Introductory lecture II. introduction to MNC.ppt

Prepared by: hiew First Prepared on: 31-01-05 Last Modified on: xx-xx-xxQuality checked by: hkpCopyright 2004 Asia Pacific Institute of Information Technology International Human Resource ManagementBUS-1-08-MBIntroductory lecture II: The MNC and the factors that affect HRM in an MNC

MBEthical and Social Issues

Last weeks lecture: refresh our memory ..We explored the concept of PM and how it has evolved to be HRM;

We also explored the IHRM field and why it is important to study IHRM;

We now understand the difference between HRM in the domestic field (local firms) and HRM in the international field (IHRM and MNCs);

In the subject field of IHRM, the study of MNCs is of great importance. So we study the HRM of MNCs;

When we say HRM we refer to all practices, polices and procedures related to human resources (i.e. recruitment and selection, training and development etc);

In the IHRM subject, when we say HRM we are talking about all HR practices and polices related to international firms /MNCs and NOT local firms;

In assignment questions do not talk about general HR polices of local firms.

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Finally..We are now ready to study the IHRM in a Multi National Corporation (MNC)!


What else in this week lecture cont..So after we learn the three theories we will use our understanding of the theories to explore the factors that influence HRM practices and polices in MNCs.(that is the factors MNC HQ take in to account when putting together HRM for the subsidiaries).

Please remember, when we say HRM in an MNC we are talking about the Human Resources polices and practices that the MNC puts together for subsidiaries they have in different countries.

IMPORTANT: When you are answering an assignment question, when the question says what are the critical factors an MNC needs to take in to account when putting together an international recruitment and selection strategy? This questions means the following : MNC means the HQ (parent head quarter) and they are putting together an international recruitment and selection strategy for their overseas subsidiaries (subsidiaries in different countries).Slide * of 19

IMPORTANT!!! Next, we look at some formulas that will cut a long story short. You must always remember these formulas!


The 10 formulas that will tell the story re. MNC and IHRM Formula 1:HRM policies and practices of a subsidiary = HRM that was formulated at MNC HQ and was sent/transferred to the subsidiary + HRM practices and policies that the subsidiary devised locally, inside the subsidiary according to local HRM practices and policies, culture and labor lawHRM (say training and development strategy/policy) at Nestle Lanka was formulated at Nestle HQ and was sent to Nestle Lanka for it to be implemented by local HR team. Then the R & S policy at Nestle Lanka was designed locally in Sri Lanka by the Nestle Lanka HR team according local labor laws etc. so as we can see the HRM at Nestle Lanka is a combination of locally formulated and MNC transferred polices. Formula 2HRM policies and practices of a subsidiary= total of everything that was designed at MNC HQ and was sent/transferred to the subsidiary.Example: in other MNCs it may be the following: HRM (Training and development, R&S, performance development strategy and polices) of Coke subsidiary in India was totally formulated by the parent company (Coca-Cola MNC HQ in US) and sent /transferred to Coca Cola India. So the local HRM team had to implement these practices and strategies that were transferred by the parent Formula 3HRM policies and practices of subsidiary= total of everything that was formulated locally by the subsidiary according to local HRM practices, polices, rules, laws, culture and institutions.Example: HRM policies and practices (T &D, R&S) in Unilever China was totally formulated by the local HRM team of Unilever China . Unilever corporate office did not send any HRM to the subsidiary in China and they let the local subsidiary decide and plan the HRM.

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The 10 formulas cont..Formula 4HRM policies and practices of subsidiary=HRM that the subsidiary devised locally , inside the subsidiary according to local HRM practices and policies, culture and institutions + HRM policies and practices that the parent HQ sent to subsidiary and subsidiary adapted and changed those polices to suit local environment.Example: HRM policies and practices at Nestle Lanka is a combination of locally formulated and those sent from Nestle HQ practices. This means for example Nestle Lankas R &S strategy was formulated locally by the local Nestle Lanka HR team but T&D strategy was sent by Nestle HQ from Switzerland, BUT before it was implemented in Sri Lanka the Nestle Lanka HR team had to change and adapt it to suit the employees in Sri Lanka . Formula 5HRM/IHRM in MNCs = all international human resources policies and practices related to the MNC HQ and subsidiary.Example: All HRM policies and practices (T&D, R&S, performance development, expatriate policy) formulated at Nestle HQ in Switzerland will be, some for the use of Nestle HQ corporate office and their corporate HRM needs and others for the use at different subsidiaries of Nestle (Nestle SL. Nestle China, Nestle UK) Formula 6HRM policies and practices designed by the MNC HQ at the MNC HQ= what they plan to transfer to the subsidiary to be implemented by the subsidiaryExample: at the Nestle HQ corporate office in Switzerland there will be teams that are dedicated to drawing up HRM policies and practices. These policies and practices will then be transferred /sent out to Nestle Lanka, Nestle Pakistan and Nestle India. Slide * of 19


The 10 formulas cont....Formula 7Critical factors that MNC need to take in to account when putting together HRM for an MNC subsidiary= home and host country cultural and institutional factors + company level factors+ industry level factorsExample: When the HRM team at Nestle HQ in Switzerland are formulating HRM policies and practices for Nestle Lanka, they have to take in to account Sri Lankas cultural, legal, political and economic environment, Switzerlands cultural and economic, political etc. environment (because the polices are made by Swiss People at Switzerland ). Further, they take in to account specific factors related to Nestle HQ company and Nestle Lankan company and also take in to account industry factors (Nestle Lanka is operating in the manufacturing industry , confectionery) We will be learning the theories so that we can evaluate the critical factors.

Formula 8Factors that affect/impact transfer of HRM policies and practices from MNC HQ to subsidiary= home and host country cultural and institutional factors + company level factors+ industry level factors.Example? . We are going to learn about these factors shortly.

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Formulas 9 and 10Formula 9MNC (Multinational Corporation )= MNC HQ + MNC subsidiaries around the world + MNC regional HQsExample: Nestle SA is a Swiss Company and it has subsidiaries all over the world. Nestle Lanka and Nestle Pakistan are subsidiaries of Nestle SA. Nestle now operates as regions. They have grouped all their national subsidiaries in to regions and each region will have a regional HQ that will report to Nestle SA in Switzerland on behalf of all the reporting subsidiaries. SAR HQ (South Asian Regional HQ) in India is the regional HQ of Nestle SAR region (South Asian region) Nestle Lanka, Nestle Bangladesh reports to SAR HQ in India. So now for all purposes Nestle Lanka is part of the SAR region and their HQ is based in India.

Formula 10Answers in assignment/ presentation = understanding of all 9 formulas + theory + Practical examples

We come back to these equations later. Now we are going to learn some terms and theories so that we can understand what

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Based on the formulas we now know..

Human Resource Management in MNCs= IHRM.(refer last weeks lecture)Human Resource Management=all polices, practices, guidelines, rules, ideas and philosophies that related to the management of employees in a company.HRM polices, practices and guidelines in a MNC subsidiary is a combination of : what is developed locally at the subsidiary, what is transferred directly from the MNC HQ (what the MNC HQ prepares for the subsidiary)- formulas 1-4In the next few sections what we are going to do is to understand the reasoning behind why MNC HQs allow the subsidiaries to produce HRM locally and why sometimes they chose to transfer HRM to the subsidiary. (formulas 1,2,,3,4)

Therefore, in order for us to understand this, we have to learn some models and theories. But they are very simple. Importantly, the theories will allow us to understand IHRM in an MNC.

When you do your assignments and projects you should be able to relate your examples and real life experiences to the theories and models and critically question the validity of the model (to get that extra marks)

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MNCs unique?MNCs have the unique capability of developing HRM practices in the home country and transferring those practices to a subsidiary in a foreign country.(transfer of knowledge and know- how)Sometimes they will allow the subsidiary to develop their own HRM practices and not transfer. (Formula 3)MNCs can also transfer capital and technology.Slide * of 19


Example: factors that impact HRM in an MNC subsidiarySlide * of 19HRM in a MNC subsidiary in Sri Lanka. (Unileaver Lanka)Sri Lanka cultural factors Social practices and beliefs of SLWork practices and culture of Sri Lanka firmsLabor laws in SLHRM practices of local firmsPotical climate and economy of SlCultural,social,political and law of parent country of MNC HQ(Netherlands and UK)


Pick your brain We learned what national competitive advantage means

We learned why some countries have competitive advantage and other countries do not.

We learned about Porters Diamond model which explains how a country can have competitive advantage.

Home work : We have to read how an MNC gains competitive advantage

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Remember!Before we learn the models/theories we have to know some background information and the meaning of some terms!Please note: theories that are developed by academics are called academic theories. From these theories some academics develop models.The end result : we students should be able to use these theories and models to explain and understand IHRM in MNCs.So your assignment answers/presentations have to have both theory and practical examplesThe cleaver students go further and question these theories and argue certain points. (CRITICAL THINKING!!)WE ALL HAVE TO DISPLAY CRTICAL THINKING IN OUR ASSIGNMENT/EXAM ANSWERSSlide * of 19


Why learn the theory and models? To understand the 10 formulas!!!That is : To understand IHRM in MNC and the nature of IHRM polices and practices that an MNC HQ formulates for a subsidiary (formulas 1-4)To understand CRICAL FACTORS BOTH EXTERNAL AND INTERNAL MNC neeeds take in to account when putting together HRM polices and practices. (formula 6)To understand why some MNC HQs allow some of their subsidiaries to develop IHRM policies and practices locally and some for some subsidiaries they formulate and sent IHRM polices and practices from the parent. ( formulas 2 and 3) And also to understand how IHRM differs from country to country and MNC to MNCTo understand how a countrys culture, society, way of live. Social beliefs or law can influence the MNC subsidiary in that country To understand all this we have to learn a few theories and know the meaning of some words so first we look at culture and MNCSlide * of 19


Slide * of 19What do we know about culture and MNCs?We know each country has its own culture, social norms and way of doing things!Each country and its culture is very different to the other country and culture.What is accepted in the US and UK may not be appropriate in south Asian cultures.Example? On a Friday having a beer after work at the office may be normal in the UK but may not be appropriate in an Indian company.When an MNC originates from a certain country we say that the MNC has that nationality. For Mc Donalds is a US MNC. So the McDonalds in the US would have a US way of doing things, their approach to people management, the way they organise the company and manage the company would be rooted in their cultural norms, way of living and attitude towards people and society. For example US people have direct , detached style of management. Chinese people consider the work place like a family environment where the boss is like a father and the employees respect the boss as they would a father.In sri lanka work place is like a community but in the US work place it is hard to find the community life.The differences are bec of culatur and way of life.


Main theories we have to learn in order understand where HRM policies and practices come from to the subsidiaryTo understand where HRM comes from to the subsidiary(factors that affect HRM in the subsidiary; whether locally created or sent from the MNC parent HQ) we have to now look at the following theories in the field of IHRM. (formulas 1-4)Some of the theories are based on the concept of national culture and its influence on MNCs. (see slide 21)

Importantly, we will come across the use of these theories in many textbooks when analysing HRM in MNCs.Importantly, we have to make sure we understand these theories and USE them to discuss questions, examples and assignment questions!When you do an assignment you will be marked on the use of theory to explain your examples.

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Debates and theories of IHRM in MNC

Convergence and Divergence theory/debateCultural and institutional theory/debateLocal responsiveness vs. global integration Host country and home country influence

We learn three famous models to understand MNCs and their IHRMHofestede ModelPerlmutters modelBartlett and Ghoshals model

These debates are very KEY in IHRM literature. If you know these theories well you can understand how an MNC operate, the strategies and organisational strategies they chose and why they make such choices. SO YOU CAN THEN UNDERSTAND THE 10 FORMULAS

These debates are very key to doing your assignments and understanding next weeks lecture.

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Slide * of 19Convergence and DivergenceConvergence vs. Divergence debate (see 1.7.)In management theory these are two dominant schools of thought. These two schools of thought have advocated two different views about the world and how management practices have emerged in organisations. Simply put, convergence and divergence means THIS: are management practices and IHRM in organisations are they adopting the same practices, global one best way approach (Convergence) or is it different in firms in different countries because of different national characteristics present in each country? (divergence)The extent to which organisations are similar or different across nationsConvergence (1.7.1 in additional notes)It is called the one best way approach/ universalist approach. based on the assumption that country differences do not matter.Firms can use the same proven practices all over the world irrespective of country the firm is based in.Assumption that as technology progresses the world will adopt the western (US) approach to management.This is to say that western management practices can be adopted by even a developing country.


Divergence viewDivergence view (see 1.7.2 in additional notes)Apposite of convergence These academics have attacked the assumption in the convergence school.They say there is no one best way to management of IHRM that can be adopted by any firm in any country.Importantly national differences in culture and institutions do matter and because of these differences you cannot export a US model and make it work in for example India!

So there will be variations in HRM and managerial practices across different national boarders and there are explanations as to why these differences exists. So national cultural differences, values, society, religion all have an impact on the way HRM is managed in an organisation or country. And these differences prevent firms from adopting a proven practice from the US!

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Examples of convergence and divergenceConvergence theory :

Divergence theory: Slide * of 19


Pick your brain We know now what an MNC is all about;

We understand that IHRM in an MNC is very important and a complex matter;

Importantly, we now know the 10 formulas for understanding HRM in MNC;

To understand HRM in an MNC ( see the 10 formulas) we have to know some theoretical models.

We now understand convergence and Divergence theory.

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For next weekWe look at the next theory: cultural and institutional theoryRead the handouts and case study Each person will discuss 2 formulas and tell the class about it with examples.The class will not start without each person presenting.Any questions please ask me/email me.E-mail : [email protected] * of 19

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Introductory lecture II. introduction to MNC.ppt

Documents

local hrm practices

hrm policies

subsidiary hrm practices

hrm of mncswhen

factors mnc hq

hr practices

international field

ihrm field