Chapter 11 HRM in the Local Context: Knowing When and How to Adapt Copyright© 2004 Thomson Learning All rights reserved Learning Objectives • Understanding how the national context affects HRM practices • Identify how recruitment and selection practices differ in various national contexts • Identify possible host adaptations in recruitment and selection practices Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives • Identify how training and development techniques are used in different countries • Identify 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Learning Objectives • Identify possible host country adaptations in performance evaluation and compensation practices for a multinational company • Understand how labor costs vary • Have an appreciation of how the national context and historical conditions affect the relationship of management and labor Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? • 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.1: How the National Context Leads to National Differences in Local HRM Practices Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? • Resource pool: all the human and physical resources available in a country • Both from natural and induced factor conditions • Include quality of labor, availability of scientific laboratories Copyright© 2005 South-Western/Thomson Learning All rights reserved 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Resource Pool • 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Why Do Nations Differ in HRM? • 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Characteristics of the National Context That Affect HRM • • • • Education and training of the labor pool Laws and cultural expectations for selection practices Types of jobs favored by applicants Laws and cultural expectations regarding fair wages and promotion criteria • Laws and traditions regarding labor practices Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Strategies • • • • • • • Walk-ins or unsolicited applications Newspaper or Internet advertisement Company Web site job posting Internal job postings Public and private personnel agencies Placement services of educational institutions Current employee recommendations Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.2: Steps in the Recruiting Process Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment in the U.S. • U.S. managers tend to see newspapers as one of the most effective recruitment methods. • Fear that recruitment by personal contacts may result in bias against some groups. • U.S. value open and public advertisements as a reflection of individualistic culture. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.3: Most Effective Recruiting Sources for U.S. Companies Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment in Korea • Backdoor recruitment: prospective employees are friends or relatives of those already employed • Managers are recruited from prestigious universities Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Around the World • Individuals around the world have preferred way to find jobs • International Social Survey Program data was analyzed • Looking for jobs through public vs. private agencies • Individuals in former communist and socialist societies were more likely to rely on public agencies Copyright© 2005 South-Western/Thomson Learning All rights reserved Recruitment Around the World (cont.) • Advertising in newspapers and responding to newspaper ads • Both very public forms of recruitment • Individualistic societies have higher preference for such forms • Apply directly versus asking friends/relatives for job • Individualistic and high femininity societies more likely to favor direct application • Socialist societies rely on asking friends/relatives Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.4: Preferred Ways to Look for a New Job—Public vs. Private Agency Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.5: Preferred Ways to Look for a New Job Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.6: Preferred Ways to Look for a New Job Copyright© 2005 South-Western/Thomson Learning All rights reserved Selection in the U.S. • • • • • Job qualifications Match skills and job requirements Individual achievements Prohibitions against nepotism—the hiring of relatives Forbidding managers to supervise family members Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.7: Typical Steps in U.S. Personnel Selection Copyright© 2005 South-Western/Thomson Learning All rights reserved Selection in Collectivist Cultures • Based on the in-group • Preference for family • Value potential trustworthiness, reliability, and loyalty over performance-related background • High school and university ties substitute for family membership Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Recruitment and Selection • Managers must follow local norms to get best workers • Often a tradeoff between home practices and costs of following local traditions Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development • Need for training and development varies by country • Differences in training and development due to • Differences in educational systems • Values regarding educational credentials • Cultural values regarding other personnel practices Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.8: Training Systems around the World Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.9: Key Specific Training and Development Characteristics of Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved 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 for training as the U.S. shifts to the service sectors. Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.10: Skills Taught by U.S. Organization Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Germany • Two major forms of vocational education • General and specialized vocational schools and professional and technical colleges • Dual system: combination of in-house apprenticeship training with part-time vocational-school training, and leads to a skilled certificate • Meister: a master technician Copyright© 2005 South-Western/Thomson Learning All rights reserved German Dual System • Stems from collaboration among employers, unions, and the state • Costs shared between companies and state • Employers have obligation to release employees for training Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.11: Skilled Worker Training in Germany Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.12: Germany’s Apprenticeship Program under Pressure Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in the U.S. • Senior level managers often identify managerial potential • Appraisals of managerial readiness based on • Assessment centers • Mentoring • “Fast track” careers • Remains the responsibility of the individual Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Japan • • • • Permanent employment Recruitment directly from universities Join the company as a group Selected on personal qualities that fit the corporate culture • Similar pay and promotion for first ten years—age seniority • Informal recognition of those high performing managers Copyright© 2005 South-Western/Thomson Learning All rights reserved Training and Development in Japan • Shifting social institutions: pressures for change • Asahi ties promotions to evaluations • Matsushita uses merit pay for managers • Honda is phasing out seniority Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Training and Development • Examine feasibility of exporting training • IHRM orientation affects training needs of local managers • Locations advantages Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.13: Workers of the Future: Student Math and Science Scores from Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Performance Appraisal • Identifying people to reward, promote, demote, develop and improve, retain, or fire • Not everyone can climb the corporate ladder • Need to assess how employees perform Copyright© 2005 South-Western/Thomson Learning All rights reserved U.S. Performance Appraisal • U.S. legal requirements regulate performance evaluation practices to ensure their fairness • Performance evaluations must relate clearly to the job and performance • Performance standards must be provided in writing • Supervisors must be able to measure the behaviors they rate Copyright© 2005 South-Western/Thomson Learning All rights reserved U.S. Performance Appraisal (cont.) • Supervisors must be trained to use evaluation measures • Supervisors and subordinates must discuss appraisals openly • Appeals procedures must be in place Copyright© 2005 South-Western/Thomson Learning All rights reserved Performance Appraisal in Collectivist Cultures • Managers work indirectly to sanction poor performance • Often avoid direct performance appraisal feedback Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.14: Cross-National Differences in Purposes of Performance Appraisals Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation • Wages and salaries, incentives such as bonuses, and benefits such as retirement contributions • Wide variations on how to compensate workers Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation in the U.S. • Wages and salaries differ based on two major factors • External: include local and national wage rates, government legislation, and collective bargaining • Internal: include the importance of the job to the organization, its ability to pay, and the employee’s relative worth to the business Copyright© 2005 South-Western/Thomson Learning All rights reserved Compensation: Japan • Traditional approach • Base salaries on positions • Skill and educational requirements • Age • Marital status and family size may count • Bonus system: employees often receive up to 30% of their base salary during traditional gift-giving seasons Copyright© 2005 South-Western/Thomson Learning All rights reserved New Merit (Japanese style) • Can affect pay raises to a greater degree than traditional position/seniority system • Nenpo system: based on yearly performance evaluations that emphasize goals • Although goals are not always the same as in Western companies • Stresses attitudes as much as performance Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.15: The Japanese Pay Raise Formula: Changing the Balance Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: Performance Evaluation and Compensation • Match HRM orientation • Seek location advantages in wages Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.17: Labor Costs and Hours Worked Per Week in Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved A Comparative View of Labor Relations • Patterns of labor relations depend on: • Historical factors • Ideology reasons • Management views of unions Copyright© 2005 South-Western/Thomson Learning All rights reserved Union-Membership Density • Proportion of workers in a country who belong to unions • Germany: estimated 40% belonged to trade unions • U.S.: 14.2% of nonagricultural workforce • Denmark: over 80% unionized • Great Britain: approximate 50% unionized Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.18: Union Density in Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Historical and Institutional Differences: Germany • Germany • Formalized, legalistic, and low-conflict bargaining between unions and large corporations • French • Militant/strong ideologies • U.S. • “Bread and butter” issues: wages, benefits, and working conditions Copyright© 2005 South-Western/Thomson Learning All rights reserved Union Structures • 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Union Structures (cont.) • 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 Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.19: Popular Form of Unions in Selected Countries Copyright© 2005 South-Western/Thomson Learning All rights reserved Implications for the Multinational: The Search for Harmony • Must deal with local labor practices • A factor in location choice Copyright© 2005 South-Western/Thomson Learning All rights reserved Exhibit 11.21: Who Gets Along? Copyright© 2005 South-Western/Thomson Learning All rights reserved