Global HRM Class 20 10 29 Sang Hoon Han PhD Candidate CPA Department of Management and Human Resources Fisher College of Business The Ohio State University Global Expansion of Business 2 Global Expansion of Business 3 Global Expansion of Business 1940s The first McDonald s drive in opened in San Bernardino California 1961 1975 Standardization and expansion Debut of Big Mac double arch M logo 1980s 1990s Global dominance and diverse menu Broader customer base more sales opportunities Yet how will global expansion of business affect HRM 4 Overview of Managing Change Global HR Global Expanding A typical change that many companies and employees face Billions of new customers New opportunity Can operate with lower labor costs Constant production Teams with members in different time zones can work around the clock HRM in a Global Environment 5 The Context of Global HRM Many organizations now operate across a number of different countries All HRM functions adapted to the international setting Labor regulations workforce quantity and quality etc Two added complexities compared to domestic HRM Must choose a mixture of international employees conditions Must decide the extent of adaptation to local The extent to which HRM practices should be adapted to local conditions 6 Test your knowledge Which of the following statements correctly reflects a challenge in global HRM that involves labor regulations workforce quality and employee mixture A Labor regulations are irrelevant when hiring only expatriates B A diverse workforce made up solely of parent country employees ensures compliance with all local laws C Understanding local labor regulations is essential for hiring a balanced mix of host and parent country employees while ensuring quality D Workforce quality is less important than regulatory compliance in E Companies can standardize their HRM practices without considering 7 every international market local workforce dynamics Multinational Strategy Organizations can take different approaches to how they manage their employees across different subsidiaries Ethnocentric Polycentric Geocentric 8 Ethnocentric Approach This strategy believes that the best work approaches and practices are those of the home country All aspects of HRM for managers and technical workers tend to follow the parent organization s home country HRM practices Benefits Consistency Economies of scale 9 Ethnocentric Approach CEO of BMW of North America Ludwig Willisch Bernhard Kuhnt Sebastian Mackensen 10 Ethnocentric Approach CEO of BMW Group Region China Karsten Engel Jochen Goller Olaf Kastner 11 Ethnocentric approach in BMW R D center Forschungs und Innovationszentrum FIZ was established in Munich in 1990 The FIZ in Munich takes technological lead and exercises tight control over the R D sites located abroad Ethnocentric approach in ASML Advanced Semiconductor Materials Lithography 1984 Dutch multinational corporation founded in Strong control of headquarters in Netherlands over the R D sites located abroad Ethnocentric approach in Walmart Headquarters Arkansas U S 11 000 stores in 27 countries globally Storage like retail shops Cost minimization business strategy Low cost private brands Same approach all around the world Ethnocentric approach in Walmart In 2006 retreated from Germany Local customers were not used to Storage like retail shops Cost minimization business strategy Low cost private brands Ethnocentric approach in BestBuy Ethnocentric approach in Hope Depot Polycentric Approach This strategy views that the managers in the host country know the best work approaches and practices Firms treat each country level organization separately for HRM purposes and adopt localized HRM practices Benefits Alignment with local contexts Fewer language and cultural barriers Lower cost e g lower local labor costs Polycentric Approach in Toyota Polycentric Approach in Toyota Steve St Angelo Jim Lentz Toyota Latin American head CEO of Toyota NA Geocentric Approach Firms take a world oriented view that focuses on using the best approaches and people from around the globe Best people from anywhere Recruit and select employee level worldwide Assign the best managers to international assignments regardless of nationality Best business strategy technique from anywhere Geocentric Approach McKinsey Kevin Sneader Born in UK 1989 joined the London office Worked in Beijing Paris Hong Kong Washington DC Been managing partner of UK and Ireland division and chairman of Asia pacific division Geocentric Approach McKinsey Bob Sternfel has worked with colleagues in nearly all of our 130 offices around the world Geocentric Approach McKinsey Global HRM Strategies and Types of Employees Ethnocentric Parent country nationals PCNs Polycentric Host country nationals HCNs Geocentric Combinations of PCNs HCNs and third country nationals TCNs 25 Types of Employees Parent country nationals PCNs employees from the country in which the organization is based Headquarters e g Japanese engineers at Honda Marysville Ohio U S Host country nationals HCNs employees from the country in which the subsidiary is based e g American salespeople at Honda dealerships in the U S Third country nationals TCNs employees who are working in a different country i e Not a PCN or TCN e g Indian tech experts at Samsung Semiconductor Austin TX USA 26 Test your knowledge A company which has its headquarters in India has branches in the United States A German manager works in a facility in the United States In this scenario India is the country and German is the country A B C D E parent third expatriate host host guest third first parent host 27 Advantages and Disadvantages of PCNs Advantages Familiarity with the parent organisation s goals objectivities policies and practices Technical and managerial competence Effective liaison and communication with parent country staff Disadvantages Difficulties in adapting to the foreign language and the socioeconomic political cultural and legal environment Excessive costs involved in selecting and developing expatriate managers Family adjustment problems Source Harzing and Van Ruysseveldt 2007 28 Advantages and Disadvantages of HCNs Advantages Familiarity with the socioeconomic political and legal environment and with business practices in the host country Lower costs incurred in hiring staff in comparison to PCNs and TCNs Provides opportunities for advancement and promotion to local nationals and increases their commitment and motivation
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