Human Resource Management in a Multinational Context - Teamwork between Company Management and Human Resource Department

Human Resource Management in a Multinational Context - Teamwork between Company Management and Human Resource Department Mag. Walter Sumetzberger Consultant and Partner of osb-international www.osb-i.com www.osb-i.com Human Resource Management in a Multinational Context 1 / 10

HUMAN RESOURCE MANAGEMENT AS A NON-DELEGABLE CORE TASK OF COMPANY MANAGEMENT From a systemic point of view, Human Resource Management is situated at the interface between the personal systems of the employees and the social system of a company. The specific difficulty in handling human resources lies in the paradoxical fact that a company even though it pays for it - has no direct access to the psychical performance of employees. The core function of Human Resource Management is therefore: to manage the paradox that work is the only factor of production which is, after the sale, not at the full disposal of the buyer (e.g. companies are unable to pin their employees down to certain motivational/performance levels). and to manage the uncertainty which is entailed with the availability of work The following figure shows the six areas of company management which must be constantly managed to guarantee that the organisational unit can survive: Figure 1: The Six Areas of Company Management www.osb-i.com Human Resource Management in a Multinational Context 2 / 10

Human Resource Management is one of the non-delegable core tasks of company management. Human Resource Management has to ensure staff ability and the willingness to perform. The central challenge is the dependence on human resources and the autonomy of those involved: The company's dependence on its staff increases because of the increased productivity requirements and the increasing importance of "knowledge" as a success factor. But the company cannot be sure of having the performance potential it purchased by merely binding staff contractually. The constant adjustment of staff and company interests and the balancing of expectations on both sides connected with it becomes a creative task that is relevant for competitive purposes with two central adjusting levers. The safeguard for willingness to perform emerges by designing an environment that supports the involvement of the staff in the interests of the company. This also includes promoting staff ability to perform with the corresponding instruments of staff selection and development. From the general manager's perspective, this concerns creating an environment that increases staff willingness and ability to perform on the basis of workable self-initiative. An International Human Resource Department can only support company management by this core task. The functions of Human Resource Management are to be performed in teamwork /in combination with the executive personnel of a company. The demand for Human Resource Services - and therefore the starting point for the co-operation between company management and the International Human Resource Department - will be substantially influenced: by market situation and infrastructure of the different countries in which the multinational enterprise is working by the organisational logic and the organisational culture of the company and the industrial sector in which the company is working, and especially in multinational enterprises, by the different values, (role-) norms and behaviours stemming from different cultural backgrounds, which determine the usual way to deal with human resource issues. Depending on the market situation and the infrastructure in the different countries, Human Resource Management has to build up staff and support personnel recruitment in growth markets to manage the availability of employees with a certain qualification level, e.g. management know how by recruiting managers from the local job market, by developing local high potentials in management training programs or by dispatching expatriates to develop and manage systems and models for different wage levels and industrial laws etc. The organisational logic and the resulting culture of a company can be described as the historically grown patterns which are important for the success and the survival of the company. Depending on industrial sectors, there are different success factors for a company. Financial institutions have other challenges than retailers or IT services. Speed of reaction, ability for innovation, delivering just-in-time, but also quality of products, reliability and customer trust in the company are success factors which are more important in one industrial sector than in another. That is why you meet different critical processes in each industrial sector; in one case a hierarchical structure of decision finding makes more sense, and in another case teams are necessary to deal with complex tasks near the point of sales. The current company culture is also influenced by the history of the company's foundation and the subsequent development. Is it a company founded by one famous person and the ownership still in the hands of descendants of the family or is it a widespread public company, has it great merits in pioneering specific new products www.osb-i.com Human Resource Management in a Multinational Context 3 / 10

is it a company with longstanding experience as a multinational corporation or is it a very young company making the first steps into other countries - all of these factors influence the culture of a company. There are a lot of studies describing different values, (role-) norms and behaviours stemming from different cultural backgrounds. The most well-known and quoted studies and descriptions are from Kluckhohn and Strodtbeck (1961), Hofstede (1980, 1991), Hall and Hall (1989), Adler (1997) and Trompenaars and Hampden-Turner (1998). In a rough summary, often used dimensions to describe the cultural orientation of a society are relationship with nature/world: dominant, harmony, subjugation relationship with people: universalism versus particularism, individualism versus collectivism, neutral versus affective, achievement versus ascription, uncertainty avoidance, power distance, masculinity versus femininity relationship with time: future, present or past orientation; monochronic versus polychronic relationship with space: private, public or mixed; specific versus diffuse Depending on the organisational logic and the organisational culture of the company, as well as on the different values, (role-) norms and behaviours stemming from different cultural backgrounds, companies have different patterns of managing the uncertainty which is entailed with the availability of work. FOUR VARIETIES OF HUMAN RESOURCE MANAGEMENT How Human Resource Management is pursued in a company depends on the condition or state of the company. You can distinguish from the type of decision making and the place of decision making in companies four varieties of Human Resource Management: Type of decision making Place of decision making Shift of responsibility to a certain position implicit PERSONNEL BOUNDED Certainty is created by membership and loyalty explicit ORDER- AND RULE-DRIVEN Certainty is created by rules Self-responsibility of persons or company sectors PERFORMANCE- AND RESULT-BASED Certainty is created by the experience of successful contributions NEGOTIATION- ORIENTED Certainty is created by communicative processes Figure 2: Four Varieties of Human Resource Management Personnel bounded Human Resource Management In this variety of Human Resource Management, companies absorb uncertainty in using family patterns to handle the incalculability of individuals. Affiliation to the social system is created by origin (relationship, acquaintance, same socialisation by vocational training, etc.). The basic contract is that by affiliation to the wider field of a family, the individual gets a secure and most likely permanent place which offers care and support. The company, in return, gets individuals with unlimited availability; it's not legitimate to demarcate from the company (= family) and the organisational expectations. Individuals have to justify if they do not fulfil the performance expectations. www.osb-i.com Human Resource Management in a Multinational Context 4 / 10

Mutual predictability emerges on the basis of personnel availability versus personnel affiliation and security: give up demarcating from expectations of performance versus covering life risks. If this predictability is disappointed, a spiral of mistrust is created. Companies with this pattern of coping uncertainty between organisation and individuals have a strong personnel bounded, implicit Human Resource Management. Typical characteristics are: Access to the company takes place by relationship and acquaintance, by recommendations and connections. There are no public job offers or vacancies. There is no professional recruiting process. A intuitive audit sorts out job applicants, whether they fit to the company/family, whether they have the same stable smell Tasks are built around persons. Loyalty to the family is more important than professional qualifications Possibility for personnel development and qualification training is a reward for loyalty No explicit Human Resource Management instruments etc. Usually there is no explicit Human Resource function. The highest management level takes care of Human Resource Management in passing. Often there are only supporting positions for personnel administration. Performance- and Result-Based Human Resource Management Everyone is his own entrepreneur in the enterprise and committed to the entrepreneurial task. Effort and output have to meet the mark. If somebody does not bring the expected performance, he will be kicked out. Trust in the willingness to perform (individuals will bring the full effort) is the way to absorb uncertainty. Affiliation is caused by bringing the expected performance. Constant learning, quick acquisition of excellent know-how is also necessary. Commitment emerges for the vision of the company. The company gets the availability of the individuals for a promise of grandeur : You really can be proud working for this company. To be part of this great business also increases the market value of an employee. For the company, this means a permanent effort to renew this promise of grandeur and make sure that it is kept. Mutual predictability emerges on the basis of experience of successful performance versus the promise to be part of something great (which also increases the market value of an employee), trust in effort and entrepreneurship versus trust in the vision of the company. As long this mutual trust exists, each side goes all out. If trust fails, it leads to separation. Typical examples for this pattern of coping uncertainty are start-ups and companies in the pioneering phase. If the company applies the pioneering spirit in the long run, this pattern of Human Resource Management will survive. In companies which work with this pattern: flexible organisational and leading structures give room for a high level of self-organisation events for common experiences about building together something great are supported professional staff recruiting is a critical factor: clear task profiles and excellent assessments of potentials to find persons with the right qualification and willingness to perform the necessity of quick integration in the working process leads to instruments like mentorship programs for new employees a quick reaction to manpower requirements is usual. That means flexible models of employment, working time and payment, and instruments like management by objectives. long-term personnel development is not addressed. etc. Human Resource Management is a task of the company management. Specialised Human Resource functions provide services and instruments to increase the accuracy of recruitment, to speed up integration of new employees and to guarantee the flexibility of employment models. www.osb-i.com Human Resource Management in a Multinational Context 5 / 10

Order- and Rule-Driven Human Resource Management From the point of view of the company, the hope to create certainty is to submit individuals to rules. Desirable are routinely working processes, by which the company can be sure about certain and repeated results. The background is a mechanistic picture of human beings: only a part of the dimensions of an individual is taken into consideration. The company also submits itself to (internal and external) rules, and then conveys certainty about the durability of employment, career, etc. to the employees. The regulations also include the idea that in the remaining elbowroom, everyone can do what s/he wants. This individual elbowroom is part of the contract. And the company gets only a specific element of effort and performance. Mutual predictability emerges on the basis of submission to the rules of both sides company and individuals. The relationship between company and individuals is extremely instrumentalised. Therefore, identification with the organisation / the company is difficult. Typical examples are companies in the public sector, but also established, big global corporations. In companies with this pattern of Human Resource Management, there exist(s): bureaucratic structures for design and supervision of regulations a high level of written documentation (keeping the personnel file is one of the most important Human Resource Management tasks) differentiated Human Resource Management standards and instruments, which serve to formalise judgement, legitimation and supervision regulated careers and standardised personnel development models of payment with automatic jumps from stage to stage etc. The typical form of organisation is departments with Human Resource Management experts. Human Resource Management is delegated to these experts and to the works council. The Management has only to control deviations and to discipline. Negotiation-Oriented Human Resource Management The paradox that the company has no direct access to the psychical performance of employees, even though it has paid for it is a main issue in the managing process. Management does not delegate to deal with this uncertainty, but rather makes it a recurrent act of negotiation. Mutual predictability is created in the respective situation in negotiation processes, knowing the interdependence between company and individuals. The certainty lies in the quality of the communication processes. In companies with a pattern of negotiation-oriented Human Resource Management: staff recruiting, assessments of potentials, staffing decisions, etc. are common processes. there is a shared responsibility for personnel development between company management and individuals instruments are available which support negotiation and feedback processes (e.g. appraisal interviews, 360 feedback, etc.) experts are able to take on functions such as moderation, conflict mediation, coaching and consulting to support communication processes To handle the Human Resource Management processes is explicitly a task of the company management. Internal or external experts support the company management as service providers. www.osb-i.com Human Resource Management in a Multinational Context 6 / 10

DESIGNING THE TEAMWORK BETWEEN COMPANY MANAGEMENT AND HUMAN RESOURCE DEPARTMENT Regarding these four varieties of Human Resource Management, how can an International Human Resource Department design co-operation with the company management in a global corporation? This teamwork can be considered in terms of a business system: Customer Model WHO? Markets Target Groups Business Processes Organisational Structure HOW? FOCUS: more advantage for customer more efficiency Performance Supply Model Model WHAT? Core Services Marginal Services Figure 3: Business System of a Human Resource Department Customer Model of an International Human Resource Department For the customer model you have to answer questions such as: What is our market? In which region, which countries, which part of the global corporation are we working? (e.g. is this specific joint venture included or not?) Who are our target groups? Which level of company managers are our target groups? Which variety of Human Resource Management dominates in the (local) companies? What is the main pattern in our multinational corporation? Which patterns are changing? What are therefore the needs and requirements of our customers? What are the central challenges for the Human Resource Management? Maybe the varieties of Human Resource Management are different between parts of the corporation. For example, you have to deal with the fact that a young regional company in Eastern Europe, which is in a pioneering phase, opens up a new market practice Human Resource Management in a performance- and result-based way, but in the central headquarters an order- and rule-driven Human Resource Management is usual: www.osb-i.com Human Resource Management in a Multinational Context 7 / 10

Supply Model of an International Human Resource Department For the supply model you have to answer questions such as: Which principles are important for designing our services? Are there company strategies which determine our services? How do we design the division of labour between company management and the Human Resource Department? What are our core services? What are our marginal services? The following table shows the 10 Dimensions of Human Resource Management: 10 Dimensions of Human Resource Management A. Assessment of personnel needs, personnel planning and personnel controlling B. Personnel marketing, recruiting, selection C. Integration and initial qualifications D. Personnel development E. Potential development for leaders/managers and future leaders/managers F. Designing of compensation and employment models G. Personnel management in a narrow sense H. Personnel exit strategies I. Personnel administration J. Co-operation with works council and unions, concretising of legal and negotiation framework regarding basic conditions Figure 4: 10 Dimensions of Human Resource Management The table can give an orientation about core services and marginal services and help facilitate decisions regarding which task belonging to the specific dimension should be made by company management or by Human Resource Department. For certain issues (e.g. also for a special target group) you may have different service levels. Following the model of value disciplines of Treacy and Wiersema (1997) - customer intimacy, product leadership and operational excellence- you have to decide where you want to place your services in the service triangle. individual, customised Quick, easy, simple, cheap standardised Highly innovative, specific brand, product leadership Figure 5: Service Triangle In multinational corporations, you always have to find a balance between services based on local articulated requirements and services based on corporate-wide strategies. You also have to decide which services should be provided locally, centrally or bought externally. www.osb-i.com Human Resource Management in a Multinational Context 8 / 10

Performance Model of an International Human Resource Department For the performance model you have to answer questions such as: How do we have to design our organisational processes and structures to fulfil our services in an effective and efficient way? How can we find out the needs of our customers? How do we develop our services? How, together with the company management, do we put our services into action? Who is responsible, who makes resources available, etc.? How do we evaluate the results? Co-operation processes of Human Resource Management in a global corporation occur in a multinational context. This context will be substantially influenced by the following bundle of factors: The structural dynamics between organisational units (headquarter and subsidiary companies, etc.) The necessity to transcend distances, which equates with enforced mobility and virtuality in working together Differences in language Cultural differences regarding values, norms and behaviour To deal with structural dynamics between organisational units, Human Resource Departments must balance tensions between: centralised versus decentralised, e.g. the headquarter tries to implement standards, and subsidiary companies try to preserve as much autonomy and individuality as possible. Centralised Human Resource Departments often depend on subsidiary companies finding their offers interesting. Superiority versus subordination, e.g. in cases of mergers and acquisitions, the company which makes the take-over is more or less legitimated - suspected to colonise the foreign company. This causes mistrust and resistance. Human Resource Departments have to promote exchange and implement new communication platforms and processes. Different interests between locations and sites, e.g. competition about production orders or about functions as centre of competence. Human Resource Departments have to take care whether they want to be involved in these conflicts. Transcending distance means a lot of travelling or working together virtually. The risk of these new forms of communication is to produce misunderstandings and offences, because the used media work at very reduced dimensions of human communication. Human Resource Departments have to pay attention to the fact that to be successful, complex issues needs adequate complex communication channels. Using a foreign language increases the possibility of misunderstandings too. There already are cultural differences regarding values and norms; for example, every country has another idea regarding what constitutes a good manager or a high potential. In addition, language differences cause nuances to vanish. Sometimes the same word has different meanings (e.g. concept in English and Konzept in German). Questions and issues will be avoided, because people do not understand the relevance of the issue or do not know how to express themselves. Subsequently, this has an affect on attribution of competence or non-competence, the feeling of being dominated by a native speaker, or the level of commitment. Human Resource Departments have to be very careful and invest a lot of time to produce a common understanding. In co-operation processes, Human Resource Departments are often faced with cultural dilemmas (following Krewer (2000)) such as: Focus on group versus focus on individual: e.g. shall I provide the performance of a team or the performance of the best individual Importance of formal rules and functions versus strategies depending on local context and personal interests: e.g. I need detailed plans and clear commitments, but I do not want to cut down creativity and attention to local circumstances, which could lead to innovations. www.osb-i.com Human Resource Management in a Multinational Context 9 / 10

Hierarchy and authority versus autonomy and participation: e.g. how can I act in my function as Human Resource Department in a responsible way, when I have no formal power and the expectations regarding hierarchy and participation are different? Pragmatic versus conceptual: e.g. how can I solve problems quickly and not neglect the development of a clear conceptual approach? Monochronic time orientation versus polychronic time orientation: e.g. how much structure do my procedures need to be well organised, and how can I be flexible for unexpected incidents and for parallel work flows? High context culture and implicit communication versus low context culture and explicit communication: e.g. how clear shall issues be addressed and clarified and how can I avoid that this is interpreted as impolite? Conflict orientation versus harmony orientation: e.g. in my function within the Human Resource Department, how can I react to the insufficient work of my partners? Task orientation versus relationship orientation: e.g. how much have I to invest for building and cultivating relationships, when urgent problems wait for a solution? Human Resource Departments in a multinational surrounding have to deal with these challenges so that no one side of these dilemmas is dominant, or else co-operation processes will fail. It is necessary to find flexible balances between the positions. Human Resource Management itself is challenging enough. In an multinational context, additional complexity arises. Dealing with this complexity cannot be reduced to a stringent model or simple advice. Necessary is a complex mindset to develop more sensitivity for what happens in the co-operation between company management and Human Resource Departments. References Adler, N.J. (1997) International dimensions of organizational behavior. Cincinnati, Ohio: South West College Publishing Garbsch, M., Vater, G., Sumetzberger, W., Wimmer, R. (2001-2003) osb-international Research Project Human Resource Management. unpublished material, Vienna Hall, E.T. and Hall, M.R. (1989) Understanding cultural differences. Yarmouth Hofstede, G. (1980) Culture s Consequences: International Differences in Work-Related Values. Beverly Hills, CA: Sage Hofstede, G. (1993) Cultures and Organizations: Software for the Mind. London: Mc Graw-Hill Kluckhohn, F. and Strodtbeck, F.L. (1961) Variations in Value Orientation. New York: Row, Peterson and Company Krewer (2000) Managing international projects. How to promote co-operation of multicultural project groups A workbook introducing experiences, cases, self tests, advice, links. Authors edition, Saarbrücken, Hamburg Treacy M. and Wiersema F. (1997) The discipline of market leaders. Perseus Books Group Trompenaar F. and Hampden-Turner Ch. (1998) Riding the Waves of Culture. Understanding Diversity in Global Business. New York: Mc Graw-Hill www.osb-i.com Human Resource Management in a Multinational Context 10 / 10