Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this document? Why not share!

Hrm%20 project %20final%20version1

on

  • 561 views

 

Statistics

Views

Total Views
561
Views on SlideShare
561
Embed Views
0

Actions

Likes
0
Downloads
10
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft Word

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Hrm%20 project %20final%20version1 Hrm%20 project %20final%20version1 Document Transcript

  • COMPARATIVE PERSPECTIVES ON HUMAN RESOURCE MANAGEMENT LINKS BETWEEN HRM AND BUSINESSSTRATEGY WITH FIRM PERFORMANCE: ACROSS-CULTURAL STUDY AMONG US, EU AND JAPANESE MNCS IN SOUTH ASIAN EMERGING ECONOMY Submitted To Dr. Md. Khasro Miah Ph.D. Associate Professor School of Business North South University Course: HRM 680 Submitted by Salman Zahir Mahjabin Sharmin
  • LETTER OF TRANSMITTAL 09 May 2012 Dr. Md. Khasro Miah, Ph.D. Associate Professor School of Business North South University Dhaka Subject: Submission of Report Dear Sir We hereby submit our report titled “Links between HRM and Business Strategy with Firm Performance: A Cross-cultural Study among US, EU and Japanese MNCs in South Asian Emerging Economy” as a partial fulfillment of the requirements of your course. We tried to follow the concepts taught by you throughout this course as well as referred to relevant text books to develop our knowledge on of human resources and business strategy. This report has helped us gain insight in to various HRM and Business Strategy across culture. We have worked hard to prepare this report to the best of our abilities and hope that our work would meet the level of your expectations. Thank you sir for your guidance and valuable suggestions for this paper without which this paper would not have been possible. Sincerely yours Salman Zahir ID- 1010573560 Mahjabin Sharmin ID- 0910058090 1
  • Table of Contents Abstract ............................................................................................................................................ 3 1. Introduction ............................................................................................................................ 4 2. Theoretical Framework ........................................................................................................ 5 3. Literature Review .................................................................................................................... 6 4.0 Hypothesis Development ........................................................................................................... 8 4.1 Determinants of HRM Performance Fit Strategy, and Firm ................................................... 8 H1: Manager’s perception of firm performance will be positively associated with Prospector Business Strategy. ........................................................................................................................... 8 H2: Analyzer Business Strategy will be positively associated with firm performance perceived by managers. .................................................................................................................. 9 H3: Defender Business Strategy will be positively associated with firm performance perceived by managers. ................................................................................................................ 10 4.2 Part –2- Determinants of HRM Strategy, and Firm Performance Fit ................................... 11 H4: Accumulator HRM Strategy will be positively associated with firm performance perceived by managers. ................................................................................................................ 11 H5: Utilizer HRM Strategy will be positively associated with firm performance perceived by managers....................................................................................................................................... 12 H6: Facilitator Business Strategy will be positively associated with firm performance perceived by managers. ................................................................................................................ 13 H7: Western MNCs firm performance is better than Eastern MNCs firm performance perceived by managers. ................................................................................................................ 13 4. Methodology ......................................................................................................................... 15 4.1 Data collection method ........................................................................................................ 15 5. Measures............................................................................................................................... 15 Conclusion ...................................................................................................................................... 17 6. Bibliography .......................................................................................................................... 19 2 View slide
  • AbstractPurpose– The purpose of this paper is to examine the links between HRM and Business Strategy withFirm Performance of US, European Union and Japanese origin MNCs active in business in South Asianeconomy.Design/methodology/approach– Through secondary research, this paper examines how, from theperspective of their operation in South Asia, a MNCs’ strategies are based upon different factors likemission and vision, host country influence, home country influence, legal and societal factors. Then itexamines how a firm’s business strategy shapes its HRM strategies and how the HRM strategiesaffect a MNC’s performance.Findings– It was found that business strategies are influenced by mission and vision, host countryinfluence, home country influence, legal and societal factors. It was also found that businessstrategies impact the performance of a firm by affecting the HRM strategies. The direct linkagebetween different HRM strategies and their impact on a firm’s financial performance was not foundbut substantial secondary research supports that a fit between business and HRM strategies leads todevelopment of employee productivity and efficiency which in turn affects financial performance.Finally it was found that in the South Asian Economy, Western MNCs are performing better thanEastern MNCs because of their ability to integrate the local and their home country’s culture better.Practical implications– This paper provides us a general guideline as to understanding how MNCsare affected by their home country and host country environment. For any HRM practitioner it givesthe conceptual framework of working out how a firm’s performance can be increased in a foreigncountry.Originality/value– The paper provides an insight into understanding why MNCs of different culturesadopt different levels of local and their home country’s culture and how this ultimately affects theirperformance.Keywords- Host country influence, HRM strategies, Business Strategies, Firm Performance.Paper type- Conceptual paper 3 View slide
  • 1. Introduction Research on MNCs has tended to be focused on those from developed countries establishingsubsidiaries either in other developed economies (e.g. U.S. to the UK) or into developing economies(e.g. the U.S.A into Latin America). U.S. firms invested in Europe from before 1939 but the majorpush came after World War Two (Ferner, Almond, Clark, Colling, Edwards, Holden, & Muller-Camen,2004). Japanese MNCs began to locate in advanced economies, particularly in the 1980s. While,there has been a rich stream of MNC research in this area, there has been relatively less research onnewer industrialized (e.g. Taiwan, India and South Korea) to the more industrialized economies(Glover & Wilkinson, 2007, p.1438). This is a new era which is often referred to as a ‘new geographyof investments’ (UNCTAD, 2004). Whilst most MNCs come from the world’s top five economies, agrowing number are from developing and newer industrialized economies. UNCTAD categorizesdeveloping economies into two groups - South Korea, Taiwan and Singapore who are newerindustrialized and have an established track record as outward investors and those such as India andChina that are rapidly developing.This paper helps identify and analyze ‘the travel of ideas’ (Delbridge, 2002; Garrahan & Stewart,2004) between the East and West, in terms of the motive and opportunity behind cross-nationaltransfer of HR policies and practices. Such an understanding of corporate management thinking andpractice in Asian MNCs helps practitioners understand their own strengths and weaknesses in thenew scheme of things and assists them in strategizing accordingly as to how best to influence thetop management layers and players. This would in turn assist them to facilitate a smooth ‘travel’ ofpolicies and practices across subsidiaries (Ferner, 2009). The reason underlying the complexity of thetravel of ideas is that, the “best practice” in one country may not be the “best practice” in anothercountry, given that the culture and value system as well as institutional and structural factors arevery different from one country to another (Aycan, 2005).The world investment report from UNCTAD (2010) indicates that although developed-countrytransnational corporations (TNCs) account for the bulk of global foreign direct investment (FDI),developing and transition economies have emerged as significant outward investors accounting forone quarter of global FDI outflows in 2010, the bulk of which came from Asia. Similarly, the growthrate of the number of TNCs from developing countries and transition economies over the past 15years has exceeded that of TNCs from developed countries. Asia dominates the list of 100 largestdeveloping country TNCs. Further, the emerging economies are investing heavily in low-income hostcountries, generating considerable South-South investment flows (UNCTAD, 2007). It is anticipatedthat in the new world economy, the balance of power will shift to the East as China and Indiacontinue to evolve as two of the most attractive inward as well as outward FDI destination countries. 4
  • 2. Theoretical Framework MNCs (Subsidiaries and Joint Ventures) vision and mission in the emerging market Parent Country National Host Country NationalCulture Influences (Global Culture Influences (Hostand Home Contextual factors) Contextual factors) Degree of Control (Legal, political, historical, socialization and socio-cultural dimension) Firm Strategy Internationalization Business strategy Internationalization strategy (adaptive) HRM Orientation strategy (exportive) HRM Activities Effectiveness of transfer across nations Firm performance Figure1: Conceptual model 5
  • 3. Literature Review The study of the diffusion of human resource management (HRM) practices acrosscountry borders has become increasingly important in international HRM research (Brewster,2006). Research shows that the transfer of HRM practices from multinational corporations(MNCs) to their foreign subsidiaries may be contingent upon the country-of-origin of theMNC (Lau & Ngo, 2001), institutional distances between the local and parent countrylocations (Gaur, Delios, & Singh, 2007), and the institutional pressures embedded in thelocal environment (Björkman, Fey, & Park, 2007). Despite extensive evidence exists aboutthe contextual factors related to the similarities or dissimilarities of MNC subsidiary HRMpractices across country borders, it is still the case that “little is known about the extent towhich high-performance HRM practices are found in foreign subsidiaries across countries”(Björkman et al., 2007: 431). Another approach has taken the view from institutional theory (Björkman et al., 2007).Björkman et al. (2007) tested the degree of utilization of high performance work systems(HPWSs) by MNC subsidiaries operating in the U.S., Russia and Finland. They foundsubsidiary factors (i.e. the status of the HR department and the involvement of subsidiary inknowledge transfer) influenced the use of HPWSs. Although they examined subsidiaries inthree host countries and addressed the significance of institutional pressures faced by thesubsidiaries, they had not directly tested specific measures of various aspects of theinstitutional environment within host countries. The likely institutional factors include thefavorableness of the political-legislative environment to business, the restrictiveness of laborlegislation, professional norms, and aspects of the cultural-cognitive institutionalenvironment. Scholars have yet to “disentangle the relative influence of MNC-internal and –external regulative, normative and cultural-cognitive processes” (Björkman et al., 2007: 444)in determining the adoption of HRM practices in the diverse context of subsidiaries. In developing guidelines on how to decide on IHR policies, we start from the models ofstrategic international human resource management (SIHRM). This work (Björkman et al.,2007: 444) has mainly taken a macro, strategic perspective focusing on the determinants ofSIHRM systems in a multinational company (MNC). The early models focused primarily onstrategy as the main factor, arguing that the central issue is not to identify the best HRMpolicy per se, but rather to find the best fit between the MNC‟s overall strategy and its HRMpolicy (Fenton-O‟Creevy, Gooderham, &Nordhaug, 2008). More recent models havespecified other internal as well as external factors to explain MNCs‟ choices of IHRMsystems. In addition to strategy, the different determinants of IHRM seem to be the industryin which a MNC is operating (Chen, Lawler, and Bae, 2005), the MNC‟s international lifecycle and experience, the organizational structure, the HQ‟s international orientation, thehost country‟s cultural and legal environments, and the resources or strategic role ofaffiliates and certain employee groups (Björkman et al., 2007). In one of the most recent SIHRM models, Taylor and colleagues have identified threedifferent SIHRM orientations in MNCs: adaptive, exportive and integrative. Theseorientations determine the company‟s overall HR approach to managing the tension betweenintegration or the pressure for internal consistency and differentiation or the pressure forexternal consistency. An adaptive SIHRM orientation is one in which each affiliate developsits own HRM system, reflecting the local environment. Differentiation is being emphasizedwith almost no transfer of HRM philosophy, policies or practices either from the parent firm toits affiliates or between affiliates (Fenton-O‟Creevy, Gooderham, &Nordhaug, 2008). Themajor advantage of such an approach is that HRM systems may be completely in tune withtheir local context. However, when each affiliate determines its own HR policies,disadvantages may occur. There may exist a lack of coherence within the MNC if, forinstance, different performance criteria are considered in the employees‟ appraisal in 6
  • different affiliates. Because each HR department is focused on its own context, there may bealso a duplication of efforts with no attention to economies of scale or synergies in terms oflearning from each other. Each affiliate will have spent time and resources to design a HRpolicy without having consulted other HR managers for best practices. The second, an exportive SIHRM orientation is one in which the parent firm‟s HRMsystem is being transferred to its different affiliates. This approach emphasizes integrationacross all affiliates, developing a highly internal consistent MNC (Fenton-O‟Creevy,Gooderham, &Nordhaug, 2008). However, the downside of such an exportive IHRMapproach is its inflexibility, ignoring the possible local differences, and therefore havingmissed opportunities with respect to learning. This all may lead to an ethnocentric orientationfrom HQ and as a consequence, affiliates will show feelings of rejection towards the imposedpractice. MNCs are confronted with the challenge of simultaneously considering global integrationand local adaptation. So, a pure exportive or adaptive IHRM approach doesn‟t seemadvisable to choose. This leads to the rise of the third kind of practice which is a hybrid ofexportive and adaptive approach. This is known as the integrative approach. Among the three options, it is the integrative IHRM approach that focuses on substantialglobal integration with an allowance for local differentiation. In this approach, the balance isbeing achieved through transferring best practices between HQ and affiliates. IntegrativeSIHRM orientation attempts to take „the best‟ HRM approaches and uses them throughoutthe organization in the creation of a worldwide system. The focus here is on substantialglobal integration with an allowance for some local differentiation. An integrative approachcombines both characteristics of the parent company‟s HRM system with those of itsinternational affiliates. Transfer of HRM policies and practices occurs and can go in anydirection, from one affiliate to HQ or between affiliates and vice versa (Björkman et al.,2007). While the advantage of this approach seems to be the spreading of good practices,the major disadvantage is that a so-called best practice may still be ill suited for a particularcontext. The three orientations of an adaptive, exportive or integrative approach representthree basic choices for IHR managers, reflecting an overall approach towards IHRM.However, in practice, IHR managers may have the option to choose for a mix of the threeapproaches. IHR professionals may also decide differently with respect to certain employee groups.When HR practices are designed for higher and senior level managers, they will probablyencounter a need for consistency worldwide, either by exporting the HQ‟s approach or by anintegrated approach. For instance, the question of how to develop global managers seemsto lead to an integrated HR approach for this employee group. Many companies emphasizethat their senior managers must not only possess technical skills but also need to have abroad understanding of history, culture, sociology, and human relations. Consequently, theselection criterion often set for this employee group is global awareness or global mindset,referring to openness to other cultures, multiple language skills, tolerance and flexibility(Björkman et al., 2007). 7
  • 4.0 Hypothesis Development4.1 Determinants of HRM Performance Fit Strategy, and Firm Huselid and Becker have done a substantial amount of research on developing acomprehensive firm-wide measure of an organization‟s HRM system. They found that a highperforming HRM system (termed High-Performance Work System) has a positive effect onfirm performance. A high performance HRM system implies designing and implementing avalidated competency model linked to every element in the HR system and with aim ofmaximizing the overall quality of human capital throughout the organization (Becker et al.,2001). In addition, their research supports the importance of both internal and externalcomplementarities. (Becker and Huselid 2000, Becker, Huselid and Ulrich 2001) reviewedtheir past research on HRM systems and ended-up presenting typologies of four HRarchitectures. Based on our literature studies of strategic human resource management (SHRM), wehave identified eight dimensions of SHRM (e.g. Becker et al., 2001). Recruiting andselection, Training, the degree of formalization, compensation, alignment of HR system andfirm strategy, Communication, Management skills of HR professionals and Executiveleadership were identified as fundamentally critical issues for HRM and SHRM by Huselid etal., 2000; Godard & Delaney, 2004 . According to goals HR bundles can be divided into two main categories: Organic HR- The overall focus of organic HR systems is to meet demands for change,skill enhancement, and growth (Peltonen, 2003) Mechanistic HR- The overall focus of mechanistic HR systems is to meet the demandsfor operational results, stability and skill utilization. (Peltonen, 2003)H1: Manager’s perception of firm performance will be positively associated with ProspectorBusiness Strategy. The environment will be perceived as growing, even dynamic by the Prospectors whoare exploiters and creators of change. For this type of firms, planning is concerned withproblem-finding. Being innovative and constantly looking for new opportunities frequentlyresult in an acceptance of moderate near-term profits in the search for new segments.Human resource units within Prospectors perform an entrepreneurial role, helping to identifyand quickly develop crucial human resources through the rapid movement and alteration ofassignments. High skill utilization is in focus. Employees are moved to match abilities, skills,and knowledge to specific tasks. HR ArchitectureDimensions ProspectorHR System OrganicRecruitment & Prospectors require highly skilled professionals, thus a highlyselection selective recruiting & selection function is requiredTraining Prospectors require that employees upgrade skills continuously and have high levels of expertise. High levels of training are required. 8
  • Degree of Prospectors employ many professionals, and personnelformalization turnover is likely to be high, therefore formalization should be low.Compensation Jobs are loosely described, difficult to monitor, and outcomes unpredictable. High emphasis on incentive compensation. Effectiveness & AlignmentAlignment between N/aHR system andfirm strategyCommunication Jobs and procedures change frequently for, changes need to be communicated effectively to ensure effective implementationManagement skills HR professionals need to be able to adapt to changingof HR professionals demands for service as the needs of line managers change frequently. HR professionals should be proactive.Executive Developmental culture. Focus on dynamics, entrepreneurship,leadership style and creativity. Source- The Fit between Strategy and Strategic Human Resource Management (Andersen,Eriksen, Lemmergaard&Povlsen, 2010) In the multinational context, when a company requires an HR system which is organic,Defender business strategy fits perfectly and a perfectly aligned strategic fit between HRpolicies and business strategies affects a firm‟s performance positively irrespective of thefirm‟s location and country of origin (Peltonen, 2003).H2: Analyzer Business Strategy will be positively associated with firm performanceperceived by managers. Analyzers perceive the environment as slowly changing and are followers of change.Simultaneously they are operating in both stable and turbulent domains with correspondingfoci on both efficiency concerning existing areas and innovation also in new marketopportunities. Analyzers, here the HRM unit plays the training and maintenance roleappropriate to the defender strategy by using accurate placement and appraisal devices. Forinnovation developments, the unit plays a more developmental role by designing flexible andenriching team structures and processes. Encourage and support self development ofabilities, skills and knowledge is in focus. The HRM unit mainly is concerned with coordinatebetween accurate placement and flexible team structures. HR ArchitectureDimensions AnalyzerHR System Mix of mechanistic and organicRecruitment & Analyzers require professionals for managerial positions. Moderateselection selectiveness.Training Analyzers require experts in managerial and professional jobs. Training should be moderate.Degree of Analyzers require experts in managerial and professional jobs.formalization Formalization should be low for managers and professionals. High for other employees. 9
  • Compensation Most jobs are well described and easy to monitor. Managerial and professional jobs are an exception. Moderate emphasis on incentive compensation. Effectiveness &AlignmentAlignment N/abetweenHR system andfirm strategyCommunication Moderate change to jobs and procedures, and moderate change in daily operations and strategy. Moderate emphasis on communication.Management Moderate change in demands for service from line managers. HRskills professionals should be proactive in relation to managers andof HR professionals. The focus should be on administration for otherprofessionals employees.Executive HR professionals need to be able to adapt to changing demandsleadership style for service as the needs of line managers change frequently. HR professionals should be proactive. Source- The Fit between Strategy and Strategic Human Resource Management (Andersen,Eriksen, Lemmergaard&Povlsen, 2010) In the multinational context, when a company requires an HR system which is a mix ofmechanistic and organic, Analyzer business strategy fits perfectly. A perfectly alignedstrategic fit between HR policies and business strategies affects a firm‟s performancepositively irrespective of the firm‟s location and country of origin (Peltonen, 2003).H3: Defender Business Strategy will be positively associated with firm performanceperceived by managers. Defenders are firms that perceive the environment as relatively stable, have a narrowproduct line, and concentrate on efficient operations. This type of firm seeks niches andspecialization through concentration on problem-solving Rumelt et al. (2001). The defenderis therefore a strategy type that favors high reliability as a criterion for obtaining internalconsistency. Therefore the HR-bundle of the defender should aim at improving the reliabilityof the human resources in the firm. Defenders rely heavily on internally developed humanresources and employees are carefully selected, placed, and trained. Furthermore,employees are expected to stay with the company for long periods of time. (Quinn 2004,2005). HR ArchitectureDimensions DefenderHR System MechanisticRecruitment & Defenders require standardized skills, and fewer professionals.selection Recruitment does not need to be as selective.Training Defenders rely on standardized skills and narrow/specialized job descriptions.Degree of Defenders require standardized skills and work processes. HRformalization systems emphasize formalization. 10
  • Compensation Jobs are well described, easy to monitor, and outcomes are predictable. The emphasis on incentive compensations should be low.Effectiveness &AlignmentAlignment between N/aHR system andfirm strategyCommunication Jobs and procedures are well described, and there are few exceptions to daily operations and strategic changes. Emphasis on communication low.Management skills Since demand for service is relatively stable, HR professionals canof HR be reactive administrators.professionalsExecutive Internal process culture. Focus on formalization and structure.leadership style Source- The Fit between Strategy and Strategic Human Resource Management (Andersen,Eriksen, Lemmergaard&Povlsen, 2010) In the multinational context, when a company requires an HR system which ismechanistic, Defender business strategy fits perfectly. A perfectly aligned strategic fitbetween HR policies and business strategies affects a firm‟s performance positivelyirrespective of the firm‟s location and country of origin (Peltonen, 2003).4.2 Part –2- Determinants of HRM Strategy, and Firm Performance Fit Bird and Beechler (in Mendenhall et al, 2007) examine the relationship of humanresource practices to business and corporate level strategies. As a low cost strategyrequires standardization, they suggest the need for tight control and conformance toprocesses across all locations. As deviation from standard practices could impact efficiencyand jeopardize the low cost position of the firm, there would be risk in allowing localization ofprocesses. However, attempting to implement practices which are inconsistent with localcultural values presents the potential for conflict and risk in successful implementation. ForMNEs implementing a differentiation strategy, a multi-domestic approach whichaccommodates local needs may be more consistent with business strategy through localizedinnovation, but limits the development of global knowledge. The authors describe threepotential Human Resource (HR) strategies which should be aligned with business strategy:H4: Accumulator HRM Strategy will be positively associated with firm performance perceivedby managers. ·“Accumulator Strategy” builds up HR capacity based on potential, and supports thedifferentiation strategy (Mendenhall et al, 2007). Differentiation Strategy: A firm is considered to pursue a differentiation strategy when itoffers a product/service that is perceived to be unique along several dimensions that arevalued by the customers. This strategy involves selecting one or more criteria used bybuyers in a market - and then positioning the business uniquely to meet those criteria. This 11
  • strategy is usually associated with charging a premium price for the product - often to reflectthe higher production costs and extra value-added features provided for the consumer.(Mendenhall et al, 2007). Accumulator develops company‟s workforce from a long termperspective, provides extensive trainings, and emphasizes stable career path within thecompany. Accumulator strategy builds up human resources of the firm through (a) acquisition ofpersonnel with large, latent (b) development of that potential over time in a mannerconsistent with the needs of the organization. According to the data provided by 229successful MNCs of Japanese, U.S. and European origin a global “Differentiator” follows thefollowing strategies (Berry, 2009)H5: Utilizer HRM Strategy will be positively associated with firm performance perceivedby managers. “Utilizer Strategy” deploys HR as efficiently as possible and is consistent with the lowcost strategy (Mendenhall et al, 2007). Low Cost Strategy- A firm producing at the lowest cost in the industry enjoys the bestprofits. Producing at lower cost is a strategy that can be used by various firms so as to havea significant cost advantage over the competition in the market. This in effect leads to growthin the market share. This strategy is mostly associated with large businesses offeringstandard products that are clearly different from competitors who may target a broader groupof customers. The low cost leader in any market gains competitive advantage from beingable to many to produce at the lowest cost. Factories are built and maintained; labor isrecruited and trained to deliver the lowest possible costs of production. Cost advantage is Product Market Geographic Market: HR Strategy Average Firm R&D Low R&D and servicesintensity all over the world intensities in foreign affiliates Highest firm services Home country sales Weak pressure forintensity in the US and then dominate consistency between parentJapan and Europe and subsidiary strategy Highest product diversity Least percent of sales in Weak pressure forof any group IP risky countries consistency with local external environments the focus. Costs are shaved off every element of the value chain. Products tend to be nofrills. However, low cost does not always lead to low price. Producers could price atcompetitive parity, exploiting the benefits of a bigger margin than competitors. Someorganizations, such as Toyota, are very good not only at producing high quality autos at alow price, but have the brand and marketing skills to use a premium pricing policy. A lowcost leader‟s basis for competitive advantage is lower overall costs than competitors. The need to manage cost is nothing new, yet surprising number of organizationsstruggles to successfully control their operating expenses overtime (Bertone, Clark, West &Groves, 2009). Successful low cost leaders are exceptionally good at finding ways to drivecosts out of their business. According to the data provided by 160 successful MNCs ofJapanese, U.S. and European origin a global “Cost Leader” follows the following strategies(Berry, 2009) 12
  • H6: Facilitator Business Strategy will be positively associated with firm performance perceivedby managers. “Facilitator” strategy is effective by focusing on knowledge, as may be suitable for firmsusing both “Low Cost” and “Differentiator” strategies (Mendenhall et al, 2007). Facilitator Strategy – is focused on new knowledge creation. It seeks to develop thehuman resources of the firm through acquisition of self-motivated personnel and theencouragement and of personnel to develop, on their own, the skills and knowledge whichthey, the employees, believe are important. Based on these three HR strategies and theneed for integration (or consistency) between Parent and subsidiary, we can illustrate thelinkages between HR and business strategies as follows: A Facilitator strategy fits the organizational requirements of Analyzer firms because itaccommodates the management of dual pressures imposed by an Analyzer strategy. Thepursuit of new markets requires an infusion of new skills and talents into the firm,encouraging hiring from the external labor market. Maintenance of existing product lines, bycontrast, necessitates the internal development of employees and encourages thedevelopment of an internal labor market. Consequently, staffing policies will likely be a mix ofboth internal and external selection. Firms with a Facilitator strategy may seek to offset thepotential schizophrenic outcomes of a mixed staffing policy by carefully recruiting employees Lowest R&D and No R&D and services Utilizer HR strategy isservices intensity in both the expenditures in foreign best suitedUS and in foreign affiliates affiliates(along with Group One) Lowest product diversity Lower developing Using host countryof any group country activities than Group nationals wherever possible One – but still second highest percent across all groups Second highest sales in Low levels of expats IP risky countries with a desire for self-development. By encouraging and supporting self-development, afirm can focus its activities more fully on the accurate placement of personnel and the designof flexible teams (Berry, 2007). The facilitator HR strategy aims to create new knowledge through self-motivatedemployees. So, this strategy can meet the needs of evolving HR demands resulting fromstrong pressures in opposing directions for both strategic orientation and integration. • In subsidiaries employing product differentiation strategies and having low degree of integration with parent, those that adopt accumulator strategy perform better. • Finally, subsidiaries pursuing both cost leadership and differentiation strategies, those which adopt a facilitator HRM strategy.( Porter, 2003) C. MNCs Comparative fit between Western MNCs and Eastern MNCsH7: Western MNCs firm performance is better than Eastern MNCs firm performance perceivedby managers. Authors following the convergence approach assume that in management „bestpractices‟ can be defined which are universally valid and applicable, irrespective of national 13
  • culture or institutional context. Efficiency imperatives and an increasingly similar globalcompetitive environment are perceived to force companies to adopt such best practices inorder to increase their competitiveness. From this follows a cross-national convergence ofmanagement practices (see e.g. Kerr et al., 1960; Levitt, 1983; Toynbee, 2001; Fenton-O‟Creevy & Gooderham, 2003). Due to the dominance of American business schools in thedevelopment and dissemination of new management knowledge, the dominance ofAmerican consultancies in further spreading this knowledge and, most importantly, thestrength of the American economy and American MNCs, „best practices‟ in management areoften, explicitly or implicitly, equated with management practices employed by successfulAmerican MNCs (Smith & Meiksins, 1995). According to Forbes 2011 issue the top ten MNCs in India, the biggest economy ofSouth Asia, are the following: 1) IBM: The net income of this company post completion of the financial year end of 2010 was $14.8 billion with a net profit margin of 14.9 % (Country of origin – United States). 2) Microsoft: A subsidiary, named as Microsoft Corporation India Private Limited, of the U. S. (United States) based Microsoft Corporation, one of the software giant‟s has got their headquarter in New Delhi. The net income of Microsoft Corporation grew from $ 14, 569 million in 2009 to $ 18, 760 million in 2010. 3) Nokia Corporation: Nokia Corporation was started in the year 1865 and is one of the leading mobile companies in India. The net sales of the company increased by 4 % in the last financial year with sales of EUR 42.4 billion as compared to 2009s EUR 41 billion. Over the past few years, this company in India has been acquiring companies, which have got new and interesting competencies and technologies so as to enhance their ability of creating the mobile world (Country of Origin- Norway). 4) PepsiCo: PepsiCo. Inc. entered the Indian market with the name of PepsiCo India from the year 1989. Within a short time span of 20 years, this company has emerged as one of the fast growing as well as largest beverage and food manufacturer. As per the annual report of the company in the last business year, the net revenue of PepsiCo grew by 33 %. (Country of origin- United States) 5) Ranbaxy Laboratories Limited: Ranbaxy Laboratories Limited, one of the biggest pharmaceutical companies in India, started their business in the country from the year 1961. In the business year 2010, the registered global sales of the company was US $ 1, 868 Mn. (Country of origin- India) 6) Reebok International Limited: This global brand is a famous name in the field of sports as well as lifestyle products. Reebok International Limited, a subsidiary of Adidas AG, is based in U. S. A. (United States of America) started its operation in 1890s. During the last financial year, Adidass currency neutralized group sales increased by 9 %. (Country of origin – United States) 7) Sony: Sony India is a part of the renowned brand name Sony Corporation, which started their business operation in the year 1946 in Japan. Established in India in November 1994, this company has captured one of the leading positions in the field of consumer electronics goods. By the end of the business year 2010 on 31st March, 2011, the company showed a remarkable increase in the share related to numerous categories. Sony India is planning to invest around INR. 150 crore for the marketing of the activities related to ATL and BTL. (Country of origin- Japan) 8) Tata Consultancy Services: Commonly known as T. C. S., this multinational company is a famous name in the field of I. T. (Information Technology) services, Business Process Outsourcing (B. P. O.) as well as business solutions. Tata Consultancy earned a growth of 8.9 % during the latest quarter of this financial year, which ended on 30th September, 2011. In this current business year, they are about to employ 60, 000 people to meet their business requirement. (Country of Origin- India). 14
  • 9) Vodafone: Vodafone Group Plc is an international telecommunication company, which has got its headquarter based in London in the United Kingdom (U. K.). Vodafone India is among the largest operators of mobile networking in the country. The turnover of the Vodafone Group Plc after the completion of the 2010 financial year grew to £ 44, 472 m from £ 41, 017 m that was the turnover of the business year 2009. 10) Tata Motors Limited: The biggest automobile company in India, Tata Motors Limited, is among the leading commercial vehicles manufacturer in the country. They are one of the top 3 passenger vehicle manufacturers. Post completion of the financial year 2010 to 2011, the global sales of the company grew by 24.2 % with sales crossing INR. 100 million. It can be clearly seen that Western MNCs are performing better than Asian MNCs in theemerging economies. 5. Methodology Methodology refers to a combination of methods and systematic outlet that leads toaccomplish certain goal. This was a purely qualitative research and was developed usingsecondary data from a variety of sources. We browsed through relevant scholarly articles,journals and periodicals to gather relevant secondary information.5.1 Data collection method Literature survey and analysis was the sole method of data collection. Data from differentjournals, articles, research papers were carefully pursued to complete this research. 6. Measures Firm Performance- Based on our literature studies of strategic human resourcemanagement (SHRM); we have identified eight dimensions of SHRM (e.g. Becker et al.,2001) that promotes firm performance. These are listed below with a brief description thatincludes key sources for the variables. The table is largely based on empirical contributions.Here it should be noted that the tradition for scale development in HRM and SHRM appearsto favor a focus on the substantive issues rather than measurement issues. Research practice does not seem to use formally validated scales, and differentmeasures often refer to the same underlying constructs. Recruiting and selection refers to the emphasis an organization places on the recruitingand screening of potential employees. When an organization devotes many resources torecruiting and selection (controlled for size of course), it is likely that it will run fewer risks ofselecting poor performers. Training refers to the amount of training offered to employees at different organizationallevels. A high emphasis on training will result in better skilled and potentially more motivatedemployees, while less training only results in employee learning-by-doing. 15
  • The degree of formalization refers to the formal HR systems that firms implement, forexample salary and hiring policies, and delegation of decision making. A high degree offormalization will entail less flexibility. Compensation refers to the use of incentive pay by organizations, and the extent towhich it is used at different organizational levels. Incentive pay means that employees arerewarded based on their results, for example through bonuses, stock options, piece ratesand similar mechanisms. Alignment between HR system and firm strategy refers to the extent that HR practicesare aimed at influencing strategy level outcomes. If this is the case, the goal of HR practicesis to affect outcomes by planning, analysis, and influence activities. Communication refers to the extent that HR issues are communicated and discussedthroughout the organization, and implies that the organization focuses on the traditionalhuman relations perspective in industrial relations that emphasizes participation in decisionmaking and extensive communication within the organization (Huselid et al., 2000; Godard &Delaney, 2004). Management skills of HR professionals refer to the extent of professionalism andproactiveness in HR professionals. This means that he HR professionals are externallyfocused, knowledgeable in their field, and engage in influence activities and activecooperation with other functions in the firm. Executive leadership style is a fuzzy concept, and the interpretation offered in e.g.Becker et al. (2001) tends to favor a uni-dimensional perspective on leadership. We offer analternative perspective based on work by (Quinn 2004, 2005) on competing values inorganizations where leadership roles are defined on two dimensions: stability-flexibility andinternal-external orientation. We believe that the Quinn‟s theory is a more refined way ofdescribing leadership in organizations, and, that there is a reasonable empirical support forthe model at both the level of leadership and the level of the organization. Business strategy - The environment will be perceived as growing, even dynamic bythe Prospectors who are exploiters and creators of change. For this type of firms, planning isconcerned with problem-finding. Being innovative and constantly looking for newopportunities frequently result in an acceptance of moderate near-term profits in the searchfor new segments. Human resource units within Prospectors perform an entrepreneurial role,helping to identify and quickly develop crucial human resources through the rapid movementand alteration of assignments. High skill utilization is in focus. Employees are moved tomatch abilities, skills, and knowledge to specific tasks. Analyzers perceive the environment as slowly changing and are followers of change.Simultaneously they are operating in both stable and turbulent domains with correspondingfoci on both efficiency concerning existing areas and innovation also in new marketopportunities. Analyzers, here the HRM unit plays the training and maintenance roleappropriate to the defender strategy by using accurate placement and appraisal devices. Forinnovation developments, the unit plays a more developmental role by designing flexible andenriching team structures and processes. Encourage and support self development ofabilities, skills and knowledge is in focus. The HRM unit mainly is concerned with coordinatebetween accurate placement and flexible team structures. Defenders are firms that perceive the environment as relatively stable, have a narrowproduct line, and concentrate on efficient operations. This type of firm seeks niches andspecialization through concentration on problem-solving Rumelt et al. (2001). The defenderis therefore a strategy type that favors high reliability as a criterion for obtaining internalconsistency. Therefore the HR-bundle of the defender should aim at improving the reliability 16
  • of the human resources in the firm. Defenders rely heavily on internally developed humanresources and employees are carefully selected, placed, and trained. Furthermore,employees are expected to stay with the company for long periods of time. (Quinn 2004,2005). HRM Strategy -“Utilizer Strategy” deploys HR as efficiently as possible and is consistentwith the low cost strategy (Mendenhall et al, 2007). “Facilitator” strategy is effective by focusing on knowledge, as may be suitable for firmsusing both “Low Cost” and “Differentiator” strategies (Mendenhall et al, 2007). A Facilitatorstrategy fits the organizational requirements of Analyzer firms because it accommodates themanagement of dual pressures imposed by an Analyzer strategy. The pursuit of newmarkets requires an infusion of new skills and talents into the firm, encouraging hiring fromthe external labor market. Maintenance of existing product lines, by contrast, necessitatesthe internal development of employees and encourages the development of an internal labormarket. Consequently, staffing policies will likely be a mix of both internal and externalselection. Firms with a Facilitator strategy may seek to offset the potential schizophrenicoutcomes of a mixed staffing policy by carefully recruiting employees. Accumulator strategy builds up human resources of the firm through (a) acquisition ofpersonnel with large, latent (b) development of that potential over time in a mannerconsistent with the needs of the organization. According to the data provided by 229successful MNCs of Japanese, U.S. and European origin a global “Differentiator” follows thefollowing strategies (Berry, 2009) 7. ConclusionThere is empirical evidence that suggests that almost all MNCs have a trace of their countryof origin within them. It could be subconscious choices which are influenced by the culturaland institutional characteristics of the country of origin of the MNC or it could be transferredthrough the people who work in the organization (Harzing & Sorge, 2003). U.S.multinationals have been typically contrasted with Japanese multinationals in respect of theirstyles of HRM employed in their subsidiaries (Harzing & Sorge, 2003). Japanesemultinationals have the characteristic of being strong but with informal centralization and arehighly reliant on establishing international networks (Bartlett and Ghoshal, 2000). U.S.multinationals appear to have elaborate systems of control and standardized worldwidesystems in place (Harzing & Sorge, 2003). Moreover, whether the country is high or low oncultural context will also determine the impact of their country of origin on the IHRMpractices. This work draws on the work of Hall (2000) and his distinction between situationswhere things are less explicit where the context exerts more influence (high context) andthose that are much more explicit where the context is less of an influence (low context).Western countries are seen as generally low on cultural context whereas Eastern countriesare mainly seen as high on cultural context (Thite, 2004). The interplay between national andorganizational culture is a significant factor in the success of global mergers, acquisitionsand alliances (Thite, 2004).Despite the increasing trend towards the globalization of trade and commerce and cross-national convergence arising from it, significant differences remain in the way in whichdifferent countries organize business activities and more specifically, the management ofemployees (Brewster, Sparrow & Harris, 2005). Even though some have contested theemphasis placed on national culture in international management at the cost oforganizational differences (Ericksen & Dyer, 2005; Gerhart & Fang, 2005), the importance ofcountry of origin is a consistent theme in the research in this area (Harzing & Sorge, 2003).Our conceptual framework adopts a broad approach by examining the key factors, such ascompany mission and vision, institutional differences, home and host country cultural 17
  • differences and the interplay between them (Schuler, Budhwar, & Florkowski, 2002). Itshows that firm strategies guide HRM strategies and when they are a fit, the firm performsbetter. The different types of business strategies were explored as used by MNCs inemerging economies and their resulting HR strategies were also seen. The level ofinternationalization was explored and the transfer of practices or lack of it was also explored.It is seen that the U.S MNCs are the best at taking an integrative approach and export homepractices as well as adopt local ones. EU MNCs and Japanese MNCs are trying to copy the“best practices” but their culture is still playing a big role in their determination of HRMpolicies. Their approach to the emerging economy of South Asia is no different than theirapproach to other emerging economies in South America.Increasing investment by emerging economies in developed as well as emerging markets,particularly via mergers and acquisitions means that there is a greater need for managementpractitioners to understand the ways in which MNCs from emerging economies strategizeand act in diffusing and coordinating management practices. For too long, international HRmanagement literature and practice have been embedded in Western thinking and conceptswith little cross-pollination (Wright, Snell, & Dyer, 2005, p.876) and an over emphasis onexpatriate management, reflecting the ethnocentric bias of North American scholars(Schuler, Budhwar, & Florkowski, 2002). It is now understood that the universal or U.S.model does not have complete applicability to the emerging MNCs. If the East becomes, inpopular jargon, the new West we need to develop newer models to aid the understanding ofhow Asian MNCs, particularly from China and India, are going to exercise corporate controlin an increasingly multi-polar world (Pudelko & Harzing, 2007, p.553).So in the 21st century knowledge economy where services and creative industries dominatethe economic landscape that is tilting more towards developing and transition economies,the theories and practices applicable to Western MNCs that monopolized the 20th centuryindustrial economy are slowly but steadily giving way to new economic and managementparadigms. Accordingly, examining the management approaches and practices of MNCs innewer industrialized and developing economies such as India, Bangladesh, Sri Lanka, Nepaland other South Asian countries are likely to remain a key research issue for the nextdecade, given the speed of economic development and the increasing influence andnumbers employed by such companies. 18
  • 8. BibliographyAwasthi, V. N., Chow, C. W., & Wu, A. (2001). Cross-Cultural Differences in the Behavioural Consequences of ImposingPerformance Evaluation and Reward Systems: An Experimental Investigation. The International Journal of Accounting. 36:291-309.Bazeley, P., & Richards, L. (2000). The NVivo qualitative project book. Thousand Oaks, CA: Sage Publication.Brewster, C., Sparrow, P., & Harris, H. (2005). Towards a new model of globalizing HRM. International Journal of HumanResource Management. 16(6): 949-970.Colling, T., & Clark, I. (2002). Looking for “Americanness”: home-country, sector and firm effects on employment systems in anengineering services company. European Journal of Industrial Relations. 8(3): 301-325.Contractor, F. J., Kumar, V., & Kundu, S. K. (2007). Nature of the relationship between international expansion andperformance: The case of emerging market firms. Journal of World Business. 42: 401-417.Delios, A., & Bjorkman, I. (2000). Expatriate staffing in foreign subsidiaries of Japanese multinational corporations in the PRCand the United States. International Journal of Human Resource Management. 11(2): 278-293.Edwards, J. R., & Rothbard, N. P. (2000). Mechanisms linking work and family: Clarifying the relationship between work andfamily constructs. Academy of Management Review. 25: 178-199.Engardio, P. (2008). Chindia: How China and India are revolutionising global business. New Delhi: Tata McGraw-Hill(Engardio, P., Arndt, M., & Geri, S. (2006). Emerging Giants. Business Week, New York, 40, July, 31Ericksen, J., & Dyer, L. (2005). Toward a Strategic Human Resource Management Model of High Reliability OrganizationPerformance. International Journal of Human Resource Management. 16(6): 907-935.Farley, J. U., Hoenig, S., & Yang, J. Z. (2004). Key Factors Influencing HRM Practices of Overseas Subsidiaries in ChinasTransition Economy. International Journal of Human Resource Management. 15(4-5): 688-704.Ferner, A. (2009). HRM in Multinational Companies In A. Wilkinson, N.Bacon, T. Redman & S. Snells (Eds.), The SageHandbook of Human Resource Management (pp.539-558). Thousand Oaks, CA: Sage.Ferner, A., Almond, P., Clark, I., Colling, T., Edwards, T., Holden, L., & Muller-Camen, M. (2004). Dynamics of Central Controland Subsidiary Autonomy in the Management of Human Resources: Case Study Evidence from US MNCs in the UK.Organization Studies. 25 (3): 363-391.Ferner, A., Almond, P., & Colling, T. (2005). Institutional theory and the cross-national transfer of employment policy: the caseof „workforce diversity‟ in US multinationals. Journal of International Business Studies. 36(3): 304-325.Gerhart, B., & Fang, M. (2005). National culture and human resource management: assumptions and evidence. TheInternational Journal of Human Resource Management. 16(6): 971.Glover, L., & Wilkinson, A. (2007). Worlds colliding: the translation of modern management practices within a UK basedsubsidiary of a Korean-owned MNC. The International Journal of Human Resource Management. 18(8): 1437.Harzing, A.-W., & Sorge, A. (2003). The relative impact of country of origin and universal contingencies in internationalizationstrategies and corporate control in multinational enterprises: Worldwide and European perspectives. Organization Studies.24(2): 187.Hofstede, G. (2007). Asian management in the 21st century. Asia Pacific Journal of Management. 24(4): 411-420.Hoskisson, R., Eden, L., Lau, C.-M., & Wright, M. (2000). Strategy in emerging economies,. Academy of Management Journal.43: 249-267.Jonsson, S. (2008). Indian multinational corporations: Low-cost, high-tech or both? . Ostersund, Sweden: Swedish Institute forGrowth Policy Studies.Matthews, J. A., & Zander, I. (2007). The international entrepreneurial dynamics of accelerated internationalization. Journal ofInternational Business Studies. 38(3): 387-403.Pudelko, M., & Harzing, A. (2007). Country-of-origin, localization, or dominance effect? An empirical investigation of HRMpractices in foreign subsidiaries. Human Resource Management. 46(4): 535-559.Rose, R. C., & Kumar, N. (2007). The transfer of Japanese-style HRM to subsidiaries abroad. Cross Cultural Management.14(3): 240-253.Thite, M. (2004). Managing People in the New Economy: Targeted HR Practices that Persuade People to Unlock theirKnowledge Power. New Delhi ; Thousand Oaks, Calif: Response Books.UNCTAD. (2004). World Investment Report 2004: The Shift Towards Services. New York: United Nations. United NationsConference on Trade and Development 19
  • UNCTAD. (2006). World Investment Report 2006: FDI from developing and transition economies: Implications for development:United Nations Conference on Trade and DevelopmentUNCTAD. (2007). World Investment Report 2007: Transnational corporations, extractive industries and development. NewYork: United Nations. United Nations Conference on Trade and DevelopmentUNCTAD. (2008). World Investment Report 2008: Transnational corporations and the infrastructure challenge. New York:United Nations. United Nations Conference on Trade and DevelopmentUNCTAD. (2010). World Investment Report 2010: Investing in a low-carbon economy. New York: United Nations. UnitedNations Conference on Trade and DevelopmentBjörkman, I., Fey, C.F., & P ark, H. J. (2007). Institutional theory and MNC subsidiariy HRM practices: evidence from a three-country study. Journal of International BusinessStudies, 38: 430-446.Brewster, C. (2006). Comparing HRM policies and practices across international borders. In G. Stahl & I. Björkman (eds),Handbook of international human resource management (pp. 68-90). Cheltenham, UK: Edward Elgar.Chen, J., Lawler, J., & Bae, J. (2005). Convergence in human resource systems: A comparison of locally owned and MNCsubsidiaries in Taiwan. Human Resource Management, 44: 237-256.Child, J. & Tsai, T. (2005). The dynamic between firm‟s environmental strategies and institutional constraints in emergingeconomies: Evidence from China and Taiwan. Journal of Management Studies, 42: 95-125.Porter, M. (2004). Competitive advantage. NY: The free press. 20