to make a course correction on the way. As they exited their
ventures in Martius and Malta after operating for a while, they found that the
market’s growth and economy were stagnant. So the organization should be
prepared for such a decision, but the most important thing today is the speed
of integration, which was Dani’s firm opinion.
One essential learning through this acquisition realized the importance of
local knowledge. When it went out for overseas operations, market dynamics
were different altogether. They had to align their products and customer
offerings to cater to each individual in the market. Along with these, there
was another issue of localizationisation and development off a solid local
cadre. The local workforce understands the needs, operating environment,
and consumer preferences better. The biggest hurdle for Indian MNCs is
attracting and acquiring local talents in their overseas venture. As Indian
companies globalize, they must develop market share to stay afloat.
The integration process is followed by acquisition, but in today’s age, it is
also essential to know the speed of integration and share the best
organizational practices with different units. Along with technology and
intelligence, emotional integration is critical as one has to realize that even
20
though they are brands, they are also customers and their employees. Introduction to
International HRM
Asian Paints, in its international operations, cleared apprehension about
acquisition through various connect initiatives. Communication played a key
role, which was followed by practical actions. It implemented systems and
techniques to make the operations efficient like a world-class entity. ERP was
implemented across all its units to complete the transaction process more
robustly. Specialized people overflew wherever any team had any concern
areas. Recently it rolled out a mega operational efficiency initiative focussing
on issues like productivity, safety, environment, reducing factory level losses,
and planning and control systems, thus adding value to acquired operations.

1.8 SUMMARY
 The purpose of this unit has been to provide an overview of the field of
international HRM.
 International HRM differs from domestic HRM in many respects.
 The complexity involved in operating in different countries and
employing different national categories of employees is a key variable
differentiating domestic and international HR.
 The differences between IHRM and HRM mainly lay in more HR
activities; the need for a broader perspective; more involvement in
employees' personal lives; changes in emphasis as the workforce mix of
expatriates and locals varies; risk exposure; and broader external
influences.
 Also we discussed the need for an expanded view of the role of HRM in
an international operation.
 The forces which have an impact on IHRM are global competition;
growth in mergers, acquisitions and alliances; organisational
restructuring and advances in technology and telecommunication.
 The multinational management has to deal with the various forces
through flexibility, local responsiveness, knowledge sharing and transfer
of competence.

1.9 SELF-ASSESSMENT QUESTIONS

1. Define and name the characteristics of International Human Resource
Management?
2. What are the similarities and differences between domestic and
international human resource management?
3. What are the different approaches to International Human Resource
Management?
4. List the different activities that fall into International Human Resource
Management?
5. What are the cultural factors responsible for the behavior of humans?
21
International
Human Resource 1.10 FURTHER READING/ REFERENCES
Management : An
Overview
 Adler, N. (1997). International Dimension of Organization Behavior 3rd
edition. Cincinnati, OH: South-Western College Publishing.

 Harris, J. E., & Moran, R. T. (1979). Managing Cultural Differences.

Houston, Tx: Gulf Publishing.

 Phatak, A. (1997). International Management: Concept and Cases.

Cincinnati, OH: South-Western College Publishing.

 Downing, P. J., & Denice, W. E. (2010). International Human Resource

Management: Managing People in a multinational context. 4th Edition.

 Hill, C. W., Jain, & Arun, K. (2009). International Business. Tata

McGraw Hill.

 Rao, S. P. (2009). International Human Resources. International Human

Resources.

 Wind, Y., Douglas, S. P., & Perlmutter, H. V. (1973). Guidelines for

Developing International Marketing Strategies. Journal of Marketing,
14-23.

22
 Social and Cultural
UNIT 2 SOCIAL AND CULTURAL CONTEXT Context of IHRM

OF IHRM

Structure
2.1 Introduction
2.2 Defining Culture
2.3 Cultural Difference and Cultural Sensitivity
2.4 Cultural Perspective and Management Theories
2.5 Cultural Convergence vs. Cultural Divergence
2.6 Summary
2.7 Self-Assessment Questions
2.8 Further readings/ References

2.1 INTRODUCTION
Social and cultural factors vary across different countries and parts of the
globe. There is a paradigm cultural shift observed across different countries.
Change in cultural context leads affects IHRM. People’s attitudes towards
each other, money, family, marriage, religion, education, ethics, human
relationship, and social responsibility influence the IHRM policies. Culture is
a group-level phenomenon. Culture is generally,
 Comes from the climatic and economic conditions of the geographical
area.
 A set of traditional beliefs and values shared by a particular society.
 A pattern of life and thought passed down from generation to generation.
 Norms, customs, arts, values, etc.;
 Prescribe the types of behavior that society considers appropriate.
 Based on social interaction.
 Acquired through learning.
 Subjective as people across different cultures have different ideas about
the same phenomenon.
 Dynamic in nature as old ideas are rejected, and new ideas are adopted.
Culture impacts a group in several ways. It provides a sense of belonging to
all the members of the group. It is used to define appropriate behavior in a
social or group setting. It can be used to share tacit knowledge amongst the
group members. Not only does it enhance the ability of the group members,
but it also impacts the thought process of the people. It influences decision-
making. It also helps in dictating boundaries.

2.2 DEFINING CULTURE

Understanding the meaning of culture is essential as it affects and governs all
facets of our lives. The concept of culture extends to communities, 23
International individuals, organizations/companies, and geographical regions. Thus,
Human Resource
Management : An understanding the national, organizational, and local culture is of utmost
Overview importance for sound global workforce management practices.
Culture is "the socially mediated patterns of behavior, norms, beliefs, and
values of a particular community.” Harris (2007) defined “culture as the way
of behaving and believing that a group of people has developed over time and
share.” Kluckhohn (1961) described culture as “Symbols representing the
unique achievements of human groups, including their embodiment in
artifacts. The essential core of a culture is its traditional ideas and, above all,
its values are composed of."

Importance of studying culture

Advantages Disadvantages
Better Workforce diversity Formation of groups and cultural
management stereotypes/assumptions
Effective mergers and acquisitions Developing inflexible and rigid
perceptions
Effective management of human Tendency to categorize and
resources at home and abroad exaggerate the influence of cultural
differences.

2.3 CULTURE DIFFERENCE AND CULTURAL

SENSITIVITY
Cultural diversity in the workspace can result from individual practices,
values, customs, or convictions regarding race, age, nationality, religion, or
gender orientation. People behave or direct their behavior based on their
culture. Globalization has led to cultural diversity in the workplace.
One of the critical determinants of cultural diversities is economic level and
conditions and regional climate. As these determinants vary from place to
place, so make the cultural differences.

So, for the smooth functioning of a global organization, it is essential to

manage cultural diversity as it enables the reduction of conflicts between the
workers at the same time while maximizing their teamwork potential.
Organizations can face many challenges in managing cultural diversity in the
workplace. Conflicting work styles can create much conflict in the
workplace, and communication can be misinterpreted across cultures and
languages. When assembling a multicultural team, professional etiquette can
alternate between cultures and represent negative stereotypes. But the
strength outclasses the weakness. Incorporating cultural diversity can be
reaped, leading to improved recruitment and retention culture. This leads to
developing new work and management styles while simultaneously creating
a better support system to address the conflicts of the diverse staff. Better
creativity, drive, and innovation are benefits of having a diverse cultural
workforce. There are more resources to solve problems.
24
Cultural sensitivity implies being able to learn from different people, Social and Cultural
Context of IHRM
understanding their backgrounds, and collaborating and cooperating with
them without being judgemental towards them. Being culturally sensitive
means viewing every individual as a unique individual.
Cultural sensitivity is essential as it sensitizes individuals with the concept of
cultural identity, cultural appreciation, and cultural differences. Cultural
identity is the sense of belonging to a particular culture, while cultural
appreciation is about appreciating another culture and taking an active
interest in learning about that culture. Cultural differences are the beliefs,
behaviors, language, and practices considered unique to a member of a
specific ethnicity, race, or origin. There is a feeling of belonging and safety.
It helps in improving communication and the quality of work. It removes the
idea of cultural superiority when dealing with people from varied
backgrounds. Different cultures lead to diverse knowledge, competencies,
perspectives, and ideas.

2.4 CULTURAL PERSPECTIVE AND

MANAGEMENT THEORIES
National and international cultures significantly influence economic utilities,
personal motivations of individuals and groups, and information exchange
and interpretation. Hofstede makes two significant proposals on cultural
perspectives on business and management (2001) and Trompenaars and
Hampden – Turner (1997).
These perspectives observe culture as:

 Deeply engrained values in a group of individuals

 Systematically varying in the societies
 Conditioning practices and policies

The difference in a national culture impacts corporate business in several

ways; hence, it is essential and central to IHRM. As per Edwards and Rees
(2006), “the national culture of host countries and parent countries of the firm
can influence by:
 Attitudes in international negotiations and their outcomes.
 International mergers and acquisitions.
 Outcome of investment, trade, and ownership within the organization.
 Idea of descriptive justice.
 Appropriate compensation, benefits, and rewards.
 Centralization and hierarchies within the organizational structure
 Manager subordinate relationship dynamics
 Concept of performance management, talent management, and talent
development.
 Recruitment and person-organization fit.
 Attitude towards job and career mobility.”
25
International Dr. Geert Hofstede, a Dutch professor of social psychology and IBM
Human Resource
Management : An employee, is a pioneer in research on cross-cultural groups and organizations.
Overview He proposed the concept of cultural dimensions in his studies of national
culture in the subsidiaries of one of the major multinational corporations,
IBM, between 1967 – 73. The study comprised 116,000 employees of IBM
working in 40 different countries. He studied the distribution of work-related
attitudes in IBM's national sales and service offices. Hofstede (1997)
provided a well-defined meaning of National Culture (NC) as the “set of
beliefs and values that distinguish people of one nationality from those of
another.” He provides two models of cross-culture impacts on the perception
and practices of people affecting IHRM policies.
 Onion Model
 Cultural dimensions

2.4.1 Cultural Onion Model

Figure 1 Hofstede's Onion Model of Culture

Hofstede (1980) developed the Cultural Onion to describe and compare

different cultures. As per Hofstede, A culture can be viewed as an onion with
several layers. From an outsider's perspective, you must work slowly to
understand each layer to reach the core. To understand the culture, you have
to look at layers. Each layer makes less and less explicit values and
assumptions. Cultural differences can be explained by symbols, heroes,
rituals, and values.
Symbols: These are words, motions, pictures, or items that have
extraordinary significance and must be perceived by the individuals who
share their way of life. New characters are grown rapidly and supplant old
ones, while old characters disappear after some time.
Heroes: These are individuals, living or dead, genuine or imagined,
possessing valuable qualities and serving as models of behavior within the
culture.
Rituals: These are group activities. Not required to achieve goals but
considered necessary by members of the culture.
Values: Values are the nucleus of culture. They are imparted and instilled in
26
children right off the bat. An idea that says what is considered essential to Social and Cultural
Context of IHRM
life. People are unaware of their values because they learn early in life.

Symbols, heroes, and rituals are visible, heard, felt, tasted, and smelled. An
outsider can notice them by focusing on the acts of their way of life. On the
other hand, values can be to describing or discussed. An outsider cannot
directly see them. Thus, Hofstede’s (1980) model can be differentiated in the
following layer,

Layer Description
Surface or explicit culture They are readily observable things akin to
(outside layer) dressing, cooking, architecture, customs, body
movements, gestures, etiquette, greetings, and
gift offering.
Hidden Culture (middle Values, religion, philosophical thinking, views
layer) of righteousness
Invisible or implicit Cultures universal truth
culture (Core)
Source: Hofstede's Cultural Onion Model

2.4.2 Hofstede’s Cultural Dimensions and their Managerial

Implications
This theory helps address cross-cultural behaviors and interactions because
geographical boundaries do not constrain the business world in the age of
globalization.

Indulgence
vs. Restraint

Long Term
Power
vs. Short
Distance Term

Cultural
Dimension

Masculinity
Individuality vs.
Femininity

Tolerance of
Uncertainty

Figure 2 Hofstede's Six Dimensions Dimensions of Culture

It works in a networked and global environment. Thus, individuals from

different countries and ethnic backgrounds work in sync to fulfill the
organization’s objectives. Understanding a multicultural environment is
essential to solving intercultural conflicts amongst employees. Cultural
27
International norms impact interpersonal relationships at work. Hofstede’s theory provides
Human Resource
Management : An a framework to help discover ways to do business across varying cultures and
Overview analyze the overall ramification of the industry. It is widely used in
intercultural fields such as intercultural communication, international
management, and intercultural psychology.

Hofstede (1980) Six Dimensions of Culture

Hofstede’s (1980) study laid down the foundations of different dimensions of
culture as mentioned below:

1. Power Distance Index

It shows the disparity of power between the powerful and the powerless.
A low index exhibits that people question the authority of the individuals
in power and seek to distribute power. A high index exhibits that
hierarchy is established, but people accept leadership positions and
unequal power distribution. They affirm power imbalances and
inequalities and respect ranks of authority. Arab countries have an
enormous power distance index, so influential people have much power
over the people with lower rankings in the hierarchy.
Important characteristics as per Hofstede (1980) are:

 Cumbersome hierarchies
 Centralized organization
 Large gaps in employee compensation
A low power distance index suggests that power is dispersed and shared.
Everyone has delegated tasks and is involved in decision-making. This
culture is responsible for promoting a flat organizational structure, which
leads to participatory or inclusive leadership and decentralized decision-
making. This leads to a flat design within the organization, with power
equally distributed between employees and supervisors. Austria has a
low power distance index, so influential people don’t have much control
over people with lower rankings in the hierarchy.

2. Individualism vs. Collectivism

Individualism gauges and analyzes how individuals are amalgamated
into a set of a particular community and perceive their dependencies and
obligations.

Individualist societies have flexible or adjustable ties and ties to the

individual's family members. They are responsible for their action and
don't take onus for the actions of others. They solely focus on their
individual performance.
Collectivism refers to amalgamated relationships existing in society,
including families and group members. Individuals are accountable to
each other and are faithful to their group. They support their member’s
best interests and are highly committed to the group. A high
individualism score indicates the accomplishments of an individual.
28
 Important characteristics as per Hofstede (1980) include: Social and Cultural
Context of IHRM
 Respect for privacy
 Personal evaluation and reward expectations
 Enjoy the challenges or contest
 Time, liberty, and privateness

A low individualism score indicates withheld sentiments. Wisdom is

requisite and negative feedback or comments in public are to be avoided.

Important characteristics as per Hofstede (1980) include:

 Maintaining group fellowship and harmonious relationship

 Focus is on possessing and developing skills.
People from the US and EU have a high individualistic score, while
people of Asian origin have low individualistic scores.

3. Masculinity vs. Femininity

It acts as a guide for the distributive roles among gender in society.
Masculinity is a penchant for community emphatics, heroism,
accomplishment, and material rewards. In a masculine community,
competitiveness and power are the characteristics. On the contrary,
Femininity is about humility, cooperation, and a propensity to care for
vulnerable social individuals. Compassion is a hallmark of the
community of femininity.
A higher MAS score indicates that people are exhilarated by goals set,
setting a benchmark for differentiating or classifying gender roles in
society.

Characteristics as per Hofstede (1980) include:

 Significance and pride
 Strong ego
 Achievement, success, and money are fundamental

A low MAS score indicates that negotiation and cooperation are the
means of achievement of success. Work-life balance is an integral part of
the company’s culture.
Characteristics as per Hostede (1980) include:

 Responsibility for the quality of life

 Consensual relationship
Japan and Hungary can be considered Masculine countries, while
Sweden and Norway can be regarded as Feminine countries.

4. Uncertainty Avoidance Index

It guides how to deal with fear and explains social tolerance for
uncertainty and ambiguity.
29
International A high Uncertainty Avoidance Index indicates strict laws, policies, and
Human Resource
Management : An codes of conduct that society adheres to. People understand expectations
Overview and goals and have a very low tolerance toward risk-taking and
uncertainty.
Characteristics as per Hofstede (1980) include

 Society’s tradition
 Emotional expressiveness by the people
 Society is conventional, structured, and unbending
A low Uncertainty Avoidance Index indicates an openness to various
ideas and thoughts. The environment is free-flowing, and the people are
open. Individuals are respected based on how they handle the situation,
and the title has no role. Rules and regulations are rigid, and people have
high risk-taking and uncertainty tolerance.

Characteristics as per Hofstede (1980) include:

 Minimalistic urgency
 Societies trend toward unlimited learning
 Willingness to change
 Inclination towards decision making.

Germany has high uncertainty avoidance. Thus, they plan everything out
to avoid uncertainty. At the same time, the US has a low uncertainty
avoidance which is also reflected in their culture.

5. Long Term vs. Short Term Orientation

It refers to the association and connections between past and future
issues.
A high long-term value suggests that loyalty is esteemed and that social
traditions are legitimate and respected. Short-term delays are ignored to
achieve long-haul success with a focus on the future. Attention is given
to long-term growth, sustainability, and endurance.
Characteristics as per Hofstede (1980) include:

 Humility and modesty.

 Attention to commitment and virtues.
 Being thrifty is valued.

Societies having short-term perspective believes in truth and consistency.

The emphasis is on short-term success, and present needs are focused on
rather than future needs. The focus is on quick results.
Characteristics as per Hofstede (1980) include:
 Attention is on the rights and values.
 Powerful beliefs.

30
 South Korea, Japan, and China can be considered long-term orientation Social and Cultural
Context of IHRM
countries, while Ghana, Nigeria, and the US are regarded as short-term
orientation countries.

6. Indulgence vs. Restraint

It assesses the tendency of society to achieve its desire.
A high indulgence vs. restraint score indicates fulfilling individuals’
emotions and desires. Dialogues and debates are encouraged in society
through mentoring, coaching, and feedback. The emphasis is laid on
work-life balance.
Characteristics as per Hofstede (1980) include
 Rejoicing
 Enjoying life
 Optimistic approach
 Right to speak freely of discourse
The low indulgence vs. restraint score indicates that societies strive to
stifle gratification. Some stern social norms and regulations govern
people’s demeanor and conduct.
Characteristics as per Hostede (1980) include:
 Strict and controlled behavior
 Pessimistic attitude
Venezuela and Mexico can be considered Indulgent countries, while Egypt
and Latvia be considered Restraint countries.

2.4.3 Globe Model

GLOBE is an acronym for “Global Leadership and Organization Behaviour
Effectiveness.” It is a multi-year, large-scale, cross-national study across 61
countries. This exploration program was contrived in 1991 by Robert J. Place
of the Wharton Institute of Business at the College of Pennsylvania.

Figure 3 Cultural dimensions of the GLOBE Model

The program analyzes the organizational norms, morals, values, and notions
of leaders in different societies. Globe takes Hofstede's findings on culture
31
International within nations and extends it to include the role of leadership in culture,
Human Resource
Management : An identifying commonly accepted rather than culture-specific traits. It identifies
Overview nine dimensions of culture. It expands Hofstede’s theory by adding four
additional sizes.
Cultural dimensions of the GLOBE Model as per House (1991):
 Uncertainty Avoidance: It is the extent to which a society tries to avoid
the volatility of future events. Society attempts to prevent uncertain
events with the help of entrenched social norms.
 Power Distance: The threshold at which cultural members expect and
accept an unequal power distribution. It is the degree and
acknowledgment of inconsistent circulation of power.
 Institutional Collectivism: The volume to which organizational and
societal establishments inspire the collective distribution of collective
motion and sources. It measures the diploma of joint allocation of
sources which is rewarded.
 In–group Collectivism: The diploma to which people have specific
faithfulness, pride, and interrelatedness of their organization or families.
 Gender egalitarianism: The extension to which society limits gender
orientation position differentiation, separation, and discrimination.
 Assertiveness: The volume to which people are self-assertive, agnostic,
and competitive in social kinship.
 Future Orientation: Extension to which people interact in future-
leaning behaviors, which include delaying gratification, planning, and
investing for the future
 Performance Orientation: The diploma to which people are
compensated for overall performance improvements.
 Humane Orientation: The diploma to which people are honored for
being fair, generous, friendly, and kind.

It clusters countries into ten regional clusters based on the nine dimensions. It
is helpful as it summarizes intercultural similarities and differences. The
GLOBE Project is thus effective in designing effective managerial systems
for employees working in a global environment like Expatriates.
Countries clustered as per their regional clusters as per Globe (1991) are as
follows:

Cluster Names Countries

Anglo Australia, Canada, England, Ireland, New Zealand,
South Africa (white sample), United States
Latin Europe France, Israel, Italy, Portugal, Spain, Switzerland
(French speaking)
Nordic Europe Denmark, Finland, Sweden
Germanic Europe Austria, Germany, Netherlands, Switzerland

32
 Social and Cultural
Eastern Europe Albania, Georgia, Greece, Hungary, Kazakhstan, Context of IHRM
Poland, Russia, Slovenia
Latin America Argentina, Bolivia, Brazil, Columbia, Costa Rica,
Ecuador, El Salvador, Guatemala, Mexico,
Venezuela
Sub Saharan Africa Namibia, Nigeria, South Africa (black sample),
Zambia, Zimbabwe
Middle East Egypt, Kuwait, Morocco, Qatar, Turkey
Southern Asia India, Indonesia, Iran, Malaysia, Philippines,
Thailand
Confucian Asia China, Hong Kong, Japan, Singapore, South Korea,
Taiwan

Source: Regional Clusters based on GLOBE Model by House (1991)

2.4.4 Trompenaars Dimensions of Culture Model

Trompenaars’ cultural dimension for cross-cultural workplace
communication was developed by Fons Tromprenaars and Charles Hampden
– Turner. The duo spent more than a decade researching the cultural values
and preferences of more than 46000 managers across 40 countries. The
research findings were presented in a framework representing seven cultural
dimensions of culture. It provides managers with tools to analyze cultures in
different business environments and manage cultural diversities. Each size
guides employees and managers to understand different cultural backgrounds
and improve working relationships and embarrassing cultural and social
situations.

Universalism
vs
Particularism

Internal Specific
vs. vs.
External Diffuse

Sequential
Culture
Achievement
vs. vs. Ascription
Synchronic

 Individuali
Affective
sm vs.
Communit vs.
arianism Neutral

Figure 4 Trompenaars Dimensions of Culture Model

The cultural dimension is:

 Universalism vs. Particularism

33
International Universalism culture believes that only a single mania single principle can be
Human Resource
Management : An applied in all situations—societies believe in absolute justice, truth, and
Overview moral principles. Countries such as the US and the UK have a lot of formal
rules that are expected to be followed. Relationships are secondary.
Particularism tradition features the eccentricity and subject matter of a
country`s cultural variations from different countries. Societies tend to
interpret justice flexibly depending on local or current circumstances. The
responses depend on the events that govern them. Countries like China and
South Korea believe that circumstances and relationships are more essential
than rules.

 Specific vs. Diffuse

A specific way of life has a clean separation of public and personal areas. A
public space’s length is more significant than a non-public or private area.
Societies tend to be pleasant and open their public area to people quickly. US
and UK are countries that like to keep work and personal life separated.
Diffuse Culture tends to blur the distinction or demarcation of public and
private spaces. Societies, at times, face trouble with role confusion. The
public space size is comparable to the private space. In a diffuse culture,
building long-term relationships is essential so that business relationships can
spill over into personal ones and vice versa. Russia, China, and India are a
few prominent examples of diffuse cultures.

 Achievement vs. Ascription

Achievement culture associates itself with individualistic culture. It values
personal competency and outcomes from one’s hard work. Individual
accomplishment is emphasized. High trust is established based on individual
merit or qualification. There is no scope for favoritism. The people in the US
value achievement and respect the person.
Ascription Culture values personal connection and family background over
individual achievement. A person is given a specific status and qualities like
title, position, age, occupation, etc. High trust establishment is based on
enrollment in a joint family, province, or pre-existing relationships.
Favoritism thrives in these cultures. Asian culture follows an ascription
culture where relationships are more important than achievement.

 Individualism vs. Communitarianism

The individualistic culture emphasizes the interest of the self and immediate
family.

The collectivistic culture emphasizes group interests before individual

interests. It tends to seek group consensus in the decision-making process.
The US culture follows individualistic culture while the Asian countries
follow a collectivistic culture.

 Affective vs. Neutral

People don't hesitate to reveal their deepest feelings in emotional or
34
emotional cultures. Individuals from nonpartisan or neutral societies are Social and Cultural
Context of IHRM
thought of as devious and misdirecting. Countries such as Italy and Spain are
vibrant cultures where people express their emotions explicitly.
Neutral Cultures tend to have control over their emotions. Societies tend to
maintain their composure carefully. It considers people from affective
cultures are immature. Countries such as Germany and Sweden try to keep
their emotions in check

 Sequential time vs. Synchronous time

People who value sequential time prefer the event to happen in a logical
order, considering planning, commitment, and punctuality. People in the US
will do each activity more often than not. People think the past, present, and
future are intertwined. They tend to multi-task and do not see plans as rigid
or unchanged in synchronous time culture. France and Mexico are countries
where people like to do more than one activity at a time.

 Internal direction vs. External direction

People with internal direction believe they have control over the environment
and their work with other individuals and team members. They allow others
to develop and take control of their environment. Conflict handling is done
openly and constructively. People in the US believe that whatever is
happening is their doing, and they are solely responsible for their actions.
People with external direction believe that the environment is controlling
them. Their action revolves around conflict avoidance and minimization.
This is achieved with the help of regular feedback and constant reassurance.
Whenever conflicts occur, it is managed quietly and efficiently. Asian
countries have an external culture where they believe that the environment
dictates destiny.

2.4.5 Kluckhohn-Strodthbeck Value Orientation Theory

The basis of the theory is behavior and thought patterns in different cultures.
Differentiate and compare cultures based on dimensions.

Orientation of The pattern of Behaviour or Thinking

People
Relation to Nature Subjugation Harmony Mastery
Time orientation Past Present Future
Basic Human Nature Evil Neutral/Mixed Good
Activity Orientation Being Controlling Doing
Relationship among Individualistic Group Hierarchical
People
Space Orientation Private Mixed Public
Source: Kluckhohn-Strodthbeck (1961) Value Orientation Theory

The primary assignment of the management is to change organization designs

and structures, including organizational culture, management practices, and
35
International personnel practices, so that individuals can reach their full potential.
Human Resource
Management : An
Overview The first orientation is human nature. A common assumption is that human
nature is evil. So, people need control. It is much easier to form teams and
delegate authority to countries where the orientation of people and
organizations seems appropriate. The preferred way of life in these countries
is democracy. The nation of humanity uses mediators, and business contracts
must be particular.
The second direction is our relationship with nature. Whether it is an internal
or an external control depends on the location of the power. A dominant-
minded nation believes that humans can control nature, so much money is
spent on research. Conflicts are rejected, and disagreements are often
fostered. A country with a harmonious exposition believes there is peace
between man and nature. There is a desire to avoid conflict. Obedience-
oriented nations believe in God and destiny. They believe God and fate rule
everything and blame God for successes and failures.
The third orientation is about relationships with others. Such individualistic
countries are concerned with their interests, not how things affect other
countries. Countries with group orientation value the welfare of their group
rather than their self-interest. They will sacrifice their self-interest for the
betterment of the group. Countries with hierarchical orientation pay respect
to seniority based on age, sex, family, or official position. There is extra
followership than leadership.
The fourth orientation is the modality of human activity. In nations favoring
‘doing as in,’ self-identity is done through motion and performance. Where
the orientation is toward ‘being,’ humans are willing toward philosophy and
spirituality. Where the orientation is toward ‘containing,’ the point of interest
is on self-control. It is ready to strive for stability among emotions and doing.
The fifth orientation is the temporal cognizance of human activity. Where it's
miles destiny-oriented, the notion is that a higher destiny may be deliberate
and controlled. When the orientation is toward the past, humans base their
choices on the classes discovered in the past.
The remaining orientation is the idea of the area withinside the minds of
humans. It considers how humans cost their privacy. If humans assume the
gap is public, there aren't any barriers drawn, and those locate it offensive if a
person attempts to be private. Privacy is considered disrespectful. While on
the other hand, space is more personal than people are apprehensive about
entering and want their privacy to be respected.

2.5 CULTURAL CONVERGENCE vs. CULTURAL

DIVERGENCE
2.5.1 Cultural Convergence
Culture is contemplated via way of means of how a collection of humans stay
their lives. Values, non-secular practices, beliefs, art, customs, food,
language, and social interplay assist in outlining the social group. Cultural
36
convergence may be defined because the fusion of cultures wherein one-of-a- Social and Cultural
Context of IHRM
kind cultures come to be comparable or come together: the way of life
evolves and influences groups. Cultures overcome times become identical or
combined and take a new identity.
Globalization has played a tremendous role in cultural convergence between
two countries. Globalization has helped build stronger economic ties and
depend on each other. It is due to cultural convergence that two countries
become close to each other and are more likely to influence each other’s
culture. The phenomenon of westernization of Asian countries due to the
strong influence of America and European can be considered a cultural
convergence.

2.5.2 Cultural Divergence

Cultures tend to diverge over time. This can happen for many reasons,
including fusions occurring through community travel, geographic
separation, or separation and immersion in another culture over time.
As per Vance & Paik (2006), economic imperatives have the following effect
on culture and strategic implications:

Economic Imperatives Impact on culture Strategic Implications

Globalization Convergence Global Integration
Localization Divergence Local Responsiveness
Globalization Crossvergence The balance between global
integration and local
responsiveness
Source: Vance & Paik (2006)

Globalization and Cultural Convergence

Globalization has led to the rapid integration of markets. Due to cultural
convergence, industrialized experience significant changes in values towards
behavior looking towards free market capitalism. Collectivist societies tend
towards individualistic work values. Therefore, the fusion of cultures driven
by the rapid diffusion of technology helps multinationals adopt the same
business and HRM practices across countries. IHRM techniques, when
applied across cultures, can help enhance a firm’s capability and help in
gaining a competitive advantage. Despite cultural differences, convergence
seems irresistible as the recruitment process is undergoing significant
changes.

Localization and Cultural Divergence

Regardless of the global and local interdependence of national economies,
cultural differences usually come out stronger. Managers must understand the
desire to adapt their management methods to their neighborhoods. The HR
function has proven to be an obstacle to globalization, as ethnic-centric HR
systems are designed for the needs of their home countries and do not fit
different situations. The idea of everyday culture is associated with limits,
primarily based on shared ethnicity. Transferring general or universally
37
International accepted management concepts that do not consider the employees’ cultural
Human Resource
Management : An values has very little chance of success. Benchmarking commercial enterprise
Overview methods that correctly paint in different nations may be one of the most
straightforward approaches to producing new thoughts in control and
organization.

Globalization and Cultural Crossvergence

Finding the best compromise between globalization and localization is
difficult for most companies. This is because the terms converging and
diverging represent extremes. A more realistic and practical style is a more
balanced approach or cross-vergence. It is the fusion of cultural systems
between the two countries. The Japanese management approach was
promoted by American corporations when the Japanese economy flourished
through the purportedly successful application of Ouchi's Z theory in the
1970s. But when the Japanese economy went into recession and the
American economy was flourishing, the Japanese were urged to adopt the
American management practices. As the global economy grows, countries
influence other economies along with culture.
Western economies see human resources as a means to an end. They believe
in maximizing human resource utilization through calculative exchange
between employee and employer. They feel employees need to be managed
effectively. While on the other hand, the eastern economies value human
resources. They view people as the end in themselves. They are seen as an
integral part of the organization rather than a disposable items, which is why
we go to great lengths to help our employees reach their full potential.
As the global economy has increased the interaction among countries, the
western countries have softened their approach toward human resources. On
the contrary, the eastern countries have increased their outlook towards an
individualistic approach.

Case Study: IKEA: Managing Cultural Difference

IKEA began its operation withinside the 1950s. There has been subsequent
internalization. However, IKEA has constantly had a hassle preserving its
`Swedishness` as an aggressive gain while concurrently adopting distinct
countrywide cultures wherein it operates. Over the last 25 years, IKEA has
become a worldwide participant, which is pretty uncommon within the
fixtures distribution enterprise that stays most effective countrywide. It is a
longtime participant throughout Europe and North America. It has
additionally taken over its rival in UK and France. It has a massive
percentage in Germany, Sweden, and France. The achievement of IKEA
turning into a marketplace chief boil down to its enterprise philosophy of
imparting inexpensive excellent, first-class fixtures without delays in supply.
Coworkers are endorsed to take the initiative, error making is visible as a way
of learning, and suitable hassle fixing is endorsed. Decision-making through
consensus is appropriately embedded in control practices. Managers
anticipate sharing their information, knowledge, and abilities with their
subordinates. Employees are considered essential and endorsed to sense
answerable for enhancing operating procedures.
38
 Social and Cultural
HRM exercise displays the Swedish subculture that humans like to take part Context of IHRM
in the decision-making to be reputable and tackle responsibility. Personnel
recruitment is primarily based on excellent verbal exchange abilities, open
minds, a high-quality painting attitude, and excellent capacity while not
having formal qualifications.
Swedish managers are anticipated to be envoys for the organization and the
United States of America and train non-Swedish co-employees in the IKEA
way. This proved highly smooth withinside the Netherlands; however now no
longer in Germany and France. In the US, older employees are comfier with
Swedish managers than American managers. Young American managers lack
the egalitarian spirit toward their co-employees.
Although there may be professional development inside the shop for non-
Swedish managers however isn't always so within the figure company,
headquarters at Almhult. In this far-off region, the most effective Swedish is
spoken.
IKEA`s control confronted many troubles from the humans in Germany,
France, and the USA. In Germany, the hassle becomes addressing the
manager’s use of first names, which undermines the manager`s authority—
doing precisely as requested. IKEA`s standards have been vague, and
managers` recommendations have been interpreted as orders. Germans felt
that the Swedish had been too ending result orientated; however, they no
longer investigated the dangers earlier than taking action, losing rules, and
wanting bureaucracy.
In France, informality became visible as a signal of weak spot or
indecisiveness, preserving subordinates informed, loss of formal task
description and written approaches and flexibility, repute no longer being
diagnosed created identification problems, and change union mistrust toward
consensus control method.
In the US, human beings felt uncomfortable with Swedish loss of displaying
emotions, fending off conflicts, and self-promotion.
IKEA has needed to function out of the doors of Sweden, wherein nations
have excessive electricity distance. So, how did IKEA adapt to the wishes
and maintain its Swedishness intact even as doing well-suited human beings
control practices?
In France, the agency has communicated genuinely concerning the
information and figures of IKEA vs. its competitors. Development of formal
education applications as options for gaining knowledge through doing.
Management has a more affirmative mindset toward employees, headed by a
Frenchman with a Swedish spouse who labored at their headquarters. They
have additionally evolved a higher dating with the change unions.
While now no longer many modifications had been cited in Germany
concerning employee control policies, tremendous changes had been made
withinside the US. It has tailored its advertising and enterprise practices. It
has furnished greater autonomy to neighborhood control. They have brought
an American-fashion overall performance control overview process,
documenting overall performance strengths and weaknesses.
39
International
Human Resource
Questions:
Management : An
Overview
1. Can IKEA preserve its Swedish method to cope with human beings in
growth globally with multicultural operations?
2. How can it increase a proper cross-cultural method to cope with and grow
human beings?
Source: Jackson, 2004 (P:15)

2.6 SUMMARY
 The business environment provides new opportunities and offers
different challenges simultaneously.
 Culture is one of the factors that organizations need to consider as it can
be responsible for the success or failure of the product or services.
 Culture is prescriptive, socially shared, learned, subjective and enduring.
 Social and cultural factors help in creating customers and business.
 Hofstede’s onion model: symbols, heroes, rituals, and values
 Hofstede’s cultural dimension: Power distance,
individualism/collectivism, uncertainty, avoidance,
masculinity/femininity
 GLOBE model: uncertainty avoidance, future orientation, power
distance, institutional collectivism, humane orientation, family
orientation, gender egalitarianism, assertiveness.
 GLOBE study clusters countries based on their culture into ten different
clusters.
 Trompenaars Dimensions of Culture: Universalism/ particularism,
specific/diffuse, achievement/ ascription, affective/neutral,
individualism/communitarianism, sequential/synchronic,
internal/external
 Kluckhohn-Strodthbeck Value Orientation Theory is based on six
orientations that analyze patterns and set human behaviors.
 Cultural convergence can be described as the fusion of cultures where
different cultures become similar or come together
 Cultural divergence is when cultures become dissimilar over a period of
time

2.7 SELF-ASSESSMENT QUESTIONS

1. What are the significant advantages and disadvantages of defining
culture?
2. What are the different layers of Hofstede’s Cultural Onion Model?
3. Elaborate on the different dimensions of Hofstede’s Cultural Dimension
Model?
4. What are the different dimensions of Trompenaars’s Cultural Model?
40
 Social and Cultural
2.8 FURTHER READINGS/ REFERENCES Context of IHRM

 McSweeney, B. (2002). Hofstede’s model of national cultural differences

and their consequences: A triumph of faith – a failure of analysis. Human
Relations, 55(1).

 Rokeach, M. (1979). Understanding human values: Individual and

societal. New York: The Free Press.

 Schwartz, S. H. (2006). A theory of cultural value orientations:

Explication and applications. Comparative Sociology, 5(2-3), 137-182.

 Hamden-Turner, C., & Trompenaars, F. (1997). Response to Geert

Hofstede. International Journal of Intercultural Relations, 149-159.

 Hofstede, G. (1997). Cultures and organizations: Software of the mind.

New York: McGraw Hill.

 Jandt, F. E. (2016). An introduction to intercultural communication:

Identities in a global community. Thousand Oaks, CA: SAGE
Publications.
 Kluckhohn, F. R., & Strodtbeck, F. L. (1961). Variations in value
orientations. Evanston, IL: Row Peterson.

41
International
Human Resource UNIT 3 CROSS-CULTURAL DIVERSITY
Management : An
Overview
Structure
3.1 Introduction
3.2 Major Economies and HRM Practices
3.3 HRM in Japan
3.4 HRM in the United States
3.5 HRM in the United Kingdom
3.6 HRM in Turkey
3.7 HRM in the Arab Middle East
3.8 HRM in India
3.9 HRM in China
3.10 Summary
3.11 Self-Assessment Questions
3.12 Further Readings/ References

3.1 INTRODUCTION
The chapter examines the ramification of the contextual factors that play a
significant role in HRM activities in the seven major economies. These
countries represent a fair picture as they sample the countries from fully
developed to developing economies. As every country has its unique set of
cultural diversity, the contextual factors also differ from country to land in a
significant way. A wide array of human resource management and
management techniques and styles in these nations presents a diverse and
complex world in which multinational corporations must operate and survive.
Most MNCs are home to the most economically advanced nations but operate
in many different countries. Emerging economies benefit from foreign direct
investment from MNCs from financially progressive governments. As such,
best practices are constantly flowing between these countries.

3.2 MAJOR ECONOMIES AND HRM

PRACTICES
The US (USA), European Association (EU), and Japan, popularly known as
“The Triad” are the birthplace of many multinational corporations. It also has
many subsidiaries and companies in developing and underdeveloped
countries. Developing countries in Africa, Asia, and Latin America have a
small number of multinationals, but they contribute significantly to the global
scenario. Therefore, triad multinationals have greater power to decide
whether to share their country's strategies, policies, and practices with host
country firms. Over time, academicians and practitioners have considered
MNCs models and sources of managerial innovations.

42
The comparison between developed and developing economies allows Cross-Cultural
Diversity
examining if they can successfully transfer to the host nations. The countries
being reviewed as mentioned below:
Developed Countries:

 United State of America (USA)

 Japan
 United Kingdom (UK)
Developing Countries:

 Turkey
 India
 The Middle East
 China

While the discussion focuses on cultural characteristics and their impact on

HRM practices, contextual factors are considered as they play a significant
role in determining HRM practices. Cultural change is seen to be very slow
and lasts for centuries. Their influence on work-related attitudes and values is
substantial for HRM. The long-lasting and detectable impacts are found in
the long and short term. Political and financial circumstances are unstable
and change quickly. At the same time, their implication can be observed in
the long-term HRM. Thus, they are more tentative and speculative in nature.

3.3 HRM IN JAPAN

Japan has a very homogenous culture as most people share its cultural
characteristics, excluding some individual and regional variations. It also has
a tiny percentage of immigrants making up its population which is in contrast
to the US. Solid feelings towards groups and communities characterize
Japanese society. Hofstede (1980) found in his study that Japan’s score was
46 on individualism, while the US scored 91 and the UK scored 89,
respectively.
Japanese are loyal to the groups with which they are affiliated and are ready
to sacrifice their interest in favor of the group interest. A collectivist approach
is evident when comparing Japan within the group to the UK, a country of
individualism and collectivism. In the UK, the ingroup includes the proximal
nuclear family: spouse, children, guardian, or parents. Within the Indian
group are close relatives and extended families, grandparents, siblings,
sisters, uncles, aunties, nephews, nieces, companions, and family members.
While in the context of Japan, the above is included in addition to the
organization to which you belong.
Japanese people are diligent and have a strong sense of duty or indebtedness.
Japanese society lacks a western style horizontal social class system, while it
has a vertical stratification by the institute or group of institutes. These
structures are found in employee unions. Trade unions are company based.
At the same time, they compared it with the UK, where trade unions are
43
International based on professional skills and between companies and organizations. The
Human Resource
Management : An characteristics of Japanese unions and management are based on corporate
Overview culture, and relationships are based on cooperation and harmony.
Status differentiation and acknowledgment can be seen in other ways than in
Western societies. Status is differentiated by actions such as the number of
bows they bow at the time of encounter, the seating arrangement at the table,
and the serving of food.
Another characteristic of Japanese companies is the “Ringi” method of policy
and decision-making. This includes informal counseling and problem-
solving. The process begins with preparing a written proposal, distribution to
those impacted by the execution of the proposition, and circulation to senior
administration. It is a time-consuming process, and thus it is only used in
critical decision-making. Employees, especially those at the operational level,
are encouraged to suggest improvements and groundbreaking thoughts in the
'suggestion box' situated on organization premises. Quality circle is one more
instrument utilized for employee participation. A quality circle is a little
gathering activity of workers and employees doing similar work, led by a
manager. This is a voluntary inclusion in the quality circle. Volunteers are
prepared for issues such as problem identification and problem-solving
techniques. Quality circles are non-mandatory and, therefore, synonymous
with Japanese collectivist culture. In addition to this measure, other
management practices sustain success—techniques such as lifetime
employment, a wage system based on seniority, and high interest in
employee training.
Lifetime employment is referred to as ‘nenko’ but is not prescribed in the
law. However, it is a standard practice in all the major enterprises, where
employees are hired and remain in the same organization for the rest of their
working lives. They undertake different ranges of jobs and progress up in the
organizational hierarchy. However, nenko is found only in large companies
and is served by a third of the country's workforce. The remaining part-time
workers and contract employees are employed for a certain period according
to their qualifications and work content.
Depending on the age and educational background, workers' salaries are low
and rise gradually until they retire. Age-appropriate wages and promotion
systems strengthen the long-term employment system. However, wages are
not dependent on performance. Performance-based factors prevent
complacency through job security through awards and bonuses. Additional
financial incentives accrue up to 1/3 of earnings.
Employees see the company as a family, an economically active social unit.
This perspective creates high employee loyalty and emotional dependence on
the organization. While the recent trends suggest that there has been a
downshift from these ideas and towards long-term commitment to the
company recently as the younger workforce is switching jobs more
frequently.
Teamwork and consensus are distinctive styles of Japanese organizational
culture. Employees view themselves as member of the community and stress
44
over consensus and teamwork. Managers seek their subordinate’s approval in Cross-Cultural
Diversity
decision-making and seek their approval. The critical factor contributing to
cohesion is the solid obligation to their colleagues and supervisors.
Supervisors feel indebted for their promotion towards their workers whose
contributions are valuable.
Job rotation, which leads to employment flexibility, is a prominent feature of
Japanese companies. Employers do not hire based on job specifications but
on comprehensive qualifications that go through an introductory phase. They
are first socialized before the initiation of on-the-job training. They are
competent in using in-house training and moving between different
departments to solve organizational problems. The early stages involve
manual labor, such as working in a store and later as a manager. During these
periods, various tasks are assigned that reflect long-term employee
developmental goals strategically planned, considering production. As a
result, employees can complete all activities at the end of training.
Japanese companies operate in a strict hierarchical system, with no rank
equivalents between workers and employees. Open-plan offices
accommodate upper-level managers and lower-level employees under one
roof. This goes against the libertarian idea of the Japanese management
system.

3.4 HRM IN THE UNITED STATES

The United States is often viewed as a melting pot in terms of ethnic
diversity, as its population includes people of diverse backgrounds. The most
prominent national cultural feature is individualism in American culture.
Americans are independent, ambitious, and profoundly individualistic. They
value freedom and accept that people can shape and control their fates. The
interest of her next of kin is paramount. The focus is on personal and
financial success. The in-group does not include workspaces. Principal
commitment and loyalty are not to your organization or another group.
Individualism influences and inspires the ethics of American management
and personal management. Diligence and long working hours when required,
individual employee decision-making motivation, outstanding self-image,
initiative, promotion, and high income as a reward are highlighted as positive
personal employee achievements. In addition, individualistic nature
encourages managers to promote on a merit basis; status, hierarchy, and
gender are often neglected in such times. The reward system is performance-
oriented and based on individual job performance.
A focus on personal freedom and success means that individuals are free to
pursue careers and change jobs to achieve success. As also implies,
organizations can hire and fire people according to their needs or market
conditions. Organizations are also free to pursue their success. Most
American companies hire based on a particular job need. As there is a limited
commitment between the employer and the employee, the job and skills
required for the specific job are clearly defined for the job. In organizations
like participatory management, bosses are friendly, and subordinates are
45
International willing to question the authorities. On the one hand, employees are open to
Human Resource
Management : An any uncertainty associated with the job, contrasting to other nations. This, in
Overview turn, facilitates decision-making, risk-taking, and the entrepreneurial go-
getter spirit while promoting competitiveness.
One of the most prominent features of American culture is anti-trade
unionism. Most workers and employees perform their job in the non-union
sector; thus, employer power is relatively high in the political and economic
scenario. There is no obligation towards employees, and it is accessible to lay
off employees in whatever way they desire. At the same time, their contract
can be terminated with or without any reason whatsoever. The employer
determines the employment conditions of employment. Management’s
preferential mode of dealing with employees is through human resource
management practices, not trade unions.
There is a dislike for rules and regulations in the American culture, but at the
same time, they are in place in the organization and society. Roles and
functions are clearly defined and legally enforced on the employees through
business contracts. Laws are drafted under the constitution to prevent the
misuse of power by the employer. The bureaucratic model provided by
Weber (1947) acts as a model of professionalism. Professionalism is also
mirrored in their business education. The established interactive management
system based on objective (MBO) is prevalent in American organizations.
This drives better performance, increased company visibility, and employee
engagement with the organization.
On the contrary, it leads to incredible bureaucracy and overproduction.
American organizations have the highest working hours, productivity, and
employee training costs. Employee training is always taken very seriously
despite leaving the organization for a better prospectus.
Most of the MNCs follow ethnocentric policies for HRM. A slight deviation
from the centrally determined strategy is accepted, keeping the view of the
requirements of the host countries. The local managers also have some
autonomy to modify strategy implementation.

3.5 HRM IN THE UNITED KINGDOM

Scotland, England, Wales, and Northern Ireland form the United Kingdom.
Even though it comprises four different nations, each country has a
distinctive cultural characteristic. At the same time, they share numerous
comparative values and institutions that bind them together. The Englishmen
are very individualistic, and much emphasis is kept on valuing freedom and
liberty. But at the same time, there is much consideration for the community,
and group action is also part of the cultural imprint. Collectivism has its roots
in the period between the 18th century and the 19th century and thus has
helped in building up powerful trade unions to represent workers and
employees. Union membership is craft-based and impacts the organization as
a whole. Many unions represent workers within the same organization and
bargain between unions. The fight realistically by the unions is for better
wages and working conditions. The essential belief is that they represent the
46
workforce, where the workers’ desires are pushed onto the employer. Cross-Cultural
Diversity
The employee-employer relationship is purely contractual, and employees do
not expect managers to take care of them and solve their problems.
Employees see this as an invasion of privacy. Management and employees
have an impersonal, task-oriented relationship. Employees are considered
career oriented and switch to another company in search of a better
prospectus. In comparison to American culture, employee training is not
taken strictly. Thus, the workforce has lower productivity rates in comparison
to Americans.
A study by Hofstede (1980) found that the UK scored lower on the power
divide than other countries. They are different from their superiors inside and
outside of the workplace. People care more about their liberty than equality.
Authorities are questioned, but it is done subtly and indirectly through
confrontation. In most cases, the argument is wrapped up around humor.
People do not like to be ordered or dictated, but authority is respected when
used well.
Power inequality is prevalent in class consciousness. It is observed based on
an individual's family background, education, and accent. The organizational
hierarchy is observed based on discriminatory treatment, with manual
workers, low-level clerks forming one group, and managers and senior staff
forming another group. White collar employees and managers are given
preferential treatment such as better power, pay, working condition, etc. At
the same time, manual or blue-collar employees are treated poorly. Due to
dual therapy, white and blue-collar employees have a dual hostile
environment.

3.6 HRM IN TURKEY

Turkey is one of the biggest business partners of the European Union (EU).
The geographical location of Turkey proves to be a significant advantage.
Situated between the Middle East, Europe, and Asia, it is a gateway
connecting the three geographical regions. With the additional advantages of
new business-accommodating regulations, a developing economy, and
abundant natural resources. Turkey draws in tons of foreign ventures and has
one of the best economic prospects. Subsequent government introduction of
pro-market economic policies and opening up the doors of liberalization for
foreign direct investment (FDI) has behaved Turkey's economic growth.
The modern Republic of Turkey is based on legal, political, and social
reforms. Despite its high diversity, Turkey is characterized by nationalism
and secularism, transforming it into a secular Western-style state.
The culture is a blend as it is conservative and traditional, especially in rural
areas and groups of lower socioeconomic status. Hofstede's (1980) study
suggests a collectivist society in which masculine and feminine values are on
par, power distances are large, and uncertainty avoidance is strong.
Furthermore, Turkish culture is malleable, maintaining the status quo and
hierarchy. Modern Turkish culture is less collectivist, less hierarchical, and
47
International less secure. Both sides influence Turkey's social and organizational structure
Human Resource
Management : An due to its geographic location, hence a mixture of Western and Eastern
Overview values. Nevertheless, general collectivist and individualistic tendencies
remain to this day.
In an organizational context, hierarchy is a way of exercising leadership. It is
important to respect authority. Due to the enormous power disparity, there is
a disparity in equality between superiors and subordinates. It is most common
in decision-making and wealth. Authoritarian leadership also complicates
dialogue between management and employees. This organization includes
highly centralized decision-making, highly personalized and strong
leadership, and partial delegation of powers or duties.
Turkish managers are not very socially friendly but have good interpersonal
relationships. They prefer to be supervised rather than managed and are not
the dominant personality type. They have a high level of tolerance and are
very empathetic. They are highly innovative and prefer the conceptual over
the concrete but are bound by traditional methods. They prefer an intuitive
approach to decision-making and pay attention to detail. They don't like to
change jobs often because they don't take risks and don't see their job as an
end. They are not good at controlling their emotions.

3.7 HRM IN THE ARAB AND MIDDLE EAST

The Middle East includes Cyprus, Turkey, Israel, Egypt, Iran, and Oman.
The majority of the countries in the Middle East are of Arab ethnicity and
follow Islam. Individuals perceive themselves as having a place with an
isolated local area from the Persian Bay to Morocco in North Africa. The
nationals of these nations shared an obligation of an unmistakable inclination
of personality and shared traits, a similar language, religion, and history.
Even though there are contrasts in variety, three components tie the Bedouins
together—a solid premise of their character, the sensation of fellowship, and
shared predetermination.
Middle Easterners are profoundly collectivist with a solid feeling of
faithfulness to their in-bunch. In-bunch participation goes past close family
and incorporates more distant family, family members, and companions.
Bunch direction supports customs like interviews, acquiescence to seniors,
dedication, eye-to-eye communication, and organization of a particular
interaction. Seniors' regard is imbued in the Islamic tradition, which urges
devotion to work, collaboration, and amicability. Faithfulness to the
gathering has brought about a low capacity to bear groundbreaking thoughts
and difficulties.
Similar qualities are seen in the association, as they are leveled and unified.
Paternalistic, dictator, the initiative style across various associations, follows
the executive’s style. Subordinates hope to be counseled yet don't anticipate
participating in the dynamic cycle as equivalent accomplices. More
established individuals stand firm in senior situations. Advancement and pay
depend on devotion to the chiefs instead of occupation execution. Be that as
it may, things are changing as a more current age acquaints western-style the
48
board rehearses with the association. Cross-Cultural
Diversity
The Bedouin tradition ‘Majlis’ of holding the council meeting has been
carried over to the organization. Managers and workers from different levels
get together and convey through private contact, discussion, and systems
administration. Written letters and memos are avoided.
The extensive use of expatriates is the main feature of Arab companies’
recruitment. Higher-level expatriates are recruited from developed countries
like Europe and North America. In contrast, for lower-level jobs, expatriates
are recruited from India, Pakistan, Malaysia, the Philippines, and other Arab
countries. This is because their nationals are not ready to find these menial
jobs. There are widespread wealth disparity and working conditions for top-
level and lower-level positions. Expatriates at higher levels are very well paid
and are provided tax exemption with comfortable accommodation provided
by the employer. However, the agreements are present moment with no work
assurance, security, or agreement restoration. Lower-level expatriates are
paid very low; the accommodation conditions are also wrong. The working
conditions are very harsh in comparison to locals. There is likewise extensive
oppression of women for homegrown and expatriates. Unions are allowed but
are formed by a single ruling party controlled by the government, so no
severe labor movement has been observed.
Middle Easterner representatives come up short on a modern mindset with a
repugnance for frameworks and systems. There is sloppiness and designation.
They also have a very non-professional attitude towards business. They have
an individualist approach towards work and prefer working alone instead of
in a team. They are always prepared to stake claim to the praises for good
deeds and pass the wrongdoings on to others or conditions when things turn
out badly. Nepotism and intense socio-cultural pressure are observed during
recruitment. No countries mentioned have a democratic process and are also
found in an organizational context. There is a disdain for committee or group
meetings and teamwork in general. Managers prefer individual consultation
over group discussion when making decisions involving more than one
subordinate. Associates also view the participative management style as a
symbol of weakness. However, they expect to be part of the consultation, not
the final decision.

3.8 HRM IN INDIA

India is a multicultural society like the US, with numerous dialects, religions,
and customs changing from one locale to another. But at the same time, there
are specific characteristics that all people commonly share. Fatalism,
emotional expressiveness, hospitality, and friendliness are standard features
observed across the cultural spectrum. Collectivism is shared by most people
and is also identified in the working environment. The people are community
conscious. Community association incorporates close family, more distant
family, direct relatives, companions, caste, and religious groups. But the,
group orientation is not observed in the workplace.
There is a significant power distance observed amongst the people. There is a
49
International high degree of regard and submission to older folks, and everybody shares
Human Resource
Management : An these qualities in gatherings. India has a very rigid caste system and is
Overview accepted by the people. Individuals draw power based on the caste hierarchy;
thus, power and privilege have added to the immense power distance. People
are not class-cognizant however are caste and sub-caste-conscious.
Organizations are hierarchical, with the focal decision-making process, and
practically zero power is given to the lower rank. The management style is
authoritarian or paternalistic, distinguishing between white and blue-collar
employees. Due to these, there is much separation in power, pay, working
circumstances, and honors for individuals in higher and lower positions. Even
though authority commands respect, people with management or control do
not go unchallenged. Being a democracy-based country, individuals partake
in a high degree of opportunity for articulation and on not hold back to voice
or scrutinize their perspectives.
In the organization, trade unions are a means of representing countervailing
power to the management. Trade unions are not craft based however are plant
or national associations that run locally in each state. Their exercises center
around their individuals' advantage in plants or nearby industries.
Arrangements are given and guaranteed under the law for setting up working
advisory groups in production lines and plants. Employees take part in the
decision-making process through this mechanism. Many legislations act
under the constitution and safeguard the employees and their well-being.
Individuals are creative and dedicated. They have a feeling of obligation.
They are frugal and innovative, aggressive and materialistic. They like to
work under bosses and look for supervisors' endorsement before making
independent decisions.

3.9 HRM IN CHINA

China is perhaps the most antiquated human civilization on the planet, with
the main populace possessing the world. The nation was under socialist rule
beginning around 1921 that had severe command over the life and security of
individuals. The party headed post-World War II in the country under the
dictatorship of Mao Zedong, who had strict control over the life and security
of the people. In 1978, Deng Xiaoping, his successor, introduced several
market reforms and decentralized decision-making. But to date, the political
reforms continue to remain tight despite economic control being relaxed.
China has much diversity due to the various ethnic groups, languages, and
religions, but the people share some common characteristics despite the
diverse culture. The engravings of social variety should be visible because of
the long imperial history and customary legacy, the communist system, the
power of the Han ethnic gathering, and the impact of the Confucian way of
thinking. Confucian philosophy has helped mold Chinese culture. Values like
moral development, the significance of relational connections, family
direction, regard for age and order, and the idea of destiny can, in any case,
be tracked down today.

50
One of the fundamental aphorisms that guide the Chinese culture is the Cross-Cultural
Diversity
philosophy of ying-yang, which acknowledges the simultaneous presence of
inverse qualities and convictions inside an individual. Because of these ethics
and values, the Chinese are collectivist and lean toward the group.
Frequently, they show individualistic inclinations also. They are not a part of
in-groups. They have a tenacity of personalized loyalty and this lack
organizational belief. Personal networking is essential to gain cooperation
and get things done, but this behavior is not duplicated in more prominent
organizations but can be found in smaller organizations.
There is a lack of discipline and willingness of the supervisors to control
employee behavior; consistency in performance and follow-through are
rarely maintained. Managers leaving the organization often convince their
subordinates to join them. Also, some employees stay in the organization
because they have a strong relationship with their superiors.
There have been no independent trade unions, and trade union leaders are
often political party personnel with much say in the organization’s
performance. This has many implications for employee behavior at the
workplace. Government has a lot of control and influence on the life of the
people and their daily affairs. The government extends this control even
during the recruitment process of the organization.
Managers who have survived the cultural revolution are not proactive or
settle on intense choices and have no free feelings. There is reluctancy
associated among managers to share information or make a risky decision.
There is a tenacity in maintaining political relationships instead of achieving
organizational goals. Problems are ignored till they cannot be overlooked,
and most of the time, the solutions are based on precedent involving veto of
power by the authority. Managers depend on rules and methods. While
acquiescence, impulse control, and acknowledgment of social commitments
are empowered, decisiveness and innovativeness are frequently overlooked.
This is fundamental because of the school system, where students are
pinpointed on their way of thinking and do not have a say. It is a hierarchical
society where status is regarded. Managers are making a couple of decisions
and not being considered accountable, and the instability of the world of
politics.
But with the passage of time and the changing workforce, practices have also
changed. The newer generation is tolerant, assertive, and lenient about
observing rules and regulations.

Case Study: Tata Motors

Tata Motors never honestly had Daewoo's business vehicle business on its
radar. The authority offers had come through KPMG, the authority counselor
to Daewoo. The language was an enormous obstruction; however, as the
acquisition cycle was straightforward and unbiased as being finished through
the court, Tata Motors chose to offer the organization in July 2003.
On their most memorable visit to the Daewoo CV plant in Korea, Tata
Motors MD posed the organization an unusual inquiry: what sort of
organization was Daewoo hoping to join forces with? Know not to be
51
International especially enamored with Indians; the middle-level manager was candid.
Human Resource
Management : An Daewoo needed to cooperate with a notable, conceivably European
Overview organization that would carry its new innovative technology and money.
The MD's quick response was to pull back and question whether they needed
to make this acquisition. In the wake of confronting a few obstacles and
direction from the gathering executive, the MD and his group concluded to
accomplish something remarkable that was not finished previously, " We
realized that to acquire Daewoo, we had to go beyond the pricing issue and
connect with the Korean society." After the first meeting, Kant, the MD, sent
letters to Bombay House (Tata Motors Headquater) requesting a Korean-
translated version of all Tata Motors brochures and pamphlets, alongside a
film with experiences on the group’s qualifications, heritage, work culture,
and philosophy, to be conveyed to the Daewoo employee and shareholders
in.
The outcome was startling in the exceptional endeavors that were made. On
his next visit to Daewoo, Kant was stunned to find that everybody from the
governor, mayor, trade minister, and employee union leader needed to meet
him. " We sensed that they had been surprised and impressed by our sincerity
and the fact that Tata Motors was owned by a trust that followed the highest
standards of corporate governance. I think the fact that we were not behaving
like buyers, rather as a company trying to sell itself to them, is what sealed
thing for us,” recalls Kant.
During further visits to Korea, before the final court announcement on the
final bidder selection, it was sure that the Daewoo representatives needed to
be related to Tata. At last, Daewoo was given over to Tata after the court
order, which was the most un-notable among the ten bidders.
Post-Acquisition took about a half year; Tata Motors made cognizant
attempts to hold the emotional bonds made during the acquisition process.
Any employee sent to Daewoo is first prepared in language, culture, and food
propensities. The cooks at the Daewoo have likewise figured out how to
prepare and appreciate Indian food. The union leaders from Korea have again
been flown over to Jamshedpur and Pune plants to comprehend Tata Motors’
size of activities.
The acquisition being a triumph is clear from the portion of the overall
industry Daewoo CV appreciates today. Medium CV rolled by Tata Motors
in Korea has a piece of the pie of 25% in the country. The heavy CV
fragment's portion of the overall industry has expanded from 21% to 27%.
Currently, 45% of the Daewoo CV's production is for exports and is adding
to the bottom line of Tata Motors’ consolidated earnings.
Questions:
1. Why did Daewoo not show much interest in Tata Motors?
2. What did Tata Motors do to draw in Daewoo to see the value in Tata’s
credentials?
3. What advances did Tata Motors take to accomplish cultural integration
with the Daewoo CV plant after its acquisition?

Source: Business Today, 3-12-2006

52
 Cross-Cultural
3.10 SUMMARY Diversity

The cultural environment plays a significant role in the way managers run
their organization while managing the employees they are situated in. MNCs
are also not exempted in this regard. They have to consider the socio-cultural
environment before implementing organizational practices. Managers need to
adjust and change their HRM practices and approaches because of the
national characteristics of different nations and regions where they work. A
similar transformation and change are pertinent when homegrown single-
country organizations adapt foreign best practices to improve performance.

3.11 SELF-ASSESSMENT QUESTIONS

1. What are the significant cultural differences between Individualistic
society and Collectivist society
2. How is the USA's culture different from China's culture?
3. What is the significant cultural difference between India and Turkey?
4. What are the significant differences between the seven economies in the
context of employee management styles?

3.12 FURTHER READING/ REFERENCES

 Hickson, D. J. (1993). Management in Western Europe. Berlin: Walter
de Gruyter.
 Hofstede, G. (1980). Cultural Consequences. London and California:
SAGE Publication.
 Jackson, T. (2002). International IHRM. Sage Publications.
 Ali, A. J. (1993). Preface. International Studies of Management and
Organization, 23, 3-6.
 Arslan, M. (2001). A cross-cultural comparison of achievement and
power orientation as leadership dimensions in three European countries:
Britain, Ireland, and Turkey. Business Ethics: A European Review, 22(3),
340-345.
 Briggs, P. (1988). The Japanese at Work: illusions of the ideal. Industrial
Relations Journal, 19, 24-30.
 Lawrance, P. (2000). What you see is what you get: thoughts on
American Management. In M. H. Tayab, International Business:
Theories, Policies, and Practices (pp. 487-493). London: Pearson
Education.
 Mathur, P., Aycan, Z., Kanungo, R. N., &'. (1996). Work culture in
Indian Organization: a comparison between public and private sector.
Psychology and Developing Society, 8(2), 199-222.

53
International
Human Resource UNIT 4 STRATEGIC HUMAN RESOURCE
Management : An
Overview
MANAGEMENT IN INTERNATIONAL
CONTEXT

Structure
4.1 Introduction
4.2 Strategic International Human Resource Management
4.3 The Architecture of Organization and Strategic IHRM
4.4 Understanding perspective on Strategy
4.5 Organizational forms by Barlett & Ghoshal
4.6 Knowledge Transfer
4.7 Global Leadership Training and Development
4.8 Strategic Control Needs
4.9 Competitive Strategies of MNCs
4.10 Structuring optimal global performance
4.11 Summary
4.12 Self-Assessment Questions
4.13 Further Readings/ References

4.1 INTRODUCTION
HRM introduces a view of people as resources that have strategic importance
for creating competitive advantages for the organization. HRM also presents
“a change in perspective by involving top management in the HRM
responsibility” (Staehle, 1994) and “proposes a shift of competencies away
from the central personnel departments back into line management to
enhance strategic integration” (Wacheter, 1987; Storey, 1995). Storey (1995)
defines HRM “as a distinctive approach to employment management that
seeks to achieve competitive advantage through strategically deploying a
highly committed and capable workforce, using an integrated array of
cultural, structural, and personnel techniques.”

4.2 STRATEGIC INTERNATIONAL HUMAN

RESOURCE MANAGEMENT
Strategy in IHRM has been defined as “human resource management issues,
functions, and policies, and practices that result from strategic deployment of
multinational enterprises and that impact on the international concerns and
goals of those enterprises” (Schuler, Dowling, and DeCieri,1993)
The theoretical framework in SHRM is influenced by three developments
that emerged in a broad historical sequence:
 Early regard for life-cycle models in light of the idea of fit among
54
 HRM and Strategic Human
Resource
 Progressive phases of the mentality of the board at base camp to Management in
International
global activities Context
 Product life cycle
 Organizational life cycle
1 Subsequent improvement of thoughts regarding organization plan and
the cycle through which strategy and structure can be coordinated for
optimal MNCs. This perspective indicates that effective organizations
make a 'fit' between their information-processing capacities and
information-processing based on their strategy, task qualities, interunit
relationship, and organizational climate. MNCs have massive data
handling necessities and vulnerability because of their size and
geological spread. Egelhoff (1991) states, “The higher the information-
processing necessity, the more organization will guide itself towards
applying parallel relations, for example, direct contact between people,
liaison jobs, taskforce, and matrix team design.”
2 Development of an integrative contingency framework starts with the
need to incorporate and separate HRM approaches (Differentiate policies
and strategies to respond to local needs and cultures whereas integrating
the local units into the more extensive organizational system). There are
three models of doing it:
 Explorative (ethnocentric) - a wholesome move of HRM strategies,
policies, and practices effective in the parent organization to
subsidiaries
 Adaptive (polycentric) - making HRM frameworks with the most
significant transformation to the local setting and conditions.
 Integrative (geocentric) - move best practice from any place it very
well may be found among subsidiaries in the Organization.

Firm Strategy in deciding HR processes in other cultures

1. Resource dependence theory: The perception is based on;

organizational decision-making isn't viewed as a result of strategic
decisions. This spotlights overwhelmingly on power connections or
relationships and exchange of resources between an organization and its
subsidiaries. The theory expects that all organizations rely upon the
progression of valuable resources (money, technology, management
expertise) into the organization to continue functioning. An MNC
affiliate may have more or less dependence and power, as these
resources are controlled by various actors, internal to the MNC (parent
company or regional operations) or external to it (government
institutions). The higher the scarcity of the valued resource, the more the
power of the entity that controls that resource increases (Wright &
McMahan, 1992).
2. Resource–biased view of the firm: It sees the firm not through its
exercises in the product market but rather as a novel heap of tangible-
55
International intangible assets (Wernerfelt, 1984). Since the beginning of time, they
Human Resource
Management : An aggregated different physical and foreign intangible assets of implicit
Overview learning and dynamic routines (Collis, 1991). Impersonation of these
assets is conceivable, assuming firms go through a similar irreversible
investment or learning experience. MNCs ought to profit from a
worldwide labor force by gaining better abilities gathered over the long
run through acquisition and education, which can be found by getting to
global labor pools and taking advantage of a different labor force's
cultural synergies. They should guarantee the following:
 Learn how to facilitate and deploy their different capabilities and
take advantage of them in numerous nations and markets.
 Identify new assets in undiscovered business sectors that will fortify
their core competencies.
 Enhance existing skills by reconfiguring value-adding exercises
across more expansive geography or tasks.

3. Knowledge-biased view of the firm and organizational learning

theory: It is argued that the globalization process resulting from the
transfer of such knowledge-based capabilities leads to some
organizations building a superior ‘knowledge transfer capacity.’

4. Relational and social capital theory: Relational capital concerns

business organizations and the interfirm connections that exist inside
these organizations. It involves “the goodwill that is engendered by the
fabric of social relations and that can be mobilized to facilitate action”
(Adler & Kwon, 2002) and is defined as “the sum of the resources, actual
or virtual, that accrue to an individual or group by possessing a durable
network of more or less institutionalized relationships of mutual
acceptance or recognition” (Bourdieu & Wacquant, 1992)

4.3 THE ARCHITECTURE OF ORGANIZATION

AND STRATEGIC IHRM
An organization’s international strategy is implemented through its
architecture, and IHRM plays an essential role in it, as it deals with three
architecture components.

Role of Human Resources in Shaping organizational architecture

56
People, culture, and the definition of appropriate incentives and control are Strategic Human
Resource
crucial for implementing a successful strategy and interwind. This part of the Management in
architecture and the resultant plan is impacted by a few inner and outer International
Context
variables, the exchange. Inside these networks.

Factors responsible while planning HRM architecture

As seen in the framework, it is evident that external environment scanning

also becomes very important when talking about HR strategy in an
international setting. The key elements to look for are global market
competition, government regulations, and labor organization. Another
significant factor is the geo-political relationship between the regions of
operation, especially with the firm’s home country and country of operation.
Cooperation and harmonious relations between countries make it easier to
address skills shortages by sending over skilled persons. However, if there is
a conflict and national sentiments are high, it is tough to hire from these
countries, and global HR has to work on other arrangements to overcome this
challenge.
HR planning plays a vital role in the successful implementation of global
strategies. Global HR has to focus on the work design and identify the people
who will be doing the work. The first step towards this starts with breaking
down the more extensive business plans to a workable level. This helps to
simplify the management and tracking of the progress. Post this
granularization; the next task is job design. The decision includes separating
more effective business performance plans and objectives into explicitly
coordinated and incorporated tasks, obligations, and jobs for individuals to
perform. The critical factors to consider in this phase are:
 Cultural Adaptation Consideration in Work design: Culture primarily
affects the design, whether people like to work in a controlled manner or
independently. The culture is a collaboration or working individually.
Based on these factors, the jobs are designed, including the workplace
arrangements such as open space or working in cubicles where people
prefer more privacy.
 Regulatory Influence on Work Design: These factors consider the host
countries' legal requirements. The working hours, rest hours, and breaks
57
International for prayers. There are restrictions on overtime hours in most nations,
Human Resource
Management : An such as 10 Hours/Day, including overtime. In India, the weekly working
Overview hour limit is of 60 hours. The provision of weekly offs has to be
considered as well.
 Labor Market Skill Levels Based on the population's skill level: The job's
complex elements can be decided. In the highly skilled workforce, high
complexity work can be included. At a low skill level, low complexity
and collaborative work can be designed. Also, it helps in understanding
whether we need to bring in a worker or need to outsource some of the
critical elements.
 Available Technology and Infrastructure: The availability of technology
and supporting infrastructure such as electricity helps bring in
automation and train employees to handle these.

4.4 UNDERSTANDING PERSPECTIVE ON

STRATEGY
The term strategy is widely used today in various sports to denote a set of
measures undertaken to achieve a specific goal. In management literature,
multiple different strategies have emerged over the years. Within the context
of international human resource management, strategy can be understood
with the help of two dimensions:
 Outcomes: Tell whether the strategy is focused on maximizing profit or
whether there are multiple goals of which profit maximization is also a
part.

 Processes: Considers whether the process comes about as a result of

planning or other factors.

Based on these two factors, Richard Whittington (1993) identified four

perspectives on strategy:
 Classical: A deliberate, profit-maximizing approach: The assumption is
that senior managers would systematically assess and analyze the
environment, resulting in a straightforward course of action for the
organization.

 Evolutionary: An emergent, profit-maximizing approach. The goal is still

profit maximization, but the process is not deliberate. Market forces play
a more significant role than planning done by managers.

 Processual: An emergent, pluralistic approach. In this view,

organizations are composed of individuals and groups with their
interests, which they seek to advance. So, strategy emerges through
discussions, negotiations, and compromises.

 Systematic: A deliberate, pluralistic approach. This view considers the

social system in which strategy formulation takes place. So, the
structural context plays a role in shaping the strategy.

58
 Strategic Human
4.5 ORGANIZATIONAL FORMS BY BARLETT & Resource
Management in
GHOSHAL International
Context
Christopher A Bartlett and Sumantra Ghoshal (1998) proposed types of
enterprises based on their structural approach and strategic capabilities based
on their research on international firms. They also identified three
fundamental forces that operate on managers in multinational firms: The
different forms proposed by them:
 Local differentiation: Since these firms operate in countries having
different national cultures, there would be a push for local differentiation
that aligns with the values and attitudes of that country.
 Global integration: Even with local differentiation to cater to specific
markets, there is a push towards global integration and achieving scale
for competitive success.
 Worldwide innovation: Markets worldwide are rapidly changing, and
firms must adapt to this in the shortest time possible by linking
operations and sharing knowledge and expertise.

The Multinational Firm: A Decentralised Federation

1920 – 50 saw such pressure for local differentiation, and Bartlett and
Ghoshal called this the ‘multi–domestic’ era. There were vast differences in
the factors that affected competition in different countries due to varying
consumer tastes and protectionism. A multinational firm can be defined as a
“collection of national companies that manage their local business with
minimal direction from headquarter.” It is characterized by loose operational
controls from the headquarters, enabling decentralized decision-making and a
financial model where capital is sent from the office and dividends are paid
back.
It is similar to the polycentric approach, where local nationals head the local
subsidiary.

The HR implications of such an organizational form can be seen through the

decentralized decision-making and little influence from the headquarters on
personnel policy and practice. Accordingly, the number of expatriate
managers is also less since decisions are left to the discretion of the local
leadership. Since each country has a unique local context, there might also be
a need for expertise and knowledge sharing between locations.

Global Firm: A Centralised Hub

From 1950 – 80, there was a drop in the cost of transportation and
communication, trade regulations were relaxed, and economies of scale
began gaining importance. There was a push towards creating mini replicas
of the home country operations. The global firm helps create standardized
products in a very cost-efficient manner. This results in efficiency through
global integration.
This organizational form sees similarities with the ethnocentric style where
values of the home country operations are replicated in local subsidiaries.
59
International They are seen as ‘cultural extensions of the parents.
Human Resource
Management : An In such firms, there is a distinctive parent company approach that also
Overview
influences practices in foreign subsidiaries. They prefer to use expatriates as
enforcers of the parent company’s policies. One concern with the global
organizational form is that it could lead to ‘screwdriver operations,’ where
essential functions like research and development are maintained at the
headquarters, and routine, low–skill jobs are sent overseas. Most of the
critical projects are retained at the parent’s location, and only work related to
maintenance and back–end support is given to the Indian subsidiary.
International Firms: A Coordinated Federation
In the following decades, from 1950 – 80, there was pressure on MNCs to
spread innovations across the firm. The main focus was on “transferring and
adapting the parent company’s knowledge or expertise to foreign markets.”
This organizational form can be said to be between the international form
centralized and the multinational structure decentralized.
Comparing it with the ethnocentric type, it is a mixture or hybrid of
polycentric and ethnocentric firms. Apart from following policies set at the
headquarters level, knowledge and expertise sharing also needs to be ensured
by local managers. In such firms, managers from the headquarters are not
seen as enforces but as points to enable this knowledge transfer and expertise.
Transnational Firm: An integrated network
Post the 1980s, firms have faced multiple pressures of being responsive
locally while also achieving global scale with the need to spread innovations
all over locations. The transnational organizational form is capable of
responding to all of this pressure. It is characterized by the ‘creation of an
integrated network of sites, each of which possesses a distinct role.’ Plants
within the network would have differentiated roles which also helps them in
responding to local pressures. Information exchange across the web allows
for knowledge and expertise to be diffused, while operations integration
enables scale efficiencies. This would be similar to the geocentric approach,
where the focus is on having the best talent for a particular role, irrespective
of nationality.
Due to the flow of people, resources, and knowledge across units, the
practices at individual sites would also reflect innovations from other parts.
The managers who go on international assignments are seen as the binding
force enabling this network and exchange of resources.
A quantitative study by Bartlett and Ghoshal (1989) on “organizational
typology” tested whether the corporation’s worldwide operations could be
clustered according to the theory. It was found that most executives perceived
their organization as multinational, followed by international and global
forms. The transnational form was not identified by many. They also found
support for the organization’s characteristics, especially in the case of
multinational and global firms. Most corporations prefer the international
organization form where there is enough freedom given to local subsidiaries
to make strategic decisions; This allows local firms to make relevant
decisions for their region.
60
Role of the Corporate Human Resource function Strategic Human
Resource
Management in
Bartlett and Ghoshal try to understand the corporate HR function's role in International
international firms. Developing global leaders is a priority in global or Context
centralized firms. In decentralized firms, the parts are minimal. The authors
suggest that in such scenarios of decentralized firms, corporate HR can
redefine their roles and focus on establishing learning processes through
organizational development and contributing to strategy.

4.6 KNOWLEDGE TRANSFER

Most top managers believe it is essential to transfer human knowledge,
expertise, and critical capabilities as they find them the most crucial factor for
sharing MNC’s performance. HRM plays a vital role in transferring firms’
critical capabilities. A crucial developing area for HRM is making the
business truly globalized. This capability requires finding the perfect
individuals for the job abroad posting. International assignments are essential
for sharing vital knowledge and abilities needed for success.
There are two classes of knowledge: explicit and tacit knowledge

Table 1 Difference between Explicit and Tacit Knowledge

Explicit Knowledge Tacit Knowledge

The knowledge that can be codified Also known as implicit knowledge, it
and easily communicated and shared is the kind of knowledge that is not
in the form of complex data, easily visible and expressible.
manuals, etc
Easy to communicate and share Difficulty in sharing or
communicating
Consist of ‘know-how or learned Comes from personal experience
skills
It can be learned through books or It only comes from individual
manuals experience
Organizations can leverage it through Effective widespread management of
technology that can be used to tacit knowledge remains elusive.
collect, store and communicate.

Few organizations can recognize the importance of HRM practices

promoting tacit knowledge sharing.

4.7 GLOBAL LEADERSHIP TRAINING AND

DEVELOPMENT
Transfer of knowledge across borders is of utmost necessity for managers, as
they need to develop in-depth expertise in specific functional areas; still, at
the same time, it is likewise fundamental to communicate effectively with
individuals with various cultural norms and values. To build a competency-
based organization, organizations try to find new avenues for managing the
61
International free inflow of talent with the requisite competency that matches the
Human Resource
Management : An organization’s objectives.
Overview
Achieving a competitive advantage for the global firm in times of
globalization means accepting cultural diversity and management styles.
Developing a worldwide firm suggests creating and overseeing individuals
who think, lead, and act according to a global perception. The key to creating
a multinational firm is managers with a global mindset. Managers need to be
able to differentiate and understand different cultural norms. Individuals act
diversely because of behavior patterns and social practices. This creates a
cultural distance that can block and muddle interpersonal relationships and
the decision-making context for the global organization. “The set of patterned
meanings or collective mental programming shared by a specific group is
called a frame of reference.” The frame of reference determines and regulates
whether certain things or behaviors are accepted in societal norms. They are
used to dictate appropriate behavior as per the social norms. Understanding
verbal and non-verbal signals makes managers difficult when exposed to new
and various environments. Managers ought to have the option to overcome
these difficulties by figuring out the impact of the activities and beliefs of
others.

4.8 STRATEGIC CONTROL NEEDS

As global competition has intensified due to globalization, it is paramount for
MNCs to keep up with the control of their international operation. Because of
this, IHRM plays a very strategic role as the parent company’s HR takes
control and coordinates with their subsidiaries with the help of expatriates to
achieve and maintain an appropriate strategic position in the global market.
Strategic control can be defined as the “MNC’s ability to ensure that all the
operating units around the world act by their overall policy in a systematic,
coordinated, and consistent manner.” But the major hurdle in this challenging
task is that MNCs’ global strategies and approaches might not align with
their local units. MNCs have been using conventional methods such as
output-based control such as finance, quality, and individual performance
metrics. Researchers have proved a substantial cultural distance between host
and parent organizations. The alternative to this strategy is using a less
formal control structure, cultural and behavioral control.
Transferring human resources between units of the MNC can be used as a
vehicle for controlling and instilling a steady corporate culture and strategy
uniformly across the organization and all its subsidiaries. Using expatriates is
a valuable mechanism to control, monitor, and evaluate all subsidiaries'
activities and behavior. Studies have shown that the assignment of expatriates
at their entities gradually increases MNCs’ control over their subsidiaries as
the subsidiary manager reflects the desired values of the parent company.

4.9 COMPETITIVE STRATEGIES OF MNC

Expanding and conducting business away in the host country comes with its
62 own set of challenges. MNCs can adopt a different broad range of options for
the business strategy and structure to build their firm capabilities. There are Strategic Human
Resource
four main strategies that MNCs use around the globe to challenge and Management in
compete in the global market, as mentioned below. International
Context
 Global cost leadership
 Multidomestic
 Transnational
 Regional
The rudimentary challenge for any MNC is creating a framework or system
that effectively balances the conflicting needs of globalization and
localization. The main task involves creating a time-tested and reliant
centralized system that is simultaneously decentralized enough for local
responsiveness. This implication leads to global integration and coordination
between the host and parent company. MNCs should be cost-effective but
simultaneously capable enough to deliver products that satisfy the local
customer’s needs as the taste and needs differ from country to country or
region to region.
Global Cost Leadership Strategy
The quick-changing global environment is impacted due to globalization of
business markets and rapid acceleration of products’ technology life cycle.
Organizations feel the need to develop global strategies. The impact of the
worldwide system is observed when the firm’s competitive position in one
country influences its work in another. Firms try to integrate their activities to
catch and take advantage of the linkage and synergies arising from mutual
coordination between nations. This helps gather a competitive advantage for
the organization in the global and local scenario. Firms pushing for global
strategy requires a significant level of coordination and interdependence
between the subsidiaries and parent company. MNCs' endeavors to cost-
saving efficiencies, economies of scale, and scope are accomplished by
incorporating and planning activities all over the globe. This leads to the
development of highly standardized products and promotion approaches.
Multidomestic Strategy
Cross-cultural diversity directly impacts the overall organizational
effectiveness and the decisions associated with employing global strategy.
Using uniform or standardized methods can be problematic due to national
and regional laws and culture. The demand by consumers for locally
differentiated products that reflect differences in standards, tastes, and needs
across nations and regions. Ignoring the specialized needs as region-specific
to set up standardized policies, structures, and operation procedures can lead
to declining interest in the local market. It can also attract local regulatory
obstruction and fines leading to a deterioration in the organization’s overall
performance. To tackle such differences, MNCs can adopt a multi-domestic
strategy strongly emphasizing or resonating with local responsiveness.
Changes that are seen due to cultural differences must be met with systems
adapted to meet the needs of the local market conditions. The scope and
direction of adaptation can vary from one regional market to another.
Subsidiaries should have independence or the autonomy to modify their
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International strategies of the home country for product divisions deemed fit as per the
Human Resource
Management : An local context.
Overview
Transnational Strategy
It has been observed that changes or adjustments happening in the global
market mirror that MNCs can’t forfeit on global integration or
responsiveness. Due to competitive pressure, organizations must pursue
globalization and localization strategies simultaneously. The ongoing
advancement in the field of information and technology has led to the global
integration of economic efficiencies as organizations utilize cost-effective
inputs and use the saved resources to cement their market position for
themselves from various places across the globe. It is due to the same
technological development that has led to cut-throat competition in each
market globally, where firms need to compete to become market leaders in
their business segments.
Nations across the globe vary from each other due to political, legal,
economic, and sociocultural environments. People’s tastes differ from region
to region due to religion, ethicists groups, regional language, and financial
income. Thus, pressure is created on the MNCs to provide locally appropriate
products and services.
The firm adopts a global strategy to meet the conflicting challenges of high
pressure for cost reduction and positive local responsiveness. The emphasis is
on global learning. It focuses on the flow of skills and product offerings.
Special attention is paid to the flow from headquarters to foreign subsidiaries
and from a foreign subsidiary to seat. While subsidiaries have greater
autonomy than global strategy, they are not as independent as the
multidomestic strategy. The transnational approach looks to conduct a
coordinated network of multiple activities or exercises with multiple
headquarters spread across various borders globally. The company uses
numerous key decision centers to optimize its global efficiency and local
responsiveness.
Regional Strategy
Usually, global strategy is considered the most effective by organizations.
Still, at the same time, it is a tough challenge to in finding the optimal
balance between global integration and local responsiveness. The creation
and rise of regional trading blocs have led MNCs’ to re-evaluate their
strategy due to globalization. Thus, the firms are utilizing regional strategy as
an alternative to balance global and multidomestic strategies. The strategy’s
focus is on isolating each region and working toward becoming market
leaders in these regions. Regional strategy is a trade-off between multi-
domestic strategy and global strategy.

4.10 STRUCTURING OPTIMAL GLOBAL

PERFORMANCE
Organizations sense different organizational structures for optimal
organizational capabilities to maximize their firms ’performance. Corporate
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structuring is essential to organization strategy as it ensures global market Strategic Human
Resource
competitiveness. The different types of organizational structures is mentioned Management in
below: International
Context
Global product division structure
When the gains arising due to global integration are significantly minor
compared to the local differences, this structure is used for optimum
organizational performance—the system allows control of all the functional
activities of the product group. Product managers make decisions on product
design from the parent’s company head. Inputs from overseas and local
subsidiaries are often not considered. The local managers serve the
organization by performing only administrative, legal, and financial functions
provided to the subsidiary are limited. The local subsidiaries act as a cost
center, not a profit center, from the parent company's perspective.

Global area division structure

It generally opts when the local adaptation of the organization’s products and
services is critical to its business strategy and structure. When there are
substantial regional differences, firms must develop strategies to adapt and
modify to meet the particular conditions or needs of the local markets. The
direction and scope of the adaptation process may vary from each local
market. Organizations should set up a global area division structure where
substantial independence is enjoyed by the regional or country manager to
adapt their strategies to the home country’s product division to tailor-fit the
local needs and demands.

Global Transnational Division Structure

A matrix or international division is set up to overcome global integration
and local responsiveness challenges. Some of the elements that the critical to
the structure are
1. Local and overseas managers share a common global vision.
2. There is a balance and synergy in the relationship between them.
3. Perennial, systematic, and elaborate movement of ideas, information or
data, resources, and workforce between them happens on the regular
basis
4. Eloquent linkages are created across operating units, subsidiaries, and
headquarters.

Transnational structures share characteristics of matrix organization where

local subsidiaries report to the area and product managers.

Regional Headquarters Structure

In this structure, organizational form is used to overcome the potential
tension between the headquarters’ pull for global efficiency and local
subsidiaries’ push for national effectiveness. Regional strategy is aligned
with the regional headquarters structure. It is established in major
geographical areas around the globe. Subsidiaries are set up in such a way
that they have to report the proceedings to their respective regional
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International headquarters. Thus, it provides an advantage for economies of scale in
Human Resource
Management : An regional strategic decision-making and planning and effectively utilizing
Overview globally competent human resources. Systematic and efficient exchange of
information, managing the interlinkages between headquarters and local
units, and continuously developing control and coordination of business
activities. It serves as a critical balance between parent company headquarters
and regional teams. It helps the organization attain its transnational goals of
any organization of globalization and localization as the operational plans
and direction are determined through comprehensive agreements that sync
the product division and regional headquarters structure. Insights are
provided to local units in a clear communicable way in this structure when
under the matrix structure.

Case Study: Philips Develops an International Culture

NV Philips Gloeilampenfabrieken, renowned as Philips, is a Dutch electronic
player producing electronic goods worldwide. With annual revenue of $25
billion, Philips is the only European firm able to survive the Japanese
insurgence in the electronic market. In the appliances market, it is second in
Europe behind Electrolux. The chairman, Cornelius Van Der Klugt, had an
ambitious plan for better market positioning of Philips in Europe and
throughout the world. He decided to close 50 out of 180 European factories,
eliminating nearly 20000 jobs from its 310000 workforce. Kurt’s overall plan
for cost-cutting totaled up to $500 million annually. But, the lackluster
performance of the firm in the 1980s worsened in 1990. Heavy losses in
semiconductors and computers caused a significant decline in the company’s
stock price, and he had to step down in July 1990.
He was replaced by Jan Timmer, who had successfully managed the
consumer product division. Timmer had a severe problem on hand, as
analysis suggested a more significant workforce reduction and selling off of
computers and semiconductors business. However, he decided not to sell the
business entities, reduce cost structures, and overhaul the bureaucracy. He
slashed 45000 jobs and sold some computer and appliances companies. He
was considered blunt and overfly-aggressive by his management team. Fierce
nationalistic ties and poor morale greatly opposed his recovery plan. He
believed nationalistic relationships need to be replaced with an international
perspective to acquire the technology and capital to compete in the world
market. International alliances are necessary for firms to penetrate global
markets.
Philips’s new cultural change began to take shape through a vast international
acquisition program, mergers, joint ventures, and other alliances. Today,
Philips has a controlling interest in North America. Under popular brand
names such as Magnavox, Norelco, and Sylvania, Philips sells various
products. It operates subsidiaries in places such as Brazil, Chile, and
Uruguay. It is interested in Hsinchu, the Taiwanese chipmaker, and has an
alliance with Sony to take advantage of the compact disk technology. It
merged its VCR and camcorder operations with Grinding, the largest German
television producer. It has a $ 1 billion project with Siemens to develop one-
and four-megabit chips. Philips is forming Joint European Submicron (Jessi),
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government-supported cooperation to help European chipmakers to develop Strategic Human
Resource
technology comparable to that of the US and Japan. Management in
International
Another aspect of Timmer’s new strategy is the rapid-fire introduction of Context
products. It first introduced a compact disk and launched a new product
called digital compact cassette (DCC) that can record and play music. Philips
is developing a new line of high-definition television (HDTV)

Questions:
1. What went wrong with Philips Chairman Klaugt’s program that forced
him to step down?

2. What were the causes for the poor performance of Philips in 1990?

3. What was Philips’s new Chairman Timmer’s strategy to streamline the

company’s business?
4. What strategy did Philips adopt to develop an international culture, and
what benefits did it bring?

Table 2Source: Wallstreet Journal, 12-8-1994

4.11 SUMMARY
International human resource management can have various forms of
strategic influence that can impact the organizational ability to be competitive
in the global marketplace. MNCs’ strategies and policies for their global
integration impact their IHRM practices.

4.12 SELF-ASSESSMENT QUESTIONS

1. What are organizational strategies in deciding HR processes in other
cultures?
2. Explain in detail the various competitive strategies used by MNCs?
3. What types of structures can an organization choose for optimal global
performance?

4.13 FURTHER READING/ REFERENCES

 Khatri, N. (1999). Emerging issues in strategic HRM in Singapore.
International Journal of Manpower, 20(8), 516-529.

 Taylor, S. B. (1996). Toward an integrative model of strategic

international human resource management. Academy of Management
Review, 21(4), 959-985.

 Wright, P. M., Snell, S. A., & Dyer, L. (2005). New models of strategic
HRM in a global context. The International Journal of Human Resource
Management, 16(6), 875-881.

 Briscoe, D. R. (2009). International Human Resource Management:

Policies. New York: Routledge. 67
International  Harris, M. M. (2008). Chapter 5. In M. M. Harris, Handbook of research
Human Resource
Management : An in international human (pp. 77-107). New York: Taylor & Francis
Overview Group.

 Mahmood, M. (2015). Strategy, structure and HRM policy orientation:

Employee recruitment and selection practices in multinational
subsidiaries. Asia Pacific Journal of Human Resources, 53(3), 331-350.

 Vance, C., & Paik, Y. (2015). Managing a global workforce: Challenges

and opportunities. New York: Routledge.

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