Assignment 7

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Chapter

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HRM in the Local Context:

Knowing When and How to Adapt

Learning Objectives (1 of 3)

Have a basic understanding how the national context affects HRM practices.
Describe how recruitment and selection practices differ among national contexts.
Identify possible host adaptations in recruitment and selection practices for a multinational company.
Explain how training and development techniques are used in different countries.

Learning Objectives (2 of 3)

Name sources of high-quality workers in different nations.
Understand how training must be adapted to host country workers.
Identify how performance evaluation and compensation practices differ in various national contexts.

Learning Objectives (3 of 3)

Discuss possible host country adaptations in performance evaluation and compensation practices for a multinational company.
Understand how labor costs vary among nations.
Appreciate how the national context and historical conditions affect the relationship between management and labor in different countries.

Key Questions

Regarding Local Employees

How can we identify talented local employees?
How can we attract these employees to apply for jobs?
Can we use our home country’s training methods with local employees?
What types of appraisal methods are customary?
What types of rewards do local people value?
Do any local laws affect staffing, compensation, and training decisions?

Why Do Nations Differ in HRM? (1 of 5)

Because of the national context:
National culture and social institutions influence how managers make decisions regarding strategies
Countries vary widely with regards to social institutions and national culture
Multinationals must select and implement practices that meet national context.

Why Do Nations Differ in HRM?
(2 of 5)

Because of the resource pool: all the human and physical resources available in a country
Includes quality of labor, availability of scientific laboratories, and sources of fuel
Arises from both from natural and induced factor conditions
Unique to each country

Why Do Nations Differ in HRM? (3 of 5)

Factors influencing the resource pool:
The quality, quantity, and accessibility of raw material
The quantity, quality, and cost of personnel available
The scientific, technical, and market-related knowledge available to firms
The cost and amount of capital available to firms for operations and expansion
The type, quality, and costs of supporting institutions such as the systems of communication, education, and transportation

Why Do Nations Differ in HRM? (4 of 5)

Natural Factor Conditions: national resources that occur naturally, e.g., abundant water supply
Induced-Factor Conditions: national resources created by a nation, e.g., superior educational system

Why Do Nations Differ in HRM? (5 of 5)

Major national context characteristics that affect HRM:
Education and training of the labor pool
Laws and cultural expectations of selection practices
Types of jobs favored by applicants
Laws and cultural expectations regarding fair wages and promotion criteria
Laws and traditions regarding labor practices

Recruitment (1 of 2)

The major steps in recruitment
Managers determine that jobs are available
Employers determine the types of people and skills that are necessary for the job
Employers generate a pool of applicants for the job

Exhibit 12.2:
Steps in the Recruiting Process

Recruitment (1 of 2)

Recruitment strategies
Walk-ins or unsolicited applications
Advertisements placed in newspaper or on the Internet
Company Web site job postings
Internal job postings
Public and private personnel agencies
Placement services of educational institutions
Current employee recommendations

Recruitment in the United States

U.S. managers:
Tend to see online or print advertising as one of the most effective recruitment methods.
Fear employee referrals result in the recruitment of people with similar backgrounds
Fear that recruitment by personal contacts may result in biases against some groups.
Open and public advertisements are the most effective, reflective of individualistic U.S. culture.

Exhibit 12.3:
Types of Recruitment and Effectiveness

Source: Based on data reported in Zalesova, A. and R.W. Robertson. 2010. “Building a better workforce: Trials and tribulations of employee recruitment and management.” Feature editions, 4, 70-80

Method of Recruitment	% of Respondent Using the Method	Effectiveness of Recruitment Method (1: not very effective to 5: very effective)
Newspaper advertisement	86	2.9
Referrals from employees	85	3.6
Use of recruiters	77	3.7
Use of Internet	66	2.6
Recruitment on schools	62	3.3
Job fairs	48	2.7
Use of consultants	44	3.1
Competitors	15	3.1

Recruitment Around the World (1 of 3)

While the U.S. favors open forms of recruitment, recruitment in collectivist societies tends to focus on the in-group, such as the family and friends of current employees.
Backdoor Recruitment: prospective employees are friends or relatives of those already employed
Managers are recruited from prestigious universities.

Micah White (MW) - The new MS A-head for this section is "Recruitment" but that A-head has already been used before in the preceding section of the new MS. Please confirm appropriate A-head and match this slide's heading to A-head. For now, I have changed this to "Recruitment Around the World," as this seems to apply to the whole section of the MS.

Recruitment Around the World (2 of 3)

Not only companies but individuals have recruitment preferences based on national culture & social institutions.
Looking for jobs through public vs. private agencies:
Individuals in former communist and socialist societies were more likely to rely on public agencies.
Individuals in more individualistic societies used private agencies.

Recruitment Around the World (3 of 3)

Posting ads and responding to ads:
Both are very public forms of recruitment.
Individualistic societies and egalitarian (low-masculinity) societies prefer such forms.
Applicants apply directly.
Individuals in Socialist societies and former communist countries prefer to talk to friends, relatives and other connections to find a job.

Selection in the United States (1 of 2)

Gather information on a candidate’s job qualifications
Find a match between the candidate’s skills and the job requirements.
The focus is on the individual’s achievements rather than group affiliations.
Many firms prohibit Nepotism, the hiring of relatives.
Many also prohibit managers from supervising family members.

Exhibit 12.7:
Typical Steps in U.S. Personnel Selection

SOURCE: Adapted from Bohlander, George W., and Scott Snell. 2009. Managing Human Resources. Cincinnati, OH: South-Western; Werther, William B., and Keith Davis. 1993. Human Resources and Personnel Management. New York: McGraw-Hill.

Selection in the United States (2 of 2)

Because the U.S. selection process is heavily based on personal achievements, applicants for jobs typically have to present themselves in such a way as to impress the recruiters.
This focus on impression management may also result in self-presentation behaviors.
Self-presentation simply refers to the applicant’s efforts to present him- or herself in a more positive light by focusing on positive attributes or minimizing negative attributes.

Selection in
Collectivist Cultures

Hiring always takes the in-group into account.
Preference is given to hiring relatives of first, the employer, then relatives of employees.
This selection values potential trustworthiness, reliability, and loyalty over performance-related background.
High school and university ties may substitute for family membership.

Implications for the Multinational: Recruitment and Selection (1 of 2)

Recruitment and selection of host country workers requires that managers of MNCs understand and adapt to local practices.
If local norms are not followed, the MNC may not get the best employees, and may offend cultural norms or break host country laws.
Many firms now using Electronic Human Resources (eHR).

Implications for the Multinational: Recruitment and Selection (2 of 2)

Cultural factors affect selection fairness perception on how potential employees view employers as attractive.
When potential employees go through the selection process, they develop an idea of how fair they are being treated.
Those who have high fairness perception tends to develop a more attractive view of the organization.
In situations where employers are competing for the best talent, those who perceive being treated more fairly are more likely to find the employer attractive and this have higher intentions to take the job.

Training and Development

Within a country, the need for training and development varies widely industry, technology, etc., but broad national differences exist.
Differences in training and development are due to:
Differences in educational systems
Emphasis on training placed by national governments
Cultural values regarding other personnel practices

Training and Development
in the United States

Companies with over 100 employees invest more than $60 billion in training costs.
Management development and computer skills are the most popular.
There is growing pressure on U. S. businesses to supplement basic educational training.
The transition to a service sector economy means the need for specialized skills training will increase.

Training and Vocational Education in Germany (1 of 4)

A sophisticated and standardized national system provides two major forms of vocational education:
General and specialized vocational schools and professional and technical colleges
Dual system: A combination of in-house apprenticeship training with part-time vocational-school training leads to a skilled worker certificate.
With advanced training, one can achieve the status of Meister: a master technician.

Training and Vocational Education in Germany (2 of 4)

The German Dual System
Stems from collaboration among employers, unions, and the state
Costs are shared between companies and the state.
Employers have an obligation to release employees for training.
Produces a well-trained national labor force with skills that are not company specific
Dual System under stress due to economic downturn

Training and Vocational Education in Germany (3 of 4)

Germany is not the only country that mandates such training.
The type of vocational training provided in a country is dependent on the type of support provided by the government.
There are three different types of vocational training.

Training and Vocational Education in Germany (4 of 4)

Types of vocational training around the world

Market-oriented system: Vocational training with no or minimal government role

Examples: UK, US, Japan

Institution system: the government is solely in charge

Examples: France and Italy

Dual system: the government works with industries to shape the vocational training system

Examples: Germany, Australia, Switzerland

Implications for the Multinational: Training and Development

Before operating in a host foreign country, multinational managers must:
Consider the quality of workers and managers there
Examine the feasibility of exporting training to them
Adaptation of management-development to different national contexts depends on intended use of host country managers.

Performance Appraisal

Performance Appraisal: Identifying people to reward, promote, demote, develop & improve, or terminate
Not everyone can move up the corporate ladder.
Assumption in individualistic cultures is that performance appraisal systems provide rational and fair solutions to these HR problems.

Performance Appraisal
in the United States (1 of 2)

U.S. system values links among individual rights, duties and rewards, and equal opportunity.
The ideal U.S. system is rational, logical and legal.
Such systems have four elements:
Performance standards
Performance measures
Performance feedback
Human resource decisions

Performance Appraisal
in the United States (2 of 2)

U.S. requirements for appraisals:
Appraisals must relate clearly to the job and performance.
Performance standards must be provided in writing.
Supervisors must be able to measure the behaviors they rate.
Supervisors must be trained to use evaluation measures.
Supervisors and subordinates must discuss appraisals openly.
Appeals procedures must be in place.

Performance Appraisal Around the World (1 of 3)

Australia, Canada, and the United States
These 3 are among the top five countries for all performance-appraisal purposes.
Very high on individualism, with heavy emphasis on the individual development of the employee
Performance appraisals are seen as the most effective method to gauge how well an employee is doing and how their performance can be improved.

Performance Appraisal Around the World (2 of 3)

Taiwan and Latin America
Also figure prominently on the list
Possible effects of social institutions such as government and trade agreements
May be emulating Western-based systems because of a desire to satisfy trade agreements and other competitiveness requirements

Performance Appraisal Around the World (3 of 3)

In Collectivist Societies, performance appraisals may not be as important:
Age and in-group memberships provide a large component of the psychological contract with the organization.
Human resource decisions take into account personal background characteristics more than achievement.
Managers indirectly sanction poor performance, and often avoid direct performance appraisal feedback.

Compensation

Compensation: includes wages and salaries, incentives such as bonuses, and benefits such as retirement contributions.
There are wide variations among countries and organizations on how to compensate workers.
A country’s economic development, cultural traditions, labor unions, and legal institutions all affect compensation.

Compensation Practices in the United States

In the U.S., wages and salaries differ based on two major factors:
External: includes local and national wage rates, government legislation, and collective bargaining
Internal: includes the importance of the job to the organization, its affluence and its ability to pay, and the employee’s relative worth to the business
94% of firms use comparative wage data to determine compensation.

Compensation Around the World
(1 of 2)

In a study of 10 countries, all managers believed:
Pay incentives should be important.
Pay should be contingent on group performance.
Pay should be contingent on company performance.
Incentives should be a significant amount of pay.
Job performances should be the basis of pay raises.
Benefits should be important.
Benefits should be more generous.
Pay should be based on long-term results.

Compensation Around the World
(1 of 2)

Russian compensation practices require an understanding of Soviet era compensation practices.
During that time, employees were guaranteed jobs and compensation levels were determined by the government to ensure low wage differentiation.
There are still some similarities with the Soviet model.
Wages and benefits are still determined by influential individuals rather than objectively determined by the HR department.

Compensation in Japan (1 of 2)

Like U.S. firms, Japanese firms determine base salaries largely by classification of positions.
Seniority has two effects:
Each position has minimum age requirements in addition to educational requirements. As the employee gains seniority, eligible to move up.
Seniority factors into pay decisions, but at a declining rate, diminishing after age 45.

Compensation in Japan (2 of 2)

More recently, the Japanese view of merit affects pay, a major shift.
Economic pressures have led to adoption of the Nenpo System, an evaluation based on yearly performance evaluations that emphasize goals.
Bonus system: Workers often receive as much as 30% of base salary, usually given twice a year, during traditional gift giving seasons.

Implications for the Multinational: Performance Evaluation and Compensation

Multinational companies must match their performance evaluation system to their multinational strategies.
If a multinational is located in many nations, it may need several different compensation packages for host country nationals.
Multinationals seeking location advantages in wages may consider Eastern Europe and India.

A Comparative View of
Labor Relations

Variations of labor relations arise from cultural differences, but also:
Historical factors
Ideological reasons
Management views of unions

Union Membership Density

Union-Member Density is the proportion of workers in a country who belong to unions.
In the U.S., union membership has declined considerably over the past 30 years.
Union membership in industrialized countries generally averages over 50%.
In South Africa with the opening of unions to the formerly barred black population, membership has more than doubled in size.

Some Historical and
Institutional Differences (1 of 2)

Britain
Unions developed without government interference.
Lack of government intervention led management and workers to develop strong adversarial relationships that remain in existence today.
Germany
Labor relations are formalized, legalistic, and low-conflict with centralized bargaining among unions and corporations; government is an intermediary.

Some Historical and
Institutional Differences (2 of 2)

French
Unions began late, and developed slowly.
The lack of legal protection of French workers and difficulties of unionization led to highly militant unions, some with ideological orientations.
U.S.
Legal protection for unions passed in 1935.
Unions focused on “Bread and butter” issues: wages, benefits, and working conditions

Union Structures (1 of 3)

Several types of unions exist:
Enterprise Union: represents all people in one organization, regardless of occupation or location
Craft Union: represents people from one occupational group, such as plumbers
Industrial Union: represents all people in a particular industry, regardless of occupational type

Union Structures (2 of 3)

Several types of unions exist: (cont’d)
Local Union: represents one occupational group in one company
Ideological Union: represents all types of workers based on some particular ideology or religious orientation
White collar or professional Union: represents particular occupational group, similar to craft union

Exhibit 12.15:
Popular Form of Unions in Selected Countries

SOURCE: Adapted from Poole, M. 1986. Industrial Relations: Heritage and Adjustment. Oxford: Oxford University Press

Country	Craft	General	Industrial	White-Collar	Professional	Enterprise
Australia	✓	✓	✓	✓	✓
Belgium	✓	✓
Canada	✓
Denmark	✓	✓
England	✓	✓	✓
Finland	✓	✓
Germany	✓	✓
Japan	✓
The Netherlands	✓	✓
Norway	✓	✓
Sweden	✓	✓	✓
Switzerland	✓	✓	✓
United States	✓	✓

Union Structures (3 of 3)

German unions favor the industrial form of organization.
An elected works council negotiates working conditions directly with the employer, and industry unions negotiate wages at the national or regional level
Works council: A German employee group that shares plant-level responsibility with managers with issues such as working conditions
Codetermination: Surrender by management to workers of a share of control of the organization traditionally reserved for management and owners.

Implications for the Multinational: The Search for Harmony

When they use local workers, multinational companies must deal with local labor practices, traditions and laws.
These must be considered in any strategic decision regarding locating in another country.
Example: In the U.S., Japanese companies have avoided locations in the more union-friendly Northern states, favoring instead Southern locations with less union activism.

Summary and Conclusions

Chapter 12 highlighted fundamental national differences in the various HRM functions.
Chapter 12 discussed how national context affects HRM.
The Chapter compared the U.S. with many other countries on recruitment, selection, training, performance appraisal and compensation.
Chapter 12 also dealt with differences in labor relations.