GLOBAL H R M – Unit - 1.pptx

GLOBAL H R M – UNIT - 1
CONTENTS:
Introduction
A Global HR Perspective In New Economy
Challenges of Globalization
Implications of Managing People and Leveraging Human Resources
Conflicts
Strategic role of International HRM
Global HR Planning
Staffing Policy
Training and Development
Performance Appraisal
International Labour Relations
Industrial Democracy
Talent Crunch
Indian MNCs and Challenges
Legal content of Global HRM
1
Prof S M Murali Krishna

Introduction:
• The Intent of Globalization is efficiency improvement and market optimization
taking advantage of the opportunities of the global business.
The Limitation of National Markets.
The diversity of resource endowments of different Nations.
Complexity of Technological Developments.
Differences in the levels of development and demand Patterns.
Differences in Production efficiencies and costs.
Technological Revolution in Communication and other fields etc.
Definition:
The IMF defines globalization as “ the growing economic interdependence of
countries World wide through increasing volume and variety of cross boarder
transactions in goods and services of international capital flows and also
through the more rapid and widespread diffusion of technology.”
Peter Drucker in his Management Challenges in 21st century All Institutes have
to make a global competitiveness is a Strategic goal.
2

CONTD;
We may consider Globalization at two levels:
Macro Level Micro Level
Globalization of Globalization of the business
the World economy and the firm
Drivers of Globalization
Lower More competition Traditional, Media, internet
Trade barrier
Technological Advances, Transportation, Tremendous Growth
F D I, Licencing, Portfolio Electronics
investment and debts Technology Transfers
3
International
Trade
Financial Flows
Communication
Technology Transfer Growth of MNCs

CONTD;
• Population Mobility, especially of Human Resources each of the drivers of the change
has accelerated in recent years and each reinforces the other.
 M N C s:
Introduction:
The Dynamics of Business environment fostered by the drastic political changes
in the erstwhile communist and socialist countries and the economic
liberalisation across the world has enormously expanded the opportunities for
the multi national corporations also known as International corporation,
transnational corporation, global corporation etc.
According to the World Investment Report:
In the year 1997 45000 M N C s with 2.8 Lakh Affiliates.
In the year 2007 78000 M N C s with 7.8 Lakh Affiliates.
1/3 of these affiliates were in the developed countries.
China was host to about 2.8 lakh of the affiliates.
M N C s are significantly contributed to share of the world’s industrial
investment, production, employment and trade.
4

CONTD;
• Meaning :
The concept of Multi nationality has several dimensions.
According to I L O Report
o The essential nature of Multinational enterprise lies in the fact that its
managerial head quarters are located in one country referred as a home
country.
o While the enterprise carries out operations in a number of other countries
o ( host Country)
Definition:
A Multi National corporation/ Company is an organization doing business
in More than one country.
A Corporation ( M N C) engages in Various activities like Exporting,
Importing Manufacturing in different Countries.
Features of M N C s:
M N C s have world wide Involvement and a global Perspective in its
Management and decision making.
5

CONTD;
M N C s consider opportunities through out the globe.
MNC s engage in international production and operate plants in a number of
countries.
Classification:
Global corporation: Global corporation produces in home country or in a single
country and focuses on Marketing the products Globally, domestically.
International Corporation: It conducts the operations in one or more foreign
countries having domestic orientation.
Multinational Corporation: It responds to the specific needs of the different country
markets regarding product, price and promotion.
Transnational Corporation: It produces Markets, invests and operates across the
world.
Why Companies become Multinationals?
Protection
Tap global Markets
Increase Market Share
Reduce cost
Overcome Tariffs.
To have Technological Advantage.
6

AGLOBALH R PERSPECTIVE IN NEW
ECONOMY
INTRODUCTION:
Globalization has led to the challenge of international competitiveness in a global
Knowledge based economy.
The challenges other than the continuing economic integration, security
environment, is the way of Human Resources ( H R) are managed and retained
with an organization.
The H R department within an organization helps to improve internal efficiencies
and streamline business processes.
Globalization means to reach and connect world wide markets for distribution of
services or product.
The implications of such businesses requires mobility of human. capital and other
resources.
This will enable the business to operate effectively in different Geographic
Locations.
Globalization also leads to acquire technological advancements and investments
in different locations.
7

Organization Challenges
8
Increase Business Efficiency
Improve Customer Satisfaction
Control Costs
Leverage Intellectual Assets
Create Competitive Advantage

TECHNOLOGY AND STRUCTURE
• New technology and management approaches have added to the challenges
facing HR managers
• The technological changes affecting HR managers are wide spread none are
more dramatic than those related to information systems
• In addition to their use in performing the traditional functions of accounting and
pay roll calculation, computerized information systems are now being used to
maintain easily accessible employee data that are valuable in job placement and
labour utilization.
• In recent times many new concepts were emerged in the field of HR. They are as
follows
• Tele commuting: to work at home by using and electronic link up with a central
office
• Employee empowerment: it is a form of decentralization that involves giving
subordinates substantial authority to make decisions
• Self- managed work teams: groups of employees do not report to a single
manager rather groups of peers are responsible for a particular area of task
9

Structural changes to the organizations
• Today’s organizations are undergoing many structural changes
• Downsizing: laying off of large number of employees in managerial
and other positions
• Outsourcing: as a result of downsizing many companies are using
outsourcing services. Outsourcing refers to subcontracting work to an
outside company that specializes in that particular type of work
• Right sizing: continuous and proactive assessment of mission -critical
work and its staffing requirements
• It is an ongoing planning process to determine process to determine the
optimal number of employees in every area of organization
• Re-engineering: it refers to a fundamental rethinking and radical
redesign of business processes to achieve dramatic improvement in
cost, quality service and speed
10

Work force diversity
• Today HRM is much more integrated into both the management and the
strategic planning process of the organization
• The organizational environment has become much more diverse and
complex
• Diversity in the work force encompasses many changes and different
dimensions including sex, race, national origin, religion, age and
disability
• Recent forecast by the U.S Bureau labour statistics project that the total
U.S labour force will consist of only 36.5% white, non-Hispanic males
by the year 2010
• Increasing globalization of many companies as companies become
more global diversity must be defined in global and not just western
terms
• It includes values and customs
• Greater diversity presents new opportunities
• Diversity creating an organizational culture that is more tolerant of
different behavioral system and wider views.
11

Demographic changes
• Demographic variables include sex, age literally mobility etc. all they
have different dimensions in employment and placement
• Women with children
• Work force diversity and immigrants
• Older workers
• People with disabilities
• Young persons with limited skills
Trends in the Utilization of HR
• Emphasis on strategic planning and succession
• Emphasis on cost related issues /cost control
• Global competition
• Outsourcing
• Down sizing
• New specialists emerging in HR
• HR planning
• International HR
12

Contd.,
• Employee assistance programmes
• Growth of government regulations
• Wages (1930s)
• Employment (1940s)
• Unionization (1960s)
• Professionalization of HR management
• Professional HR societies
• The internet revolution
• Electronic recruiting
• Records management
• HRIS
13

Global competition
• Competition is the buzz word in today’s corporate world
• Every organization wants to become a globally competitive
• Fierce competition is prevailing between individuals and as well as in
organizations
• Every organization is working to gain a competitive advantage
• Customer focus is the major task for the organization
• Customer satisfaction and customer retention are major challenges for the
organizations
14

Implications of Managing people and
Leveraging Human Resources
The scares resource and the primary source of competitive advantage are no longer
physical or financial capital, but human capital.
No longer can an organization leverage its competitive advantage by basing it solely
on its strategy and structure without taking care of its employee aspect.
A comprehensive H R Strategy rooted firmly on a core set of shared beliefs and values
and properly aligned with the corporate strategy can only help an organization
leverage is true competitive advantage.
Corporate strategies, therefore, have to built around human capital.
H R D strategies need to be integrated with the overall business strategy of an
organization which means that H R Managers need to be partners with the line
Managers in guiding the business of an organization.
The Role of H R M In Globalized Scenario:
Becoming a strategic partner: The role of H R M as strategic partner lies in aligning
H R strategies with overall business strategies that would ensure which will enable the
company for better service to the customers or increase share holder’s value.
15

Contd.,
The H R Managers will have to reposition themselves to create value for the
organization. They need to be:
• An administrative expert: As an administrative expert H R facilitates by improving
the efficiency of both their own function and the entire organization.
• An employee Champion: The role of H R ensures that employees are engaged ,
committed to the organization and contributing their abilities for the organizational
growth and survival.
• A change agent: As a change agent H R makes sure that change initiatives that are
focused on creating high performing teams. Being a catalyst in bringing about a
cultural change , H R articulates why it is central to business success process for
assessing cultural gap and identifies alternative approaches for creating changes.
• H R as A Strategic Partner: The role of H R is a Partner in Strategy execution.
• Strategy flows from vision
• As a Strategic partner H R initiates and guides serious discussion on how the company
should be organized to carry out its strategy.
• The following steps are suggested:
16

Contd.,
• Defining an organizational architecture:
• A company’s way of doing business is analysed by H R.
• It will include organizational components like strategy, structure. Rewards,
process and people.
• The 7 -S framework created by Mckinsey& Co. has distinguished 7
components in a company as structure, strategy, systems, staff. Style, skills and
shared values.
Conducting an organizational audit:
• Its objective is to identify which components of the company must be changed
to facilitate strategy execution.
Identify the gap between the current practices and the best practices:
• H R should lead in proposing. Creating, and debating the best practices for
effective strategy implementation.
Establish clear practices and align with the jobs
• H R establish the clear practices and enlighten the employees about their job
description with strategy implementation and prioritizes accordingly.
17

Conflicts
Introduction:
• Alliances aim at co operating and collaborating with other partners in order to
achieve a common goal.
• But the initial common goal results in conflicting goals at a later stage. Further
stage conflicting situations may also arise.
• Hence, the partners of the alliance should manage the conflicting situations
successfully in order to maintain the alliances.
Methods of Managing conflict situations:
Compatibility: The company should select a partner with which it can work
effectively and can trust. Strategic alliance is unlikely to succeed without mutual
trust. Ex: G E a U K company and the Siemens of Germany failed due to
incompatibility of Management styles.
Nature of Potential Partner’s Products/services: Companies with complimentary
but not competitive products or services can have alliances. Otherwise, the
alliance will fail. Ex: Pepsi and Lipton collaborated on complimentary products.
The Relative Safeness of the Alliance: The partners should assess the potential
for the success or failure of the alliance, based on the previous agreements of their
companies and other companies and undertake the alliance cautiously.
18

BREAK –UPOFALLIANCES
• Alliances or coalitions always may not result in success stories. They may end-up
with break - ups resulting in heavy loss to all the partners. Now, we discuss the
reasons for break – up of coalitions.
In compatibility of partners: the incompatibility between or among partners in
management styles, financial position, culture, business interests result in break
– up of coalition. Ex: AT & T and Olivetti of Italy announced alliance but it
failed before the agreement was reached.
Access to Information: The partners of the alliance should provide necessary
information to other party. But partners at the stage of implementation of the
alliance fail to provide access to information to the partners. This leads to break
–up of coalition. Ex: Alliance between Ford and Mazda to work on the design of
the new Ford Escort almost stalled when Mazda officials refused the officials of
Ford to visit their Research Laboratory.
Distribution of income: Normally, the partners agree on the distribution of
profits. But conflicts develop over the distribution of other income.
Changes in Business Environment: The changes in business environmental
factors, like political, economic, technological make the alliance obsolete. Then
it results in break – up of coalition.
19

Contd.,
Acquiring the Strengths of the Partner: The companies over the period of alliance,
acquire the strengths of the partner and turn their weakness into strengths and break –
up the partners. Mostly foreign companies enter the markets through alliance, then
acquire the marketing Know – how from the local partner.
Legal Factors: Some times the legal factors become hurdles for the continuation of
the alliance. Some times the changed law in the host country creates the hurdles and
results in break – up of alliance.
Strategic role of International H R M :
International human resource management policies and practices need to be aligned
with the strategies of M N C s as well as domestic companies employing expatriates.
Similarly, M N C s and domestic companies employing expatriates modify the
organizational strategies in tune with the availability of human resources as well as
human resource cost and other considerations.
In fact, the consequences of liberalizations, privatization and globalization such as
competition, quality, low cost, high speed in delivery, customization and customer
relationship, made the C E O s of various M N C s to include the human resource
aspects in the international strategic management process and manage the human
resources based on the companies' strategies.
20

Contd.,
• The vital aspect in strategic management is the human resource management.
• As such international strategic human resource management gained prominence in the
post globalized era. Now, global H R Managers are a member of strategic
management team in MNCs.
International H R Strategies:
 Human Resource Planning
 Recruiting
 Selecting
 Developing
 Compensating
 Utilizing
 Immigration/ Migration
 Socialization Services
 Security
 Retrenching
 Downsizing
 Repatriation/ Deportation
21

Global H R Planning
• H R planning in Global perspective is difficult and complex when compared to the
domestic H R Planning.
• It is the fact that global H R Planning should consider a number of additional
issues such as language, culture, spouse & family adaptability in addition to job
skills, talents and knowledge requirements.
• M N Cs have to consider not only the current job and country requirements, but
also the future assignments in various other countries where the M N C is
currently operating and / or propose to operate in future. In addition , M N Cs
should also consider the possible alliances like joint ventures, mergers and
amalgamation's where human element is a key factor, in their H R P.
• Thus the H R demands of MNCs are complex and the H R P Process is critical.
• In addition, forecasting the supply of Human Resources in global markets is also
critical compared to domestic labour market due to the problems in collection of
H R data throughout the globe.
• Further International labour market is highly dynamic due to the variations in
quantity and quality of human resources available in various countries at different
times.
22

Contd.,
23
Draw them to the place
where business is
located
Shift manufacturing facilities
to the place of cheap labour
Draw the services via
on-line
MNCs
Symbolic Services/ Professionals,
Engineers Doctors Managers etc.
Domestic companies
Routine production services/
Less skilled H R
In-Person Services/ people with
relatively trained and need to be
to close to the customers

ISSUES IN SUPPLY OF INTERNATIONAL
HUMAN RESOURCES
• A number of issues are involved in the supply of human resources in
global labour market. They are as Follows -------------
 Availability of data
 Aging population
 Young population
 Challenges of 2000s
 Migration and Immigration Issues
 Brain Drain
Availability of Data: International and national agencies and bodies
provide the needed data per global H R Planning.
Aging Population: Aging population has been increasing in many
advanced countries as well as in some developing countries.
24

Contd.,
• Young population: Most of the advanced countries like the U S A, Germany and
Japan are faced with the problem of aged population.
• Nearly 30% of the populations are more than 60 years of age causing the talent
shortage. This situation would remain until 2050.
• As a result of it such countries are looking at India where the much young population is
available more than 85%.
• MNCs have to bear additional direct and indirect labour costs like cost of visa, work
permit, socialization, cultural training, housing and security.
• Challenges of 2000s: Reactive and proactive strategies of human resource
Managers centred on recruitment, Retention, competency mapping and H R matrix.
• Migration and Immigration Issues: MNCs have to deal with migration and
immigration issues, like visa, work permits for employee as well as spouse, resident
permits, visiting visas for employee’s dependants etc.
• Brain Drain: The mobility of labour force from developing countries to advanced
countries results in brain drain in the developing countries.
• In fact, developing countries heavily invest in such people in the form of education and
train and develop the country’s human capital.
• Ex: Medical graduates in India
25

Staffing Policy
• Staffing policy is concerned with the selection of employees for particular jobs. At
one level, this involves selecting individuals who have the skills required to do
particular jobs.
• At another level, staffing policy can be a tool for developing and promoting corporate
culture. By corporate culture, we mean the organization's norms and value systems.
Firms pursuing transnational and global strategies have high needs for a strong
unifying culture, and the need is somewhat lower for firms pursuing an international
strategy and lowest of all for firms pursuing a multi domestic strategy
• In firms pursuing transnational and global strategies, we might expect the HRM
function to pay significant attention to selecting individuals who not only have the
skills required to perform particular jobs but who also "fit" the prevailing culture of
the firm.
• Ex: G E which is positioned toward the transnational end of the strategic spectrum, is
not just concerned with hiring people who have the skills required for performing
particular jobs; it wants to hire individuals whose behavioural styles, beliefs, and
value systems are consistent with those of GE.
• This is true whether an American is being hired, an Italian, a German, or an
Australian and whether the hiring is for a US operation or a foreign operation.
26

Contd.,
• The belief is that if employees are predisposed toward the
organization's norms and value systems by their personality type,
the firm, which has a significant need for integration, will
experience fewer problems with performance ambiguity.
• The need for integration is substantially lower in a multi domestic
firm. There is less performance ambiguity and not the same need for
cultural controls. In theory, this means the HRM function can pay
less attention to building a unified corporate culture. In multi
domestic firms, the culture can be allowed to vary from national
Strategy, Structure, and Control Systems
27

Types of Staffing Policy
• It has identified three types of staffing policies in international businesses: the
ethnocentric approach, the polycentric approach, and the geocentric approach.
• We will review each policy and link it to the strategy pursued by the firm.
• The most attractive staffing policy is probably the geocentric approach, although
there are several impediments to adopting it.
• The Ethnocentric Approach
• An ethnocentric staffing policy is one in which all key management positions are
filled by parent-country nationals.
• This practice was very widespread at one time. Firms such as Procter & Gamble,
Philips NV, and Matsushita originally followed it.
• In the Dutch firm Philips, for example, all important positions in most foreign
subsidiaries were at one time held by Dutch nationals who were referred to by their
non-Dutch colleagues as the Dutch Mafia. In many Japanese and South Korean
firms today, such as Toyota, Matsushita, and Samsung, key positions in
international operations are still often held by home-country nationals.
28

The Polycentric Approach
• A polycentric staffing policy requires host-country nationals to be
recruited to manage subsidiaries, while parent-country nationals
occupy key positions at corporate headquarters.
• In many respects, a polycentric approach is a response to the
shortcomings of an ethnocentric approach.
• One advantage of adopting a polycentric approach is that the firm is
less likely to suffer from cultural myopia.
• Host-country managers are unlikely to make the mistakes arising from
cultural misunderstandings that expatriate managers are vulnerable to.
• A second advantage is that a polycentric approach may be less
expensive to implement, reducing the costs of value creation. Expatriate
managers can be very expensive to maintain.
• A polycentric approach also has its drawbacks.
• Host-country nationals have limited opportunities to gain experience
outside their own country and thus cannot progress beyond senior
positions in their own subsidiary.
29

Contd.,
• As in the case of an ethnocentric policy, this may cause resentment.
Perhaps the major drawback with a polycentric approach, however, is
the gap that can form between host-country managers and parent-
country managers. Language barriers, national loyalties, and a range
of cultural differences may isolate the corporate headquarters staff
from the various foreign subsidiaries.
• The lack of management transfers from home to host countries, and
vice versa, can exacerbate this isolation and lead to a lack of
integration between corporate headquarters and foreign subsidiaries.
The result can be a "federation" of largely independent national units
with only nominal links to the corporate headquarters. Within such a
federation, the coordination required to transfer core competencies or
to pursue experience curve and location economies may be difficult to
achieve. Thus, although a polycentric approach may be effective for
firms pursuing a multi domestic strategy, it is inappropriate for other
strategies.
30

The GeocentricApproach
• A geocentric staffing policy seeks the best people for key jobs throughout
the organization, regardless of nationality. There are a number of
advantages to this policy.
• First, it enables the firm to make the best use of its human resources.
Second, and perhaps more important, a geocentric policy enables the firm
to build a cadre of international executives who feel at home working in a
number of cultures.
• Creation of such a cadre may be a critical first step toward building a
strong unifying corporate culture and an informal management network,
both of which are required for global and transnational strategies.
• Firms pursuing a geocentric staffing policy may be better able to create
value from the pursuit of experience curve and location economies and
from the multidirectional transfer of core competencies than firms
pursuing other staffing policies.
• In addition, the multinational composition of the management team that
results from geocentric staffing tends to reduce cultural myopia and to
enhance local responsiveness. Thus, other things being equal, a geocentric
staffing policy seems the most attractive.
31

Contd.,
• A number of problems limit the firm's ability to pursue a geocentric policy.
• Many countries want foreign subsidiaries to employ their citizens. To
achieve this goal, they use immigration laws to require the employment of
host-country nationals if they are available in adequate numbers and have
the necessary skills.
• Most countries (including the United States) require firms to provide
extensive documentation if they wish to hire a foreign national instead of a
local national.
• This documentation can be time consuming, expensive, and at times futile.
A geocentric staffing policy also can be very expensive to implement.
There are increased training costs and relocation costs involved in
transferring managers from country to country. The company may also
need a compensation structure with a standardized international base pay
level higher than national levels in many countries.
• In addition, the higher pay enjoyed by managers placed on an
international "fast track" may be a source of resentment within a firm.
32

Concepts of Training And Development
• Planned effort to change the
behavior or attitude of
employees.
• Provide knowledge & skills
required for the job.
• Training emphasizes Doing.
• Significant management tool in
bringing about the change.
33

Development
• Long term educational
process.
• Systematic & organized
procedure through which
employees learn conceptual
and theoretical knowledge.
34

Types of Training
1. Skills Training 5. Creativity Training.
2. Retraining. 6. Literacy Training
3. Cross-Functional 7. Diversity Training
4. Team Training 8. Customer Service Training
.
36

Contd.,
1. SKILLS TRAINING:
Focus on job knowledge and skill for:
• Instructing new hires.
• Overcoming performance deficits of the workforce.
2. RETRAINING:
Maintaining worker knowledge and skill as job
requirements change due to:
• Technological innovation
• Organizational restructuring
37

Contd.,
3. Cross-Functional Training
Training employees to perform a wider variety of
tasks in order to gain:
• Flexibility in work scheduling.
• Improved coordination.
4. Team Training
Training self-directed teams with regard to:
• Management skills.
• Coordination skills.
• Cross-functional skills.
38

Contd.,
5.Creativity Training
• Using innovative learning techniques to
enhance employee ability to spawn new ideas
and new approaches.
6. Literacy Training
• Improving basic skills of the workforce such as
mathematics, reading, writing, and effective
employee behaviors such as punctuality,
responsibility, cooperation, etc.
39

Contd.,
7. Diversity Training
• Instituting a variety of programs to instill
awareness, tolerance, respect, and acceptance of
persons of different race, gender, etc. and
different backgrounds.
8. Customer Service Training
• Training to improve communication, better
response to customer needs, and ways to enhance
customer satisfaction.
40

INTRODUCTION TO PERFORMANCE MANAGEMENT
Performance management is a fairly imprecise term, and
performance management processes manifest themselves in many
different forms. There is no one right way of managing performance.
The approach must depend on the context of the organization-
Its culture
Structure
Technology
The views of stakeholders
And the type of people involved.
But it is still possible and desirable in very broad terms what
performance management is about and to discuss generally the
concerns and scope of fully realized processes of managing
performance.
41

Definition of PerformanceAppraisal and Performance
Management
 Performance appraisal is the process of determining and
communicating to an employee how he or she is performing on the
Job and ideally establishing a plan of improvement. When properly
conducted performance appraisals not only let employees know how
well they performing but also influence their future level of effort
and task direction.
 What is performance: performance refers to the degree of
accomplishment of the tasks that make up an employee’s Job. It
reflects how well an employee is fulfilling the requirements of a Job.
 Definition of performance management:- Performance management
is a strategic and integrated approach to delivering sustained
success to organizations by improving the performance of the people
who work in them and by developing the capabilities of teams and
individual contributors.
42

DEFINING PERFORMANCE
Performance is what expected to be delivered
by an individual or a set of individuals
(team(s)) within a time frame.
The expectations may be in terms of,
Results or efforts
Tasks
Quality, with specification of conditions
under which it is to be delivered.
43

Determinants of Performance
Performance =
Declarative Knowledge
X
Procedural Knowledge
X
Motivation
44

A. Declarative Knowledge
Information about
• Facts
• Labels
• Principles
• Goals
Understanding of task requirements
45

B. Procedural Knowledge
Knowing
What to do it
How to do it
Skills
Cognitive
Physical
Perceptual
Motor
Interpersonal
46

C. Motivation
Choices
• Expenditure of effort
• Level of effort
• Persistence of effort
47

Objective and Role of PM Systems
oTo develop career and succession planning
oTo Take decisions on Termination and promotion
oHuman Resource planning Identifying the
individual and org. problems
oImprove productivity
oPromote internal control
oCreate a positive work environment
oStimulate, recognize and reward achievement
oProvide affective measures of performance
oFurnish information for other human resource sub-
systems.
48

Characteristics of An Ideal PM Systems
Every organization is effective in its way within its own particular
content. Perhaps the only characteristic that is generally recognized
is the importance of defining affective and of planning to achieve
them.
This interest in affective was, of course started by Peter Drucker
(1955) is as follows.
They enable the organization to explain the whole range business
statements in a small number of general statements
 They allow the testing of these statements in actual experience
They enable behavior to be predicted
They facilitate the examination of the soundness of decisions while
they still being made rather than after they fail.
They provide for performance in the future to be improved as a
result of the analysis of past experience.
49

Contd.,
According to the tom peters (1988) proposed the following
characteristics
Break organizations into the smallest possible independent units
Give every employee a business person’s strong sense of revenue,
cost and profit
Achieve ever-closer involvement with the customer
Minimize organization layers
Achieve flexibility by empowering people
Learn to love change through a new view of leadership at all levels
Pursue fast- paced innovation and creativity.
50

Performance Dimensions
1. Output or result dimension
2. Input dimension
3. Time Dimension
4. Focus dimension
5. Input-Output Relationships
6. Dyadic performance
7. Team Performance
51

1. Output or result dimension
 Measurable dimension
 Consequence of inputs in a summary form or a
final or semi-final product form or service
form.
 Describes the standard
 Measurable in terms of figures like targets,
completion of tasks to meet the deadlines,
customer numbers.
 These are called as Key Result Areas (KRAs)
52

2. Input dimension
 Activities or tasks to be accomplished by the
individual.
Influential factors for inputs are,
• Ability or competence to perform these tasks
• Motivation
• Organizational support
Performance (o/p) = {work effort(I /p) + [motivation +Support]}
(Intervening Variables)
53

3. Time Dimension
 Performance can be defined for a task, for a day, for a
week, month, year or life.
 For IT, Banking, Manufacturing companies the time
dimension is for quarter / a three-month period.
 Normally, individual performance is judged in relation
to a role and across a short period.
 Some organizations which are project driven are
interested in the individual performance in a project as
well as in a role.
 Thus, in context of organization, performance
management is time bound as well as role specific
54

4. Focus dimension
 Focus may be on profits, market share, new areas
covered, quality, cost or financial dimensions.
5. Input-Output Relationships
 Competencies
 Interest
 Internal environment
 External environment
55

6. Dyadic performance
 The role played by the boss or subordinate or team
member in determining performance.
 This is normally neglected and less discussed about.
• Dyadic performance measured in two aspects
 Outcomes measures
• Situational variations and are based on assumptions
 Process measures
• Deals with interpersonal processes
• Motivation to other person, extent to which there is mutuality,
help, synergy and learning.
56

7. Team Performance
 It is widely recognized
 Often mixed with individual performance.
Finally, Performance of an individual in
organizational setting may therefore be defined as “the
output delivered by an individual in relation to a
given role during a particular period of time under
the set of circumstances operating at that point of
time”.
57

Approaches to Measuring Performance
Trait Approach
Emphasizes individual traits of employees
Behavior Approach
Emphasizes how employees do the job
Results Approach
Emphasizes what employees produce
58

Trait Approach
Emphasis on individual
•Evaluate stable traits
 Cognitive abilities
 Personality
•Based on relationship between traits &
performance
59

Trait Approach (continued)
Appropriate if
• Structural changes planned for organization
Disadvantages
• Improvement not under individual’s control
• Trait may not lead to
Desired behaviors or
Desired results
60

Behavior Approach
Appropriate if
• Employees take a long time to achieve desired
outcomes
• Link between behaviors and results is not
obvious
• Outcomes occur in the distant future
• Poor results are due to causes beyond the
performer’s control
Not appropriate if
above conditions are not present
61

Results Approach
Advantages:
• Less time
• Lower cost
• Data appear objective
Most appropriate when:
• Workers skilled in necessary behaviors
• Behaviors and results obviously related
• Consistent improvement in results over time
• Many ways to do the job right
62

Choosing Performance MeasurementApproach
Performance Measures:
Achievement of objectives
Competence
Quality
Contribution to team
Customer care
Working relationships
Productivity
Flexibility
Skills/learning targets
Aligning personal objectives with
organizational goals
Business awareness
Financial awareness
63

Labor Relations in the International Arena
• Collective Bargaining
The process whereby formal labor agreements are reached by
union and management representatives; it involves the
negotiation of wages, hours, and conditions of employment and
the administration of the labor contract.
• Union
An organization that represents the workers and in collective
bargaining has the legal authority to negotiate with the
employer and administer the labor contract.
The U.S. Approach to Labor Relations
64

• Efforts are made to solve problems at the lowest level of the hierarchy as
quickly as possible
• First step usually involves a meeting between the union representative
(shop steward) at the operating level and the employee’s supervisor –
they attempt to agree on how to solve the grievance
• Unresolved grievances may involve union officials and higher-level
management representatives – these conciliatory approaches usually
solve the grievance
• Sometimes the matter ends up in the hands of a mediator or an
arbitrator
The U.S. Approach to Labor Relations Steps of a Grievance Procedure
65

• Mediator
A person who brings both sides (union and management
representatives) together and helps them to reach a
settlement that is mutually acceptable.
• Arbitrator
An individual who provides a solution to a grievance
that both sides (union and management representatives)
have been unable to resolve themselves and that both
sides agree to accept.
Mediation and Arbitration
66

• Three of the most common arbitration approaches for resolving
wage-related issues include:
50/50 Split
Splitting the difference between the demands
of the two parties
Either/Or
Using an either-or approach: one position is
fully supported and the other is rejected
What’s Fair?
Determining a fair wage based on market
conditions
The U.S. Approach to Labor Relations Mediation and Arbitration
67

Labor Relations in the InternationalArena
• They directly determine labor costs, productivity, and
eventually, even profits
 Labor costs in the United States are lower in recent years than in
most other major industrial countries.
 Thanks to union–management cooperation, U.S. companies have
been able to introduce high-tech, efficient machinery.
 Much of this outcome is a result of effective labor relations
strategies.
Importance of Positive Labor Relations
68

• Labor relations strategies vary greatly from country to
country—the strategy used in one country is sometimes
irrelevant or of limited value in another.
• A number of factors can account for this:
• Economic development of the country
• Entry strategies must often be modified
• Changes in the political environment
• Strike activity
• Other differences are more regional
Labor Relations in Other Countries
69

• EUROPE
• European firms typically negotiate agreements with
unions at the national level
• Many European unions have more political power
than U.S. unions
• Salaried employees in Europe (including those at
managerial levels) often have unions of their own
• European unions have existed longer than those in the
United States and occupy a more accepted position in
society
Labor Relations in Other Countries Regional Differences
70

• In developing and emerging economies such as
China, India, and Southeast Asia:
• Labor is less powerful
• Unions are less prevalent
• Workers are often compelled to accept conditions of
work set by management
Labor Relations in Other Countries Regional Differences
71

• Great Britain
• A labor agreement in Great Britain is not a legally binding
contract
• Violations of the agreement by the union or by management
carry no legal penalties
• British unions are relatively powerful and strikes are more
prevalent than in the United States
• British union membership has declined in recent years
• British labor agreements do not usually include provisions for
arbitration of disagreements or grievances
Differing Approaches to
Industrial Relations
72

• Germany
• Rights of workers are addressed more carefully by management
• Union power in Germany is still quite strong
• Union membership is voluntary—generally one union in each
major industry
• A minority of the labor force is organized
• Individual workers are free to negotiate either individually or
collectively with management to secure wages and benefits that
are superior to those spelled out in the agreement even when
covered by a labor contract
Labor Relations in Other Countries Differing Approaches to
73

• Japan
• Social custom dictates non confrontational union–management
behavior
• Provisions in Japanese labor agreements are usually general
and vague, although they are legally enforceable
• Agreement disputes are settled in an amicable manner though
sometimes resolved by third-party mediators or arbitrators
• Labor commissions have been established by law
• Japanese unions remain relatively weak.
74

• China, India, and Southeast Asia
Labor relations in the developing and emerging economies of the
world are quite distinct from those in industrial democracies:
• Economic employment conditions generally favor owners over
workers
• Employees have less power and are less likely to initiate actions or
organize unions to negotiate for improved working conditions
75

• China
• The Chinese economy has shifted from a command economy to a
more market-led one
• An increasing emphasis is being placed on the role of the collective
contract system
• Integration of trade unions into workplace management continues to
prevent collective consultation from providing an adequate
framework for the full freedom and regulation of labor relations
• Labor relations in China has become a point of contention in
international trade and human rights discussions
Labor Relations in Other Countries Differing Approaches to
76

• Southeast Asia including Brunei, Cambodia, East Timor,
Indonesia, Laos, Malaysia, Myanmar (Burma), Philippines,
Singapore, Thailand, and Vietnam
• Many states are still focused on keeping labor movements in
check, whether in the name of economic development, national
unity, or social stability
• Labor movements are fragmented or constrained due to the
political environment
• Labor relations in Southeast Asia have been influenced by
market-based policies of international competition
• Thomas Friedman – The World is Flat
77

International Structure of Unions
• Most labor unions are locally or nationally based
– some are active internationally
• Three basic ways Union internationalization has
been achieved
Intergovernmental Organizations
Transnational Union Affiliations
Extension of Domestic Contracts
78

• Grievance
A complaint brought by an employee who feels that he or she
has been treated improperly under the terms of the labor
agreement.
Inter governmental Organizations
79

International Labour
Organization (ILO)
Organization for Economic
Cooperation &
Development (OECD)
There are two important inter governmental organizations:
 A government, industry, and
union group founded in 1976 that
has established a voluntary set of
guidelines for MNCs
80

International Labor
Organization (ILO)
There are two important intergovernmental organizations:
 A United Nations affiliate
 Consists of government, industry,
and union representatives
 Works to promote fair labor
standards in health, safety, and
working conditions, and freedom
of association for workers
81

There are four basic types of international trade affiliations:
 Global international trade-union
affiliations
Trade-union relationships that cut
across regional and industrial groups
and are heavily concerned with political
activities
Global
International Confederation of Free Trade Unions (ICFTU)
The most important global international union confederation.
Transnational Union Affiliations
82

• Work councils exist in all European countries
• Basic function is to improve company performance,
working conditions, and job security
• Some councils are worker- or union-run – others are
chaired by members of management
• Workers are elected typically to serve on the council
• Management representatives are appointed by the company
Common Forms of Industrial
Democracy Work Councils
83

• Some common forms of shop floor participation
include:
• Worker involvement programs
• Quality circles
• Other forms of participative management
• QWL (quality of work life) programs are currently popular in
manufacturing and assembly plants
Common Forms of
Shop Floor Participation
84

• Most common forms of financial participation:
• Profit sharing between management and workers
• Productivity or gain-sharing – management and workers share
productivity gains in a predetermined ratio
• Has not been widely adopted overseas
• Has gained a foothold in a number of U.S. firms,
especially those using gain sharing as a team
incentive for performance improvement
Common Forms of
Financial Participation
85

• Can become the mechanism to obtain industrial
democracy for workers if no specific forms of industrial
democracy are in effect
• The ability of unions to bargain collectively is legally
restricted in some countries
• Some nations require collective bargaining
Common Forms of
Collective Bargaining
86

• Collective bargaining is the most common form of
industrial democracy – guidelines are spelled out by law
• NLRB certified unions become the exclusive bargaining
agent for employees authorized to represent workers in
negotiation and administration of labor–management
contracts
Industrial Democracy in
Selected Countries
United States
87

• Employee groups discuss ways to improve
quality, efficiency, and overall work
environment
Problem-solving
Teams
 Employee groups that design and introduce
work reforms and new technology
Special Purpose
Teams
Self-managing
Teams
 Employee groups perform supervisory
duties and manage themselves
 Consist of individuals who learn all the
tasks of all the group members
 Team members rotate jobs
Selected Countries
United States
88

• Industrial democracy in Great Britain takes the form of
collective bargaining and worker representation through the
use of teams
• British work groups elect a chief spokesperson or steward to
interface with management
• Union councils represent unionized employee to ensure
workers are treated fairly by management
This may create a problem if the spokespersons or stewards
in the firm disagree with the union councils.
Selected Countries
Great Britain
89

• Industrial democracy and co - determination strong in Germany
• Unions are charged with handling the collective bargaining
• German law has established internal boards to ensure co determinism in the
workplace
• Supervisory boards are similar to a board of directors in U.S. firms
• Management boards are responsible for daily operation
• Employees in each plant elect a plant work council
• Members of plant work councils in multi plant companies also serve on a
company work council
Selected Countries Germany
90

• Industrial democracy in Sweden is directed very heavily toward
ensuring quality of work life (QWL) and worker participation in the
operation of the enterprise
• Semiautonomous work teams and a cooperative spirit between
management and workers are key elements of Swedish industrial
democracy
• Swedish firms have workers as members of their board of directors
Worker board participants receive formal training and spend time
with other workers on the board to ensure they are competent in
their tasks
Selected Countries
Sweden
91

• Chinese enterprises traditionally had two policy-making committees
• Communist Party leaders and members
• Managers and worker representatives
• The political climate determined which committee had more power
• After reforms in the 1980s, the workers (not the party members)
represented industrial democracy in communist countries
The Chinese government has agreed to an ambitious program
of cooperation with the ILO which will provide advice on such
things as job creation, workplace safety, collective bargaining,
and the settlement of labor disputes.
Selected Countries
China
92

• Industrial democracy in Japan is not closely tied to political
philosophy
• Japanese firms are oriented more to the operating philosophy of
enhancing worker performance
• Management is receptive to workers’ ideas that will produce
bottom-line results
• Due to the basic nature of Japanese union–management relations
there is very little industrial democracy in the European sense
Selected Countries
Japan
93

Strategic Management of International Labor Relations
• Approaches labor relations in other
countries identical to its approach
at home
• Cultural, legal, and economic
factors of the host country are not
considered in industrial relations
efforts
• Generally ineffective and can have
disastrous results
Ethnocentric
Philosophy
The Philosophical Backdrop
94

• Evaluates each country or
geographic region as a separate
entity
• Will use a series of different
international industrial relations
strategies depending on the country
Ethnocentric
Philosophy
Polycentric
Philosophy
95

• Characterized by an effort to
understand interrelationships between
various geographic locations and a
strategy to link them with a unifying
thread and a composite industrial
relations approach
• Primary difference between
polycentric and geocentric
philosophies is that the latter considers
inter relationships between the various
groups
Ethnocentric
Philosophy
Polycentric
Philosophy
Geocentric
Philosophy
96

• Many European and to a lesser degree Asian companies are trying
to regain some of the competitiveness they lost through high
labor costs
• They face the same challenges their counterparts in the United
States began confronting a decade ago:
• The workforce is being downsized
• A strong focus is being placed on providing higher-quality output
at lower costs
New Labor Force Trends and Pressures
97

Strategic Management of International
Labor Relations
• Part-Time Work
• Most widely used form of flexibility in Europe
• One in seven people in the EU is a part-time worker – during
the last few years this form of employment accounted for more
new jobs than any other
• There are a large number of part-time workers in the United
States
• A growing number of MNCs are using part-time and temporary
contract workers
New Labor Force Trends and
Pressures
Part-Time Work and Shiftwork
98

• Shiftwork
• Very popular in Europe
• Widely used in newspaper production, public transportation,
utilities, food production, delivery services, hospitals,
emergency services, telephone sales, and banking
• Very popular with employers in Italy, Sweden, Belgium,
England, France, and Germany
Pressures
Part-Time Work and Shiftwork
99

• Benefits of Using Nonpermanent Employment
• Length or amount of work is uncertain
• Some jobs require a limited period of time
• Short-term recruitment is a cost-effective
• Temporary employees do not get benefits
• Special skills are needed quickly and inexpensively
• Easy to terminate temporary workers when no longer needed
• Good way to determine if someone will “fit in” on a permanent basis
Pressures
Nonpermanent Employment
100

• Involves replacing employment contracts with commercial
contracts
• Widely used in construction – workers move from one contract to
another or are laid off between jobs
• Popular in European public sector and private organizations that
prefer to focus on their core business
Pressures
Subcontracting
101

• MNCs are under increasing pressure to upgrade working conditions
and labor practices of manufacturing and other facilities
• NGOs and other groups are pressuring MNCs to adhere to
international standards and adopt new codes of responsibility
• The ILO addresses the conditions of workers through its standards
and conventions (international treaties), nonbinding
recommendations, codes of conduct, resolutions, and declarations
Pressures
Global Pressures for Improved
Labor Practices
102

• The Organization for Economic Cooperation and Development
(OECD) approved a code of conduct in 1976 called “Guidelines for
Multinational Enterprises”
• The North American Free Trade Agreement (NAFTA) and many
other trade agreements include side agreements in which
governments commit to enforcing labor standards and allowing for
free association of workers
• Social Accountability International (SAI) addresses child labor,
forced labor, health and safety, compensation and working hours,
discrimination, discipline, free association, and collective
bargaining
Pressures
Global Pressures for Improved
Labor Practices
103

• U.S. firms tend to concentrate authority at corporate
headquarters, with greater emphasis on formal management
controls and a close reporting system
• European MNCs tend to deal with labor unions at the industry
level rather than the company level – the opposite is more
typical for U.S. firms
• Many U.S. have large domestic sales are relative to overseas
operations so are more likely to regard overseas operations as an
extension of domestic operations – the opposite is true for many
European MNCs whose international operations represent the
major part of their business
Organizing International Industrial Relations
104

Talent Crunch
• There is an opportunity for the HR community to lobby to simplify immigration processes
and make movement of people into India more seamless
• What challenges face Indian companies when looking at global expansion?
Most challenges are common to all companies regardless of their country of origin, and
most significant are those related to cultural differences that become evident when
expanding operations outside the home country.
• These cultural differences are related to the way things get done, how people are managed
and how problems are solved.
• Talent pool is global today.
• How do you see the movement of people into India for work opportunities?
India has many exciting opportunities to offer to foreign talent pool.
• You have a growing economy that is facing a talent crunch and offers exciting growth and
learning, and there is still a slowdown situation in majority of countries in the West.
• So, there is obviously a great opportunity to utilize talent from the West in India.
• The challenge is that of cultural and people integration. For example, for an American to
work and succeed in the Indian environment is much tougher than, say, for a Mexican or a
South European, and the reason is that similarities or differences in their culture which
plays a very important role in adapting and succeeding in a given country.
105

Contd.,
• The Indian IT industry is a great example of how employees across the globe can be utilized in
the form of a collective global talent pool.
• The administrative challenges involved in bringing expatriates to India are still high.
• There is an opportunity for the HR community to lobby to simplify immigration processes and
make people movement into India more seamless.
• What are the trends in Indian companies bringing in expatriates?
What I have seen in the last few years is that sophisticated expatriate packages are being used on
a more selective basis.
• The reason is a change in the demand-supply equation. India today has access to people in other
countries who cannot find job opportunities in their home country and hence available to work
globally.
• From the demand side, companies are segmenting expatriates between business critical groups
and general expatriate hiring.
• It all drills down to why you are bringing the person or group on board as expatriates and what
will be the return on investment to your business.
• Employees with scarce and sought after skills will have a customized expatriate package based
on individual situation and needs so that it is attractive for the expatriate to accept the offer.
• Employers in India need to research where the talent pools are and source talent from those
locations.
• For example IT companies eyeing opportunities to currently recruit from Europe at the graduate
level, is likely adopt a more localized approach where people are paid at local salary levels and
then provided with a few benefits like flight tickets with a defined regularity, accommodation for
the first few weeks and some allowances on top of the local salary.
106

Contd.,
• The administrative challenges involved in bringing expatriates to India are still
high. There is an opportunity for the HR community to lobby to simplify
immigration processes and make people movement into India more seamless.
• What are the issues that expatriate face?
One of the main reasons why expatriate assignments fail is the lack of integration
of the families to the new country. The children may face problems in accessing
schooling and adapting to new education systems and the spouse might feel
alienated if he or she does not get social and employment support.
• Another issue is healthcare, and companies need to be sensitive and provide
extended healthcare for expatriate and families.
• There are also smaller benefits like providing transportation, driver, domestic help
etc. that can make life more comfortable.
• Finally, support on taxation implications of the expatriate assignment is also very
important as it can affect the take home pay of the employee. Normally countries
have a generic approach to taxation wherein people only pay taxes in a given
country if he or she has lived in that country for, say, more than 180 days in a
financial year.
• This is not true in the US where citizens are taxed in the US on their global income
regardless of where they live.
107

Defining success for MNCs in India
• Success for MNCs in India can be defined along 2 dimensions :
• Capturing the Domestic Market Opportunity
• Leveraging India’s resource base to derive additional value for the corporation
• R&D / Manufacturing / Sourcing / BPO
Performance of MNCs – An Analysis
• Over the last few decades, most MNCs have shown typical characteristics in
their growth plans in India
• Prefers operations to be less assets intensive
• Lean operations as far as employees are concerned
• Preference of profitability over growth
• Most businesses generate high ROCEs
• Extremely cagey to enter “non-Parent” growth areas
108

Various studies have shown that there are 3 key success
factors for MNCs operating in India …
• Commitment at global level :
• Raise the profile of India
• Formulation of bold long term targets
• Empowered local Management :
• More cost effective, enhances continuity, leverages understanding
of local environment
• Localized product / market business models: create
customized products and services in response to unique
environment in India
• Deliver the right product at the right price with right positioning
for India
109

Key Advantages of existence of MNCs in India ….i.e.
what has India really gained?
• Work culture for employees
• Systems
• Training and Learning
• Technology – especially concept of working with better technologies
• Safety Health and Environmental Learning's
• Culture and Ethos
• Excellent training grounds for many entrepreneurs
• Outsourcing Centers for key processes setup by various MNCs
• R&D Outsourcing – Pharmaceuticals, Engineering, IT, Telecom
• Product development centers (Telecom, IT)
110

What are the key issues in the Indian context which
have hindered MNCs growth?
• “Global parent strategy” dictates India plans
• Limitations of growth due to regulatory / legislation / IPR issues
• Limited Autonomy for top MNC Managers
• Sometimes bureaucratic setups have delayed decision making –
sharp contrast to most Indian entrepreneur companies
• Insistence of some companies on having expats
• Rigidity and insistence on evaluating India like any other market
• Not being able to recognize early enough that India is a price and
quality conscious market
• Limitations of following aggressive M&A options (detail next slide)
• Many MNCs have got consistently caught in rounds of “parent
consolidation”
• 100% subsidiary conundrum
111

Key challenges that “Indian MNC” would face
• Domestic market like India vis a vis International expansion
• Language
• Culture
• Autonomy to “local” managers – how comfortable are we ?
• Styles of doing business
• Handling of potential liabilities related to Labor, IPR etc.
• And ………………Patience !
112

…learning never ends
the journey of excellence
continues…
Thank You
113

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