INTERNATIONAL HR

STRATEGIES
 CONTENTS

SR. TOPICS PAGE NO.

NO

1. INTERNATIONAL HRM 1

2. FACTORS AFFECTING GLOBAL HRM 9

3. HR MANAGEMENT CHALLENGES 20

4. ETHICAL ISSUES 28

5. INTERNATIONAL HR STRATEGIES USED 34

 1. INTERNATIONAL HRM

Global Human Resource Management is a process concerned broadly with recruiting of persons,
training them and putting them to the most productive usage. It is also concerned with
maintaining of congenial international industrial relations. It is the essential prerequisite for the
success of the international firm owning to its complexities.

Broadly defined, international human resource management (IHRM) is the process of procuring,
allocating, and effectively utilizing human resources in a multinational corporation. If the MNC
is simply exporting its products, with only a few small offices in foreign locations, then the task
of the international HR manager is relatively simple. However, in global firms human resource
managers must achieve two somewhat conflicting strategic objectives. First, they must integrate
human resource policies and practices across a number of subsidiaries in different countries so
that overall corporate objectives can be achieved. At the same time, the approach to HRM must
be sufficiently flexible to allow for significant differences in the type of HR policies and
practices that are most effective in different business and cultural settings.

1.1 Characteristics of International HR –

• International Human Resource Management (GHRM) -- the planning, selection, training,

employment, and evaluation of employees for global operations.
• GHR managers serve in an advisory or support role to line managers by providing
guidelines, searching, training, and evaluating employees.
• How a firm recruits, trains, and places skilled personnel in its worldwide value chains
sets it apart from competition. The combined knowledge, skills, and experiences of
employees are distinctive and provide myriad advantages to the firm’s operations
worldwide.
1.2 Regulatory Policies of International HR:

• Four major tasks of HRM

– Staffing policy.
– Management training and development.
– Performance appraisal.
– Compensation policy.

1.2.1 STAFFING POLICY:

a. Selecting individuals with requisite skills to do a particular job.

b. Tool for developing and promoting corporate culture.
c. Types of Staffing Policy
• Ethnocentric
• Polycentric
• Geocentric

1) Ethnocentric Policy:

• Key management positions filled by parent-country nationals.

• Best suited to international businesses.

 Advantages:

– Overcomes lack of qualified managers in host nation.

– Unified culture.
– Helps transfer core competencies.

 Disadvantages:

– Produces resentment in host country.

– Can lead to cultural myopia.
2) Polycentric Policy:

• Host-country nationals manage subsidiaries.

• Parent companies nationals hold key headquarter positions.
• Best suited to multi-domestic businesses.

 Advantages:

– Alleviates cultural myopia.

– Inexpensive to implement.
– Helps transfer core competencies.

 Disadvantages:

– Limits opportunity to gain experience of host country nationals outside their own
country.
– Can create gap between home and host country operations.

3) Geocentric Policy:

• Seek best people, regardless of nationality.

• Best suited to global and trans-national businesses.

 Advantages:

– Enables the firm to make best use of its human resources.

– Equips executives to work in a number of cultures.
– Helps build strong unifying culture and informal management network.

 Disadvantages:

– National immigration policies may limit implementation.

– Expensive to implement due to training and relocation.
– Compensation structure can be a problem.
The aim of the Human Resources Strategy is to support staff. This it will do by developing and
promoting good HR practice for the recruitment and development of high quality staff, by
effectively managing their performance and by providing appropriate rewards and flexible
opportunities that allow individuals to manage their own development.

Core Functions of International Human resources are:

A. Recruitment
B. Selection Process
C. Expatriates
D. Performance Appraisal
E. Training and Development
F. Compensation

Sources of Recruitment -

Sources of Recruitment
There are many different types of interviews. Once you are selected for an interview, you may
experience one or more of the situations described below. When you schedule an interview, try to
get as much information about whom you will be meeting. It is rare to have only one interview
prior to a job offer. Most employers will bring back a candidate a number of times to be sure a
potential employee will fit into the company culture.

MODERN TECHNIQUES AND SOURCES OF RECRUITMENT FOR GLOBAL

COMPANIES -

1) Walk-In -: The busy global organizations and the rapid changing companies do not find time
to perform various functions of recruitment. Therefore they advise the candidates to attend for an
interview directly and without a prior application on a specified date, time and at a specified
place.

2) Consult-In -: The busy and dynamic global companies encourage the potential job seekers to
approach them personally and consult them regarding the jobs. The international companies
select the suitable candidates from among such candidates though the selection process.

3) Head-Hunting -: The global companies request the professional organizations to search for
the best candidates particularly for the senior executive positions. The professional organizations
search for the most suitable candidates and advice the global company regarding the filling up of
the positions.

4) Body-Shopping -: Professional organizations and the hi-tech training institutes develop the
pool of human resources for possible employment. The prospective employers contact these
organizations to recruit the candidates. The body shoppers appoint people for their organization
and provide the required/specific employees to various organizations on request. In fact, body
shoppers collect fee/commission from the organizations and pay the salary/benefits to the
employees.

5) Business Alliance -: It is like acquisitions, mergers, and takeovers help in getting human
resources. In addition, the companies do also have alliances in sharing their human resources on
ad-hoc basis.
6) Tele-Recruitment -: The technological revolutions in telecommunication helped the
organizations to use internet as source of recruitment. Organizations advertise the job vacancies
though the World Wide Web internet. The job seekers send their application though e-mails or
internet websites.

STEPS IN THE SELECTION PROCESS -

Step 1: Preliminary Selection

Preliminary selection of applicants is often done by setting minimum standards for the job, and
communicating these standards to the employees, and agencies who help them recruit. The fact
that some potential applicants may not apply because of their inability to meet the minimum
requirements serves as an initial screening device.

Then, when reviewing resumes and application forms, firms are further able to screen out
unacceptable job candidates. At this point, firms can also assign priorities to the resumes so that
the most promising candidates may be seen first.

Step 2: Employment Tests

One way to ensure that selection decisions are based on objective data, is to use employment
tests. Employment tests provide firms with objective data for purposes of comparing applicants.
Examples of such tests include; paper and pencil test, manual dexterity and strength tests, and
simulation exercises.

Employment Tests: Validation

To be useful, employment test must be valid. Validity requires that the test scores relate to actual
job performance. Hence, the use of tests is not necessarily a simple process. Whereas a firm may
be inclined to use an "off-the-shelf" product, such a test may bear little resemblance to the job-
related tasks a successful applicant might be required to do. Before using a test, firms should
ensure that they are, in fact, valid. Tests must be validated on those jobs to which tests are being
applied and, tests must be validated for all groups to which tests are being applied.
Employment Tests: Reliability

Not only must employment test be valid, they must also be reliable. That is, employment tests
should yield consistent results. An employment test should give a similar score each time the
person takes the test (tests that rely on luck are not reliable).

Very often, paper and pencil tests are used to test knowledge. A firm could use a paper and pencil
knowledge test to ascertain an applicant's knowledge of computer programming skills or to test
whether or not an applicant understands government regulations governing an industry.
Generally, knowledge tests have good reliability, but their validity must be tested before they are
used.

A keyboarding test, testing an applicant's keyboarding speed and accuracy, is an example of a

manual dexterity or performance test. Performance tests measure the applicant's ability to
perform some part of the job for which applicants are to be hired. Often, there is an assumption
of validity insofar as the test includes a representative sample of the work the applicant may be
required to do. Firms must be cautious not to use tests that might discriminate against any
minority group.

An in-basket exercise, in which administrative activities are simulated and an applicant's abilities
to deal with these activities is evaluated, is one example of a simulation exercise.

Step 3: Selection Interview

Selecting the best candidate for the job is the #1 priority of the selection process. The
employment interview is conducted to learn more about the suitability of people under
consideration for a particular job and is one further obstacle for the applicant to overcome.

The interview is one further means of reducing the number of people who might be eligible for
the job. The selection interview proceeds in a series of stages. Initially, the interviewer needs to
be prepared. Part of this preparation includes deciding where to hold the interviews and which
type of interview to conduct. Preparation also includes carefully reading through and making
notes on the applicants' application forms and resumes. At this stage, interviewers should make
frequent reference to the job (job description) to compare the applicant's background with the
job's requirements. The preparatory stage also includes developing a series of job-related
questions. During the interview, the interviewer should have an outline of questions, on which to
take notes.

During the interview process itself, initially, the interviewer(s) should ensure the creation of
rapport between interviewer(s) and the interviewee. Next, the two parties can engage in the
exchange of information. Once the interview has been terminated, the interviewer(s) must set
aside some time to evaluate the notes they have taken during the process.

Step 4: Verification of References

Personal References

• Usually provided by friends or family.

• Objectivity and candor are questionable.

Employment References

• Differ from personal references.

• Discuss the applicant's work history.
• Questionable usefulness
o former employers are unlikely to be candid
• Useful primarily as confirmation of prior employment.
• Frequently omitted entirely from the selection process.

Employment References: the Telephone Inquiry

• Fast.
• Cheap.
• Voice inflections or hesitations to blunt questions may be very informative.
• Less than 22% seek negative information.
• Approx. 48% used to verify application information.
Step 5: Medical Evaluation

• Generally a health checklist

o health information
o accident information
• Occasionally the checklist is supplemented by a physical examination
• Rationale:
o employer may be entitled to lower health or life insurance rates for company-paid
insurance
o may be required by provincial or local health officials
o may be used to determine whether the applicant can handle physical or mental
stress
• Caution:
o a congenital health condition may be considered a disability failure to hire an
applicant due to a disability may be seen as discrimination against a qualified
applicant

Step 6: Supervisory Interview

Since the immediate supervisor is ultimately responsible for new workers, he or she should have
input into the hiring decision. The supervisor is better able to evaluate the applicant's technical
capabilities and is in a better position to answer the interviewee's job-related questions. Further,
the supervisor's personal commitment to the success of the new employee is higher if the
supervisor has played a role in the hiring decision.

Step 7: Realistic Job Preview

The realistic job preview involves showing the applicant(s) the job site in order to acquaint them
with the work setting, commonly used equipment, and prospective co-workers. The realistic job
preview is intended to prevent initial job dissatisfaction with a job by presenting a realistic view
of the job. Research shows that job turnover is lower when realistic job previews are used.
Step 8: Hiring Decision

The actual hiring of an applicant constitutes the end of the selection process. At this stage,
successful (as well as unsuccessful) applicants must be notified of the firm's decision. Since
money and effort has been spent on all applicants, the HR department may wish to consider even
the unsuccessful applicants for other openings in the organization.

The applications of unsuccessful applicants are often kept on file and the applications of
successful applicants will be retained in the employees' personnel files.

No matter what the form of the job offer, the principle is generally the same: do not make
promises or statements that you cannot or do not intend to keep. Such statements can lead to
expensive litigation if it is later decided to terminate the employee.

When a job offer is made, it should include the following information:

• Position offered.
• Location of the job.
• Salary (although sometimes salary must be negotiated before the applicant will accept).
• Benefits.
• Starting date.
• Any papers or information that should be brought on the first day of work.
• A date (or time) by which the applicant must respond to your job offer, so you can move
on to the next candidate if your first choice doesn't accept.
• Benefits.
• Starting date.
• Any papers or information that should be brought on the first day of work.
• A date (or time) by which the applicant must respond to your job offer, so you can move
on to the next candidate if your first choice doesn't accept.
• The interviewing process.
 • Did employment tests support or help the hiring decision? If not, maybe the firm will
have not the kinds of test it administering. Further the evaluation process should help the
firm decide if the time and cost involved in the testing is worth it.

EXPATRIATES

Global companies, after selecting the candidates place them on the jobs in various countries,
including the home country of the employee. But, the employees of the global companies are
also placed in foreign countries. Even those employees who are placed initially in their home
countries are sometimes transferred to various foreign countries. Thus the employees of global
companies mostly work and live in foreign countries and their family members also live in
foreign countries.

1.2.2 TRAINING AND DEVELOPMENT:

Training is an act of increasing the knowledge and skill of an employee for doing a particular
job.

Importance of Training and Development - It leads to

• Improved job knowledge and skills at all levels of the organization

• Improved morale of the human resource
• Improved profitability and more positive attitudes towards profit-orientation
• Improved relation between boss and subordinated
• Improved understanding of culture of various countries

Need for Training and Development for Global Jobs -

• To match employee specifications with the job requirement and organizational needs
• To achieve organizational viability and the transformation process
• To meet the challenges of technological advancement
• To understand the organizational complexity
 • To make the employee and his family members familiar with the language, customs,
traditions etc of the foreign country

1.2.3 PERFORMANCE APPRAISAL:

It is a method of evaluating employee behavior relating to expected work and behavior.

Appraising the employee performance on foreign jobs is a highly complicated task as
expectations of global company are multifarious.

Objectives - The objectives of performance appraisal are to create and maintain a satisfactory
level of performance, to contribute to the employee growth and development through training
and to guide the job changes with the help of continuous ranking.

Appraisers - The appraisers may be any person who has a thorough knowledge about the job
content, content to appraised, standards of content and the one who observes the employee while
performing a job. Typical Appraisers are:

• Supervisors
• Peers
• Subordinates
• Consultants
• Customers
• Users of Services

1.2.4 COMPENSATION:

It is the amount of remuneration paid to the employees.

Expatriate pay - It is mostly based on the balance sheet approach. Under the balance sheet
approach, the compensation package enables the expatriate employees in various countries to
maintain the same standard of living.

Gratuity - Expatriate employees are paid gratuity at a fixed rate for every year of completion of
services in the foreign country

Allowances - Expatriate employees are paid various allowances like car allowances, resettlement
allowances, housing allowances etc

Taxable - Some countries pay tax-free salary. Most of the countries pay taxable salary and
gratuity

Profit Sharing & ESOP -

The Multinational corporations in order to motivate the employees for higher performance
introduced a scheme of Profit Sharing. The Employee Stock Option allows the employees to
purchase the share of the company at a fixed and reduced rate

The advantages of stock ownership includes -

• The plan enables the MNCs to retain efficient employees with them.
• It encourages the employees to improve performance.
• This scheme establishes significance of team effort among employees.
• It increases employee involvement and Participation.
 2. FACTORS AFFECTING GLOBAL HRM

Managing human resources in different cultures, economies, and legal systems presents some
challenges. However, when well done, HR management pays dividends. A seven-year study in
Britain of over 100 foreign companies showed that good HR management, as well as other
factors, accounted for more of the variance in profitability and productivity than did technology,
or research and development.

The most common obstacles to effective HR management are cross-cultural adaptation, different
organizational/workforce values, differences in management style, and management turnover.
Doing business globally requires that adaptations be made to reflect these factors. It is crucial
that such concerns be seen as interrelated by managers and professionals as they do business and
establish operations globally. Figure 2.1 depicts the general considerations for HR managers with
global responsibilities. Each of those factors will be examined briefly.

POLITICA
L

LEGAL ECONOMI
C

CULTURA
L
Fig.2.1

2.1 Legal and Political Factors -

The nature and stability of political systems vary from country to country. U.S. firms are
accustomed to a relatively stable political system, and the same is true in many of the other
developed countries in Europe. Although presidents, prime ministers, premiers, governors,
senators, and representatives may change, the legal systems are well-established, and global
firms can depend on continuity and consistency.
However, in many other nations, the legal and political systems are turbulent. Some governments
regularly are overthrown by military coups. Others are ruled by dictators and despots who use
their power to require international firms to buy goods and services from host-country firms
owned or controlled by the rulers or the rulers’ families. In some parts of the world, one-party
rule has led to pervasive corruption, while in others there are so many parties those governments
changes constantly. Also, legal systems vary in character and stability, with business contracts
sometimes becoming unenforceable because of internal political factors.

International firms may have to decide strategically when to comply with certain laws and
regulations and when to ignore them because of operational or political reasons. Another issue
involves ethics. Because of restrictions imposed on U.S.-based firms through the Foreign
Corrupt Practices Act (FCPA), a fine line exists between paying “agent fees,” which is legal, and
bribery, which is illegal.

HR regulations and laws vary among countries in character and detail. In many Western
European countries, laws on labor unions and employment make it difficult to reduce the number
of workers because required payments to former employees can be very high.

Equal employment legislation exists to varying degrees. In some countries, laws address issues
such as employment discrimination and sexual harassment. In others, because of religious or
ethical differences, employment discrimination may be an accepted practice. All of these factors
reveal that it is crucial for HR professionals to conduct a comprehensive review of the political
environment and employment-related laws before beginning operations in a country. The role
and nature of labor unions should be a part of that review.

HR Perspective – The Legal and Political Environment of Unemployment in Europe

Europe cannot seem to shake its chronic unemployment. The unemployment rate has ranged
from almost 20% in Spain to over 10% in France—but it averages about 12%. Joblessness is
much higher in Europe than in the United States or Japan. Forecasts are that even with an
improvement in the economy and employment, unemployment at over 10% will continue in
European Union (EU) countries. Why?
Economists disagree about many matters, but not about unemployment. Generally they agree that
labor markets need to be flexible, but in European countries they are relatively rigid. Very
generous unemployment benefits, high minimum wages, strong unions, and unique (by U.S.
standards) laws dissuade employers from hiring more employees. For example, in Spain, a
permanent employee who is fired can get 45 days’ pay times the number of years he has been
with the company. It is a large liability, so few firms create more permanent jobs. Similar
legislation in other countries tends to keep those who have jobs at work, but the effect of the
protective legislation keeps employers from creating more jobs. Economists tell us that in the
long run, without such laws, firms that cut costs and become more productive create more jobs
because productive industries tend to expand.

The pressure of world competition that is forcing painful reform is not popular in Europe. Many
Europeans are crying “enough,” and questioning how quickly the European economies can
transform themselves into the Anglo-Saxon model of capitalism. That formula - high
productivity, low jobless rates, and a minimal social safety net – is not typical in most Western
European countries. For example, a recent French poll found that two-thirds of the French people
prefer their rich benefits and high unemployment to America’s approach of lower unemployment
and limited social welfare benefits. Of course, elected politicians tend to follow the wishes of
their constituents, bringing political and legal factors together—in this case, resulting in an
average of 12% unemployment. Europe cannot seem to shake its chronic unemployment. The
unemployment rate has ranged from almost 20% in Spain to over 10% in France—but it
averages about 12%. Joblessness is much higher in Europe than in the United States or Japan.

2.2 Economic Factors -

Economic factors affect the other three factors. Different countries have different economic
systems. Some even still operate with a modified version of communism, which has essentially
failed. For example, in China communism is the official economic approach. But as the
government attempts to move to a more mixed model, it is using unemployment and layoffs to
reduce government enterprises bloated with too many workers.
Many lesser-developed nations are receptive to foreign investment in order to create jobs for
their growing populations. Global firms often obtain significantly cheaper labor rates in these
countries than they do in Western Europe, Japan, and the United States. However, whether firms
can realize significant profits in developing nations may be determined by currency fluctuations
and restrictions on transfer of earnings. Also, political instability can lead to situations in which
the assets of foreign firms are seized. In addition, nations with weak economies may not be able
to invest in maintaining and upgrading the necessary elements of their infrastructures, such as
roads, electric power, schools, and telecommunications. The absence of good infrastructures may
make it more difficult to convince managers from the United States or Japan to take assignments
overseas. Economic conditions vary greatly. Cost of living is a major economic consideration for
global corporations.

In many developed countries, especially in Europe, unemployment has grown, but employment
restrictions and wage levels remain high. Consequently, many European firms are transferring
jobs to lower-wage countries, as Mercedes-Benz did at its Alabama plant. In addition, both
personal and corporate tax rates are quite high. These factors all must be evaluated as part of the
process of deciding whether to begin or purchase operations in foreign countries.

2.3. Cultural Factors -

Cultural forces represent another important concern affecting international HR management.

Culture is composed of the societal forces affecting the values, beliefs, and actions of a distinct
group of people. Cultural differences certainly exist between nations, but significant cultural
differences exist within countries also. One only has to look at the conflicts caused by religion or
ethnicity in Central Europe and other parts of the world to see the importance of culture on
international organizations. Getting individuals from different ethnic or tribal backgrounds
working together may be difficult in some parts of the world. Culture can lead to ethical
differences among countries.

One widely used way to classify and compare cultures has been developed by Geert Hofstede, a
Dutch scholar and researcher. Hofstede conducted research on over 100,000 IBM employees in
53 countries, and he identified five dimensions useful in identifying and comparing culture. A
review of each of those dimensions follows.

POWER DISTANCE - The dimension of power distance refers to the inequality among the
people of a nation. In countries such as Germany, the Netherlands, and the United States, there is
a smaller power distance—which means there is less inequality—than in such countries as
France, Indonesia, Russia, and China.

As power distance increases, there are greater status and authority differences between superiors
and subordinates. One way in which differences on this dimension affect HR activities is that the
reactions to management authority differ among cultures. A more autocratic approach to
managing is more common in most other countries, while in the United States there is a bit more
use of participatory management.

INDIVIDUALISM - Another dimension of culture identified by Hofstede is individualism,

which is the extent to which people in a country prefer to act as individuals instead of members
of groups. On this dimension, people in Asian countries tend to be less individualistic and more
group-oriented, whereas those in the United States score the highest in individualism. An
implication of these differences is that more collective action and less individual competition is
likely in those countries that deemphasize individualism.

MASCULINITY/FEMININITY - The cultural dimension masculinity/femininity refers to the

degree to which “masculine” values prevail over “feminine” values. Masculine values identified
by Hofstede were assertiveness, performance orientation, success, and competitiveness, whereas
feminine values included quality of life, close personal relationships, and caring. Respondents
from Japan had the highest masculinity scores, while those from the Netherlands had more
femininity-oriented values. Differences on this dimension may be tied to the role of women in
the culture. Considering the different roles of women and what is “acceptable” for women in the
United States, Saudi Arabia, Japan, and Mexico suggests how this dimension might affect the
assignment of women expatriates to managerial jobs in the various countries.
UNCERTAINTY AVOIDANCE - The dimension of uncertainty avoidance refers to the
preference of people in a country for structured rather than unstructured situations. A structured
situation is one in which rules can be established and there are clear guides on how people are
expected to act. Nations high on this factor, such as Japan, France, and Russia, tend to be more
resistant to change and more rigid. In contrast, people in places such as Hong Kong, the United
States, and Indonesia tend to have more “business energy” and to be more flexible.

A logical use of differences on this factor is to anticipate how people in different countries will
react to changes instituted in organizations. In more flexible cultures, what is less certain may be
more intriguing and challenging, which may lead to greater entrepreneurship and risk taking than
in the more “rigid” countries.

LONG-TERM ORIENTATION - The dimension of long-term orientation refers to values

people hold that emphasize the future, as opposed to short-term values, which focus on the
present and the past. Long-term values include thrift and persistence, while short-term values
include respecting tradition and fulfilling social obligations. People scoring the highest on long-
term orientation were China and Hong Kong, while people in Russia, the United States, and
France tended to have more short-term orientation.

Differences in many other facets of culture could be discussed. But it is enough to recognize that
international HR managers and professionals must recognize that cultural dimensions differ from
country to country and even within countries. Therefore, the HR activities appropriate in one
culture or country may have to be altered to fit appropriately into another culture or country.
WORK CULTURE OF MAJOR ECONOMIES -

1) Major Japanese national cultural characteristics and management practices-

National Culture

• Collectivism: group-orientation, a strong sense of community, loyalty to group

• Masculine: competitive, ambitious
• Endurance: the way of warrior, acceptance of hardship without complain
• Indebtedness: a strong sense of duty and obligation
• Absence of horizontal social grouping: vertical stratification by institution or group
• Observance of social status: deference to seniors, status clearly signaled in social
interaction
• Harmony: preference for consensus over conflict
• Avoidance of loss of face
• High uncertainty avoidance

HRM and other employee related values and practices

• Enterprise-based trade unions, cooperative relationship between employees and

company, avoidance of open conflict
• Emotional and dependent relation between company and employees
• Ringi method: collective decision making
• Quality circles
• Implicit discreet performance appraisal
• Teamwork: multi-skill work teams, team appraisal and reward
• Nenko: life-time (or long term) employment for regular core employees
• Seniority-based pay and promotion
• Process-oriented
• A strong sense of obligation to colleagues and supervisors
• Discrimination against women
 • Employee-oriented leadership style
• Job-rotation, job-flexibility
• Employee loyalty and long-term commitment to company

2) Major American national cultural characteristics and management practices

National Culture

• Highly individualistic: self-focused, preference to act as individual rather than as

members of group, yet can be collectivist in face of a common threat
• Small power distance: egalitarian, tend not to treat people differently even when there
are great differences in age or social standing
• Masculine: ambitious, competitive, goal-oriented, achievers
• Low uncertainty avoidance, risk-takers, entrepreneurial
• Low context: directness, expressive in communication, do not talk around things, tend
to say exactly what they mean
• Open: friendly, informal
• Ethnocentric: believe their culture and value are superior to all others
• Future-oriented: strong belief that present ways of doing things in evidently are to be
replaced by even better ways
• Readiness to change: try new things, a predisposition to believe that new is good
• ‘can-do’ attitude

HRM and other employee related values and practices

• Prefer participative leadership style

• Superiors are approachable
• Subordinates are willing to question authority
• Status based on how well people perform their functions
• Performance-oriented
• Promotion and reward based on merits as opposed to status, hierarchy, or gender
 • Live more easily with uncertain, skeptical about rules and regulations
• Value punctuality and keep appointments and calendars
• Much more concerned with their own careers and personal success than about the
welfare of the organisation or the group
• Value success and profit
• Acceptance conflict
• System-driven: conviction that all problems can be solved, system and energy will
overcome any obstacles
• Proactive take initiative, aim high, ‘go for it’
• Result-oriented
• Professional educated and well trained
• Strong devotion to managerial prerogative
• Hire and fir policies
• Communications skill, informal, direct, explicit, often aggressive
• Emphasis on entrepreneurship and innovation
• Legalist approach to contracts
• Informality yet a preference for written rules and procedures
• Dislike of trade unions

3) Major Indian national cultural characteristics and management practices

National Culture

• Collectivism, clannish, community conscious, large in-group includes extended

family, clan, and friends
• Low concern for privacy
• Large power distance, obedience to seniors and respect for people in position of
power, all wisdom comes from elders
• Resourcefulness, hard work, tenacity, ability to cope with diversity
• Risk aversion, low tolerance for ambiguity and uncertainty
 • Emotional dependence
• Rigid social stratification, caste system
• Acceptance of status quo, preference for conformity
• Disciplined, self-resistant, yet emotional and display their emotions in public
• Honest, trustworthy, yet considerable corruption in public sector
• Law-abiding but prepared to bend the rules for friends and relatives
• Ambitious and materialistic
• High rate of illiteracy, especially among lower caste people and in rural areas

HRM and other employee related values and practices

• Entrepreneurial
• Preference for paternalistic and authoritative leadership
• Prefer to work under supervision
• Contractual relations with the workplace, in-group does not include the workplace,
low level of commitment
• Manual workers are unskilled and uneducated
• Well educated and highly skilled managers and high-ranking staff
• National and plant based trade unions, confrontational industrial relations
• Pro-workers labour legislation
• Strong sense of responsibility
• Centralised decision making, little or no job autonomy for middle and low ranking
staff and shop floor
• Low level of formulisation and use of written instructions and rules and regulations
especially at the shop floor mainly because of workers illiteracy
• Differentiated reward systems and control strategies for white collar and manual
workers.

4) Major British national cultural characteristics and management practises

National Culture

• Individualism: antimony, liberty, love of privacy, yet caring for community

• Small power distance, yet deference and acceptance of inequality, class conscious
• Aggressive, yet caring and friendly
• Reserve: shy, self-control, self-discipline
• High ideals of conduct both for themselves and for others
• Conservatism: dislike of change and uncertainty, aversion to risk, lack of ambition
• Tenacity: resilience, resourcefulness
• Pragmatic: social-political realism, compromise, flexible unwritten constitution, common
law, prepared to bend the law when it does not suit them
• Chauvinism: dislike of foreigners, xenophobia
• Honesty, trustworthy, and trusting
• Past-orientation: love of age-old traditions, the present is a culmination of past
developments, ambivalence towards new technology
• Dislike of open conflict

HRM and other employee related values and practices

• Preference to have freedom to choose their own approach, using individual skills and
abilities
• Job satisfaction derived from personal sense of achievement and superiors recognition of
individual contributions
• Leadership style: persuasive
• Expectation from subordinate: commitment, initiative, ownership, responsibility, honesty
• Deference to authority
• Comfortable with minimal amount of rules and procedure
• Flexibility yet a preference to work according to the rules
• Well educated, skilled and , in certain circumstances, adaptable workforces
 • Compliance with legislation
• Short-term perspective: low expenditure on training and low employee productivity rates
compared to many leading economies
• Some evidence of discrimination among employees and job applicants on the ground of
age, gender or ethnicity, ‘glass ceiling’
• Formal in communication and interpersonal relationships at work
• Ethnocentric attitudes towards foreign counterparty
• Conservative approach towards new technology
• Contractual, non-emotional relationship with the workplace
• Strong trade union tradition
• Pragmatic trade unions: fight for better pay and working conditions not ideologically-
based class struggle against managers, absence of serious trade union challenges to
managements prerogative and right to manage
• Class distinctions reflection within the workplace in form of hostile them-and-us-attitude
• Expectation of governmental involvement in employment relationships

HR Perspective – Cultural and Ethical Differences

Why do negotiators from some countries get loud, angry, emotional, and gesture wildly in
business negotiations, while others sit quietly, smile, and make sure they get what they want? It
is, in many cases, differences in culture. Culture is in one sense a shared set of meanings, values,
and common views on relations with other people, right and wrong, etc. These differences lead
to different ideas as to what constitutes ethical business behavior. For example:

In one Eastern European country, obtaining a new telephone line in less than three months
requires making a cash payment, referred to as an “expediting charge” (a bribe in most places),
to the local manager of the telephone office. All parties to the deal know that the manager will
retain the cash, but a telephone is essential for doing business internationally.
 Foreign firms wishing to do business in one Asian Pacific country must hire a “business
representative” in order to obtain appropriate licenses and operating permits. In this country, it is
well known that the two best representatives are relatives of the head of the country. It also is
common to give the representative 10%—20% ownership in the business as a “gift” for promptly
completing the licensing process.

A U.S.-based firm engaged in such practices could be violating the Foreign Corrupt Practices Act
(FCPA), which prohibits U.S. firms from engaging in bribery and other practices in foreign
countries that would be illegal in the United States. Competing firms from other countries are not
bound by similar restrictions. However, the law reflects the U.S. culture’s view on the ethics of
bribery.

Specifically relating to HR management, another major concern is the use of child labor and
prison labor. According to one estimate, over 80 million children under age 18 are working in
factories and fields for international companies. In some countries, people convicted of “political
crimes” are forced to work in factories that manufacture goods to be sold to U.S. and European
firms. In those countries, prison labor also competes with other labor sources at lower wage
rates.

When stories of these situations have been publicized, customer boycotts and news media
coverage have focused unfavorable attention on the companies involved. To counter such
concerns, firms such as Levi Strauss and Starbuck’s Coffee, among others, have established
minimum standards that must be met by all operations of their subcontractors and suppliers.
Unfortunately, other firms have not been as aggressive.
 3. HR MANAGEMENT CHALLENGES

The environment faced by HR management is a challenging one; changes are occurring rapidly
across a wide range of issues. A study by the Hudson Institute, entitled Workforce 2020, has
highlighted some of the most important workforce issues. From that and other sources, it appears
that the most prevalent challenges facing HR management are as follows:

• Economic and technological change

• Workforce availability and quality concerns
• Demographics and diversity issues
• Organizational restructuring

3.1 OCCUPATIONAL SHIFTS -

Projections of the growth and the decline in jobs, illustrates the economic and employment shifts
currently occurring. It is interesting to note that most of the fastest-growing occupations
percentagewise in 2002-03 were related to information technology or health care. The increase in
the technology jobs was due to the rapid increase in the use of information technology, such as
databases, system design and analysis, and desktop publishing.

HRM in the new economy ought to be human centric with a strong technology focus. We need to
leverage on emerging technologies to better satisfy the wants and needs of the knowledge
workers, and in the process, build a competitive advantage that lasts.

Attraction and retention of talent have become the main external influence on Nokia’s human
resources strategies, as other companies also strive to be the employer of choice.
3.2 GLOBAL COMPETITION -

One major factor affecting these shifts is the globalization of economic forces. As seen the past
few years, the collapse of Asian economies had significant effects on many organizations.

E.g. nokia was in pressure because of thriving of and stiff competition by other companies like
Siemens, Samsung and sony-ericsson. And as a result of it their market share collapsed from
34% to 31% in US and Europe. But nokia still made it to profits because of Indian and Asian
markets. This now made outbreak of a war between companies i.e. competitors will approach
high profile employees in other’s organization and may get that employee. Thus, causing the
later company lose a valuable asset.

This is particularly true with more highly skilled, technical jobs in technology-driven industries.
As a result, these export-driven jobs pay wages averaging 25% higher than most other
manufacturing jobs. On the other hand, the less-skilled manufacturing assembly jobs have been
shifting from the higher-wage, developed economies in the United States and Western Europe to
developing countries in Eastern Europe, China, Thailand, Mexico, India and the Philippines. Due
to the increase in information technology, global linkages are now more extensive and
production and transportation can be coordinated worldwide.

3.3 WORKFORCE AVAILABILITY AND QUALITY

In many parts of the world today, significant workforce shortages exist due to an inadequate
supply of workers with the skills needed to perform the jobs being added. In the last several
years news reports have regularly described tight labor markets with unemployment. Also,
continuously there are reports by industries and companies facing shortages of qualified,
experienced workers. Jobs with extreme supply shortages for several years have included
specialized information systems technicians, physical therapists, plumbers, air conditioning
repair technicians, and many others. Consequently, HR professionals have faced greater
pressures to recruit and train workers.

Many occupational groups and industries will require more educated workers in the coming
years. The number of jobs requiring advanced knowledge is expected to grow at a much more
rapid rate than the number of other jobs. This growth means that people without high school
diplomas or appropriate college degrees increasingly will be at a disadvantage, as their
employment opportunities are confined to the lowest-paying service jobs. In short, there is a
growing gap between the knowledge and skills required by many jobs and those possessed by
employees and applicants. Several different studies and projections all point to the likelihood that
employers in many industries will have difficulties obtaining sufficiently educated and trained
workers.

Unless major efforts are made to improve educational systems, employers will be unable to find
enough qualified workers for the growing number of “knowledge jobs.”

A number of employers are addressing the deficiencies that many employees have in basic
literacy and mathematical skills by administering basic skills assessments to employees. Then
they conduct basic mathematics and English skills training classes at workplace sites for
employees with deficiencies. Some employers also sponsor programs for employees and their
family members to aid them in obtaining general equivalency diplomas. To address the skills
deficiencies, HR management must do the following:

• Assess more accurately the knowledge and skills of existing employees, as well as the
knowledge and skills needed for specific jobs.
• Make training for future jobs and skills available for employees at all levels, not just
managers and professionals.
• Increase the usage of new training methods, such as interactive videos, individualized
computer training, and via the Internet.
• Become active partners with public school systems to aid in upgrading the knowledge
and skills of high school graduates.

Case - NCR Ltd. In Scotland:

Around 1980 NCR manufacturer and exporter of “self-service systems” looked into future and
found that half of the present employees will be present in company after 20 years that is in 21 st
century. The company also found that the requirement of skills to achieve jobs was increasing.
Also, the unskilled had disappeared completely and semi-skilled were diminishing real fast.
Also, the technological advancements needed capable men to handle work to achieve efficiency
and effectiveness.

So, NCR Ltd. challenged employees to gain degree education through any institution, in any
language and in from stream. And that company would pay for them and would also give leave
for that period. The only condition was they should serve company after completion and
education should be taken only in the field which company deals in.

Effect of this was that,

a) There was increase in knowledge and skills of employees.

b) Programme helped in building employees’ trust and loyalty.

3.4 GROWTH IN CONTINGENT WORKFORCE -

In the past, temporary workers were used for vacation relief, maternity leave, or workload peaks.
Today “contingent workers” (temporary workers, independent contractors, leased employees,
and part-timers) represent over 20% of the workforce. Many employers operate with a core
group of regular employees with critical skills and then expand and contract the workforce
through the use of contingent workers.

This practice requires determining staffing needs and deciding in advance which employees or
positions should form the “core” and which should be more fluid. Instead of hiring regular
workers when work piles up and then firing them when the work is finished, the company relies
more on temporary workers and independent contractors. Productivity is measured in output per
hour. Thus, if employees are paid only when they are working, overall productivity increases.

Another reason for the growth in contingent workers is the reduced legal liability faced by
employers. As more and more employment-related lawsuits have been filed, some employers
have become more wary about adding employees. Instead, by using contract workers supplied by
others, they face fewer employment legal issues regarding selection, discrimination, benefits,
discipline, and termination.

3.5 DEMOGRAPHICS AND DIVERSITY

The workforce has been changing dramatically. It is more diverse racially, women are in the
labor force in much greater numbers than ever before, and the average age of the workforce is
now considerably older than before. As a result of these demographic shifts, HR management in
organizations has had to adapt to a more varied labor force both externally and internally. The
three most prominent dimensions of the demographic shifts affecting organizations are
highlighted next.

3.6 RACIAL/ETHNIC/RELIGIOUS DIVERSITY

The Asian and Hispanic labor forces are expected to increase faster than the African-American
labor force. The importance of all these shifts is that HR professionals must ensure that diverse
groups are managed and treated equitably in organizations. Also, HR professionals will have to
develop diversity-oriented training so that all employees, regardless of background and heritage,
can succeed in workplaces free from discrimination and inappropriate behaviors. It also means
that more attention will have to be given to recruiting, staffing, and promoting individuals
without regard to their racial/ethnic heritage, so that equal employment results for all.

3.7 AGING OF THE WORKFORCE

Most of the developed countries are experiencing an aging of their populations—including

Australia, Japan, most European countries, and the United States. In these countries, the median
age will continue to increase. The aging of the population also is reflected in the occupational
shifts noted previously. The growth in medically related jobs will be due primarily to providing
care to older persons who will live longer and need greater medical care. Taken together, this
aging issue means that HR professionals will continue to face significant staffing difficulties.
Efforts to attract older workers through the use of part-time and flexible staffing will increase.
HR will face significant challenges in replacing them with workers having the capabilities and
work ethic that characterize many older workers. For HR management, elder care will grow as a
major HR issue. More workers will have primary care responsibilities for aging.

3.8 BALANCING WORK AND FAMILY

For many workers, balancing the demands of family and work is a significant challenge. While
this balancing has always been a concern, the growth in the number of working women and dual-
career couples has resulted in greater tensions for many workers, families and households today
can be described as follows:

The decline of the traditional family and the increasing numbers of dual career couples and
working single parents place more stress on employees to balance family and work. For instance,
many employees are less willing than in the past to accept relocations and transfers if it means
sacrificing family or leisure time. Organizations that do get employees to relocate often must
offer employment assistance for spouses. Such assistance can include contacting other
employers, providing counseling and assistance in resume development, and hiring employment
search firms to assist the relocated spouse. Additionally, balancing work and family concerns has
particular career implications for women, because women more than men tend to interrupt
careers for child rearing.

To respond to these concerns employers are facing growing pressures to provide “family-
friendly” policies and benefits. The assistance given by employers ranges from maintaining
references on child-care providers to establishing onsite child-care and elder-care facilities.

3.9 ORGANIZATIONAL RESTRUCTURING

Many organizations have restructured in the past few years in order to become more competitive.
Also, mergers and acquisitions of firms in the same industries have been made to ensure global
competitiveness. The “mega-mergers” in the banking, petroleum, and telecommunications
industries have been very visible, but mergers and acquisitions of firms in many other industries
have increased in recent years. As part of the organizational changes, many organizations have
“right sized” either by

• Eliminating layers of managers,

• Closing facilities,
• Merging with other organizations, or
• Out placing workers.

One of the challenges that HR management faces with organizational restructuring is dealing
with the human consequences of change. Where many large firms have cut jobs by reducing their
workforces, many smaller firms have continued to create jobs. This is particularly true in high
technology industries, such as software development and services industries. These
entrepreneurial firms are faced with growth, while trying to attract sufficient workers with
flexible capabilities and to conserve financial resources.

3.10 DECISION MAKING ON MERGERS, ACQUISITIONS, AND DOWNSIZING

In many industries today, organizations are merging with or acquiring other firms. The merger of
Chrysler and Daimler-Benz has had significant implications for the automobile industry. Many
other examples could be cited as well. In all of these mergers and acquisitions there are
numerous HR issues associated with combined organizational cultures and operations. If they are
viewed as strategic contributors, HR professionals will participate in the discussions prior to top
management making final decisions. For example, in a firm with 1,000 employees, the Vice-
President of Human Resources spends one week in any firm that is proposed for merger or
acquisition to determine if the “corporate cultures” of the two entities are compatible. Two
potential acquisitions that were viable financially were not made because he determined that the
organizations would not mesh well and that some talented employees in both organizations
probably would quit.

3.11 ATTRACTING AND RETAINING HUMAN RESOURCES

As strategic business contributors, HR professionals must ensure an adequate supply of people
with the capabilities needed to fill organizational jobs. Various experts on human capital have
predicted a skills shortage. Organizations would hurt their competitive edge unless more
investment is made in human capital. If that trend spreads as predicted, being able to attract
people to the organization with the requisite capabilities currently requires more planning and
creative implementation than in the past. For instance, at a computer software firm, growth is
being limited by shortages of programmers and systems analysts. The company plans to open a
new facility in another state so that a different labor market can be tapped, and the HR director
heads up the site-selection team.

To meet the staffing challenges, HR professionals are using a greater number of options.
Traditionally, work was done by people who were employees. Increasingly today, work is done
by independent contract workers, consultants, temporary workers, and others who are not
employees of organizations.

Developing policies, negotiating contracts, evaluating staffing suppliers, and monitoring work
performance of these non-employees requires a broader role than when all workers are
employees. But recruiting and selecting new employees is only part of the challenge. The HR
activities in organizations must be revised in order to retain employees. For every employee who
does not leave the organization for a new job elsewhere, that is one less employee who has to be
recruited from outside. Therefore, significant emphasis is being placed on keeping existing
employees and providing growth opportunities for them.
 4. ETHICAL ISSUES

Ethics, social responsibility of business and corporate governance have become hot issues in the
wake of a series of scandals reported from all over the world. It needs special attention because
multinationals operate in a large number of countries with varying standards of moral behaviors
and multicultural perceptions about what is right and what is wrong. Their workforce also
consists of high diversity with individuals having different values and beliefs. Their actions and
activities are also commented upon and attention from the media as well as national
governments.

As the issues faced by HR managers have increased in number and complexity, so have the
pressures and challenges of acting ethically. Ethical issues pose fundamental questions about
fairness, justice, truthfulness, and social responsibility. Concerns have been raised about the
ethical standards used by managers and employees, particularly those in business organizations.
It appears that the concerns are well-founded, if the results of one study of 1,300 employees and
managers in multiple industries are an indication. About 48% of those surveyed admit engaging
in unethical behavior at work. Some of the most frequently mentioned items were cheating on
expense accounts, paying or accepting bribes and kickbacks, forging signatures, and lying about
sick leave.

4.1 What is Ethics?

Ethics is the discipline that examines the moral standards by an individual or a corporate or a
society. Its explicit purpose is to determine whether the actions or activities of an individual or
corporate are within the framework of moral standards or value systems embedded in a particular
society. Different societies have a different moral standards and value systems according to their
own culture.

Ethics is a function of one’s consciousness. It is, therefore, beyond the boundaries of law. Some
activities may be legal but may not be ethical, although law represents the moral code or
standards practiced by a society or country to resolve conflicts and allow freedom to individuals
and groups to achieve their uniqueness, pursue their goals and live in peace. Ethics exists at the
individual level, organizational level, and at the societal level. It represents the practiced value
system. If ethics at the societal level is not strong, it affects the performance and ethical climate
of organizations, which in turn influences individual actions and approach to work and life.

In this context, the role of multinationals becomes interesting as different ethical climates may
exist in their various subsidiaries operating in different societies. This may create problems for
the parent company as actions of any one subsidiary may tarnish its image across the globe.
However, there are international norms and conventions from which their actions can also be
judged.

4.2 ETHICAL ISSUES & CORPORATE SOCIAL RESPONSIBILITY

Ethics and corporate social responsibility are differently interpreted, complex and controversial
subjects in the context of organizations which are operating internationally in diverse social,
economic, political, cultural and legal environments. Ethical issues and considerations arise in
particular when the business practices in the host country differ markedly from those in the home
country. Three types of “ethical responses“ have been identified:

Ethical relativism (the ethical standards in the host country should be followed),

Ethical absolutism (the ethical standards of the home country should be followed), and

Ethical universalism (this presumes that there is a universal ethical standard of right and wrong
which transcend cultural boundaries and that these must be followed by the organization
(distinction between morally wrong and culturally different.

Corporate Social Responsibility is basically about an organization promoting non-economic

objectives, i.e., instead of just focusing on maximizing value for shareholders, organization
(specifically business corporations) attempt to play the role of “good citizens“, balancing the
interests of shareholders with those of society at large. Corporate Social Responsibility can be a
complex issue at the domestic level, but at the international level it takes on a much larger
significance. Areas where organizations operating internationally can demonstrate their social
responsibility include, for example, observance of basic human rights, adoption of adequate
workplace working conditions and health and hygiene standards, payment of adequate wages and
salaries, equal employment opportunities, avoidance of child labor, adequate education and
training, allowing unionization and protection of the environment.

4.3 ETHICAL ISSUES FACING MULTINATIONALS –

The most common unethical practices business resort to include:

Manipulation of stock markets: In India, manipulation of stock market is not uncommon.

There are several investigations and a few brokerage firms and individuals have been prosecuted.
MNC’s generally avoid manipulation of capital markets.

Lobbying: Lobbying is the practice of influencing decisions made by government for the benefit
of its citizens (in groups or individually). It includes all attempts to influence legislators and
officials, whether by other legislators, constituents, or organized groups. A lobbyist is a person
who tries to influence legislation on behalf of a special interest or a member of a lobby.
Governments often define and regulate organized group lobbying. This is a tool of public
relations. Japanese spend millions of dollars in the US every year to bend rules in award of
contracts or to get sensitive information or restricted equipment more than other countries.

Fudging of accounts and balance sheet: It is very common in developing countries like India
and Indonesia to manipulate accounts to avoid taxes or manipulate share price before public
issues. However it was shocking when American corporate heavyweights Enron and World.com
were found manipulating accounts and balance sheets.

Product Piracy: Lax enforcement of intellectual property rights has resulted in large-scale
piracy of music and picture videos, software, fake drugs and other intellectual property capital in
China, India, Latin America and Eastern Europe. It is estimated that 30,000 shops in Shanghai
alone sell pirated videos. In a raid in Thailand, 44,000 bootleg tapes were recovered from one
shop alone. Here lax societal moral standards cause great loss to multinationals.
Surrogate and deceptive advertising: There are many ethical issues in advertising, including
violation of cultural norms and nudity, apart from false information ot customers. Many MNC’s
are not sensitive to these issues though they spend most on advertisement and promotion.

Discrimination in selection, compensation and promotion: In spite of equality laws in

different countries, companies still practice some bias in selection and other management
processes on the basis of gender, color, race and show ethnocentrism. Sexual harassment at
workplace is growing trend.

4.4 STEPS FOR ORGANIZATION TO BUILD ETHICAL BEHAVIOR –

Ethical issues and corporate social responsibility are closely related to the human resource
function in organizations which are operating internationally and in diverse contexts:

 Minimize the exposure of employees to corrupt conduct by assisting in the development,

publication, and implementation of appropriate codes of conduct.
 Ensure training programmes cover areas which are of ethical concern (e.g. bribery,
human rights, justice, and the common good).
 Align performance appraisal and compensation systems so that they support the ethical
stance taken.
 Be conversant with the type of requests that may be made of staff operating
internationally, and provide them the necessary training so that they have the requisite
negotiating skills to handle possible problem situations.
 Ensure that employees understand the difference between corrupt payments, gifts and
permissible facilitation payments.

It is not easy to build an ethical climate and accompany and it requires the top management’s
best effort.
4.5 CASE STUDY ON NESTLE: UNFAIR LABOR PRACTICES

Nestle was one of the biggest purchasers of cocoa from the Ivory Coast, a country in West
Africa. Most of the world’s cocoa production came from farms and plantations located in Ivory
Coast. Studies conducted by some of the major welfare organizations in the world like the
International Labor Organization, UNICEF and other independent agencies revealed that the
workers on these plantations lived and worked in poor conditions. They were paid minimal
wages and exploited by the land-owners. Most of the workers had been trafficked i.e. bought and
sold, making them practically slave labor. Nestle purchased cocoa from these farms despite its
awareness of the conditions of the laborers, thus becoming it a party to their exploitation.

Child labor was also employed on the plantations. UNICEF studies revealed that over 200,000
children were shipped to Ivory Coast and other cocoa producing countries in Western Africa
from neighboring countries like Mali and Burkina Faso, to work on the plantations, especially
during the harvesting of cocoa or coffee beans. The children were sometimes as young as nine
years and could not escape from the plantations to return to their homes.

A report released by the International Institute of Tropical Agriculture (IITA) also confirmed that
child labor was used extensively on plantations in Africa, from where Nestle sourced most of its
cocoa. The report – which surveyed 1,500 farms in Ivory Coast, Ghana, Nigeria, and Cameroon
– found that more than 200,000 children worked in hazardous conditions using machetes and
spraying pesticides and insecticides without the necessary protective equipment.

The labor was usually supplied to the plantations by labor broker, totally unrelated to the laborer.
The workers actually received only a very small proportion of the price paid for the Nestle
product by the final consumer. Nestle was aware of the exploitative labor practices used by its
suppliers and was also in a position to pressurize them to change, as it was a major buyer.
Besides the report of several credible organizations, public interest groups also sent several
petitions and representations to Nestle to stop buying bonded labor-tainted cocoa. However, the
company chose to ignore these petitions, and continued its purchases of cocoa from these
suppliers.

Nestle was also involved in union busting in some countries. For instance, when a group of 13
workers, working in a sub-contracting facility of Nestle in Thailand, organized themselves to
form a union, Nestle immediately cut the number of orders to that company and asked the
company to put the unionized workers on indefinite leave with half pay. The workers were
forced to quit, because of their lowered pay. In doing so, Nestle had clearly denied there workers
their right to organize themselves to better their interests.

Companies like Nestle made a public show of their support to social causes, in order to divert
attention from their irresponsible behavior elsewhere. Nestle set up the ‘Nestle Trust’ to support
social issues relating the children and aged. However, some people believed the company was
using these social causes for pure promotional purposes. Nestle has well laid out charters to
govern their social responsibility and behavior, but more often than not, these are only on paper.
 5. INTERNATIONAL HR STRATEGIES USED

Strategic Management refers to the process of Formulating, implementation and evaluating

business strategies to achieve organizational objectives. At the core strategic management
process is a team comprising the CEO aided by top executives. For example, the core team that
formulated and executed the recent strategic takeover of Corus by Tata Steel considered of Ratan
Tata, the CEO, and Muthuraman, MD. Tata Steel, Arunkumar Gandhi, Head of the M&A cell if
the Tata Group and Koushik Chatterjee, VP Finance, Tata Steel

International Human Resource Strategy refers to the process of developing practices,

programmes and policies that help achieve organizational objectives. What is essential is that
these programmes, policies and practices need to be aligned with organizational strategies.
Elaborating further, strategic human resource management considers the implications of business
strategy for all hr systems within the firm by translating company objectives into specific people
management systems. The specific approach and process utilized will vary from organization to
organization, but the key concept is consistent, that is, essentially all HR programmes and
policies are integrated within a larger framework helping achieve the firm’s objectives.

HR role in strategic management seems to be merely latitudinal but little in practice. Rarely in
HR executive consulted in vital decisions, such as mergers or acquisitions. This popular
perception, invites your attention towards a reality check

It is not that the HR manager himself/Herself formulates strategies. He or she will be the member
of a core team which formulates company strategies and ensures their implementation. To be
full-fledged strategic partners with senior management, HR executives should impel and guide
serious discussion of how the company should be organized to carry out its strategy. Four roles
of HR executives are relevant in this context.

First, HR should define an organization’s architecture. In other words, it should identify the
underlying model of the company’s way of doing business. More specifically, the architecture is
a judicious mix of structure, systems, rewards, processes, people, styles, skills and shared values.
After the architecture is defined it needs to be articulated explicitly. Without such clarity,
managers tend to become more myopic about how the company runs

Second, HR needs to be accountable for conducting an organizational audit. Audit helps identify
which components of the architecture should be changed in order to facilitate strategy execution

The third role of HR as a strategic partner is to identify methods for renovating the parts of the
organizational architecture that need it. In other words, HR manager should be assignees to take
the lead in proposing, creating, and debating best practice that can help implementing strategies.

Fourth and finally, HR must take stock of its own work and set clear priorities. At any given
time, the HR staff might have several initiatives in its sights, such as pay-for-performance, global
team work, and action-learning development experiences. But to be truly to business outcomes,
HR needs to join forces with line managers to continuously assess the impact and importance of
each one of these initiatives.

5.1 STRATEGIC HRM VERSUS CONVENTIONAL HRM -

Traditional HRM Strategic HRM

Responsibility of HRM Staff specialists Line managers
Partnerships with internal and
Focus Employee relations
external customers
Transactional, change
Role of HR
follower, and respondent
Initiatives Slow, reactive, fragmented Fast, proactive, integrated
Short, medium, long (as
Time horizon Short term
necessary)
Bureaucratic-roles, policies, Organic-flexible, whatever is
Control
procedures necessary to succeed
Tight division of labor, Broad, flexible, whatever is
Job Design
independence, specialization necessary to succeed
Key Investment Capital, products People, knowledge
Accountability Cost center Investment center
5.2 BARRIERS TO STRATEGIC HRM

Though strategic HRM looks convincing and essential, several barriers operate in the way of
organizations taking to strategic orientation of their HR functions. The first barrier is that most
organizations adopt a short-term mentality and focus on current performance. This is no surprise
since stakeholders, particularly shareholders, expect quick rewards and executives need to live
up to these expectations. Employees expect quick rewards based on their performance.

The second barrier relates to the inability of HR executives to think strategically. They are unable
to go beyond their area of operation. Their knowledge about general business functioning, their
awareness about technological advancements and their ability to convince colleagues in other
department is limited.

The third barrier is that most senior managers lack appreciation for the value of HR and its
ability to contribute to the organization from strategic perspective. Many understand only the
conventional HR and fail to realize the contribution HR can make as a strategic partner

A fourth barrier is that some functional managers as well and is concerned more with technical
aspects of their areas of responsibility than the human aspects. As stated earlier, every line
manager is an HR manager too. But in reality, finance controller for example, fails to see beyond
cash inflows and outflows, so also the operations executive who is obsessed with inputs, outputs
and the conversation process.

A fifth barrier to strategic HR is the problem of quantifying many of the outcomes and benefits if
HR programs. It is believed that many of the outcomes of HR function are abstract – felt but not
seen. In an environment where firms operate under pressure, what attracts every ones attention is
an activity that contributes to the bottom line. Anything else is shelved

Yet another barrier to strategic HR is the fact that human assets are not owned by organizations
and, therefore, are perceived as higher risk investment than capital asset, particularly in highly
competitive environment where key executives are poached from competitors, there is a
tendency to invest less in employees than in technology and information, which are more
propriety. This mindset and approach prevents organization from realizing the fact that it is the
people who invest technology and it is human brains behind revolution in informatics, and it is a
competitive advantage to invest in people. How can such firms adopt strategic approach to
human resources?

Finally, strategic HR may be resisted because of the incentives for change that might arise.
Taking a strategic approach to HR may mean making drastic changes in the firm’s architecture.
Not many executives are prepared to accept such drastic changes.

Short- term mentality/focus on current performance

Inability of HR to think strategically
Lack of appreciation of what HR can contribute
Failure to understand general manager’s role as an HR manager
Difficulty in quantifying many HR outcome
Perception of human assets as higher risk investments
Incentives for change that might arise

Barrier to Strategic HR

5.3 CASE STUDY I -

What is the role of HR executive in strategy formulation? He or she should evolve his or her own
strategies which must be aligned with corporate, unit and functional strategies. Motorola’s is a
vivid case. The American based MNC has been riding a roller caster for two years. Though the
1980s, the company’s market share was commanding. Profitability was excellent. But in the
early 1990s, the world of consumer electronics changed dramatically, as people began spending
more and more time out of the office-working from homes, in planes and in hotel rooms. They
demanded fasters, smaller, more integrated and energy-efficient electronics. At the same time,
competition for their business grew more and more intense. Major competitors sprang up in
Europe and Asia that produced more attractive and easy affordable products. Competition
resulted in price cuts and heavy pressure on the bottom line of Motorola.

It was under these conditions that the Motorola HR leadership came out with a powerful strategy.
Their goals:

• Link HR practices to customer and shareholder requirement

• Help drive business unit strategy while promoting coordination strong enough to have a
multiple effect on Motorola’s overall revenue
• Position Motorola as a more effective competitor
• Make Motorola’s cultural capabilities consistent with its desired market place brand
identity.
• Engage the enthusiasm and support of management and employees

Working closely with line management, the HR professionals identified the culture that the
increasingly competitive environment demanded. The HR team provided a powerful agenda for
integrating staffing, performance management, training and development, structure, and
communications with common business focus and direction. This allowed HR to maximize its
impact on performance

5.4 CASE STUDY II -

The Coca-Cola Company is the most successful MNC. With operations in as many as 200
countries and nearly 80 percent of its revenue coming from foreign operations, Coca-Cola is
typically perceived as the quintessential global corporation. The US based believes in “thinking
global but acting locally” and this strategy guides the cola giant’s management cross-border
operations. It grants national business the freedom to conduct operations in a manner appropriate
to the market. At the same time, the company tries to establish a common mindset that all its
employees share.

The corporate HRM function is charged with providing the glue that binds all the divisions (there
are 25 operating divisions) into Coca-Cola family. The corporate HRM achieves this in two main
strategies: (i) by propagating a common human resource philosophy within the company, and (ii)
by developing a group of internationally minded mid-level executives for future senior
management responsibility.

The corporate HRM group perceives its mission as one of developing and providing the
underlying philosophy around which local businesses can develop their human resource
practices. For example, rather than having a standard salary policy for all its subsidiaries, Coca-
cola has a common salary philosophy the compensation package should be competitive with the
best companies in the local market. Twice a year the corporate HRM group also conducted a
two-week HRM orientation session fir the HR staff from each of its 25 operating divisions.
These sessions give an overview of the company’s HRM philosophy and talk about how local
business can translate that philosophy into HR policies. Coca-Cola has found that information
sharing is one of the great benefits if bringing HRM professionals together. Fir example, tools
that have been developed in Brazil to deal with specific HRM problem might also be useful in
Australia. The sessions provide a medium through which HRM professionals can communicate
and learn from each other, which facilitates the rapid transfer of innovation and valuable HRM
tools from region to region

5.5 CASE STUDY III -

Colgate-Pamolive is a successful company specializing in personal care products. In early 1980s,
the company realized that if it was to be successful in emerging competitive environment around
the world, it would have to develop a more transnational’s orientation. Its rivals such as P&G,
Uniliver and Kao were trying to become transnational companies and Colgate needed to follow
suit. Being a transnational requires developing an international cadre of executives who are as
compatible working in one culture as in another, and who have the ability to rise above their
ethnic perspectives.

As a first step towards building such a team, Colgate began recruiting college graduates in 1987
and putting them through intensive international Training programmes. The typical recruit holds
an MBA from a US university, speaks at least one foreign language, has lived outside the US,
and has strong computer skills and business experience. Over one quarter of the participants are
foreign nationals.

Unlike most US companies. Colgate does not send foreign-born trainees to their native countries
for their initial jobs. Instead, it is more likely that a French national will remain in the US, a US
national will be send to Germany and British national will go to Spain. The foreigners receive the
same generous expatriate compensation packages as the American do, even if they are assigned
to their Home countries

In addition to the management training programme, Colgate has taken a number of other steps to
develop its international cadre of managers. In Europe, for example, the company is developing
“Euro-managers” managers who have experience of working in several European countries. This
departure from the established practice of having managers spends most of their working careers
in their home country.