Managing People in the Global Economy

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3033IBA

WORKSHOP 3

IHRM SCENARIO

James Anderson is the HRM Director of @Cloudlink; an Australian-based MNC that develops

and sells ICT software which links in-house ICT ‘legacy’ systems to internet cloud-based

applications. The firm had initially expanded internationally by setting up a subsidiary in New

Zealand. This was followed by new subsidiaries in the US and the UK.

The firm’s decided to employ an ethnocentric IHRM strategy during the setting up stage of the

above subsidiaries, as this was seen as the best way to transfer firm-specific knowledge and

skills, maintain organisational control and give some of their promising managers international

experience. PCNs were therefore used to staff senior management positions in the subsidiaries.

However the firm had reduced the number of PCN expatriates in the above subsidiaries over

time, as local HCNs were recruited, trained and became familiar with the firms organisational

culture. This strategy had been very successful, with the above subsidiaries performing well.

Buoyed by this success the firm then decided to set up subsidiaries in the Asia-Pacific region,

including China, India and Japan. The Chinese and Japanese subsidiaries were aimed at

accessing their respective local markets, while the firm also hoped to develop the Indian

subsidiary into a research and development (R&D) facility, as well as selling products and

services to the local Indian market.

The firm decided that the Japanese subsidiary, which would be located in Tokyo, would be

their first foray into the Asia-Pacific region. Senior management saw Japan as a developed

economy with a mature market (similar to its earlier subsidiaries) and it had a long trading

history with Australia.

However, despite the firms’ initial international success, James has been mulling over the

failure of their first Japanese subsidiary expatriate manager, John Smith, to complete their three

year overseas assignment.

John Smith had an ICT technical background and had extensive experience in selling the firm’s

software in the Australian market. John had been one of the firm’s most successful sales

managers and his ICT technical knowledge was seen as giving him a major advantage when

explaining and selling the firm’s product to clients.

With his strong technical knowledge of the software combined with his successful sales

experience in Australia, John Smith was seen as the natural choice to head up the new Japanese

subsidiary. John was originally very enthusiastic about the Japanese appointment, which was

his first overseas posting, while his wife and two teenage children had also been excited about

the prospect of moving and living overseas.

Given the high costs of living in Tokyo, the firms decided to deviate from its previous

ethnocentric staffing policy and recruit most of the staff locally in order to reduce costs

[management also felt that their previous international experience would allow them to train

local staff relatively quickly]. John was therefore the only Western ‘expat’ (PCN) at the

subsidiary, with all of the remaining staff being recruited locally (i.e. Japanese HCNs).

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Senior management were keen on getting the Japanese subsidiary up and running as soon as

possible and John’s pre-departure orientation and training for the new position was relatively

brief. This included a one day cross cultural training program along with some perfunctory

information on Japanese business etiquette and customs.

To cover language issues the ability to speak English was included as part of the selection

criteria for the HCN employees. However, after his arrival in Japan, John Smith reported that

the actual spoken English ability of the HCNs varied greatly.

Despite their earlier enthusiasm, John and his family appeared to struggle to settle in to their

new country. Further, despite his reputation as a high-performance employee, management

were also concerned that John was not meeting pre-set performance targets in Japan.

Within 6 months of the initial posting John’s wife and family had returned home, citing family

issues. However anecdotal evidence and feedback from other workers suggested to James that

they had struggled to adapt to the new living environment. After arriving home John’s wife

had also complained to other worker’s that she had felt very isolated in Tokyo.

Ten months into John’s posting James received the following email:

31 October 2015

Dear James

I am shocked at the apparent inability of the firm to understand, let alone value, the enormous

amount of time and effort that I have put into setting up this subsidiary and making it a viable

entity.

I should add that my first performance review was conducted less than 3 months after my

initial arrival here when I still didn’t know the difference between sushi and sashimi!!

Even without earthquakes & tsunamis, you need to understand that things operate very

differently over here – this is not Australia!!

It takes TIME to work out the how the system operates here. Japan is a very difficult market

to crack - half the time I don’t even know if the business people here are agreeing with me

or not!!

And don’t talk to me about the different accounting rules over here!

I have also had to spend much of my time here just to trying and gain the confidence of my

local workers, most of whom have never worked for a Western boss before - they don’t call

us gainjin (outsiders) for nothing!!

So here I am. I’m working 7 days a week, I haven’t seen my family for months and my

reward? A lousy performance review!!!

This is in spite of the contacts and progress I’m finally starting to make!

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Let me tell you, I’m at a tipping point!!

As you know I’ve been loyal to this firm for many years, but this has not been reciprocated.

John Smith

John was obviously disgruntled and returned to Australia soon after he sent the above email.

Despite being offered a job back in head office John chose to accept an offer from another

company and left the firm.

This had been an expensive exercise for the firm both in terms of the cost of sending John and

his family overseas along with the loss of corporate knowledge and ability. John had also been

seen as a potential future senior executive in the firm and this posting had been seen as a way

to further develop his high potential within the firm. His skills would also be hard to replace.

John and his family’s early return had also generated a lot of damaging rumours around the

organisation which had a negative impact on convincing other promising managers to take

international assignments.

James was therefore mulling over how the firm could have handled this placement so badly?

Further, along with replacing John, the firm also had to appoint expatriates to new subsidiaries

that were shortly to open in Beijing, China and Hyderabad, India.

Given the problems with John Smith’s posting and the firms lack of experience in the Asia-

Pacific region, James decided to bring in a consultancy firm that specialised in offering training

programs (including cross cultural training) for expatriates to advise on how the firm should

progress from here?

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AS PART OF THE ABOVE CONSULTANCY FIRM, YOUR GROUP NEEDS TO

CONSIDER THE FOLLOWING:

Activity 1.

1. List the problems/issues that led to the above expatriate failure in relation to John Smith?

2. Advise how the firm could better address these challenges and reduce the risks of future

expatriate failure for this posting? You will need to consider:

 how the firm can better develop global mindsets for expatriates such as John Smith?

 Cross cultural training needs?

Activity 2*

The firm needs to fill positions in the following two subsidiaries which it hopes to open shortly.

2a. Chinese subsidiary – based in Beijing

Position: Manager of subsidiary

Job description: Development/high potential (i.e. position seen as further developing potential

future senior executives in the firm)

Length of assignment: 2 to 3 years

Position: ICT Specialist

Job description: technical (involves initial setting up of back-end ICT requirements)

Length of assignment: 6 months

Position: ICT Trainer

Job description: technical/training (involves training local HCNs in the firm’s ICT systems and

practices).

Length of assignment: short term business trips (4 weeks each) – ongoing.

2.b. Indian subsidiary – based in Hyderabad

Position: Manager of subsidiary

Job description: Functional (i.e. general setting up and running of subsidiary)

Length of assignment: 2 to 3 years

Position: Manager R&D

Job description: technical/training/development (involves developing local HCN R&D talent).

Length of assignment: 2 to 3 years

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*As part of the above consultancy firm your group needs to design/map out cross cultural

training programs for the above positions. This will require you to:

 Map out/list training requirements;

 Tailor these requirements to the local contest (i.e. China and India have very different cultures);

 Consider associated family issues (i.e. the expatriates who are offered the above positions may or may not have family commitments).

But: Remember training is expensive! Therefore you will need to balance training

imperatives with firm financial constraints!