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Increasing global competitiveness_hr

  1. 1. Increasing Global Competitiveness through Effective People Management Linda K. Stroh Paula M. CaligiuriAn overall goal of improving global competitiveness is the imperative under which managers strategi-cally guide their organizations today. Any process orfunction that enables organizations to gain a com-petitive advantage on a global scale is therefore considered valuable to those at the helm. Through ourresearch on 60 of the world’s top multinational organizations, we found that the effective managementof the people side of global business does, in fact, pay dividends in stronger bottom lines.I n our rapidly changing global econ- omy, an organization’s ability toreadily adapt its everyday business pro- resources). Given that HR strategy and an organization’s overall business strat- egy should be closely linked, havingcedures as well as its long-term goals is adaptability in all areas of the MNCs’a critical determinant of its success in business except human resources maythe international market (Bartlett & well threaten global competitivenessGhoshal, 1992). Managers of successful (Dyer, 1983; Lengnick-Hall & Leng-multinational companies (MNCs) nick-Hall, 1988; Schuler & MacMillan,understand that to compete effectively 1984; Tichy, Fombrun, & Devanna,they must be adaptable with respect to 1982; Stroh & Reilly, 1994). Thus, ittheir product lines, financial portfolios, should follow that MNCs that havemarketing initiatives, and the like. All effective global HR management prac-too frequently, however, they overlook tices should be more successful on aa critical aspect of their business in global scale.which they must also strive for adapt- Our research, sponsored by the Inter-ability-the management of their orga- national Personnel Association, exam-nizations’ human assets (i.e., human ined 60 of the largest multinational companies in the United States in an _Linda K. Stroh, Institute of Human Resources & effort to study what, if any, impact theirindustrial Relations, Loyola University Chicago, 820 human resource management practicesN. Michigan Avenue, Chicago, IL 60617. Paula M. and policies have on the global compet-Caligiuri, School of Management & Labor Relations, itiveness of these MNCs. (Appendix IRutgers University, 2006 Janice H. Levin Bldg., Liv-ingston Campus, New Brunswick, NJ 08903. lists the companies participating in the Improving Global Competitiveness 1
  2. 2. study.) Qualitative analysis of inter- what are the barriers holding companiesviews with the top global human back from successfully implementingresource managers in these organiza- these HR initiatives? How could thesetions and a comparison of the organiza- barriers be overcome? The insighttions’ relative success revealed that gained from our research sheds light oneffective management of the human the answers to these questions.asset did pay dividends in stronger bot-tom lines. This paper describes thequalitative differences, as identified by SUCCESSFULMNCs HAVEthe global HR executives in our inter- FLEXIBLE PRACTICES, PEOPLE, ANDviews, between the more successful and HR FUNCTIONSless successful organizations. “I” you want to be around 20 years A content analysis of the interviews from now, your people must be flexiblewas conducted to identify the three and willing to make change-or theaspects of people management that organization will be gone. ” This senti-were most critical to the MNCs’ suc- ment, expressed by Andre Rude, an HRcess in the global arena. These three executive at the Hewlett Packard Cor-features were the adoption of flexible poration, summarizes well the opinionsmanagement policies and practices shared by the managers at the success-worldwide, the inclusion of the human ful MNCs in our study. According toresource function as a strategic partner Rude, “Flexibility is IN” at Hewlettin global business, and the development Packard. In the case of MNCs, flexibil-of global leaders. Granted, these issues ity is critical with respect to the policiesmay seem fundamental to the operation and practices typically developed atof any successful MNC, but, as our headquarters and then implementedresearch suggests, companies vary worldwide. Policies and practices aregreatly in how effectively they address considered flexible if they allow forthem. “More successful” MNCs had variation across nations, thereby takingmore effective initiatives to address national cultures into account. Yet, allthese issues, whereas “less successful” too often, the goal is to maintain consis-MNCs had fewer, less effective ways to tency across nations, and rigid andaddress them. (Appendix II describes inflexible policies and practices are thethe sample and the method of content result.analysis; Appendix III outlines the To illustrate this, some of the execu-method used to differentiate “success- tives mentioned the conflict aroundful” from “unsuccessful” organiza- diversity programs. This conflict arisestions.) between those advocating the need for This leads to an important question: consistency or centralization and thoseif these three aspects of people manage- administering policy at the local level.ment are so fundamental to the success- In an extreme case of centralization,ful operation of MNCs, why hasn’t corporate headquarters may ask all theevery global organization made these managers of the organization’s foreignissues top priorities? More specifically, subsidiaries to implement the same very2 Journal of World Business / 3% I)/ 1998
  3. 3. structured program. International man- strongly encouraged to “get on board”agers are likely to become frustrated with the more flexible management phi-with the home office for being so cul- losophy.turally insensitive and naive as to Shearer and other executives notedbelieve that people worldwide hold the that technological changes (once the same value concerning, for example, clear source of an MNC’s global com-individualism and equal opportunity as petitive advantage) may not be the driv-a fundamental right. Because there is ing force behind successful globaltoo much centralization, rather than companies in the next decade. Our cur- sending the message that the organiza- rent environment is so sophisticatedtion views people as an important that the technological changes compa-resource, regardless of race, gender, and nies make can be replicated in a veryso on, the message is confused with the short period of time-and in manymedium. In contrast, interviewees from countries concurrently. The sheer speedsuccessful multinational organizations of technological change is so rapid thatexplicitly stated that they demonstrate all smart companies can very quicklytheir appreciation for their employees replicate and introduce the same new(regardless of race, gender, and so on) technology. According to Ms. Shearer,worldwide-not only in those coun- it is only people who cannot be quicklytries that have laws requiring EEO com- replicated or replaced. People, there-pliance. Successful global executives fore, can become a source of competi-noted that global management must be tive strategic in conveying the message that Given that it is the people in an orga-“discrimination will not be tolerated” nization who design and implementbutflexible in the manner in which they policies and practices worldwide, exec-impart this core organizational value. utives must foster an organizational cul-The same balancing act must be played ture that supports, and in fact demands,out for each process and practice world- flexibility in its people. Shearer notedwide (e.g., compensation, recruitment, that in the ’30s and ’40s Caltex oftenrewards and recognition). threw money at its problems and used Carrie Shearer, from Caltex Corpora- band-aid solutions to make short-termtion, attributed her company’s excep- changes. Today, Ms. Shearer noted,tional global success to a CEO who Caltex no longer treats employees as if“supports movement into the 21st cen- they all came from a cookie-cuttertury” by getting rid of management mold. For example, the company oftenthinking that does not recognize the creates focus teams of expatriates orneed (or is resistant to the need) to their spouses to learn employees’ opin-adapt and grow. Shearer noted that ions about global assignments. In thethose in Caltex’s executive suite felt past, Shearer noted, “We alwaysstrongly about the need for change in its thought we knew what employeesorganizational culture in the direction wanted and created policies based onof more flexible management practices our knowledge. Now, we ask expatri-and that the management team was ates and spouses what they need and Improving Global Competitiveness 3
  4. 4. want. No question is too trivial.” often irrelevant because they are too“Tweaking” no longer works, Ms. ethnocentric in orientation.Shearer says. Employees at Caltex As an executive from one companybegin each problem-solving project by noted (name withheld), “Companiesthrowing out the old way of doing must move away from being ‘relational’things and start with a blank slate. [whereby decisions are made based on As Ms. Shearer strongly suggested, who you know] to ‘transactional’to introduce flexibility into the organi- [whereby decisions are based on whatzational culture may mean having to you know]. The pendulum eventually“dust old mentalities” out of the man- needs to swing to the center, but for theagement team. This can be especially time being, we must swing to thedifficult for managers involved in solv- extreme to meet current needs. Someing problems and establishing policy, managers at the less successful organi-when the same approaches may have zations rationalized relational decisionbeen used for decades. Many managers making as a “more efficient” model forindicated that they had been given six making decisions about company poli-months or less to “get on board” and cies and practices. At the more success-accept the new methods of decision ful MNCs, however, the managersmaking and flexible thinking. Many of recognized that politically contrivedthe organizations we studied found it decision making based on who younecessary to let those go who could not know is a shortsighted and detrimentalget “on board.” Needless to say, this management technique.often meant many faces changed within To overcome this mentality, execu-the organizational hierarchy. In less tives must question the origins of deci-successful MNCs, relational processes sions about policies and practices thattook on much greater significance. affect their organizations worldwide. IfManagers at these organizations were managers are held more highly account-less willing to adapt new, more flexible able for soliciting input from the vari-ways of thinking because that would ous global businesses affected by theirentail “letting go” of friends and col- policies, they will begin to make deci-leagues who were not able to “get on sions based less on their relational net-board.” Thus, globally diverse and pos- work and more on the true globalsibly conflicting opinions were often environment. At Amoco, recognitionignored in favor of maintaining social of the importance of this approachnetworks and the current relational con- resulted in the global HR functiontract, whereby the most important deter- totally revamping the way it worked. Tominant of decisions is who you know begin this process, the staff in Amoco’srather than what you know. Our global HR function spent one yearresearch showed that MNCs suffer accounting for the tasks they do. Thewhen the network for decision making initial thrust was internal, so they coulddoes not elicit complete information prove to themselves that they werefrom the global environment. Policies undertaking “value-added” work. Theyand practices get bogged down and are even developed a set of core policies4 Journal of World Business ! 33(I) ! 1998
  5. 5. and made them consistent across all warned not to step on anyone’s units and then created a set of There is little sharing of information-“flexible policies” that allowed local no sincere push to make change.”unit managers to use or delete policies Many of the less successful MNCsbased on local cultures and needs. In so referred to their global managementdoing, each HR staff member became counterparts as “them,” reflecting theirmore accountable for his or her time “us versus them” mentality. By con-and unique contribution to the organiza- trast, to the managers at the more suc-tion. Ultimately, the unit justified its cessful MNCs, “us” encompassedexistence in dollar terms, thus allowing everyone in their unified global organi-this area of the company to better part- zation.ner with its business units because it To overcome this “turf protection-now looks and acts more like the busi- ism” requires executives to diagnoseness units it serves. the causes and address them directly. Answering the following questions gen-Managers/Units at Successful MNCs erally uncovers some common causes:Share Power and Information Do managers believe that relinquishing As the HR executives from Amoco control to foreign subsidiaries will and many other successful MNCs sug- lower their credibility or their position gest, the best policies and practices may in the organizational hierarchy? Do originate in countries other than the one managers believe that their position is where headquarters is located. Truly redundant with that of others worldwide creative ideas may come from manag- and therefore might be eliminated? Do ers who are familiar not only with the managers possess insufficient knowl- organization’s culture but with other edge of global business-and fear that cultures as well (Mead, 1994). Yet, as this will be realized when their global interviewees pointed out, an open and counterparts are included in decision flexible approach to the development of making? Do managers believe that policies and practices that incorporate being in headquarters equates with ideas and input from around the world power over foreign subsidiaries? Is a may threaten managers who are fixed in language or other communication bar- the rigidity of HQ ethnocentrism. As a result, managers at headquarters may be rier (e.g., not having e-mail worldwide) reluctant to relinquish power and infor- hindering the open flow of information? mation to others-both individuals and If the answer is “yes” to any of these departments-especially managers in questions, then it is likely that turf pro- international offices. One interviewee tectionism exists. Once diagnosed, noted (company withheld), that “our executives can revamp reporting struc- company is very militaristic in tures, alter managerial rewards and nature.. . . There is a huge turf protec- accountabilities, and improve commu- tion mentality. For example, when Z nication to facilitate more open rela-first came [to my organization] Z was tionships among the subsidiaries andasked to develop new programs but with headquarters. Improving Global Competitiveness 5
  6. 6. The Monsanto organization is an worldwide basis, decisions that areinteresting case in point. Monsanto has made based on input across subsidiariesdeveloped an organizational strategy reflect the flexibility needed in the glo-whereby the U.S. office is no longer the bal environment. Thus, taking into“center of gravity.” Although this account the culture of various countrieschange of power as an information and sharing power and information withsource may concern some of those people in the various host countriesworking on the U.S. side of the organi- leads not only to more flexible policieszation, Monsanto recognizes that the but to competitive advantage.ultimate aim is to develop a strongerorganization that can sustain itself.Monsanto is working hard to change the SUCCESSFULMNCs TREATexisting U.S.- based paradigm by creat- HUMANRESOURCESASAing an HR function of specialists STRATEGICPARTNERaround the world. Thus, the global HR Although most managers would agreefunction has created centers of expertise that it is the people in an organizationin different regions that handle special who determine its success (or failure),activities. For example, Singapore is the the human resource function is oftencenter for cross-cultural training, criticized as being useless and bureau-Argentina is the “Quality Center,” and cratic. For example, in an article enti-Europe handles the bulk of Monsanto’s tled “Taking on the Last Bureaucracy,”salary administration. in the January 1996 issue of Fortune Other managers noted that corporate magazine, author Woods suggests, inheadquarters plays an important role in reference to HR departments,” Why notimproving communication and sharing blow the sucker up?” (p. 105). Garrishpower among international units. Jane comments aside, our research hasPrendergast, director of HR for Coca- shown that there is room for improve-Cola, suggests the “corporate office” ment and that stronger links need to beshould act as a “symphony conductor” established between business units ofputting people together and opening the organization and global humanlines of communication worldwide. resource functions (Shenkar, 1995;Equally important, this process must be Caligiuri & Stroh, 1995; Hendry, 1994;orchestrated in a way that can be under- Briscoe, 1995). In other words, humanstood in each national culture where the resources, like other functional areas,company is conducting business. must align itself with the strategic goalsFinally, it is the responsibility of head- of the organization. Many of the HRquarters to let all employees worldwide executives we interviewed indicatedknow they are appreciated, that all that often HR was not aligned with theemployees have knowledge, skills, and global business strategy.abilities that will help to maintain the At the same time, evidence from thecompetitive advantage of the MNC. past 10 years suggests that human When communication improves and resource units have been improving inmore information is gathered on a this regard. A strong piece of support-6 Journal of World Business / 33( I ) / 1998
  7. 7. ing evidence is found in a research arti- operating in this more reactive mode.cle by Huselid in the Academy of By contrast, at the more successfulManagement Journal (1995). Huselid organizations, the global HR functionfound that strategic human resource was more proactive and strategicallypractices are, in fact, having a signifi- integrated with the rest of the business.cant positive effect on the bottom-line This lack of involvement of HR as aeconomic success of organizations. Fur- strategic business partner can occur forthermore, within their respective orga- one of two reasons: (1) because of anizations, greater numbers of human lack of interest on management’s part inresource professionals have earned the having HR involved in the strategicrespect of their managerial counter- planning of the business or (2) becauseparts by demonstrating the worth of HR the company’s HR professionals lackin terms of strategic advantage and eco- the expertise to address issues on a glo-nomic gain. As Harrison of Bristol- bal scale. The executives we inter-Myers Squibb noted, “HR is able to viewed suggested that the latter maycontribute directly to both the expense have, in fact, caused the former. Ifcontrol and profitability of our organi- members of other functional areas per-zation.. . . We [in HR] are fully partici- ceive HR as lacking in internationalpating business partners and strategic business expertise, they may opt to notplanners.” involve HR in deternining policies and The challenge for human resource practices affecting global issues. Thus,units, as relatively new strategic part- the greatest barrier to HR units becom-ners in the international arena, has ing strategic on a global scale is theirincreased with the inception of global own lack of expertise of internationalcompetition. Like the domestic HR business-related issues (Black,function, global HR managers need to Gregersen, & Mendenhall, 1992;anticipate the HR needs of their organi- Anderson & Fenton, 1993; Stroh &zations. Many of the executives in thisstudy remembered a time when their Caligiuri, 1998).organizations’ HR departments were In a frantic attempt to respond to theunprepared to meet the needs of the need for experts on international busi-new human resource demands thrust ness, many MNCs outsourced their glo-upon them: staffing foreign subsidiar- bal HR duties. This was a temporaryies, managing multiple employment solution, but often meant that bothenvironments worldwide, establishing domestic and global HR efforts becamecompensation rates using vastly differ- fragmented. To align domestic andent pay scales, accommodating to dif- international HR functions, new staffferent legal systems affecting with international expertise were hiredpersonnel decisions, and the like. Glo- and those currently in domestic HRbal HR was, at best, functioning in a positions were retrained. Thus, thereactive rather than a proactive, strate- more successful organizations in ourgic mode. At the less successful organi- study now have HR personnel withzations. the HR function was still international expertise. Improving Global Competitiveness 7
  8. 8. Based on the current study, it appears more important, must be able to com-that the most successful MNCs not only municate the differences and similari-have staff with international expertise ties of this environment to home officein the HR function but that these staff executives and managers and expatri-know how to use it to grow the global ate personnel, in addition to the localbusiness. Here, those in the HR func- executives, management, and work-tion are engaged directly in interna- force. With this background, the HRtional operations. Harrison, from executive must be able to put together aBristol-Myers Squibb, said, “Before hiring, training, and development planentering into a potential foreign market, that capitalizes on the best of bothHR conducts a full political, economic, worlds-the home company strengthsand labor recommendation.” The same while keeping in mind the host countrywas true at other successful MNCs. By norms and requirements. The HR exec-contrast, managers at the less successful utive who can do all of this has mas-MNCs reported that the staff of their tered the fine art of global humanHR units were not even considered part resource management.of the initial business strategy team. Along with highlighting the need forThese organizations usually had to HR professionals to develop new skills,solve preventable HR problems in a this comment suggests a problem thatreactive manner after a global business prevents multinationals from becomingwas established. strategic on a global scale; that is, Managers at the more successful efforts undertaken by subsidiaries andMNCs also reported that the staff of headquarters often become fragmented.their HR functions were actively When there is too much localization,involved on an ongoing basis in predict- subsidiaries waste resources reinventinging future global HR needs. They also policies. When there is too much cen-reported that HR had a greater number tralization, subsidiaries feel restricted-of tasks related to international business often to the point of being unable toand fewer administrative tasks. In addi- implement policies dictated by head-tion, HR had active plans for develop- the global skills of its staff. As described in the previous section, D. L. Brown, a former executive with successful MNCs are able to balanceOwens Illinois and currently a partner the goal of centralization with the needin Linden, Inc, summed up the critical for appropriate levels of localization.role of HR in international operations: Rather than having headquarters initiate Carrying out the normal HR func- HR policies, high-level regional manag-tions for a foreign operation, especially ers collaborate equally in this process,in emerging markets, requires that HR making the “home/central office” oneexecutives must be much more “total of several strategists rather than thebusiness people.” The HR executive only unit setting policy. As a worldwidemust understand the local business, team, these managers decide whichpolitical, and social environment before aspects of various policies and practicesestablishing the local plan of action and, will be dealt with locally and which will8 Journal of World Business / 33( 1) / 1998
  9. 9. be decided upon collaboratively. In all including the education level of itsglobal business activities, there is some workers (e.g., literacy rates, apprentice-optimal balance between maintaining ship programs), laws governingconsistency across all of the organiza- employment (e.g., selection, workingtions’ geographic locations and allow- hours), union relations (e.g., strength ofing local units to dictate business the union, participation), and nationaldecisions and practices (Black et al., cultural norms as they relate to work 1992; Caligiuri & Stroh, 1995). When practices, among other things. Like-the optimal balance is achieved, MNCs wise, HR should be involved from theare able to leverage their core values beginning in the process of negotiatingand save resources otherwise wasted joint ventures. Global HR could con-because of redundancy. duct a thorough analysis of the differ- Sometimes the greatest difficulty ences in work practices, organizationalglobal HR has is letting other functional cultures, leaders, decision-makingareas know it has something to “bring methods, and so forth. Once it has ato the strategic table.” To echo the com- base of knowledge about these differ-ments of the executives in this study, ences, HR can then develop ways toglobal HR needs to do a better job of facilitate the merger across bothmarketing itself to other units. In a national and corporate cultures-recent Fortune article (September 29, thereby avoiding problems later on. 1997), Fisher wrote that there are two These are just two examples of waysreasons HR is not considered part of the that global HR can strategically affectstrategic team that can add value to the an organization’s bottom line.bottom line of the organization: (1) HRreally is not able to identify how to sup-port the strategic objectives of the orga- SUCCESSFUL MNCs DEVELOPTHEIRnization or (2) HR is able to support the GLOBALLEADERSstrategic mission of the organization but Our study showed that the most suc-nobody in the organization cares to lis- cessful MNCs recognize the importanceten. Fisher suggests is that if HR were of having top managers who have a glo-genuinely doing an effective job mak- bal orientation. Thus, a critical part ofing “a detailed and convincing case” of the global HR function is to provideways it could add value to the objec- managerial talent with opportunities totives of the organization, the second develop a global orientation or globalpossible argument for not involving HR leadership skills. Almost all the organi-would probably be superfluous. zations in our study have as a stated What, then, are some of the specific objective that they will send managersskills global HR can bring to the table? on global assignments, in part toOne is that it can conduct a thorough develop this global orientation. Fromanalysis prior to the organization open- this perspective, global assignments noting a facility in a host country. Such an only fill technical or managerial needsanalysis would contain an evaluation of but are perceived as developmentalthe entire HR system in the country, experiences for managers. In fact, in Improving Global Competitiveness 9
  10. 10. many successful MNCs, having one’s this shortsightedness. ” Acknowledging “ticket punched” on an international that talent exists and using the talent assignment is a requirement for appropriately are two different issues- advancement to the executive suite. The one idealistic, the other strategic. Phillip Morris Company, for example, One way in which global HR can views its people as “strategic weapons” support the effective use of talent on a and recognizes the importance of both worldwide basis is through the use of developing and retaining top global tal- international Human Resource Informa-ent. Eunice Hamilton, director of man- tion Systems (HRIS). The executives at agement and organization development many organizations described their use at Phillip Morris, notes that most of of this technology as evidence that athose who go on international assign- shift is occurring toward more strategicments do so for developmental rea- use of human talent on a global scale. sons-to broaden their managerial/ Regardless of how global assignees areleadership talent. Ms. Hamilton adds sourced (either from headquarters orthat although there is a trend among other subsidiaries), ensuring that globalthose who go on international assign- assignments are truly developmentalments to move on to yet another such experiences for managers, and aassignment, having international expe- rewarding experience for the organiza-rience is increasingly important for all tion, is another important part of themanagers at Phillip Morris. global HR function. Global HR needs to The development of global leader- be responsible for managing severalship skills should not stop with home critical aspects of cross-national assign-country nationals. Global HR should ments. Based on our research findings,also be involved in developing a global these include but are not limited to find-orientation among host country nation- ing appropriate employees who haveals as well. This means, for example, the requisite skills for the assignments,sending not only home country manag- providing cross-cultural and languageers on global assignments but host skills training, developing career man-national talent to the corporate office agement strategies during and after theand to other divisions around the world. assignments, and assisting the spousesMany of the managers at the successful of expatriates in making internationalMNCs talked about how their compa- assignments fulfilling.nies develop talent in this way. In addi- Finding people who are willing totion, they described a “desired state” for accept global assignments is one of thehuman resources, including the ability greatest HR challenges, according toto source talent within the company many of the managers in our study. Onefrom around the world. Victor Guerra, such manager was James McCarthy,an executive at Prudential, commented: from Motorola., who said: “One of the“We need to continually recognize that most difSicult aspects of developing glo-there are bright, articulate people who bal leaders is getting people to move ondo not live in the home country. U.S. international assignments. Dealing withmultinationals are especially guilty of dual careers is often one of the greatest10 Journal of World Business / 33( 1) / 1998
  11. 11. challenges. ” Many global HR execu- In addition to logistical issues, thetives indicated that the desire to accept global HR executives we interviewedglobal assignments has been “remain- acknowledged that there was a systemicing flat” while the need for global problem associated with finding appro-assignees has been steadily increasing. priate people for global assignments-This supply and demand problem is one namely, that some organizations simplyglobal HR can help solve in their orga- do not have enough people who havenizations. For some organizations, the the necessary motivation or skills tosolutions are logistical; for others, the live and work in a host country. Thesolutions are more systemic. more successful organizations have Like McCarthy at Motorola, most of addressed this need by recruiting morethe managers we interviewed were managers, including in some casesstruggling with the “dual-career” issue recent college graduates, who have for-and saw the problem of finding people, eign language skills, foreign experi-especially married managers, who are ence, an interest in living overseas, andwilling to accept assignments as an the personality characteristics (e.g.,impediment to developing global lead- flexibility, openness) that indicate theyers. Research suggests that spouses who might well have global managementare unhappy overseas have a deleterious potential.effect on the overall performance and Many successful organizations,adjustment of the international including Coca-Cola, have recently cre-assignee (Black et al., 1992; Pellico & ated a position called chief learningStroh, 1997). The most successful orga- officer (CLO). Much like a chief finan-nizations offered several creative solu- cial officer, who is dedicated to build-tions in this area. For example, ing the financial strength of anMotorola actually pays spouses of glo- organization, the chief learning officerbal assignees while they are on interna- is responsible for developing-on ational assignments, albeit only a worldwide scale-the organization’sfraction of their annual domestic sala- human talent and for utilizing theries (Pellico & Stroh, 1997). These human knowledge present in the orga-organizations encourage the spouses to nization. In the case of Coca-Cola, theuse the money for professional develop- CL0 is also responsible for creating ament, in the hopes that their overseas learning environment that allows peo-experience will pay off for them profes- ple to take intelligent risks, even tosionally in the long run. Based on an make mistakes-provided the mistakesassessment of its policy, the Motorola can be turned into a positive element ofCorporation found that those spouses knowledge for the multinational com-taking advantage of the benefits of its pany. Creating this environment on adual-career policy thought it helped worldwide scale can be a challenge,them adjust better while overseas and especially given the variance acrossbetter prepared them for repatriation nations in their norms toward risk-tak-and employment upon their return to ing behavior and toward questioningthe United States. managers’ authority. As was noted Improving Global Competitiveness 11
  12. 12. above, a challenge for the global HR dence of their flexibility and soundfunction is to be flexible in adopting its business strategy.practices worldwide. Global HR must Unlike those organizations that mustdetermine how learning can best take learn from their cultural mistakes (usu-place in each country and manage the ally made by culturally ignorant indi-process accordingly. The goal does not viduals), successful MNCs recognizechange, but the process might. the value in having global managers with the expertise to anticipate the orga- nization’s markets and to respond pro-SUMMARY actively. These organizations have learned that managers who are flexibleIn conclusion, our research suggests and open to the demands of the globalthat to ensure a competitive advantage market have made possible the organi-in the global arena, MNCs should, first, zation’s international business success.adopt flexible management policies andpractices-in particular, question man- Acknowledgment: An earlier versionagement practices and polices based on of this paper was presented at the Acad-who you know rather than what you emy of Management Meeting, Cincin-know. Second, MNCs should include nati, August, 1996. The authors wouldmembers of the human resource func- like to thank the membership of the Inter-tion in decision making as global strate- national Personnel Association (IPA),gic partners-provided they gain the and in particular, the IPA Executiverequisite strategic skills to participate. Board for their participation and finan-Third, MNCs should think strategically cial support of the research study. Theabout how to develop global leaders; Board also provided instrumental feed-this may involve paying attention to back on the survey and interview proto-work and family issues, in particular the col and constant support throughout thecreation of spousal assistance programs. study. A special thanks to: Glen Ander- Successful MNCs often boast that son, Tony Annoni, Matthew Ashe, Billthey assess their upper-management Edgley, Michael Gordon, Sven Grass-teams on the basis of global representa- hoff, Victor Guerra, Andree Rude, Jamestion-by the number of non-U.S.-born McCarthy, Luiz Jacques M. da Silveira,executives on these teams. In divisions Raj Tatta, Linda Watson, Ed Nunez,and functions in which a variety of Erica Fox and Brad Stroh. We also thankcountries are not represented, the devel- Loyola University Chicago, The Insti-opment of international employees (and tute of Human Resources & Industrialat times, new jobs) becomes a priority. Relations and Rutgers University forThis makes sense from a strategic busi- partial support for the study.ness perspective. A common goal ofthese MNCs is to align the nationalitiesof their management teams with those APPENDIX Iof their markets. Their ability to The following companies participatedrespond to the global market is evi- in the study:12 Journal of World Business / 33(l) / 1998
  13. 13. Alcan Aluminum LTD. PfizerAllied Signal Phillip Morris InternationalAmerican Cyanamid Polaroid CorporationAmeritech International PraxairAmoco Corporation The Procter & Gamble CompanyArthur Andersen Price Waterhouse L.L.P.Andersen Worldwide PrudentialAT&T Rohm & HaasAvon Products Royal Bank of CanadaBristol-Myers Squibb Joseph E. Seagram & SonCaltex Petroleum Corporation Schering-Plough CorporationCampbell Soup Company SmithKline BeechamCitibank, NA Texaco, Inc.The Coca-Cola Company Texas Instruments Inc.Coopers & Lybrand, L.L.P. Unilever U.S., Inc.Digital Equipment Corporation Warner-Lambert CompanyThe Walt Disney Company Xerox CorporationThe Dow Chemical CompanyDresser Industries, Inc.Dresser-Rand Company APPENDIX IIErnst & YoungFidelity Investments Description of Sample andFMC Corporation Content AnalysisFord Motor Company Participants. The sample for thisGTE Corporation study included 84 global humanW.R. Grace & Company resource executives working in 60 mul-Halliburton Energy Services tinational U.S.-based firms. The sampleHewlett Packard was drawn from the membership of theHoechst Celanese Corporation International Personnel Association (theIBM Corporation total membership participated), an asso-lnco Limited ciation composed of HR executives inInternational Flavors & Fragrances 60 of the leading multinationals in theJohnson & Johnson world. Members of this exclusive asso-Kaiser Aluminum & Chemical Corpo- ciation include senior HR professionals ration in Fortune 500 corporations and equiva-Kraft Foods International lent organizations with significant inter-Levi Strauss International national activities. The association isMerck & Co. INC. representative of all major industries.Mobil Oil Procedure. Interviews were under-Monsanto Company taken either in person or by telephone byMotorola Inc. the authors of the study and lastedRJR Nabisco Inc. between 30 and 90 minutes. Each partic-KPMG Peat Marwick, L.L.P. ipant was asked the following question: Improving Global Competitiveness 13
  14. 14. “Over the next decade, what factors are ways. First, taking into account thatlikely to enhance/impede global human these corporations represented a vari-resources’ ability to compete success- ety of industries, a standardized profit-fully in the global marketplace?” ability and growth score was created. Analysis. Transcripts of the inter- Using data from Forbes’ Annual Reportviews were content analyzed to assess on American Industry (January, 1996),those factors impeding/facilitating the both industry medians and companyeffectiveness of global human data were collected for all of the follow-resources. The first step of the content ing:analysis was done independently byeach author. Each author reread the 1. Return on equity over the past fivetranscripts from the interviews and years,developed categories to best describe 2. Return on equity for the mostthe three main themes mentioned dur- recent 12 months,ing the interviews. After this step, the 3. Return on capital over the mostauthors met to discuss overlaps in their recent 12 months,themes. Consensus was considered 4. Sales growth of the company forreached when the same theme appeared the past five years,on both lists or the themes on both lists 5. Sales growth of the company forwere considered similar enough except the most recent 12 months, andfor the term used to describe it. 6. Profit margin for the most recent 12 Evaluation. The next step was to months.create an index to differentiate moresuccessful and less successful organiza- To handle missing data, the six dichoto-tions (described in Appendix III). Once mous variables shown below were aver-a list of these organizations was created, aged (M = 1.70, SD = .25). The alphathe authors separated the transcripts coefficient for the MNC Success Indexbased on whether the interviewees was .72.worked for less successful or more suc- Next, an index of MNC success wascessful organizations and assessed the calculated as follows, where I = thetranscripts on the basis of the themes company’s industry median, c = com-they contained. This method was used pany data, and A, B, C, D, E, and F =to avoid potential bias the authors may the six growth and profitability vari-have toward respondents from more or ables above.less successful organizations. Step 1. Deviations from the industry medians were calculated for each of theAPPENDIX III six variables.Description of the Organizational A dev=Ac-AiPerformance Measure B dev = B, - Bi Data on the financial success of eachorganization were collected in two Cd,>= Cc - Ci14 Journal of World Business / 3X1) / 1998
  15. 15. D dev = D, - Di the company was in the low group. If the company appeared in the top thirdEdr,, = E, - Ei for both variables, then the companyF dev = Fc - Fi was in the high group. (Because these were just rough estimates of organiza-Step 2. Deviations were recoded, tional success, we believed it was morereflecting whether a company was appropriate to use these data as orderedhigher than the industry median, equal categorical estimates, rather than treat-to the industry median, or lower than ing them as interval-level data.) Thethe industry median. Six scores, with data in the known groups (high- versusvalues of either 1 or 2, resulted for each low-performing organizations) werecompany. then examined qualitatively. From this case study perspective, we wanted to1. If A,, through Fdev I 0, then A,,,, see if there was any pattern of inter- through Fscore = 2, respectively. viewee responses between the high-per-2. If A,,, through Fdev c 0, then A,,,, forming and low-performing through F,,,O,.e= 1, respectively. organizations. (The small sample pre- cluded us from doing statistical meanStep 3. The scores were added, and a comparisons; our interpretation of thesemean was calculated to form a compos- data should therefore be consideredite MNC Success Index. The mean exploratory.)scores ranged between 1 and 2. If, forexample, a company had data for onlyfour out of the six variables, the total REFERENCESwas divided by 4 instead of by 6. Anderson, L.M., & Fenton, J.W. (1993). The light at the end of the tunnel: Window of(Ascore + Bscore + cscore + DscOre + opportunity or an oncoming train? Busi-E score + Fscore) + 6 ness Horizons, 36 (1): 72-75. Bartlett, C.A., & Ghoshal, S. (1992). Trunsna- tional management. Boston: Irwin.The mean for the Forbes MNC Success Black, J.S., Gregersen, H.B., & Mendenhall,Index was 1.7. The second index of M.E. (1992). Global assignments: Suc-organizational performance represents cessfully expatriating and repatriatingthe scores given in Fortune’s America’s international managers. San Francisco:Most Admired Companies (March, Jossey-Bass. 1996). The Fortune scores had a mean Briscoe, D.R. (1995). International humanof 6.92. The Fortune and Forbes data resource management. Englewoodwere then combined to form two known Cliffs, N.J.: Prentice Hall.groups (1 = low-performing companies; Caligiuri, P.M., & Stroh, L.K. (1995). Multina- tional corporation management strategies2 = high-performing companies). Two and international human resource man-known groups were created using a split agement practices: Bringing international(in thirds) of both the Fortune and HR to the Bottom Line. InternationalForbes data. If a company appeared in Journal of Human Resource Manage-the bottom third for both variables, then ment, 6(3): 494-507. Improving Global Competitiveness 15
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