Chapter 12
HRM in the Local Context:
Knowing When and How to Adapt
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Learning Objectives (1 of 3)
• Have a basic understanding how the national context
affects HRM practices.
• Describe how recruitment and selection practices differ
among national contexts.
• Identify possible host adaptations in recruitment and
selection practices for a multinational company.
• Explain how training and development techniques are
used in different countries.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives (2 of 3)
• Name sources of high-quality workers in different
nations.
• Understand how training must be adapted to host
country workers.
• Identify how performance evaluation and
compensation practices differ in various national
contexts.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives (3 of 3)
• Discuss possible host country adaptations in
performance evaluation and compensation practices
for a multinational company.
• Understand how labor costs vary among nations.
• Appreciate how the national context and historical
conditions affect the relationship between management
and labor in different countries.
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Key Questions
Regarding Local Employees
• How can we identify talented local employees?
• How can we attract these employees to apply for jobs?
• Can we use our home country’s training methods with
local employees?
• What types of appraisal methods are customary?
• What types of rewards do local people value?
• Do any local laws affect staffing, compensation, and
training decisions?
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why Do Nations Differ in HRM?
(1 of 2)
• Because of the national context:
• National culture and social institutions influence how
managers make decisions regarding strategies
• Countries vary widely with regards to social institutions
and national culture
• Multinationals must select and implement practices
that meet national context.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.1:
How the National Context Leads to National
Differences in Local HRM Practices
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Why Do Nations Differ in HRM?
(2 of 2)
• Because of the resource pool: all the human and
physical resources available in a country
• Includes quality of labor, availability of scientific
laboratories, and sources of fuel
• Arises from both from natural and induced factor
conditions
• Unique to each country
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Key Factors that Influence
the Resource Pool
• The quality, quantity, and accessibility of raw material
• The quantity, quality, and cost of personnel available
• The scientific, technical, and market-related knowledge
available to firms
• The cost and amount of capital available to firms for
operations and expansion
• The type, quality, and costs of supporting institutions
such as the systems of communication, education, and
transportation
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
National Factor Conditions:
Natural and Induced
• Natural Factor Conditions: national resources that
occur naturally . E.g., abundant water supply
• Induced-Factor Conditions: national resources created
by a nation. E.g., superior educational system
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Characteristics of the National
Context That Affect HRM
•
•
•
•
Education and training of the labor pool
Laws and cultural expectations of selection practices
Types of jobs favored by applicants
Laws and cultural expectations regarding fair wages
and promotion criteria
• Laws and traditions regarding labor practices
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Recruitment
•
The major steps in recruitment
• Managers determine that jobs are available
• Employers determine the types of people and skills
that are necessary for the job
• Employers generate a pool of applicants for the job
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Exhibit 12.2:
Steps in the Recruiting Process
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Recruitment Strategies
•
•
•
•
•
•
•
Walk-ins or unsolicited applications
Advertisements placed in newspaper or on the Internet
Company Web site job postings
Internal job postings
Public and private personnel agencies
Placement services of educational institutions
Current employee recommendations
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Recruitment in the U.S.
• U.S. managers:
• Tend to see online or print advertising as one of the
most effective recruitment methods.
• Fear employee referrals result in the recruitment of
people with similar backgrounds
• Fear that recruitment by personal contacts may result
in biases against some groups.
• Open and public advertisements are the most
effective, reflective of individualistic U.S. culture.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.3:
Most Effective Recruiting Sources
for U.S. Companies
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Recruitment in
Collectivist Countries
• While the U.S. favors open forms of recruitment,
recruitment in collectivist societies tends to focus on
the in-group, such as the family and friends of current
employees.
• Backdoor Recruitment: prospective employees are
friends or relatives of those already employed
• Managers are recruited from prestigious universities.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Recruitment Around the World
(1 of 2)
• Not only companies but individuals have recruitment
preferences based on national culture & social
institutions.
• Looking for jobs through public vs. private agencies:
• Individuals in former communist and socialist
societies were more likely to rely on public agencies.
• Individuals in more individualistic societies used
private agencies.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Recruitment Around the World
(2 of 2)
• Posting ads and responding to ads:
• Both are very public forms of recruitment.
• Individualistic societies and egalitarian (lowmasculinity) societies prefer such forms.
• Applicants apply directly.
• Individuals in Socialist societies and former communist
countries prefer to talk to friends, relatives and other
connections to find a job.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.4:
Preferred Ways to Look for a New
Job: Public vs. Private Agency
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.5:
Preferred Ways to Look for a New
Job: Answered Ads vs. Advertised
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.6:
Preferred Ways to Look for a New
Job: Apply vs. Friends & Family
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Selection in the U.S.
• Gather information on a candidate’s job qualifications
• Find a match between the candidate’s skills and the
job requirements.
• The focus is on the individual’s achievements rather
than group affiliations.
• Many firms prohibit Nepotism, the hiring of relatives.
• Many also prohibit managers from supervising family
members.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.7:
Steps in U.S. Personnel Selection
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Selection in
Collectivist Cultures
• Hiring always takes the in-group into account.
• Preference is given to hiring relatives of first, the
employer, then relatives of employees.
• This selection values potential trustworthiness,
reliability, and loyalty over performance-related
background.
• High school and university ties may substitute for
family membership.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Implications for the Multinational:
Recruitment and Selection
• Recruitment and selection of host country workers
requires that managers of MNCs understand and
adapt to local practices.
• If local norms are not followed, the MNC may not get
the best employees, and may offend cultural norms or
break host country laws.
• Many firms now using Electronic Human Resources
(eHR).
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Training and Development
• Within a country, the need for training and
development varies widely industry, technology, etc.,
but broad national differences exist.
• Differences in training and development are due to:
• Differences in educational systems
• Emphasis on training placed by national
governments
• Cultural values regarding other personnel practices
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.8:
Training Systems around the World
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Exhibit 12.9:
Training & Development
in Selected Countries
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Training and Development
in the U.S.
• Companies with over 100 employees invest more than
$60 billion in training costs.
• Management development and computer skills are the
most popular.
• There is growing pressure on U. S. businesses to
supplement basic educational training.
• The transition to a service sector economy means the
need for specialized skills training will increase.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.10:
Skills Taught by U.S. Organization
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Training and Vocational
Education in Germany
• A sophisticated and standardized national system
provides two major forms of vocational education:
• General and specialized vocational schools and
professional and technical colleges
• Dual system: A combination of in-house apprenticeship
training with part-time vocational-school training leads
to a skilled worker certificate.
• With advanced training, one can achieve the status of
Meister: a master technician.
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The German Dual System
• Stems from collaboration among employers, unions,
and the state
• Costs are shared between companies and the state.
• Employers have an obligation to release employees for
training.
• Produces a well-trained national labor force with skills
that are not company specific
• Dual System under stress due to economic downturn
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.11:
Germany’s Apprenticeship
Program under Pressure
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Implications for the Multinational:
Training and Development
• Before operating in a host foreign country,
multinational managers must:
• Consider the quality of workers and managers there
• Examine the feasibility of exporting training to them
• Adaptation of management-development to different
national contexts depends on intended use of host
country managers.
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Performance Appraisal
• Performance Appraisal: Identifying people to reward,
promote, demote, develop & improve, or terminate
• Not everyone can move up the corporate ladder.
• Assumption in individualistic cultures is that
performance appraisal systems provide rational and
fair solutions to these HR problems.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Performance Appraisal
in the U.S.
• U.S. system values links among individual rights,
duties and rewards, and equal opportunity.
• The ideal U.S. system is rational, logical and legal.
• Such systems have four elements:
• Performance standards
• Performance measures
• Performance feedback
• Human resource decisions
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Performance Appraisal
Around the World (1 of 3)
• Australia, Canada and the United States
• These 3 are among the top five countries for all
performance-appraisal purposes.
• Very high on individualism, with heavy emphasis on
the individual development of the employee
• Performance appraisals are seen as the most
effective method to gauge how well an employee is
doing and how their performance can be improved.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.12:
Cross-National Differences in
Purposes of Performance Appraisals
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Performance Appraisal
Around the World (2 of 3)
• Taiwan and Latin America
• Also figure prominently on the list
• Possible effects of social institutions such as
government and trade agreements
• May be emulating Western-based systems because
of a desire to satisfy trade agreements and other
competitiveness requirements
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Performance Appraisal
Around the World (3 of 3)
• In Collectivist Societies, performance appraisals may
not be as important:
• Age and in-group memberships provide a large
component of the psychological contract with the
organization.
• Human resource decisions take into account
personal background characteristics more than
achievement.
• Managers indirectly sanction poor performance, and
often avoid direct performance appraisal feedback.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Compensation
• Compensation: includes wages and salaries,
incentives such as bonuses, and benefits such as
retirement contributions.
• There are wide variations among countries and
organizations on how to compensate workers.
• A country’s economic development, cultural traditions,
labor unions, and legal institutions all affect
compensation.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Compensation in the U.S.
• In the U.S., wages and salaries differ based on two
major factors:
• External: includes local and national wage rates,
government legislation, and collective bargaining
• Internal: includes the importance of the job to the
organization, its affluence and its ability to pay, and
the employee’s relative worth to the business
• 94% of firms use comparative wage data to
determine compensation.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Compensation Around the World:
A Study of 10 Countries
• Managers of all countries and regions believed:
• Pay incentives should be important.
• Pay should be contingent on group performance.
• Pay should be contingent on company performance.
• Incentives should be a significant amount of pay.
• Job performances should be the basis of pay raises.
• Benefits should be important.
• Benefits should be more generous.
• Pay should be based on long-term results.
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Compensation in Japan (1 of 2)
• Like U.S. firms, Japanese firms determine base
salaries largely by classification of positions.
• Seniority has two effects:
• Each position has minimum age requirements in
addition to educational requirements. As the
employee gains seniority, eligible to move up.
• Seniority factors into pay decisions, but at a
declining rate, diminishing after age 45.
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Compensation in Japan (2 of 2)
• More recently, the Japanese view of merit affects pay,
a major shift.
• Economic pressures have led to adoption of the Nenpo
System, an evaluation based on yearly performance
evaluations that emphasize goals.
• Bonus system: Workers often receive as much as
30% of base salary, usually given twice a year, during
traditional gift giving seasons.
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Exhibit 12.13:
The Japanese Pay Raise Formula:
Changing the Balance
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Implications for the Multinational:
Performance Evaluation and
Compensation
• Multinational companies must match their performance
evaluation system to their multinational strategies.
• If a multinational is located in many nations, it may
need several different compensation packages for host
country nationals.
• Multinationals seeking location advantages in wages
may consider Eastern Europe and India.
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A Comparative View of
Labor Relations
• Variations of labor relations arise from cultural
differences, but also:
• Historical factors
• Ideological reasons
• Management views of unions
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Union-Membership Density
• Union-Member Density is the proportion of workers in a
country who belong to unions.
• In the U.S., union membership has declined
considerably over the past 30 years.
• Union membership in industrialized countries
generally averages over 50%.
• In South Africa with the opening of unions to the
formerly barred black population, membership has
more than doubled in size.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.14:
Union Density, Selected Countries
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Historical and
Institutional Differences
• Britain
• Unions developed without government interference.
• Lack of government intervention led management
and workers to develop strong adversarial
relationships that remain in existence today.
• Germany
• Labor relations are formalized, legalistic, and lowconflict with centralized bargaining among unions
and corporations; government is an intermediary.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Historical and
Institutional Differences
• French
• Unions began late, and developed slowly.
• The lack of legal protection of French workers and
difficulties of unionization led to highly militant
unions, some with ideological orientations.
• U.S.
• Legal protection for unions passed in 1935.
• Unions focused on “Bread and butter” issues:
wages, benefits, and working conditions
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Union Structures (1 of 2)
• Several types of unions exist:
• Enterprise Union: represents all people in one
organization, regardless of occupation or location
• Craft Union: represents people from one
occupational group, such as plumbers
• Industrial Union: represents all people in a particular
industry, regardless of occupational type
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Union Structures (2 of 2)
• Several types of unions exist: (cont’d)
• Local Union: represents one occupational group in
one company
• Ideological Union: represents all types of workers
based on some particular ideology or religious
orientation
• White collar or professional Union: represents
particular occupational group, similar to craft union
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Exhibit 12.15:
Popular Form of Unions in
Selected Countries
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Implications for the Multinational:
The Search for Harmony
• When they use local workers, multinational companies
must deal with local labor practices, traditions and
laws.
• These must be considered in any strategic decision
regarding locating in another country.
• Example: In the U.S., Japanese companies have
avoided locations in the more union-friendly Northern
states, favoring instead Southern locations with less
union activism.
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Summary
• Chapter 12 highlighted fundamental national
differences in the various HRM functions.
• Chapter 12 discussed how national context affects
HRM.
• The Chapter compared the U.S. with many other
countries on recruitment, selection, training,
performance appraisal and compensation.
• Chapter 12 also dealt with differences in labor
relations.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.