Class 3 Global Human Resource Management

1. Class 3 Global Human Resource Management Spring, 2010 Sully Taylor Berrin Erdogan

2. Roadmap of the day • Recapping the Peter Hanson case • Adapting to local HR realities • Effective Expatriation – and expatriation choices. • The case of the Celtic Tiger • Integrating and Adapting HR systems in Global Firms • International Mergers and Acquisitions – role of HRM • Case in point: Toivenen Paper • Creating Global Corporate Culture and Global Mindset • Using performance appraisal as a tool for socialization • Case in point: Gold Peak Electronics

3. Peter Hanson case….illustrates • Offshoring (in-house) to increase the talent pool • Influence of strategy on talent management • Importance of effective expatriate management

4. Hi Tech and the PDC in China • What is the strategy of Hi Tech? • What is its distinctive competence? How does that affect the way it manages its network of PDCs? • How does it affect its corporate culture? • How would you describe its corporate culture?

5. Peter Hanson case presents us with several questions: • What is the goal of the PDC, and what will it take to make it successful? What would success look like? • What are the cultural and institutional forces it must take into account? • How can it reconcile (bridge) the conflicting cultural and institutional forces? • Why was Peter Hanson chosen to head the PDC, and how?

6. Goals of the PDC and strategic imperatives: Goal: to create a world-class PDC that is fully integrated into the global system. Strategic imperatives: • Integrate with other PDCs and communicate with them during the product development process, share ideas. Requires shared organizational culture, particularly around accountability, meeting deadlines and high levels of teamwork. • Exhibit high levels of innovativeness. • Draw on local sales and marketing units in China in order to get input for the development work.

7. Can the PDC in China use the same HRM policies as the rest of the firm to encourage these behaviors? • Cultural forces working against adaptation: • Higher levels of hierarchy • Higher levels of collectivism • Higher emphasis on harmony • Low tolerance for ambiguity • Institutional forces working against adaptation: • Educational system that emphasizes rote • Tight labor market for highly qualified personnel

8. How can the differences be bridged?

9. The Chinese culture in flux Hierarchy “Egalitarian” Group orientation Country orientation Societal order: Relationship Party Ascribed status Class background Hero: scholar Hero: farmer/worker Past oriented “Future” Indirect (face saving) Secrecy communication Communist values Traditional values Emerging values Less hierarchical, Individualist-materialist, Towards ‘rule by law’ Achievements, Hero: entrepreneur, Current oriented, More direct communication

10. Up-date on the Peter Hanson case after 12 months • Recruitment of local employees: found some to overstate own competencies • Telephone interviews by immediate superior with concrete technical questions to screen • 2-4 interviews common • Managers spent more time than expected specifying tasks, clarifying expectations concerning team work, setting deadlines, and follow up results • Performance management system practices in reality somewhat adapted • Feedback more top-down– but the discussions & specified objectives seen to help clarify expectations • Possible career paths, including a sequence of courses have been developed as support for both superiors and subordinates in PM discussions

11. Up-date on the Peter Hanson case (cont.) • MNC network integration for the new local employees seen as crucial • Training and visits abroad crucial, together with the help of expatriates in making sure that the trips are successful by using their own networks • Though some knowledge-, language-, and cultural problems also reported on trips abroad  better preparation • “Young people want to adapt to the Western working style, more direct communication – that’s why they are attracted to the company” • Required a somewhat larger number ofexpatriates than expected up front • Positive, non-hierarchical, performance-oriented atmosphere has emerged Over all the establishment of the PDC has been successful, with the first of its own product already successfully on the market!

12. The PDC in 2003 • Had 250 employees • Had successfully launched five of its own products, all commercially successful • Works on a range of projects integrated with other parts of the company • Lower employee turnover than in similar units owned by foreign firms in China • Higher employee satisfaction that in other parts of the corporation!

13. Peter Hanson case also illustrates the importance of a good expatriation system • The personal side of expatriation….Celtic Tiger case • What’s your impression of the expatriation system in Peter’s case? John’s case? • If you were John’s friend, what advice would you give him?

14. But what about the candidate’s point of view? What should YOU consider if offered an expatriate assignment? • Fit with your purpose/goals (career and personal). • Experience of others in company with expatriate assignments (support; return). • Willingness/ability of you and your family to take on this assignment (new role? Cultural distance? Other obligations?).

15. Integrating HRM in Global Companies The pressure to localize

16. What IS localization? • Two ways of thinking of it: • The degree of local responsibility for decision-making. Letting local managers decide important issues. • More usually, customizing a product or policy to the “local” environment (national, regional, group etc.). This could be decided anywhere, although typically done at local level.

17. In a general sense, localization helps with: • Meeting customer needs better. • Accessing lower cost local suppliers. • Accessing local distribution channels, and adapting marketing to local tastes. • Meet government regulations. • Take into account industry realities (e.g., in insurance business).

18. What does localization of people and HRM policies “get” you? Why do it? • Makes you seem more ‘local’ to authorities and host nationals. Good for lowering political profile. • Helps you retain local talent. The company feels more ‘comfortable’ (familiar, fit with local culture). • Cost reduction. It is expensive to try to find the right ‘adaptation’ of a company wide policy.

19. Factors that affect HRM policy design in a local environment (localized vs. integrated) • Culture • Workplace environment/societal effect • Mode of operation • Firm size • Maturity and international experience of the company • Subsidiary role/mandate

20. Factors – further explanation • Host-country culture – e.g., the idea that goal setting can work (some cultures see personal control as weak). • Workplace environment – which is affected by the Societal effect: interrelationships between economic, educational, financial, legal, institutional and political systems. • E.g. Employment-at-will is not a concept that is strong in most of Europe; inability to change careers in Japan due to lack of mid-life educational institutions.

21. Factors: further explanation • Mode of operation • Acquisition, wholly owned subsidiary, joint venture? • Firm size • The larger the firm, generally the more resources it has to devote to integration. • Maturity and International experience • The higher both factors, the more likely integration will occur.

22. On the other hand, what does creating an integrated HRM system do for the MNC? (i.e., NOT localizing!) • Helps create a unified organizational culture, which leads to shared objectives and behaviors among employees worldwide. • Helps you to share and create new knowledge throughout the firm. • But is less cost effective!

23. Moving toward high consistency/high responsiveness – a Glocal Mentality “…to recognize when global consistency, local responsiveness, or a balance of global and local tensions is best.” (Begley & Boyd)

24. Congratulations! You are working in your new job in global supply chain after receiving your MIM degree. It has been a year, and your boss hasn’t said anything in all that time about whether she thinks you are doing well or not. She just sometimes offers suggestions. Your internal customers don’t seem to complain, and it appears you are accomplishing your responsibilities. How do you feel?

25. It is the following week and…. You come to work and discover that your colleague, who does the same job you do and was hired at the same time, has been promoted into a position that you had hoped to occupy soon. You don’t feel he is any better at the job you both do now, than you are. How do you feel?

26. Managing Performance…Conducting a Performance Appraisal Interview Why is performance appraisal important? What is it used for? Evaluation goals Coaching and Development goals Why do problems arise in performance appraisal interviews? What are characteristics of an effective performance appraisal interview?

27. Evaluating Performance: why performance ratings get inflated and deflated • Inflation: • Maximize merit raise • Protect an employee (e.g. low performance due to illness) • Avoid ‘dirty laundry’ that would reflect badly on manager • Avoid written record of poor performance • Avoid confrontation with employee • Reward employee for performance improvement • Increase likelihood of disliked employee’s promotion out! • Deflation • Shock employee into higher performance • Teach a rebellious employee a ‘lesson’ • Send a message to consider leaving the organization • Build a paper trail so that an employee can be fired

28. How can Performance Appraisal help build the corporate culture? • Helps reinforce company’s values (e.g., teamwork; continuous learning) in its criteria. • Provides opportunity for managers to explain what the values mean with real examples. • Shows what the company wants from employees with regard to careers and retention.

29. The Toivenen Case

30. Does it make sense for Toivonen to dispense its corporate culture to local subsidiaries? • Yes. • Not a large cultural distance between Finland and US. • Toivonen works many of same suppliers and customers across the world, so important to have same approaches and understanding of T’s values. • Can help with sharing information across groups.

31. What potential problems and pitfalls do you see with implementing T’s corporate culture in the Treelin facility? • Where are they different on cultural dimensions? • Power distance : Finns prefer flatter organizations and smaller wage differentials • Uncertainty avoidance : Finns higher, so have more formal written rules and procedures. Emphasize HR policies for stability and security. • Masculinity : role of leader in Finland is to safeguard employee’s well-being, social responsibility. • Individualism : Finns favor teams, group level bonuses. • But not a drastic difference!

32. Which Forces will influence People Management in Toivenen in its adaptation of HRM to US? Culture • Cultural values & assumptions Legal Context • Local laws • Regulations concerning expatriates • Labor relations rules • Rules regarding employee contracts People Management • Stability • Local & regional political tensions • Corruption • Political & governmental influence on operations Political Context • Size • Composition • Educational level • Geographical distribution • Class divisions • Income levels • Labor Market Socio-Economic Context • Characteristics • Strategy Firm

33. Effective cross-cultural communication is a key element of effective integration of systems in global firms….Do we mean the same thing when we say “excellent performance”?

34. Sent Message Received Message Receiver “Culture B” Sender “Culture A” Received Response Sent Response

35. What interferes with communication across cultures? • Misperception • Misinterpretation • Misevaluation

36. Misperception occurs because… • Perception is selective • Perception is learned • Perception is culturally determined • Perception is consistent • Perception is inaccurate

37. Misinterpretation occurs because interpretation is affected by…. Subconscious cultural blinders Lack of cultural self-awareness Projected similarity

38. When Mexican children simultaneously view tachistoscopic pictures of a bullfight and a baseball game, they only remember seeing the bullfight. Looking through the same tachistoscope, American children only remember seeing the baseball game.

39. Misevaluation occurs because… Cultural conditioning shapes our evaluations. We tend to use our own culture as the standard of measurement, judging that which is like our own culture as normal and good and that which is different as abnormal and bad. (adapted from N. Adler, 2000)

40. In general, all three problems are exacerbated by… Language: fluency, second language use Communication style: direct vs. indirect; succinct vs. elaborate; self-enhancement versus self-effacement Non-verbal communication: e.g., proxemics, tone of voice, gestures, body position, eye contact, facial expression.

41. What do effective cross-cultural communicators do? They assume difference until similarity is proven. They emphasize description rather than interpretation or evaluation. Try to see it through the eyes of the other. Treat their explanations as guesses, and constantly check with knowledgeable others.

42. International Mergers and Acquisitions • Developed versus developing country M&As • Reasons for Int’l M&As • Making M&As work – the role of HRM • Creating a Global Culture for Retention helps create identity with firm, thus increasing retention • Facilitates knowledge flow • Particularly tacit/sticky knowledge • Creates both technological and social mechanisms to build trust and facilitate communication

43. How does the Gold Peak M&A differ from the Toivonen situation? • Motivation • Companies from developed countries usually facing economic slowdown, need new markets. Usually want to achieve growth and cut costs. • Companies from developing countries have high growth, and want to obtain competencies, brands, technology, more upmarket. • Country of Origin • Type of company acquired – • Companies from developed countries often acquire a company with similar business model; not true for developing countries. • Knowledge flows • Parent to acquired versus acquired to parent. • Speed of integration/timeline for payoff • Faster pay-off expected by companies from developed countries.