IHRM 2024 Globalization & Organization PDF

„International Human Resource Management“ Globalization & Organization Institute for Organization and Human Resource Management PD. Dr. Thomas Köllen © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 1 Agenda Session 1: Introduction: IHRM & Culture (20.02.2024) Session 2:...

„International Human Resource Management“ Globalization & Organization Institute for Organization and Human Resource Management PD. Dr. Thomas Köllen © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 1 Agenda Session 1: Introduction: IHRM & Culture (20.02.2024) Session 2: Globalization & Organization (05.03.2024) Session 3: IHRM: Personnel Selection and Development (19.03.2024) Session 4: Intercultural Communication, Collaboration, & Leadership (16.04.2024) Session 5: International Assignments (30.04.2024) Session 6: Diversity Management (14.05.2024) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 2 Globalisation and Organisation Learning objectives Once you've worked your way through today‘s lecture, you should be able to explain the interdependencies between strategy, structure and HRM in international organizations, the concept of globalization, the implications of globalization for corporate strategy and organizational structure, consequences of globalization for HRM. © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 3 Globalization Introduction Size Flow and volume of information Operation modes Host-country demands Structure Management demands of internationalization Geographical dispersion Control mechanisms National cultures and languages (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 4 Globalization Introduction https://www.youtube.com/watch?v=JJ0nFD19eT8 © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 5 Globalization Definition Attempts of definition “The term ‘globalization’ has been widely used to describe the increasing internationalization of financial markets and of markets for goods and services. Globalization refers above all to a dynamic and multidimensional process of economic integration whereby national resources become more and more internationally mobile while national economies become increasingly interdependent.” (OECD, OECD Handbook on Economic Globalisation Indicators (OECD, 2005), p. 11. ) “Globalization is a process that encompasses the causes, course, and consequences of transnational and transcultural integration of human and nonhuman activities.” (Al-Rodhan & Stoudmann, Geneva Centre for for Security Policy, 2006) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 6 KOF Globalisation Index Introduction The KOF Index is published by the KOF Swiss Economic Institute (ETH Zurich) The KOF Globalisation Index measures the three main dimensions of globalization (de jure & de facto): » economic globalization, characterized as long distance flows of goods & services (trade), and capital (financial) » political globalization, embeddedness in international political structures; and » social globalization, as e.g. international voice traffic, migration, international tourism, freedom to visit (interpersonal), use and access to internet (information), trade in cultural goods, civil liberties, McDonalds and IKEA (cultural) In addition to three indices measuring these dimensions, an overall index of globalisation and sub-indices is calculated Data are available on a yearly basis for 207 countries over the period 1970 - 2018 (Dreher (2006); KOF, ETH Zürich, http://globalization.kof.ethz.ch, retrieved Februrary 2019) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 7 KOF Index Economic Globalisation (% of population/GDP) Notes: Weights in percent for the year 2021. Weights for the individual variables are time variant. Overall indices for each aggregation level are calculated by the average of the respective de facto and de jure indices (KOF, ETH Zürich, http://globalization.kof.ethz.ch, retrieved March 2024) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 8 KOF Index Social Globalisation (KOF, ETH Zürich, http://globalization.kof.ethz.ch, retrieved March 2024) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 9 Country ratings from Freedom House's Freedom in the World 2024 survey, concerning the state of world freedom in 2023 https://freedomhouse.org/explore-the-map?type=fiw&year=2024 © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 10 Country ratings from Freedom House's Freedom in the World 2024 survey, concerning the state of world freedom in 2023 https://freedomhouse.org/explore-the-map?type=fiw&year=2024&mapview=trend © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 11 KOF Index Political Globalization (KOF, ETH Zürich, http://globalization.kof.ethz.ch, retrieved Februrary 2019) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 12 KOF Index World Map of Globalization 1970 (© 2021 KOF, ETH Zürich, http://globalization.kof.ethz.ch/maps/, retrieved Februrary 2021) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 13 KOF Index World Map of Globalization 1991 (© 2021 KOF, ETH Zürich, http://globalization.kof.ethz.ch/maps/, retrieved Februrary 2021) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 14 KOF Index World Map of Globalization 2021 (© 2024 KOF, ETH Zürich, http://globalization.kof.ethz.ch/maps/, retrieved March 2024) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 15 KOF Index Index of Globalisation 1970 – 2018 for Selected World Regions (© 2021 KOF, ETH Zürich, https://www.kof.ethz.ch/en/forecasts-and-indicators/indicators/kofglobalisation-index.htmlretrieved Februrary 2021) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 16 KOF Index Index of Globalisation 1970 – 2018 for Selected World Regions (© 2021 KOF, ETH Zürich, https://www.kof.ethz.ch/en/forecasts-and-indicators/indicators/kofglobalisation-index.htmlretrieved Februrary 2021) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 17 KOF Index Rank Country Globalisation Index, overall Rank Country Globalisation Index, de facto Rank Country Globalisation Index, de jure 1 Switzerland 91 1 Switzerland 91 1 Luxembourg 93 2 Belgium 90 2 Netherlands 90 2 Sweden 92 3 Netherlands 90 3 Belgium 90 3 United Kingdom 91 4 Sweden 89 4 Austria 88 4 Finland 91 5 Germany 89 5 Ireland 87 5 Belgium 91 6 Austria 89 6 Germany 87 6 Netherlands 91 7 United Kingdom 88 7 Denmark 86 7 Germany 91 8 Denmark 88 8 Sweden 86 8 Switzerland 91 9 Finland 87 9 United Kingdom 85 9 France 90 10 France 87 10 Singapore 85 10 Spain 90 11 Luxembourg 86 11 Malaysia 84 11 Denmark 89 12 Ireland 85 12 France 84 12 Austria 89 13 Spain 85 13 Finland 83 13 Czech Republic 89 14 Norway 85 14 Norway 83 14 Portugal 88 15 Czech Republic 85 15 Hungary 82 15 Estonia 87 16 Portugal 85 16 Greece 82 16 Slovak Republic 87 17 Greece 84 17 Portugal 81 17 Italy 87 18 Canada 84 18 Spain 81 18 Canada 86 19 Hungary 83 19 Czech Republic 81 19 Norway 86 20 Italy 83 20 United Arab Emirates 81 20 Romania 86 21 Slovak Republic 83 21 Canada 81 21 Poland 86 22 Singapore 82 22 Italy 79 22 Malta 86 23 Estonia 82 23 Luxembourg 79 23 United States 86 24 Lithuania 81 24 Slovenia 79 24 Greece 85 25 United States 81 25 Slovak Republic 78 25 Hungary 85 26 Croatia 81 26 Croatia 78 26 Lithuania 85 27 Slovenia 81 27 Lithuania 78 27 Cyprus 84 28 Poland 81 28 United States 77 28 Croatia 84 29 Malta 81 29 Serbia 77 29 Ireland 84 30 Malaysia 80 30 Estonia 77 30 Latvia 84 © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 18 (© 2024 KOF, ETH Zürich, https://www.kof.ethz.ch/en/forecasts-and-indicators/indicators/kofglobalisation-index.htmlretrieved March 2024) 2023 Globalisation Index (ranking for the year 2021) Introduction Standardisation vs. Localisation Localisation Global standardisation According to MNE‘s global requirements: Strategy and structure Corporate culture Firm size and maturity According to the host country context: Cultural environment Institutional environment Firm size and maturity According to features of the local affiliate: Mode of operation Subsidiary role Balancing global standardisationKand localisation of HRM © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ (Festing, Eidems, & Royer, 2007) 19 Introduction Stages of internationalization Network of subsidiaries Foreign production Sales subsidiary Exporting Licensing Subcontracting (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 20 Stages of internationalization Export Corporate Executive Finance Manager Logistics/ Procurement Manager Production Manager Domestic Sales Manager Human Resource Manager Marketing Manager International Sales Manager Issues of roles and responsibilities (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 21 Stages of internationalization Sales Subsidiary Corporate Executive Finance Logistics/ Procurement Production Direct Exports Marketing / Sales Exports Human Resources Issues of roles and resposibilities Sales Subsidiary (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 22 Stages of internationalization International Division Headquarters Domestic Division General Manager product line A Domestic Division General Manager product line B Domestic Division General Manager product line C International Division General Manager area line Functional units Europe General Manager (product A, B, and/or C) Middle East General Manager (product A, B, and/or C) Africa General Manager (product A, B, and/or C) (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 23 Stages of internationalization Global Production Division Global product division structure Worldwide production group or division A Headquarters Worldwide production group or division B Area 1 (domestic) Area 2 (international) Functional units Functional units Global area division structure North American area Worldwide production group or division C Latin America area Headquarters European area Middle East / Africa area Far East area (Dowling, Festing, & Engle, 2013; Hill 1997) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 24 Consequences of internationalization Global Matrix Structure Headquarters Area 1 Area 2 Area 3 Product divsion A Product division B Product division C Manager here belongs to division B and area 2 (Hill, 1997) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 25 Consequences of internationalization Global Matrix Structure Management issues arising from the global matrix structure according to Barlett and Goshall: conflict and confusion informational logjams turf battles and a loss of accountability barriers of distance, language, time and culture (Bartlett & Goshall, 1990) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 26 Consequences of internationalization Mixed Structures In reaction to the growth in global competitors, global customers, universal products, technology investments, and world-scale factories, many companies have opted for mixed structures. For example, organizations that pursued area structures kept geographic profit centres, but added worldwide product managers: at Colgate- Palmolive, product managers were added at the corporate office to direct R&D funding and to coordinate marketing programs worldwide. Product-divisionalized firms have reintroduced international divisions: at Motorola, product groups had worldwide responsibility for their product lines and an international group has been introduced to enhance coordination across product lines in Japan. (Galbraith & Kaznjian, 1986: 46) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 27 Consequences of internationalization Organizational Structures in Mature MNEs The heterarchy: A MNE may have a number of different kinds of centers apart from that traditionally referred to as „headquarters“. Competitive advantage does not necessarily reside in any one country. It may be found in many so that each subsidiary center may be simultaneously a center and a global coordinator of discrete activities, thus performing a strategic role for the MNE as a whole. The transnational: an organizational form that is characterized by an interdependence of resources and responsibilities across all business units regardless of national boundaries multinationals that try to cope with the large flows of components, products, resources, people, and information among its subsidiaries, while simultaneously recognizing distributed specialized resources and capabilities demands a complex process of coordination and cooperation involving strong cross-unit integrating devices, a strong corporate identity, and a well-developed worldwide management perspective (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 28 Consequences of internationalization Organizational Structures in Mature MNEs (Bartlett & Ghoshal, 1990: 119) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 29 Consequences of internationalization Organizational Structures in Mature MNEs (continued) Network structures: Subsidiaries have developed into significant centers for investments, activities and influence. Interactions between headquarters and subsidiaries: dyadic, taking place between various actors at many different organizational levels and covering different exchanges Such MNEs are loosely coupled political systems This runs counter to the traditional structure where linkages are described formally via the organization‘s structure and standardized procedures, and informally through interpersonal contact and socialization. Management challenges in network structures: Delegation of decision-making authority to appropriate units and levels. Geographical dispersal of key functions across units in different countries. Delayering of organisational levels. De-bureaucratization of formal procedures. Differentiation of work, responsibility and authority across networked subsidiaries. (Dowling, Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 30 Consequences of internationalization The Place of the HR Function in Structural Forms Scullion and Starkey (2000) investigated the consequences of internationalization and growth on the HR function in 30 UK firms. They identified three distinct groups: Centralized HR companies, characterized by large, well-resourced HR departments responsible for a wide range of functions. The key role for corporate HR was to establish and maintain control over world-wide top level management positions, such as divisional and subsidiary managers, so that strategic staffing was under central control. Companies in this group operated within product-based or matrix structures. Decentralized HR companies, characterized by devolving the HR responsibilities to a small group who confined their role to senior management at corporate HQ. This was consistent with the decentralized approach of other functions. Companies within this group operated within product or regional-based structures. Transition companies, characterized by medium-sized corporate HR departments staffed by a relatively small group at corporate HQ. They operated in a decentralized, product-based structure. (Dowling Festing, & Engle, 2013) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 31 Strategic IHRM: Introduction and Definition Strategy, organizational structure and human resource management Political Forces Economic Forces Cultural Forces Mission & Strategy FIRM Organizational Structure Human Resource Management (cf. Tichy/Fombrun/Devanna 1982: 48) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 32 Strategic IHRM Internationalization Strategies of HRM Ethnocentric strategies Activities primarily focus on the home market. Key positions in foreign subsidiaries are mostly filled with managers from the parent company. Attempts are made to transfer concepts that have proved successful in the parent company to subsidiaries. Subsidiaries are managed by expatriates from the parent country (PCNs). Polycentric strategies … presume that foreign subsidiaries will gradually gain in importance and simultaneously in autonomy. Thus country specific strategies can be developed so as to optimally adapt to the relevant foreign markets. This approach has key positions in the various countries filled exclusively with natives (HCNs). (Evans 1987: 116 f. cf. Heenan/Perlmutter 1979; Scherm 1999: 140 ff.; Scholz 2000: 94 ff.) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 33 Strategic IHRM Internationalization Strategies of HRM Regiocentric strategies This approach departs from the geographical strategy and structure of a multinational. A pool of internationally active managers is established who are sent to foreign countries within a specific geographic region. Regional managers are usually not promoted to company headquarters, but are granted a high degree of decision-making autonomy on the regional level. Geocentric strategies Not the nationality, but only the skills of the employee are decisive. In order to be successful, this kind of nationality-indifferent recruitment policy must be accompanied by a world-wide integrated corporate strategy. The aim is a high degree of global efficiency of the entire company. The choice of a suitable approach in international HRM is crucially influenced by organizational structure and corporate strategy. (Evans 1987: 116 f. cf. Heenan/Perlmutter 1979; Scherm 1999: 140 ff.; Scholz 2000: 94 ff.) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 34 Strategic IHRM Strategic IHRM: Definition "Strategic international human resource management is the adjustment of HR management activities and guidelines in accordance with international companies‘ strategic activities and organizational structure, and supporting the achievement of corporate objectives." (Festing, 1996: 35) Achievement of corporate goals Corporate strategy Design and adjustment of HR management activities within and between company divisions Organizational structure Company evironment (Weber/Festing/Dowling/Schuler 2001: 284) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 35 Strategic IHRM Integrative Framework of Strategic IHRM (I) Strategic MNE Components Exogenous Factors Industry Characteristics Country/Regional Characteristics Endogenous Factors Structure of International Operations Headquarters International Orientation Competitive Strategy Experience in Managing International Operations Interunit Linkages Internal Operations Strat.IHRM Issues Interunit Linkages - Control/Variety Internal Operations - Local Sensitivity/Strategic Fit Strat. IHRM Policies/Practices Staffing Appraising Compensating Developing Strat. IHRM Functions Orientation Resources Location MNE Concerns and Goals Competitiveness Efficiency Local Responsiveness Flexibility Learning and Transfer © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ (cf. Schuler, Dowling, & De Cieri 1993: 423) 36 Strategic IHRM Integrative Framework of SHIRM (II) External factors Industry characteristics Country-regional characteristics Interorganisational networks Strategic HRM HR function strategy HR practices Internal organizational Factors MNE structure -structure of international operations -intraorganizational networks -mechanisms of coordination -mode of operation MNE strategy -corporate-level strategy -business-level strategy Experience in managing international operations Headquarters international orientation MNE concerns and goals Competitiveness Efficiency Balance of global integration and local responsiveness Flexibility (cf. Dowling & Welch 2004: 271) © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 37 References Al-Rodhan & Stoudmann, Geneva Centre for for Security Policy, 2006. Barlett, Christopher A./Ghoshal, Sumantra (1990). Internationale Unternehmensführung. Innovation, globale Effizienz, differenziertes Marketing. Campus, Frankfurt/Main, New York. Dowling, P.J., Feting, M., & Engle, A. D. Sr. (2013). International Human Resource Management, 6th ed., Cengage Learning: Singapore. Dowling, Peter J. & Welch, Denice E. (2004). International Human Resource Management. Managing people in a multinational context, 4th ed., London. Dreher, Axel, Noel Gaston & Pim Martens (2008), Measuring Globalisation – Gauging its Consequences. New York: Springer. Dreher, Axel (2006): Does Globalization Affect Growth? Evidence from a new Index of Globalization, Applied Economics 38, 10: 1091-1110. Evans, Paul (1987). The context of strategic human resource management policy in complex firms. In: Personalmanagement und strategische Unternehmensführung, Ed. Charles Lattmann, Heidelberg 1987, pp. 105-117. Festing, Marion, Eidems, Judith, & Royer, Susanne. (2007). "Strategic Issues and Local Constraints in Transnational Compensation Strategies: An Analysis of Cultural, Institutional and Political Influences". European Management Journal, 25, 118-131. Gygli, Savina, Florian Haelg, Niklas Potrafke and Jan-Egbert Sturm (2019): The KOF Globalisation Index – Revisited, Review of International Organizations, https://doi.org/10.1007/s11558-019-09344-2 Galbraith, Jay R./Kaznjian, Robert K. (1986). Organizing to implement strategies of diversity and globalization: the role of matrix designs. In: Human Resource Management, vol. 25 1986, issue 1, pp. 37-54. Hill, C. (1997). International Business: Competing in the Global Marketplace, 2nd ed. McGraw Hill: Newark. KOF Index of globalization 2015. [Online] URL: http://globalization.kof.ethz.ch/, retrieved: February 2015. Lu, J. W. & Beamish, R. W. (2001). The Internationalization and Performance of SMEs. Strategic Management Journal, 22, 565-586. Schuler, Randall S, Dowling, Peter J, & Cieri, Helen De. (1993). "An integrative framework of strategic international human resource management". International Journal of Human Resource Management, 4, 717-764. Scullion, Hugh & Starkey, Ken. (2000). "In search of the changing role of the corporate human resource function in the international firm". International Journal of Human Resource Management, 11, 1061-1081. Tichy, Noel M./Fombrun, Charles J./Devanna, Mary Anne (1982). Strategic Human Resource Management. In: Sloan Management Review, vol. 23 1982, issue 2, pp. 47-61. OECD, OECD Handbook on Economic Globalisation Indicators (OECD, 2005). Weber, Wolfgang/Festing, Marion/Dowling, Peter/Schuler, Randall S. (2001). Internationales Personalmanagement, 2nd ed., Wiesbaden 2001 Zellmer-Bruhn, M. & Gibson, C. (2006). Multinational Organization Context: Implications for Team Learning and Performance. Academy of Management Journal, 49(3), 501-518. © IOP 2024 I PD Dr. Thomas Köllen I „International Human Resource Management“ 38