Although the overall international corporate strategy determines which of the four approaches to IHRM, Francesco & Gold (2005) argue that the six following factors, in host countries, have influence: political and legal concerns, level of development, technology and nature of the product, organizational life cycle, age and history of the subsidiary, organizational and national cultural differences. I’d add the Labor Unions power level.
Thus, there is no better approach to be recommended except the fact that managers should remain vigilant and flexible and monitor developments in each regional subsidiary. For further considerations, we will assume that our subsidiaries headquarters are located in Hong-Kong for the Asian market(s), in Cairo for the Middle-East market(s), in Brussels for the European market(s) and in Toronto for US and Canadian markets.
This headquarters choice remains open as it is justified by their easy access to market. 1. Major Global Human Resource Management Functions Czinkota et al (2002), Francesco ; Gold (2005) and Mello (2006) sustain that IHRM has responsibility for five functional areas. In fact, multicultural organizations have two general human resource objectives: The first one is the recruitment and retention of a workforce made of the best people available. The second objective is to increase the effectiveness of the workforce. This one depends to a great extent on achieving the first one. Competent managers or workers are likely to perform at a more effective level if proper attention is given to the factors that motivate them. To attain the two major objectives, the activities and skills needed are:
A. Personnel planning and staffing, the assessment of personnel needs. This function is known as “recruitment and selection”. B. Personnel training to achieve a perfect fit between the employee and the assignment. This function is defined as “training and development”. C. Performance evaluation on a regular basis. This function is called “personnel performance evaluation”. D. Personnel compensation according to employees’ effectiveness. This function is known as “compensation and benefits”. E. An understanding of labor management relations in terms of how the two groups view each other and how their respective power positions are established. This function is called “labor relations”.
Of course, there are other less important functions such as salaries taxation in host countries and repatriation of benefits, school and religious activities/churches organization for expatriates’ children, spouses, establishment of welfare activities etc… Important remark: The five functions of international human resource management show, once more, that choosing an HRM approach (among the four) is not an easy task and may even become very complex. That is why I recommend that each market region be handled according to its own specific cultural characteristics. Flexibility will prevail always.
For example, the concept of labor relations varies greatly in different parts of the world. So does the concept of compensation and benefits practices. Therefore, managers may find it more effective to apply an ethnocentric approach in one region while applying polycentric, regiocentric or geocentric approach (es) in another region (other regions). According to Chong ; Park (2003), from international perspective and drawing upon Hofstede (1980 ;1993) model of cultural dimensions there are nine classical planning principles that can potentially provide useful broad guidelines for managers engaged in international planning, including workforce staffing planning: principle of the contribution to objectives, principle of primacy of planning, principle of efficiency of plans, principle of planning premises, principle of strategy and policy framework, principle of limiting factor, the commitment principle, principle of flexibility and principle of navigational change.
Hofstede’s dimensions are: power distance, uncertainty avoidance, masculinity, individualism and long-term orientation. Hempel (1998), Schuler & Rogovsky (1998) use these dimensions in exploring compensation theories. According to Francesco & Gold 2005, employees in international organizations are classified in one of the following three types: PCN-parent country national (same nationality as the firm country).
HCN-host country national (employee’s nationality is same as the location of the subsidiary). TCN- third country national (employee’s nationality is different from both firm’s and subsidiary’s). However, Briscoe 1995 argues that as IHRM staffing becomes increasingly more and more complex, these classifications do not cover all employees. For example, within EU9 workers of one country can work in other member countries without any work permit.
Searching for Global Executives and Regional Senior- Managers In recent years, many corporate decision makers and academics, including Czinkota et al 2002, have realized that finding effective global leaders and executives is not easy. A full of 29 of Fortune 500 firms surveyed had nowhere near enough global leaders and 56% said they had fewer than needed and 2/3 said that the global leaders in their companies had less capability than needed.
According to another survey of 1,200 midsize US multinationals with annual sales of $1billion or less conducted by International Business Magazine, senior executives seek managers who are culturally diverse but responsive to the direction of headquarters. Most western-based companies try to fill senior positions abroad by locals, using expatriates only in such specific projects as technology transfer.
However, the same companies send their middle managers clear messages that overseas operations are so important to corporate welfare that solid international experience is needed for advancement. Another difficulty lies in the fact that while major markets in Europe and in Asia possess deeper pools of managerial talent than ever before, many of these nationals prefer working for their domestic rather than for foreign firms. In particularly short supply are marketing managers-49% of the surveyed companies say “marketing manager” is the very hardest slot to fill. It is also especially hard to find people with cross-cultural experience and skills to make good “regional managers”.
In fact, very few global managers are born that way, that is, with an international childhood, a command of several languages, and an education from an institution with an international focus. In most of cases, they need and have to be trained and nurtured carefully. To make a business global, its leadership has to be able to: 1). See the world’s challenges and opportunities. 2). Think with an international mindset. 3). Act with fresh, global-centric behaviors; and 4). Mobilize a world-class team and company.
To achieve this, companies use different and various approaches of selection and recruitment. None of the approaches should be considered to be the best or the most recommendable/effective one. It is all a matter of feeling that a candidate is the right person at the right place. Anyway, international managers should know that recruitment for positions in a host country (for top positions) is one of the most difficult IHRM tasks. Once such a leader has been found, his/her retention is vital! That is why companies that spend time and money creating and training global talent naturally want to retain it as long as possible, by offering global opportunity, professional challenge, and a competitive compensation package. (Czinkota et al 2002, page: 477.
According to Harvey et al (2000)10, significant demands are imposed on corporate management of multinational corporations to develop a strategic orientation of their global human resource management systems. This strategic orientation, which should balance the need for both global stability and local flexibility, necessitates a more multicultural management membership. Developing a human resource system designated to identify, attract and retain an adequate complement of global managers who are capable of coordinating the global strategic efforts of the firm while at the same time controlling local host strategies is a daunting task.
The competency-based criteria are used to identify global manager candidate pools capable of executing an integrated global management system (Harvey et al 2000). Czinkota et al 2002 suggest that in addition to competence factors, which include technical knowledge, leadership ability, experience, past performance, area expertise and language, we should look also for adaptability that requires the candidate to be interested in overseas work, his/her relational abilities, cultural empathy, appreciation of new management styles, appreciation of environmental constraints and adaptability of his/her family. Personal characteristics are also important: age, education, sex, health, marital status/relations, and social acceptability.
Example of gender: There is growing evidence to suggest that women are making greater stride on the international front than ever before. According to a 1999 Global Relocation Survey, conducted by Windham International and National Foreign trade Council (of America) provides various measures of that trend. Expatriate women have reported numerous advantages to being female. Being highly visible (both internally and externally) has often been quoted as an advantage given that many such women are “firsts” for their companies. Foreign clients are curious about them, want to meet them, and remember them easily after the 1st encounter. (www.windhamint.com).
Francesco ; Gold (2005) sustain that global companies need also competent people in other non-executive positions for their subsidiaries. For example, they may need engineers. For example, a given firm will hire and use specialists in software and in computers. There are two possibilities: a. filling all (or part of) subsidiaries management or specialized positions with nationals or b. hiring entry-level managers and specialists who have lived abroad or were born and educated abroad and acquired cross-cultural skills for the region. Companies may fetch from the foreign affairs and diplomatic departments or corps.
They concur with Czinkota et al 2002 when he argues that the location and the nationality of candidates for a particular job are the key issues in recruitment. A decision will have to be made to recruit within the company or to rely on external talent. Similarly, a decision will have to be made whether to hire or promote locally or use expatriates (or expats); that is, parent-country nationals or third-country nationals (citizens of countries other than the home or host country). All may depend on environmental constraints on the legal, cultural, political and/or economic host front.
Quelch ; Bloom (1999)11 determine that the advantages of appointing a national of headquarters country in an overseas post as the expatriate: Knows the company’s products and culture, relates easily and efficiently to corporate headquarters; speaks the verbal and cultural language, has technical or business skills not available locally (in host country), may have special transferable capabilities, for example, opening operations in emerging markets; will protect and promote the interests of headquarters in international joint ventures and acquisitions requiring tight financial control; is unlikely to seal proprietary knowledge and set up competing business; does not put the country ahead of the company(unless she/he goes native); fits the company’s need to develop future leaders and general managers with international experience.
B. Disadvantages: Quelch ; Bloom (1999) add that the disadvantages of appointing an expat include: High costs-covering relocations, housing, education, hardship allowance (often exceeding 200% of the home country base). Black-outs: 25% of expats have to be called home easily. Brown-outs: another 30 to 50% stay but under-perform, leading to lost sales, low staff morale and a decline in local goodwill. Prolonged start-up and wind-down time: in a typical three-year assignment the first year is spent unpacking and the third year is spent in packing and positioning for the next move. A shortsighted focus: expats with a three year assignment tend to focus on the next career rather than on building the local company.
Difficulty in finding experienced managers willing to move because of spouse’s career, children’s schooling, or life-style and security concerns (for example, in Middle-Eastern countries). Expat’s concern: about negative out-of-sight, out-of-mind impact on career development. Re-entry problems: a high percentage of expats leave their companies because jobs with similar breadth of responsibility are either not available or not offered. Division of senior managers to overseas markets is difficult especially for similar companies that do not yet have a lock on their domestic markets. Czinkota et al (2005, page: 480).
We learn from different authors and academics, including Lewis (2004), Elashmawi (2001) and Morrison, Conaway & Borden (1994) that Asians value mostly harmony (of family and/or group), relationships, seniority, authority and reputation. We also found that Chinese are quite everywhere (in mainland, Taiwan, Singapore, Hong-Kong, Thailand and Malaysia). I advise that the Asian subsidiary headquarters be located in Hong-Kong, mostly because Hong-Kong is one of the Asian cities having accumulated profound Western influences and cultural values, where Western-style churches, schools and kitchen and entertainment are available, in addition to other religions temples and mosques. Any firm has still options of opening sales offices in New Delhi, Tokyo, Jakarta, Singapore, Shangai, Macao, Kuala Lumpur, Bangkok, Manila, etc.
To reduce probabilities of cultural clashes between the firm and its Asian counterpart firms, the Senior Manager of the Asian headquarters should be fully versed in Asian cultures. It is recommended this individual is a male, over 45 years old, married, speaking either Mandarin or Cantonese (preferably Mandarin). This man should have global marketing skills but mostly, he must be used to ascriptive culture and to collectivist values.
He will need to negotiate and deal with Chinese, Koreans and Indonesians, who will consider testing him on all those Asian cultural values (Huo, Huang, and Napier (2002). Of course, he will require utilizing various other connections when negotiating with Japanese, Singaporeans, Taiwanese, Thais, etc. However, his job will be much easier if he can understand and master all main Asian cultural values and he must respect all of them.