Chapter 03 IHRM

Chapter 3
For use with International Human Resource Management 6e

By Peter J. Dowling, Marion Festing, and Allen D. Engle. Sr.
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Chapter 3
THE
ORGANIZATIONAL
CONTEXT
START
Chapter 3
Click on an item to
go to its section.
Vocabulary
Objectives
Introduction
Standardization & localization of HRM practices
Factors driving standardization
Factors driving localization
The path to global status
Control mechanisms
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Chapter 3
THE ORGANIZATIONAL
CONTEXT
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cover below to
return to this table
of contents.
local staff
corporate culture
agents of socialization
international boundary spanners
intrinsic & extrinsic rewards
institutionalism perspective
centralized set-up
country-of-origin, host country, & home country effects
reverse diffusion
local responsiveness
global standardization, localization
SOEs, WOSs
Six Sigma Quality Control
IJV
global innovators
local innovators
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Chapter 3
Vocabulary (1 of 2)
integrative player
global innovator
implementer
export oriented approach vs. integrative management orientation
corporate immune system
knowledge-sharing hostility, knowledge hoarding
person & non-person oriented coordination
born globals
MNE structures:
mother-daughter, matrix, heterarchy, N-form, transnational, network,
meta-national
chaebols
greenfield building approach
Bamboo network firm
clan = social control
social capital
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Chapter 3
Vocabulary (2 of 2)
Objectives
We learn about:
1. Issues of standardization & localization
2. Structural responses to international growth

3. Control & coordination mechanisms,
including cultural control

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4. The effect of responses on

HRM approaches & activities

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Chapter 3
Introduction

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Figure 3.1
Management demands of international growth

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Chapter 3
Standardization & localization

of HRM practices
Why globally standardize HRM?

Consistency
Transparency
Alignment
of a geographically fragmented workforce
around common Principles

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Chapter 3
Objectives
Why locally responsive HRM?

To respect
local
Cultural values
Traditions
Legislation
Government policies
Education systems

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regarding HRM and work practices
Figure 3.2

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Balancing the standardization and localization of HRM in MNEs

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Factors driving standardization
MNEs that standardize

pursue multinational or transnational
corporate strategies
supported by corresponding org structures
that are

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Chapter 3
reinforced by a shared
worldwide corporate culture

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Factors driving localization
Localization factors include:

Cultural environment
more social context more complete balance of
extrinsic & intrinsic rewards
more individual
more extrinsic rewards
or fast changing
personal & social contexts

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Institutional environment (country-of-origin & HC)

Mode of operation abroad
Subsidiary role: e.g., global innovator,
integrated player, implementer
Figure 3.3

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Institutional effects on MNEs
Table 3.1

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Examples of impact of the cultural & institutional context on HRM practices
Table 3.2

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Gupta & Govindarajans four generic subsidiary roles

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The path to global status
Organizational structures
typically change due to

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Strain imposed by growth & geographical spread

Need for improved coordination & control across
business units
Constraints imposed by host-government
regulations on ownership and equity
Figure 3.4

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Stages of internationalization
Figure 3.5

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Export department structure
Figure 3.6

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Sales subsidiary structure
Figure 3.7

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International division structure
Two major MNE issues of structure

Extent to which key decisions are made
at PC headquarters or at subsidiary units
(centralization vs. decentralization)

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Type of control exerted by the parent over

the subsidiary unit

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Figure 3.8A
Global product division structure

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Figure 3.8B
Global product division structure
Figure 3.9

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Global matrix structure
Internationally, matrix is difficult

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Dual reporting can cause conflict & confusion

Many communication channels can create
information logjams
Overlapping responsibilities can produce
- turf battles
- loss of accountability
Distance, language, time, & culture barriers
make it difficult for managers to resolve conflicts
& clarify confusion
Matrix requires managers who

Know the business in general
Have good interpersonal skills
Can deal with ambiguities of
responsibility & authority
Have training for presenting ideas in groups

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HR planning in matrix MNEs is more critical

than in traditional organizations
Beyond the matrix org. structures
At this stage, there is less hierarchy & no

structure is considered inherently superior
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The Heterarchy
MNEs have different kinds of centers apart from
headquarters
The Transnational
resources & responsibilities are interdependent
across national boundaries
The Network
subsidiaries are nodes, loosely coupled political
systems
Figure 3.10

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Chapter 3
The networked organization
5 dimensions of networked MNEs

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1. Decision-making authority is delegated to

appropriate units & levels
2. Key functions are dispersed geographically across
units in different countries
3. Fewer organizational levels
4. Formal procedures are less bureaucratic
5. Work, responsibility, & authority are differentiated
across the networked subsidiaries
Beyond networks: meta-nationals

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Meta-nationals have 3 types of units:

1. Sensing units
Uncover widely dispersed engineering & market insights
2. Magnet units
Attract & create business plan to convert innovations
into products & services
3. Marketing & production units
Market & produce adaptations of these
products & services around the world
Think:
An M-N = global tournament played at 3 levels
HRs place in structural forms

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Three ways HR develops with international growth:

1. Centralized HR firms
large, well-resourced:
typically product-based or matrix structures
2. Decentralized HR firms
small group, mostly for senior mgmt. at corp. HQ:
mostly product- or regional-based structures
3. Transition HR firms
medium-sized corp. HR with small staff at HQ:
decentralized, product-based structure
European MNEs: mother-daughter

global with product/area divisions or matrix structure
Swedish MNEs: Tend to adopt mixture of
mother-daughter & product divisions
Nordic MNEs: may prefer matrix structure
United States MNEs: limited success with matrix
Japanese MNEs: similar to US, but evolve more
slowly, possibly not changing structure
Not much info yet on
Chinese & Indian MNEs
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Different countries, different paths

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Control mechanisms
Figure 3.11

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Control strategies for multinational firms

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Chapter 03 IHRM

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Chapter 3

For use with International Human Resource Management 6e

Click on the book

2. Structural responses to international growth

For use with International Human Resource Management 6e

4. The effect of responses on

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

Standardization & localization

Why globally standardize HRM?

For use with International Human Resource Management 6e

Why locally responsive HRM?

For use with International Human Resource Management 6e

regarding HRM and work practices

For use with International Human Resource Management 6e

Balancing the standardization and localization of HRM in MNEs

For use with International Human Resource Management 6e

Factors driving standardization

MNEs that standardize

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

Factors driving localization

Localization factors include:

For use with International Human Resource Management 6e

Institutional environment (country-of-origin & HC)

For use with International Human Resource Management 6e

Institutional effects on MNEs

For use with International Human Resource Management 6e

Examples of impact of the cultural & institutional context on HRM practices

For use with International Human Resource Management 6e

Gupta & Govindarajans four generic subsidiary roles

For use with International Human Resource Management 6e

The path to global status

For use with International Human Resource Management 6e

Strain imposed by growth & geographical spread

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

Export department structure

For use with International Human Resource Management 6e

Sales subsidiary structure

For use with International Human Resource Management 6e

International division structure

Two major MNE issues of structure

For use with International Human Resource Management 6e

Type of control exerted by the parent over

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

For use with International Human Resource Management 6e

Global matrix structure

Internationally, matrix is difficult

For use with International Human Resource Management 6e

Dual reporting can cause conflict & confusion

Matrix requires managers who

For use with International Human Resource Management 6e

HR planning in matrix MNEs is more critical

Beyond the matrix org. structures

At this stage, there is less hierarchy & no

For use with International Human Resource Management 6e

The networked organization

5 dimensions of networked MNEs

For use with International Human Resource Management 6e

1. Decision-making authority is delegated to

Beyond networks: meta-nationals