International Human Resource Management Second Edition

International Human Resource Management Second Edition

This is an ideal foundation text for anyone studying or working in the International Human Resource Management (IHRM) arena. This text incorporates most of what is currently known in the field. It features data and examples from academic research, international business, consulting firms, and interviews with HRM managers in multinational and global firms. The book offers both a theoretical and practical treatment of this important and constantly evolving area.

Thoroughly updated and revised, this second edition now includes key terms, learning objectives, discussion questions and an end-of-book integrative case study. It has been designed to lead readers through all of the key topics in a highly engaging and approachable way. The book focuses on IHRM within multinational enterprises (MNEs) and covers topics including:

● MNE and country culture ● Organizational structure, strategy, and design ● International joint ventures and cross-border mergers and acquisitions ● Employment law and labor relations ● Labor standards, ethics, and codes of conduct ● Selection and management of international assignees ● Training and management development ● Compensation and benefits ● Health and safety and crisis management ● IHRM departments and professionals.

Uncovering precisely why IHRM is important for success in international business and how IHRM policies and practices function within the multinational enterprise, this outstanding textbook provides an essential foundation for an understanding of the theory and practice of IHRM. This book is essential reading for all students, professors and IHRM professionals.

Dennis R. Briscoe is Professor of International Human Resource Management at the University of San Diego, where he has taught for over twenty years.

Randall S. Schuler is Professor of Strategic International Human Resource at the School of Management and Labor Relations at Rutgers University and Research Professor at GSBA Zurich.

Routledge Global Human Resource Management Series Edited by Randall S. Schuler, Susan E. Jackson, Paul Sparrow, and Michael Poole

Routledge Global Human Resource Management is an important new series that examines human resources in its global context. The series is organized into three strands: content and issues in global Human Resource Management (HRM); specific HR function in a global context; and comparative HRM. Authored by some of the world’s leading authorities on HRM, each book in the series aims to give readers comprehensive, in-depth and accessible texts that combine essential theory and best practice. Topics covered include cross-border alliances, global leadership, global legal systems, HRM in Asia, Africa, and the Americas, industrial relations and global staffing.

International Human Resource Management – Second Edition Policy and practice for the global enterprise Dennis R. Briscoe and Randall S. Schuler

Globalizing Human Resource Management Paul Sparrow, Chris Brewster, and Hilary Harris

Managing Human Resources in Cross-Border Alliances Randall S. Schuler, Susan E. Jackson, and Yadong Luo

Managing Human Resources in Africa Edited by Ken N. Kamoche, Yaw A. Debrah, Frank M. Horwitz, and Gerry Nkombo Muuka

Managing Human Resources in Asia Pacific Edited by Pawan S. Budhwar

International Human Resource Management

Second Edition

Policy and practice for the global enterprise

Dennis R. Briscoe and Randall S. Schuler

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First published 1995 by Prentice Hall

Second edition 2004 by Routledge 29 West 35th Street, New York, NY 10001

Simultaneously published in the UK by Routledge 11 New Fetter Lane, London EC4P 4EE

Routledge is an imprint of the Taylor & Francis Group

© 1995, 2004 Dennis R. Briscoe and Randall S. Schuler

All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data Briscoe, Dennis R., 1945–

International human resource management: policy and practice for the global enterprise/by Dennis R. Briscoe and Randall S. Schuler. – 2nd ed.

p. cm. – (Routledge global human resource management series ; 5) Includes bibliographical references and index.

1. International business enterprises – Personnel management. 2. International business enterprises – United States – Personnel management. I. Schuler, Randall S. II. Title. III. Series. HF5549.5.E45B74 2004 658.3 – dc22 2003026520

ISBN 0–415–33835–2 (hbk) ISBN 0–415–33834–4 (pbk)

This edition published in the Taylor & Francis e-Library, 2004.

ISBN 0-203-69459-7 Master e-book ISBN

ISBN 0-203-67977-6 (Adobe eReader Format)

“Briscoe and Schuler have created the benchmark by which other IHRM texts will be

measured. The book is remarkable in its breadth of coverage of the IHRM field and the

authors’ in-depth knowledge of the topics they write about reflects their academic and

applied expertise. Students, lecturers, and others interested in IHRM will be enriched by the

contents of this volume.”

Wayne Cascio, Professor of Management, University of Colorado at Denver

“The second edition of Briscoe and Schuler’s International Human Resource Management

is an outstanding addition to the literature. It will not only serve as an excellent university

text but also provide a comprehensive overview of the field for IHRM practitioners and

other interested professionals.”

Cal Reynolds, Consultant

“To have the right staff at the right time is a safe recipe for business success. Although this

is easier said than done the second edition of International Human Resource Management

provides the appropriate tools to achieve just that. The book brings together highly relevant

perspectives on the effective management of human resources on a global scale by two

internationally renowned scholars on the leading edge of research and practice. This fully

updated new edition should be mandatory reading for any student and practitioner of

international business.”

Professor Jan Selmer, Hong Kong Baptist University

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This book serves as a basis for many other books in the Global HRM Series edited by Randall S. Schuler, Susan E. Jackson, Paul Sparrow and Michael Poole. This series contains books that discuss in more detail the many IHRM policies and practices introduced in this book such as compensation, staffing, legal systems, training and development, and structure, strategy, and design. The Series also includes books that are dedicated to specific topics such as managing human resources in cross-border alliances, and the HR profession in global organizations. In addition, the Global HRM Series contains many books that describe country characteristics and IHRM policies and practices within regions of the world such as Latin America, Asia, Africa, and Europe and countries therein. The books in the Global HRM Series form a series that is comprehensive, useable, and accessible. For further information about this book and the other books in the Series, please visit our website at www.routledge.com or email info.business@routledge.co.uk.

Contents

List of illustrations xi Foreword xiv Acknowledgments xvi

Introduction 1

PART I INTRODUCTION TO INTERNATIONAL HUMAN RESOURCE MANAGEMENT: THE CONTEXT

1 International business and International Human Resource Management 11

The internationalization of business 13 The internationalization of Human Resource Management 20 Conclusion 33 Points for further discussion 34

2 Strategic International Human Resource Management 35

Strategic IHRM 36 Evolution of the multinational enterprise 38 A model for Strategic IHRM 55 Conclusion 64 Points for further discussion 64

3 Organizational structure and design of the multinational enterprise 65

Global organization design: an introduction 66 IHRM and organizational design 70 Designing the multinational enterprise 70 It’s more than formal structure 80 Conclusion 85 Points for further discussion 85

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4 Cross-border mergers and acquisitions, international joint ventures and alliances 86

Cross-border M&As, international joint ventures, and alliances 87 Managing the cross-border merger or acquisition 92 International joint ventures 103 Alliances and partnerships 107 Conclusion 111 Points for further discussion 112

5 Country culture and MNE culture 113

The most important issue: culture 114 Cultural attitudes and values and management practices 126 Impact of culture on IHRM 127 Research in IHRM 131 Conclusion 136 Points for further discussion 136

6 Global employment law, and labor relations 137

Global employment law and enforcement 139 Comparative employment law 147 Extraterritorial application of national law (with special attention

to the US) 160 Application of national law to local foreign-owned enterprises

(with special attention to the US) 160 Union and labor relations 161 Immigration law 171 MNE employment policy and practice 173 Conclusion 174 Points for further discussion 174

7 Global ethics and labor standards 175

The ethics of HR decision making in foreign operations: a general perspective 177

International standards 189 Balancing the extremes: suggested guiding principles 197 Conclusion 198 Points for further discussion 198

viii • Contents

PART II INTERNATIONAL HUMAN RESOURCE MANAGEMENT IN THE MULTINATIONAL ENTERPRISE: POLICIES AND PRACTICES

8 Global workforce planning, forecasting, and staffing the multinational enterprise 201

Global workforce planning and forecasting 202 Staffing the multinational enterprise: an introduction 210 Global staffing choices: implications for multinational enterprises 224 Conclusion 227 Points for further discussion 228

9 Staffing the global enterprise: selection of international assignees 229

International assignees and international assignments 229 Staffing with international assignees 232 Successful expatriation 256 Immigration law 258 Conclusion 259 Points for further discussion 260

10 Training and management development in the global enterprise 261

Training in the global enterprise 262 Management development in the global enterprise 291 Conclusion 304 Points for further discussion 304

11 Global compensation, benefits, and taxes 305

Compensation and benefits for expatriates 308 Designing a compensation strategy for multinationals 333 Conclusion 350 Points for further discussion 351

12 International performance management for international assignees and foreign managers 352

Purposes and roles of international performance management 354 Challenges to the effectiveness of the IPM system 355 Managing the IPM system 361 International assignee and foreign manager development 367 Senior managers’ attitudes about international performance

management 368 Overcoming IPM challenges 368 Characteristics of effective IPM systems: guidelines 369

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Contents • ix

Conclusion 372 Points for further discussion 373

13 Health, safety, and crisis management in the global enterprise 374 Employee health and safety around the world 375 Health and safety for international assignees 380 Conclusion 391 Points for further discussion 392

PART III THE PROFESSION AND THE DEPARTMENT OF INTERNATIONAL HUMAN RESOURCE MANAGEMENT

14 The IHR department and the role and future of IHRM 395

The IHR department 396 Role of IHRM 409 Future of IHRM 415 Conclusion 418 Points for further discussion 419

INTEGRATIVE CASE STUDY: LINCOLN ELECTRIC IN CHINA 420 Ingmar Björkman and Charles Galunic

The Lincoln Electric tradition 421 International expansion 425 Lincoln Electric in Asia 428 Acknowledgments 435

Notes 436 Index 485

x • Contents

Illustrations

Figures

1 Chapter map 2 1.1 International Human Resource Management 22 2.1 Basic elements of the strategic management process 37 2.2 Evolution of the multinational enterprise 52 2.3 Strategic IHRM: matching HRM to IB strategy 56 3.1 Simple headquarters – subsidiary model 73 3.2 Bausch & Lomb’s international division structure c. 1984 73 3.3 Bausch & Lomb’s international geographic structure c. 1992 74 3.4 Black & Decker’s international structure 74 3.5 Single-business geographic structure 75 3.6 3M’s multi-business international product line plus regional structure

c. 1992–1993 77 3.7 MNE structure combining traditional business functions with

geographic/country focus 78 3.8 Nestlé’s international structure 78 3.9 ABB Asea Brown Boveri’s matrix structure 79 5.1 The three layers of culture 118 5.2 Development of cross-cultural competence 119 9.1 Successful expatriate experience 237

11.1 International compensation: balance sheet approach 312

Tables

4.1 The numbers don’t lie: ten of the biggest mergers of all time and their effect on shareholder wealth 91

5.1 International cross-cultural country profiles 125 6.1 Global termination practices 151 6.2 Enforceability of non-compete covenants around the world 154 6.3 Comparative international labor laws 156 8.1 Female participation rates in selected countries 204 8.2 Share of population aged over sixty 205

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9.1 The twenty-first-century expatriate manager profile 238 10.1 The match of training techniques to country culture 271 10.2 Preparing and training the international assignee 278 10.3 The skills of the transnationally competent manager versus those

of the traditional international manager 293 11.1 US State Department indexes for cost-of-living and housing

allowances for selected cities 316 11.2 Compensation for expat relocation from New Jersey to Paris 319 11.3 National income tax rates 323 11.4 Hourly compensation costs for production workers in manufacturing 336 11.5 Average pay for chief executives in firms with annual sales of more

than US$25 billion 337 11.6 Vacations, holidays, and working hours around the world 339 11.7 Statutory maternity leave in EU and selected other countries 349 12.1 Raters of international assignee performance 364

Boxes

5.1 Cultural attitudes and values relevant to MNEs and IHRM 126 5.2 Management practices impacted by cultural values 128 6.1 General statement of equivalent employment standards stated by

various international organizations 139 6.2 The United Nations global compact 141 6.3 Fundamental social rights of EU workers 144 6.4 EU privacy rights 159 6.5 US immigrant and non-immigrant visas 172 7.1 SA 8000 requirements 193 8.1 International employee types linked with traditional categories 224 9.1 Definition of expatriate failure 243 9.2 Reasons for expatriate failure 244

10.1 Preparation and training for international assignees 277 10.2 Tips on how to “globalize” management 284 10.3 Competencies of the global executive 295 10.4 The development of organizational cross-cultural savvy 298 10.5 Global trends in training and development 303 11.1 Salary differentials for foreign assignments 313 12.1 Criteria for appraisal of international assignees and foreign managers 362 14.1 Examples of IHR support services provided by external vendors 410

IHRM in Action

1.1 Harry Ramsden’s goes international 14 1.2 Internationalization of a local manufacturer 25 2.1 Ford Motor Company goes international 42

xii • Illustrations

2.2 The shift to being a global company 44 2.3 Cap Gemini-Sogeti: a transnational organization 46 3.1 The effective global firm of the future 68 4.1 The acquisition strategy of Germany’s Siemens 89 4.2 Continual two-way communication in BCE’s acquisition of

Teleglobe International 96 4.3 Acquisition integration: GE lessons learned 102 4.4 Links between Bombay and Manhattan firms open doors for two

architects 109 5.1 Intercultural understanding 115 5.2 McDonald’s 130 6.1 Works councils and “inform and consult” at the merged Hewlett

Packard/Compaq in Europe 148 6.2 Non-compete agreements and Value Partners v. Bain International 153 6.3 Ford Motor Company’s global industrial relations 163 7.1 Child labor at Levi Strauss 185 7.2 Excerpts from Reebok International’s human rights production standards 187 7.3 Excerpts from the Caux Round Table principles for business 190 8.1 The Broadmoor Hotel finds a new way to fill jobs 206 8.2 In the Netherlands, labor shortages are dealt with by hiring the retired 207 8.3 A world marketplace for jobs 208 8.4 Location, location, location 209 9.1 John Deere’s competitive advantage 233 9.2 Language skills improve global business 246 9.3 Repatriation at Monsanto 253 9.4 Firms woo executives from “third countries” 256

10.1 International training at Johnson Wax, IBM, 3M, McGraw-Hill, and Merck 265

10.2 Training managers in Malawi 273 10.3 The global CEO 286 10.4 Colgate takes its management development global 301 11.1 Compensation problems with a global workforce 309 11.2 Tax savings to help the global bottom line 327 11.3 How Physical Acoustics manages its international taxes 329 11.4 Global compensation programs do work 335 11.5 International pensions at Johnson & Johnson 341 11.6 Canon uses incentive compensation – a Japanese exception 343 11.7 US employee equity plans run into foreign snags 344 12.1 Evaluation of local national by Richard Evans, expatriate managing

director 358 12.2 Nokia tackles expatriate performance management 371 13.1 AIDS threatens global organizations 379 13.2 Truth and consequences: expatriate health abroad 384 13.3 International emergency medical assistance 385 14.1 IHR applies Oracle’s technology to itself 406

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Illustrations • xiii

Foreword

Global HRM is a series of books edited and authored by some of the best and most well known researchers in the field of human resource management. The series is aimed at offering students and practitioners accessible, coordinated, and comprehensive books in global HRM. To be used individually or together, these books cover the main bases of comparative and international HRM. Taking an expert look at an increasingly important and complex area of global business, this is a groundbreaking new series that answers a real need for serious textbooks on global HRM.

Several books in this series, Global HRM, are devoted to human resource management policies and practices in multinational enterprises. Some books focus on specific areas of global HRM policies and practices, such as global leadership, global compensation, global staffing, and global labor relations. Other books address special topics that arise in multinational enterprises such as managing HR in cross- border alliances, developing strategies and structures, and managing legal systems for multinational enterprises. This book, International Human Resource Management – Second Edition: policy and practice for the global enterprise, serves as the foundation book for all the other books that focus on specific areas of global HRM policies and practices, and for the books that address special topics such as cross-border alliances, global strategies and structures and global legal systems. As such its fifteen chapters provide the broadest possible base for an overview of all the major areas in the field of international human resource management. As with all the books in the series, the chapters are based upon the most recent and traditional research as well as numerous examples of what multinational enterprises are doing today.

In addition to books on various HRM topics in multinational enterprises, several other books in the series adopt a comparative approach to understanding human resource management. These books on comparative human resource management describe the HRM policies and practices found at the local level in selected countries in several regions of the world. The comparative books utilize a common framework that makes it easier for the reader to systematically understand the rationale for the existence of various human resource management activities in different countries and easier to compare these activities across countries.

This Routledge series, Global HRM, is intended to serve the growing market of global scholars and professionals who are seeking a deeper and broader understanding of the role and importance of human resource management in companies as they operate throughout the world. With this in mind, all books in the series provide a thorough review of existing research and numerous examples of companies around the world. Mini-company stories and examples are found throughout the chapters. In addition, many of the books in the series include at least one detailed case description that serves as a convenient practical illustration of topics discussed in the book.

Because a significant number of scholars and professionals throughout the world are involved in researching and practicing the topics examined in this series of books, the authorship of the books and the experiences of companies cited in the books reflect a vast global representation. The authors in the series bring with them exceptional knowledge of the human resource management topics they address, and in many cases the authors have been the pioneers for their topics. So we feel fortunate to have the involvement of such a distinguished group of academics in this series.

The publisher and editor also have played a major role in making this series possible. Routledge has provided its global production, marketing, and reputation to make this series feasible and affordable to academics and practitioners throughout the world. In addition, Routledge has provided its own highly qualified professionals to make this series a reality. In particular we want to indicate our deep appreciation for the work of our series editor, Francesca Poynter. She, and her predecessor Catriona King, have been behind the series from the very beginning and have been invaluable in providing the needed support and encouragement to us and to the many authors in the series. She, along with her staff, has helped make the process of completing this series an enjoyable one. For everything they have done, we thank them all.

Randall S. Schuler, Rutgers University and GSBA Zurich Paul Sparrow, Manchester University

Susan E. Jackson, Rutgers University and GSBA Zurich Michael Poole, Cardiff University

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Foreword • xv

Acknowledgments

There are many individuals who have provided valuable information, insights, and assistance in completing this book. They include: Susan E. Jackson, Rutgers University; Paul Sparrow, Manchester Business School; Michael Poole, Cardiff University; Chris Brewster, Henley Management College; Paul Evans, INSEAD; Vlado Pucik, IMD; Yadong Luo, University of Miami; Andrew Inkpen, Thunderbird; Hilary Harris, Cranfield School of Management; Gary Florkowski, University of Pittsburgh; Cal Reynolds, Calvin Reynolds & Associates (particularly for his original article written for the website); Hugh Scullion, Strathclyde University; Stu Youngblood and Rob Rhodes, Texas Christian University; Bruno Staffelbach, University of Zurich; Martin Hilb, University of St Gallen; Christian Scholz, University of Saarlandes; Gerold Frich, Fachhochschule, Aachen; Michael Morley, Limerick; Charlie Tharp, Ibraiz Tarique, Paula Caligiuri, and Rucha Hardikar, Rutgers University; Shimon Dolon, ESADE; Georges Bachtold, Blumer; Darryl Weiss, Director of IHR and Corporate Attorney, Orincon; Jerry Edge, Director of International Compensation, Callaway Golf; Joann Stang, VP of HR, Solar Turbines; Bernie Kulchin, VP of HR, Cubic Corporation; Ben Shaw, Bond University; Lisbeth Claus, Willamette University; Ed Watson, KPMG; Gardiner Hempel, Deloitte & Touche; Wayne Cascio and Manuel Scrapio, University of Colorado–Denver; and Bob Grove, San Diego Employers’ Association. For use of the Lincoln Electric in China integrative case in Chapter 15, we thank Ingmar Björkman of INSEAD and the Swedish School of Economics and Charles Galunic and Isabel Assureira of INSEAD. Dr Schuler thanks many students at Rutgers University in the Department of Human Resource Management for their input into the creation of the Global HRM website for use in his class, “Managing the Global Workforce” (http://www.ghrm.rutgers.edu). In the creation of this website the students were greatly assisted by the department’s webmaster, Joanne Mangels, and we all thank her for this contribution. And Dr Briscoe thanks his graduate students at the University of San Diego School of Business for help in research into IHRM and country HR practices and in development of Dr Briscoe’s website, www.internationalhrm.com, particularly Mario D’Angelo, former graduate assistant and now web designer at Globe3. Finally we thank many fine individuals at Routledge for their wonderful assistance and support throughout the project. These individuals include: Francesca Poynter, the editor for the Global HRM Series, Natasha Mary, Nicola Cooper, and Kristen Sensenig.

Dr Briscoe would also like to provide special acknowledgments to his wife, Georgina, who provided the inspiration, support, and example for “going for the summit” and completing this second edition, and without whom the climb would have been much harder, and to Randall Schuler, who was great to work with, who provided the support necessary to complete the project within tough deadlines, and who improved beyond measure the final product.

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Acknowledgments • xvii

Introduction

This book is about International Human Resource Management (IHRM). That is, it is about human resource management in the international environment. IHRM is an important enough topic to warrant its own text because the conduct of business is increasingly international in scope and managing human resources is critical to the successful conduct of global business. The majority of this book discusses the IHRM issues faced by multinational enterprises (MNEs), primarily from the perspective of the parent company or headquarters. A concerted effort has been made to internationalize this presentation to make it apply to most MNEs. That is, the information is presented from the perspectives of as many different MNEs, from as many different countries, as possible, although much of the reported research and writing has come from an American perspective. The focus is placed on IHRM problems created in an MNE performing business in more than one country, rather than those posed by working for a foreign firm at home or by employing foreign employees in the local firm. These latter two foci, however, will be addressed as they become important for particular IHRM policies and practices.

Parts and chapters

This book is divided into three parts, with each section addressing a major component of the topic of the book. Part I describes a number of key components of the environment in which IHRM takes place. The first part of the book sets the scene for International Human Resource Management – Second Edition: Policy and Practice for the Global Enterprise and explains why international human resource management is important for the success of international business, describing the environment of global commerce as it relates to IHRM. A number of critical components in the environment of international business help create the context for the policies and practices of IHRM. The first seven chapters of this book describe these critical components. These chapters include (1) introduction to international business (IB) and to IHRM; (2) Strategic IHRM and its role in the pursuit of IB; (3) design of international organizational structure and the crucial role of IHRM in the design of global organizations; (4) the role of IHRM in the success of cross-border alliances, international joint ventures, and international mergers and

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