Wits univ business school gfc & hrm ir in mn cs oct 2011[1]

Multinational companies, human resource management & industrial relations in turbulent times

Wits Business School, Johannesburg, October 2011

Professor Patrick Gunnigle, Kemmy Business School,

University of Limerick,Ireland

2. Multinational companies & HRM through the global financial crisis

THREE OBJECTIVES Highlight the key role played by

MNCs in Ireland & more generally in the world economy

Draw on recent large scale survey evidence to provide a summary profile of MNCs in Ireland

Consider the impact of the global financial crisis on HRM and industrial relations in MNCs

4. Why study MNCs? Key drivers of globalisation

82,000 MNCs with 810,000 subsidiaries 77 million employees 76 of the top 150 economic entities are

MNCs Exports by foreign affiliates account for

1/3 of total world exports of goods & services

Huge Economic (& Political) influence e.g. US MNCs in Ireland

5. MNCs are particularly important in Ireland

Ireland is one the world’s most FDI-intensive economies (5th highest ratio of FDI stock to GDP in world)

Product of long standing ‘industrialisation by invitation’ policy (late ‘50s)

MNCs have played a key role in economic development (esp. US FDI)

2006: stock of American FDI of €52.5bn - more than BRIC combined (€46.5bn)

Change in recent years shift to services (esp. financial services) & outward FDI growth

5

7. By ownership….not particularly diverse

US39%

Irish18%

UK14%

Cont Europe24%

RoW5%

6

8. By sector….services now dominant

9. Implications of GFC for FDI & MNCs

Global decrease in FDI inc. shift from old order to developing

countries In Ireland many changes already

afoot Accelerated by GFC

Not all negative….for some MNCs recession can be a good time to

grow: Economic recession + high

unemployment = a buoyant labour market/lower labour costs

But impact of GFC immense in Ireland….

10. Dramatic fall in economic activity

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

-15

-10

-5

0

5

10

15

GDP% GNP%

11. & Equity market

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.00

1,000.00

2,000.00

3,000.00

4,000.00

5,000.00

6,000.00

7,000.00

8,000.00

9,000.00

10,000.00

Irish stock exchange 1998-2010

12. Summary of impact of GFC in Ireland

• GDP (2007-2009): -11% • volume of retail sales (2007-2010): -

16.7% • company insolvencies: +80% (2008-

2010) • debt/GDP ratio (2008-2011): 44.4%

111% (est.) • unemployment (2007-2011): 4.6%

14.7% • net emigration (2007-2010): - 67,3000

+ 34,500• €85bn loan (bailout)from IMF/EU/ECB

• Effective nationalisation of financial system & state capitalisation (€70bn)

13. HRM in Recession – a snapshot

FOCUS ON RE-STRUCTURING & COST REDUCTION

pay freezes/cuts, short-time working, redundancies (Intel, Bausch & Lomb, SR Technics, Dell) but some others paying (Apple, Pepsi, Pfizer, Abbott).

redundancies but settlements (€) Examples

Independent News & Media: pay cuts & new working time arrangements. Unilaterally introduced, Unions opposed.

Aer Lingus: ‘Leave and return’ + voluntary redundancies; changes in working conditions & lower pay for new entrants. Initially union led, but worse to come?

AXA: voluntary redundancies, early retirement, new pay & performance mgt system Agreed with unions

Element Six: short-time + voluntary redundancies. Agreed with unions. Compulsory redundancies on lower terms – Unions opposed

Dell Computers: 2000 job cuts; off-shoring; Non-union (but led to creation of employee representative association)

14. Job losses & gains in MNCs 2000-2009 (Forfas 2010)

0

5,000

10,000

15,000

20,000

25,000

30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Gains

Losses

13

15. Job Losses & Gains in MNCs

EXPANSION LOSS CHURN

Aldi – 650 jobs Dell -1900 jobs Hewlett Packard - 133 / + 500

Ikea – 500 jobs SR Technics – 1100 jobs

IBM -120/+100

Hewlett Packard – 500 jobs

Intel - 300 jobs Option Wireless – 150/+145

IVAX Phara – 165 jobs

Hibernian – 600 jobs Pfizer -180/+100

Pfizer – 100 jobs Tyco – 320 jobs Dell continue to recruit?

IBM – 100 jobs Waterford Crystal – 250 jobs

Pfizer Grangecastle?

16. Impact on HRM

Staffing: Job Churn but employment held up well; little preference for PT & temp but short time working popular; labour availability & turnover no longer a concern (end or truce in ‘war for talent’?)

Training and Development: expenditure but evidence of prioritisation (managerial & change management focus). Decline in standard training

Pay: Pay freezes most common, then pay cuts (mostly SMEs/service sector/non-union firms) & last pay increases (mostly unionised MNCs and some larger indigenous companies)

“We decided not to have pay cuts or pay freezes even though we could probably get away with it. We are looking at a 2.5%

increase next year… We could give no pay increase but that’s a short term tactic – we can pay and we need to be fair”

Benefits: changes to pension plans & profit-sharing schemes

Industrial Relations collapse of social partnership union power/influence changed IR climate & worker malleability?

17. Impact on HRM in MNCs (contd)

management opportunism

“It’s an opportunity to cut deep and clear out poor performers. The

weakness of the unions helps here”

union demand but difficult to meet expectations – what can unions

do?

Role of HRM/HR Function Evidence points to something of a conundrum……HR playing a key role in delivering org. responses to the GFC (‘Conformist innovation’, Legge, 1978?)

but… ‘hard metric’ evaluation of HR contribution resulting in rationalisation & re-configuration of HR delivery & shared service provision

CONCLUSIONSThough arguably one of the countries hardest hit by the GFC, MNCs in Ireland have weathered the crisis reasonably well, both in terms of employment & exports (which have reached record levels)

Additional interview quotes

as part of this cost agenda people in HQ have said ‘ hang on a second we are not just squeezing production & engineering…we need to look at enabling functions like HR, finance, IT. We need to start squeezing you`’. They are moving to a centre of excellence model which is driving redundancies in HR. I had 8 people working for me when I started – now there’s me and one other.. there were [HR] redundancies, about 20%. If you have a HR issue, it’s gone to Shared Services ...it [HR] has been stripped down to the bare bones. It has thrown up a huge challenge and behind all this is cost - to drop the numbers, push more work back to the line, drive specialisation.

We have recently moved from a decentralised regional/local (HR) structure to a more centralised ‘call centre’ model. For example, in [US city] I have one HR manager responsible for 1000 people and another 100 on the west coast plus a call centre – that’s 1 HR person plus a call centre for 1100 people & that call centre also caters for (larger numbers of) other US employees.

there is less focus on …the sunshine side of HR – your L&D, OD, being flathulach with comp & bens but a massive demand on the other side: for skills on negotiations, redundancies…& the administrative and logistical support needed to process large pools of people exiting the organisation

This (HR) is an increasingly strategic role as it …involves working with other key managers (e.g. supply chain, engineering) in evaluating sites, deciding on investment/ divestment, outsourcing, evaluating labour costs. For a company such as us, cash rich, the time havenever been better for acquisition. HR plays a key role in acquisitions.

Source material

Spain & Ireland compared(CIA world factbook/OECD Factbook 2010)

España Ireland

Population 46.8 million (27th in world) 4.6 million (119th in world)

GDP (2010) $1.376 trillion (14th in world) $172 billion (57th in world)

GDP Growth -0.2% (2010)-3.7% (2009)

- 1.6% (2010)- 7.6% (2009)

GDP per capita

$29,500 $37,600

GDP by sector Agric 2.9% Industry 25.5% Services 71.5%

Agric 2% Industry 29% Services 70%

Labour force 23 million 2.15 million

Labour force by sector

Agric 4.2% Industry 24% Services 71.8%

Agric 5% Industry 20% Services 76%

Unemployment

20% 14%

Public Debt 63.4% of GDP 94.2%

Inward FDI $605,140 million $193,451 million

Exports $268 billion (18th in world) $116 billion (34th in world)

21

% Manufactured Exports

21

2000Total = €65,353

million

2008Total = €86,218

million

Source: A Devitt FORFAS based on data from CSO

Manufacturing base has changed dramatically

3. Sources of data

Survey of Employment Practice in MNCs in Ireland: UL-ESRI survey of 260 MNCs in Ireland (63% response rate) – face to face interviews covering all areas of HR practice.

MNC Regions Project in Ireland: Ongoing study supported by IRCHSS focusing on role of sub-national governance actors in the attraction and retention of MNCs

Key informant interviews: In-depth interviews with selected senior HR practitioners and trade union officials.

Secondary data analysis: 3 key sources (a) Industrial Relations News; (b) European Industrial Relations Observatory (EIRO) and (c) the European Restructuring Monitor (ERM).

6. But who are today’s MNCs?

· Previous research unrepresentative- ‘large and famous’ - Incomplete or inaccurate listings - Exclusion of home-owned MNCs

· Profile of MNCs in Ireland….