The Role of IHRM IHRD within Global Strategy

1. The Role of IHRM & IHRD within Global Strategy Sue Shortland

2. Learning outcomes To evaluate critical competencies for international HRM/HRD To understand the stages of growth and development of global businesses To evaluate approaches to international strategy formulation To evaluate the role of HRM/HRD in achieving global strategic business objectives To discuss the implications of organisational culture within global organisations

3. Why operate internationally? Factors influencing the decision to internationalise: - markets - production advantages - people - risk - cost - host government/country

4. Internationalisation trends Increase in volume of international trade Development of global markets International division of labour Internationalisation of financial markets Supranational state systems and trading alliances Advanced information technology Increase in volume of cross-national investment and ownership Increase in number of joint ventures and alliances Internationalisation of consultancy

5. Stages of internationalisation Export Licensed Franchising Partnerships Foreign direct investments - greenfield start - foreign takeover - international merger - foreign joint venture MNC/MNE

6. IHRM - involvement in international people management Operation of parent company/subsidiary firms overseas Government agencies and non-profit organisations Operation of foreign firms in the home country The employment of foreign citizens Joynt and Morton, 1999

7. IHRM/IHRD - challenges Cultures Policy development in several business environments Co-ordination of activities in diverse environments Joynt and Morton, 1999

8. Domestic v. international HRM Responsibility for a greater number of functions and activities Requires a broader perspective Greater involvement in employees� lives Having to change emphasis Greater exposure to problems Coping with greater number of external influences Having to consider greater overall complexities in decision making Joynt and Morton, 1999

9. Domestic v. international HRD More and different functions Greater involvement in non-work related situations More external influences Different emphasis Walton, 1999

10. The role of the IHR professional Raise, define and clarify the capabilities required to win globally Invest, design and deliver HR practices that ensure these capabilities Stewart Black and Ulrich 1999

11. Capabilities for global integration and local adaptation Determine the core Achieve consistency Build global brand equity Get leverage and scale Share knowledge and learning Engender a global perspective Stewart Black and Ulrich 1999 Determine the non-core Allow flexibility Honour local customs Get focused Experiment and create new knowledge Ensure local accountability

12. HR investments for global integration and local adaptation Staffing Developing Performance Management Communication Governance Stewart Black and Ulrich 1999

13. Critical competencies for IHR managers Build business credibility Study execution capabilities Demonstrate leadership Focus on adding value Measure and communicate results Brake T , 1999

14. Globalisation (1) Some definitions: A phenomenon �driven by many factors, of which technology, the related mobility of people, goods and ideas, and a liberal trading environment are perhaps the most obvious�. McKenna, 2000.

15. Globalisation (2) Some definitions: �Attracting foreign investment, while increasing exports and developing international alliances to penetrate new markets� Granell, 2000.

16. Globalisation (3) Optimists versus the critics Convergence versus divergence Globalisation versus localisation thesis

17. Stage approaches to organisational design/growth

18. Global growth stages and HRD (1) Perlmutter�s model (1969): Ethnocentric (development and use of PCNs) Polycentric (development and use of HCNs) Regiocentric (development and use of TCNs - regionally based) Geocentric (development and use of TCNs - globally based)

19. Global growth stages and HRD (2) Bartlett and Ghoshal (1989) adapted by Walton (1999): Model A (multi-domestic): �nuclear� aggregation of domestic strategies Model B (international): HQ control, knowledge transfer to the locally autonomous �less advanced� Model C (global): centralised hub with cross-national operations Model D (transnational): Local responsiveness and global efficiency with knowledge transfer across boundaries

21. Classical strategy Strategy is a rational, analytical, long-term planning process undertaken in pursuit of profit maximization. It is premised on the existence of a hierarchical organisation structure, over which a chief executive officer presides. The CEO leads the senior management team in the formulation of strategy. Operational managers are responsible for strategy implementation. The main criticisms surround the neglect of human and organisational complexities and politics which militate against super-rationality and the analogy of the organisation as a military machine in which control and command are deemed not problematic. This model is naive and idealistic.

22. Evolutionary strategy Market unpredictability militates against heavy investment in strategic plans. The market, not managers, secure profit maximization and determine strategies. Managers need to keep their options open, and the firms that survive are the fittest and most efficient. Criticisms stem from a failure to acknowledge that large firms, with oligopolistic power can select markets, and that firms may be able to differentiate and adapt in order to survive.

23. Processual strategy The strategy emerges from the day-to-day activities of the firm, rather than being a function of the market. Hence the strategy is a continuous, formative and adaptive process (adaptive rationality) or a pragmatic response to events in which managers continually make compromises and adjustments. This approach acknowledges the limits of human cognition, the imperfections of human behaviours and action and the realities of organisational life. Formulation and implementation are inextricably entwined, and may emerge, such that they are only identifiable in hindsight. The firm's core, distinctive competences lie at the heart of a firm's competitive advantage and sustainability.

24. Systemic strategy Organisations can plan ahead and formulate strategies that are appropriate to particular contexts, but strategic goals and processes are shaped by social and economic systems and factors such as culture. Hence, it acknowledges a range of contextual factors beyond those observed in the Anglo-Saxon cultures of the USA and the UK, including the role and strength of financial institutions and different political regimes. There can be no single strategic model. Competitors' strategic position can only be understood with reference to social or industry sector factors.

25. Blue ocean strategy Red oceans are all the industries in existence today - the known market space. In red oceans, industry boundaries are defined and accepted and the competitive rules of the game are known. As the market space gets crowded, prospects for profits and growth are reduced and cut-throat competition turns the red ocean bloody. This is where most businesses compete today. Blue oceans, in contrast, represent all the industry that is not in existence today, unknown market space untainted by competition. In blue oceans, demand is created rather than fought over, and there is ample opportunity for growth. Ref: Kim & Mauborgne, 2006.

26. Red vs. Blue Ocean Strategy Red Ocean Strategy Compete in existing market space Beat the competition Exploit existing demand Make the value-cost trade-off Align the whole system of a firm�s activities with its strategic choice of differentiation or low cost Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firm�s activities in pursuit of differentiation and low cost

27. Organisational culture Corporate culture is the pattern of basic assumptions that a given group has invented, discovered or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and therefore to be taught to new members as the correct way to perceive, think and feel in relation to those problems. (Schein 1984)

28. Strategy, organisational culture and IHRM Sociability versus solidarity: Networked organisations Mercenary organisations Fragmented organisations Communal organisations Goffee and Jones 1999

29. Networked organisations Knowledge of local markets is critical success factor Corporate success is an aggregate of local success Few opportunities for learning between divisions or units Strategies are long term

30. Mercenary organisations Capacity to act swiftly in a highly co-ordinated way Economies of scale/competitive advantage from corporate centres of excellence Nature of competition is clear Corporate goals are clear and measurable

31. Fragmented organisations Innovation produced primarily by individuals, not groups Standards are achieved primarily through input rather than process Few learning opportunities between individuals Low levels of work interdependence

32. Communal organisations Innovation requires team working across functions and locations Measurable synergies and opportunities for teamworking Strategies are long term and emergent Business environment is dynamic and complex

33. IHR strategies Networked firm: Remuneration sustains equity Recruitment of compatible people Training concerns shared norms Leadership focuses on interpersonal skills Development of cross-cultural awareness and communication

34. IHR strategies Mercenary firm: Careful measurement of performance Rigorous recruitment/loss processes Golden handcuffs for high performers Leadership development via contests

35. IHR strategies Fragmented firm: Little focus on working together Minimal interference from organisation Retain �tacit� knowledge of individuals Support for �rare� individuals

36. IHR strategies Communal firm: Values organisational cohesion Values compatibility Leadership development ensures competencies to lead and follow