The International Journal of Human Resource Management, Vol. 21, No.

6, May 2010, 836850

Skill webs and international human resource management: lessons from a study of the global skill strategies of transnational companies
David Ashtona, Phillip Browna* and Hugh Lauderb
a

School of Social Sciences, Cardiff University, Cardiff, Wales, UK; bDepartment of Education, University of Bath, Bath, UK This paper examines the development of global skill webs in transnational companies (TNCs). Based on research in seven countries, it argues that skill webs are becoming more strategic in character as companies seek competitive advantage by relocating high-skilled work to low-cost locations. The paper explores the implications of these ndings for both the conventional approach to international human resource management and that inuenced by the varieties of capitalism School. Keywords: Digital Taylorism; globalisation; knowledge management; skill formation; skill webs; transnational companies; varieties of capitalism

Introduction The process of skill formation has not been a major focus in the human resource management literature, despite training and development being central to human resource (HR) practitioners. Now, however, it is assuming strategic signicance because the restructuring of skill formation by transnational companies (TNCs), through what we term skill webs, is a crucial factor in their competitiveness. This is because TNCs now have the ability to congure skills across the globe and can make decisions as to how skill is to be categorized, judged and appraised according to corporate priorities. In order to make this case, the paper elaborates on ndings from a three-year research project into the global skill strategies of TNCs. This study interviewed executives and senior managers from 30 TNCs with head ofces in Britain, Germany, Japan, South Korea and the United States, and where possible in their subsidiaries in China, India and Singapore. We also interviewed managers in newly emerging Chinese and Indian companies seeking to globalize their operations, along with government policy-makers in all seven countries. It is clear from this research that the global reach of TNCs, along with their capacity to create global skill webs, is placing HR management in a quite different position to the way it has been conceived and characterized in much of the literature. In order to make this case we start in section 1 with a critical account of two theoretical positions on international human resources, what we refer to as the conventional international human resources management (IHRM) position and that which has been developed from the varieties of capitalism (VoC) approach to management and skill formation. This analysis raises questions that lead into our own research. In section 2, we detail the research methodology and questions. In section 3 we discuss the concept of skill webs and outline the changes that have made them possible. In the conclusion, we consider the implications of our ndings in relation to established theoretical positions.

*Corresponding author. Email: BrownP1@cardiff.ac.uk

ISSN 0958-5192 print/ISSN 1466-4399 online q 2010 Taylor & Francis DOI: 10.1080/09585191003729325 http://www.informaworld.com

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We stress the emergent nature of our theory and ndings because our data can be seen as a provisional report from the front line of IHRM and skill formation with respect to the construction of skill webs. It reects the early stages of an uneven process as some TNCs have globalized their skill webs more than others. There have been failures and impediments to the development of global skill webs that we document below, and it is currently difcult to judge the impact of global recession on corporate skill formation. 1. The present state of theory on HR and skill formation The conventional approach The analysis of skill formation within the international human resource community tends to be dominated by two separate but related schools, what we refer to as the conventional IHRM approach and that which stems from the VoC approach. It is argued here that the rst school adopts a managerialist perspective which results in a segmented analysis of skill formation. The VoC School has avoided the problems associated with the managerialist perspective and developed a more holistic analysis which represents an advance in our thinking. However, our latest research suggests that this advance is not sufcient to comprehend the current changes underway in the process of skill formation that stem from new technologies and the process of globalization. The HR literature grew out of the experience of large national corporations in the second half of the twentieth century. These were companies which typically had highly centralized authority systems with power vested in senior management. Their authority was exercised through command and control hierarchies (Chandler 1990). The differentiation of the management function created a series of specialist divisions, such as production management, personnel, nance and marketing, within which corporate careers were pursued. Manual workers were employed either as skilled craft workers or production operatives subject to the constraints imposed by either the production line or work-study engineer. The concept of skill was commonly restricted to the activities of manual workers, such as those in skilled craft occupations or semi-skilled operatives involved in more routine jobs. For some skilled workers, training was organized by personnel in conjunction with trade unions, while the company tightly controlled the activities of semi-skilled operatives. As for management, their learning processes were described as development. Management training was not restricted to specic technical skills but rather to acquiring sufcient knowledge of the organization to represent the interests of employers in seeking to raise the productivity of the workforce. This focus on organizational culture and soft skills had a higher status, reecting the greater discretion exercised by managers and their closer proximity to the centre of power in the organization. Management development became the responsibility of personnel departments as much of the training of engineers and other technical specialists took place outside the company. These arrangements had a number of consequences for our understanding of skill formation. First, the terminology of training for manual workers and development for managers, not only reected status divisions within the company but also different approaches to blue-collar and white-collar employees. Second, the differentiation of functions and roles within personnel departments meant that any one group of personnel specialists were only ever concerned with a single aspect of the overall process of skill formation. The identication of people with the appropriate skills or attributes was the province of recruitment and selection specialists; the process of transmitting skills, that of trainers and management development specialists. Issues connected with the struggles

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over the utilization of skills in the form of demarcation disputes, together with those concerned with the rewarding of skills, were the province of industrial relations specialists. The underlying process of skill formation was therefore segmented both horizontally and vertically, while the knowledge base: the scientic and engineering knowledge which underpinned the production process was excluded from the prism of those practically involved with the emergent profession of HRM (Storey 2000; Legge 2005). This sub-division of professional activities was subsequently reected in the curriculum devised by the professional associations in their struggle to monopolizes qualications and entry to the HR profession. While this meant that the practical interests of managers were addressed, there was little or no attempt to conceptualize the process as a whole, certainly not from within the HR discipline. This task was left to academics such as Bendix (1956) and Fox (1974) who demonstrated the interdependence of the various groups within the rm as the productive system developed. It was this group of academics that highlighted the struggles over the control of knowledge and associated activities and how this impacted on the skill strategies of employers, the skills of the workforce, and the level of rewards they received (Burawoy 1979). This serves to remind us that skills and their relationship to occupations are often a source of tension and struggle between employers and workers, a fact that has been ignored in much of the business literature given an emphasis on the increasing value of knowledge work (Drucker 1993) and intellectual capital (Stewart 2001). With the development of multinational (MNCs) and subsequently transnational corporations (TNCs), this approach to the study of HRM was simply transferred from the national to the international level in the areas of selection, recruitment, training and development, payment systems and industrial/employee relations. In one of the standard texts on IHRM, Briscoe and Schuler (2004) argue that rms internationalize their business in response to the development of global markets. They see the internationalization of business resulting in the internationalization of stafng (nding the best and lowest cost employees anywhere in the world), executive development (ensuring the management group has the knowledge and ability to operate anywhere in the world), compensation (being globally competitive), and labour relations (which vary from country to country), thereby transforming HRM into IHRM. They see IHRM as the:
process which involved the introduction of new activities such as the management of international assignees, working alongside HR professionals from other countries and adapting HR practices to multicultural and cross-cultural environments. (Briscoe and Schuler 2004, p. 27)

Other scholars in the eld of IHRM have moved beyond this tendency to see IHRM as just an international version of HRM. For example, Sparrow and Brewster (2006) recognize that IHRM is confronted with new developments and problems that cannot be adequately handled by treating IHRM in this way. They point out that only a few multinational companies (MNCs) have penetrated markets across the globe or have the capability to locate, source and manage resources anywhere in the world. While they consider that most MNCs are still operating within their own national systems, they acknowledge that rms adopting an international orientation confront new HR issues and problems. They see new global business structures over-riding country based HR processes. In global MNCs, HR activities are extended to take advantage of new technologies of e-enabled HRM, and knowledge transfer through the development of corporate Centres of Excellence, alongside the desire to reduce the cost of innovation by locating some of these Centres in low cost locations. In addition, central to the new role of HR is the need

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to develop organizational capability in the areas of R&D, production centres, logistics networks, and new HR processes and systems. Here we see the emergence of a new agenda with HR becoming involved in the wider business processes such as knowledge management and supply chain management. In this respect it marks a major shift in intellectual perspective from the old IHRM. The strength of the new IHRM is that it points to some of the changing skills being developed within globally oriented MNCs: the skills required to manage knowledge through Centres of Excellence, to negotiate and manage alliances with other companies and institutions, as well as those enabling the manage of talent at a global level. Whereas the old IHRM was merely an extension of the conventional HR agenda, this new approach is pointing to the fact that there is something different in the ways in which skills issues are handled by rms at the transnational level. However, the speed of the processes of global skill formation we report on below suggests that the new IHRM needs a fundamental change in perspective. The varieties of capitalism approach The VoC approach has avoided the conventional managerial perspective by focusing on the ways in which business practices, including the formation of skills, are shaped by the national institutions within which they are created and sustained. The theory sees the strategies of rms as based on distinctive national institutional structures created in response to specic problems which rms have to address. These are concerned with problems of industrial relations, vocational education and training, corporate governance, inter-rm relations and the disciplining and motivating of the workforce (Hall and Soskice 2001). From this perspective MNCs utilize the strengths derived from their national contexts in the global market as part of their competitive advantage. This will mean that they react differently from similar competitive challenges; rms in liberal market economies (LMEs) such as Britain and the USA will be more likely to be offshore because they have greater expertise in exploiting markets in less developed economies, whereas rms from coordinated market economies (CMEs) such as Germany are less likely to offshore because they gain competitive advantage from the high skills they generate at home. However, where they see a comparative advantage German rms will engage in institutional arbitrage, for example CME rms shifting their R&D to California while LME rms may move to CME countries to access specialized skills. Skills, developed as a result of the interaction of the rm with national institutional structures, also take on specic national forms. Estevez-Abe, Ivinson and Soskice (2001) distinguish between three different types of skills: rm specic, industry specic and general skills. Firm specic skills are just that and not portable, industry specic skills are those portable between rms in the same industry. These have, typically, been found in Korean and Japanese rms. Industry specic skills are created through industry based training such as apprenticeships. These produce a form of standardized training that transfers leading edge skills across the industry (Brown, Green and Lauder 2001). Germany is typical of this approach. General skills provide little in the way of a competitive advantage for employers apart from low cost which forms the basis of their protability. These skills are typically found in LME exible labour markets because they require little additional training by rms and workers with such skills can be easily hired and red. The UK is typical of this approach. Almond and Ferner (2006) developed this analysis in their work on US MNCs in Europe, looking at how they manage their employment relations across borders in what

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they term different national terrains. They found considerable support for the notion that the country of origin has an important structuring effect on MNCs with national origins in the USA (Almond and Ferner 2006, p. 289). In this respect they see US MNCs as centralized, formalized and short-termist, but found their HR practices to be contested by local management and local institutions. Others from the same tradition, such as Whitley (2001), have looked more directly at the impact of globalization on national business systems and have come to the conclusion that:
As long as these domestic business environments remain distinctive and cohesive, and the international business environment is relatively anomic with weakly institutionalised norms and procedures governing business practices, FDI is likely to increase the organisational complexity without changing the nature of the rms engaged within it. (Whitley 2001, p. 64)

Whitley (2005) also argues that the organizational capabilities distinctive of national business systems have not been changed by globalization, hence MNCs are little different in their organization from the national counterparts in their home country. For representatives of this School, the coordination of activities across countries does not necessarily produce distinctive capabilities. Morgan summarizes the arguement:
MNCs do not constitute a distinctive kind of company from the point of view of the rm. Rather the extent to which international rms do form cross-national capabilities that are distinct from national and regional ones varies considerably. (Morgan 2005, p. 13)

Morgan and Quacks (2005) discussion of the internationalization of professional service companies comes to a similar conclusion, namely that the development of distinctive cross-national competences and capabilities within these rms is clearly limited. In short the VoC literature suggests that the power of national business systems to structure the process of skill formation continues to limit the emergence of any new forms of skill formation associated with globalization. However, the research we report on below suggests that we have to step outside current thinking and investigate the overall process of how companies are re-dening their human resources as a source of competitive advantage. 2. Methodology and research questions

In the initial stages of this research we had assumed that we would be studying MNCs, however, we rapidly came to the view that the majority of companies that we were studying were TNCs, in itself a reection of the pace of change that we observed over the period of the study. The United Nations Conference on Trade and Development (UNCTAD) denes a transnational (TNC) as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy.1 By contrast, multinational corporations are more bounded by a centralized head ofce and localized operations reecting national institutional practices. In these terms most of the companies that we studied would be considered transnational or global network corporations (McKern 2003; Prahalad and Krishnan 2008). The research questions addressed were as follows: 1. In what ways, if any, are processes associated with globalization changing the skill formation strategies of TNCs? 2. What is the impact of the new emerging economies on skill formation strategies? 3. Are there differences in TNC skill formation strategies according to country of origin and/or industrial sector?

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Between 2004 and 2007 we interviewed 125 senior managers and chief executive ofcers responsible for HR functions in 30 TNCs operating in nancial services, automotive and the electronic/telecommunications sectors in Great Britain, China, Germany, India, Singapore, South Korea and the United States. This provided data on the changes that were taking place in their business strategies, the problems they faced in the global markets within which they were operating, and the implications this had for the ways they developed and utilized skills within their own enterprises. It also generated signicant insights into the challenges they faced in operating in global markets. We also conducted 65 interviews with policy-makers in the seven countries in which we interviewed TNCs. This enabled us to examine national strategies for inward investment, including the policies that China and India have adopted to compete for high tech, high skilled jobs. This offered fresh insights into the skill formation strategies of TNCs as they become less dependent on Western education and training institutions to supply them with a highly skilled workforce (Ashton, Brown and Lauder 2009). The number of people interviewed within any one company varied in accordance with its size and the number of branches it had in the countries selected. At the majority of interviews two researchers were present to facilitate the establishment of joint understanding and to provide the opportunity for critical reection and analytical discussion immediately after the event. All the interviews were transcribed. Themes emerging from each interview were then followed-up where appropriate with other branches of the same company in other countries. By interviewing head ofce and overseas branches of the same company we were able to triangulate views and explore differences in descriptions and perceptions of change. The interviews were semi-structured being informed by a checklist but, crucially for an exploratory project such as this, allowing the opportunity to follow new ideas or leads as they emerged. The interviews were wide ranging and focused on the business strategy and culture of the company and how these are changing; the problems they faced in global markets; the character of competition in the market; the organizational structure of the company and its HR system and recruitment; how production was organized; the companys use of labour at all levels; and where it was sourced and its relevance to corporate strategy. However, we did not have the resources to delve into the implementation of policies and practices across all countries in the tradition of researchers such as that reported by Almond and Ferner (2006) and colleagues. But we were able to identify perceptions of change within companies and explore differences and similarities across companies and industrial sectors. 3. Towards the construction of global skill webs

Our ndings suggest that among the companies studied the changes in relationships at the global level are so profound that a new form of skill formation is emerging that we refer to as strategic skill webs (Brown, Lauder and Ashton 2010). TNCs have developed much greater control over their sourcing options along the length of the value chain. These companies are seeking to globally integrate key aspects of their human resource functions, especially talent management, and to make more strategic decisions that challenge most of their preconceived ideas about what can be done where, especially in terms of high-skilled, high-value work. In this sense we can understand the concept of skill webs as one in which companies seek to globally integrate a range of related agents, strategies and functions through the organizing concept of skill. But the value derived from these webs is not simply the connection between isolated individuals, companies, suppliers and research institutes situated across the globe

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as much of the value is embedded in the network itself. Central to this network is the integration of knowledge creation and transfer from innovation to invoice. Strategy therefore has to involve questions of where R&D is to be located, how innovatory process knowledge is to be communicated and how both product and process innovations are to be communicated to partner companies and sub-contractors. All these strategies are informed by cost. Global competitiveness is such that every company in our study referred to the need to squeeze costs, an issue that will become more pressing at a time of global economic recession. By denition, the concept of global skill webs implies a movement away from companies attachments to their country of origin. This is a process which has been noted in general terms by other researchers such as Dore (2000) and Jacoby (2004). This is not to suggest that all the TNCs in our study had moved wholly away from their home country, as we shall see, but they were making clear attempts to do so. Therefore, the concept of global skill webs refers to the shift from national to global sourcing of skills and talent. Organizational metaphors such as webs or networks are inevitably limited but thinking in terms of strategic skills webs is useful in respect to transnational companies in at least three ways. First, human resources based on national pyramids of employees, functions, and trained capability, are being transformed into global webs indifferent to national, functional and organizational boundaries as sourcing options have dramatically increased, including the use of outsourcing and off-shoring. Previously, knowledge work was spatially clustered around the home base with satellite operations restricted to the developed economies. These webs of high skilled capability have become increasingly globalized as companies seek to accelerate the pace and reduce the cost of innovation and other core activities. Second, webs retain centres of power and inuence from which global capability is woven. This may be contrasted with the idea of network organizations that emphasize the diffusion of corporate power. Third, the idea of web-like organizations highlights how companies are seeking to integrate, align and standardize various activities, procedures, and HR functions, to benet from the economies of scope and scale that new technologies and global markets now offer. The changes that have made the creation of skill webs possible and which have structured their framework include the following: 1. 2. 3. 4. The internationalization of skill formation. The relocation of knowledge production. Knowledge innovation. The rationalization and management of knowledge work.

The internationalization of skill formation TNCs now have the ability to reduce their dependence on national business systems for the production of their workers skills. For many years the developing countries have provided low-cost, low-skilled labour, but more recently the entry of China, India and Russia into the global market has transformed the opportunities available to TNCs. Not only has it extended the pool of unskilled labour available for global production, it is also increasingly providing a new source of highly qualied labour (Brown, Lauder and Ashton 2008). Nations including China and India are greatly expanding their systems of higher education. China has approximately 20 million students in higher education which is more than the United States. There has also been a doubling of the number of higher education students around the world, with a growing proportion from within emerging economies (Brown et al. 2010). This new source of graduate labour in emerging economies provides

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TNCs with an alternative supply of high-skilled workers, so that if the costs are too high in one location or shortages are experienced, they can buy in or offshore to another. As the HR Vice-President of one German engineering and IT company put it when asked about the availability of engineers:
Its not a problem to get enough highly educated people in these markets. The education level usually is very good. This applies, just to take two examples . . . to Russia, it also applies to China. [The] educational level is pretty high in particular in Russia where people are very well educated. Although they have to get accustomed to the, lets say to the way business is done from a more Western perspective, thats quite normal. The consequence for a country like Germany is, or for the Western countries, is that they have really to work hard to catch up.

The consequences are dramatic as they now enable the TNCs to locate production anywhere in the developing world which has a good education and business infrastructure. Thus, when asked where he could locate his operations, another automaker, this time from the United States, added, If you had asked me 5 years ago I would have said that the skill sets probably are still in the advanced economies but I think that is changing very, very quickly. The internationalization of skill formation is not limited to manufacturing, in services it is even more evident where, because they are weightless, they can be moved with extraordinary speed. In an interview with a major bank the difference between manufacturing and nancial services was clearly recognized:
We just have to move knowledge around, whereas if you are a car manufacture you have to move steel and parts of engines around and so you need a big plan of logistics of how you globally integrate your manufacturing plants . . . We can overnight change everything. We had I would say 10 years ago nobody with global responsibility . . . but now we have 2000 managers who have their teams sitting in all time zones and I have my directors reporting . . . to me sitting in New York, London, Sydney, Singapore or Frankfurt and their teams are also spread all over the world.

This provides TNCs not only with the opportunity to move their low value-added forms of mass production to take advantage of lower labour costs, but also with the opportunity to transfer higher value-added activities such as R&D. Hence, widely held assumptions concerning the social and spatial organization of human resources have to be re-thought as emerging economies gear up to compete for knowledge intensive work. What is exceptional about German engineering or American lmmaking has been called into question (Lauder, Brown and Ashton 2008). Many companies are experimenting at the boundaries between the tangible and intangible to assess what can be lifted from one work context and transplanted to another in an attempt to build global exibility, and to assess the benets and trade-offs in terms of cost, quality and competitiveness. The relocation of knowledge production New technology has created a vast range of opportunities to re-organize productive systems on a global basis, creating major changes in the division of labour which are now being exploited by the TNCs in order to generate new forms of competitive advantage. One of these is through the relocation of head work. In the past, quality work typically associated with the creation, development and dissemination of knowledge was conned to the West. Now, however, the combination of new electronic technology, a plentiful supply of well-qualied graduates in China, India and Russia, and fundamental changes to the labour process have challenged the Wests monopoly of head work and placed the question of skill at the centre of company competitiveness. As a result global competition is no longer based on quality or price but on quality and price, enabling companies to raise their game and lower their costs at the same time.

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Another source of this competitive advantage is through offshoring. One of the most striking things about nancial services including retail and investment banking, insurance and brokerage, is the way new technologies have enabled them to utilize offshoring and globally integrate complex activities such as research, nancial analysis, regulatory reporting, accounting and human resources work, as well as the more routine activities such as customer services, invoicing and payroll. An Indian, senior manager working for an American bank in Mumbai, explained how they began offshoring high-end nancial services almost by accident. There had been no strategic decision to shift jobs to India from New York or elsewhere within the group, but it began following a discussion between senior staff in Mumbai and sponsors in New York which led to a handshake for a few operations jobs. This was in 2002 when the company began engaging in a number of pilot projects in response to increasing cost pressures. The experiment with back ofce functions reected the growth in offshore call centres and business process outsourcing (BPO). There was little point using staff in New York or London to process invoices or very basic data entry jobs when it could be done in real time in India or Vietnam at a fraction of the price. But while the front line ofce has remained relatively small as the company is in the early stages of development investment banking services within the country, there was a rapid growth of the middle ofce that includes research and analytical jobs for its New York and London ofces. For ve analysts in New York or London there could be at least 15 in India. Before 2000, business process and analytical work were done close to the main business centres, but with the rapid development of internet capability, secure networks and standardized software, they have drawn a clearer distinction between work and place. Differences in time zones also facilitated the need for investment bankers and brokers in North American and Europe to make a pitch to a client based on quick and accurate information that could be packaged overnight in Asia. A young woman of Indian heritage currently working for this company in Mumbai, with work experience in London and New York, told us that while she believed that Indians are often viewed as smart, intelligent and being able to put their head down and do the job, she thought that colleagues in North America were:
Surprised at the extent and the kind of work they are doing. The speed at which we are delivering and the fact that some of these individuals are actually moving into front line jobs and competing with them in their sphere as well.

Her senior colleague added, that what was really different was the quality of the research that they were generating for the frontline to use, that is those who actually negotiate the deals with clients:
These are the areas that we nd that talent is delivering to an even higher standard than expected. Were not doing those menial call centre type jobs. Its global work and thats where we think weve been able to add a lot more value than what was initially expected and that will continue.

Knowledge innovation Another advantage that skill webs create is to help speed up the creation of knowledge. One way in which this was done was through the shorter life cycles of products, services and processes. As a major telecoms company told us, 80% of what we sell today did not exist 5 years ago. When we contrast knowledge management in these organizations with their precursors in the old national corporations, the contrast could hardly be more marked. Rather than a small group that monopolized business knowledge, our participating

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companies were searching for new ways to reduce the time from innovation to invoice to capitalize on new market opportunities in both developed and emerging markets. The network of knowledge both within and outside of the company is a major contributor to competitive advantage (Delbridge, Gratton and Johnson 2006). In the automobile, electronics and telecommunications sectors much of this high skilled, high value-added work, which had been located in the TNCs country of origin, is being undertaken across the globe. While the head ofce remains strategically important, a growing proportion of its research, design and development activities are becoming decentralized. In part this was justied due to supply-side problems of recruiting American and European scientists and engineers which was pushing them to move new R&D work to Asia. But it was also being driven by cost, as it is far cheaper to hire research scientists in Asia or Eastern Europe than college-educated graduates from the US and Europe. Moreover, their performance was usually judged to be just as good. The head of an R&D centre for an American motor vehicle manufacturer in India, noted that salaries that he had to pay were a third of those he would expect to pay in Europe or America. As a result a number of companies were in the process of establishing good relationships with higher status universities in these developing countries in order to ensure a ow of future recruits. Of course there were other reasons for establishing R&D centres and manufacturing and sales establishments in these countries apart from the cost of labour. Access to markets was of crucial importance, but whereas R&D centres in emerging economies were originally established to undertake applied research, now they were engaged in basic research for the global market. This process was most advanced in manufacturing as scientists and engineers in developing countries worked together in virtual teams with those in centres in the developed world, to take advantage of time zone differences and so speed up the design of new models. For example, an American motor manufacturer had recently set up a new research centre in India. This centre specialized in the virtual modelling of the production process because they were able to recruit talented IT and Mathematics graduates. When asked whether they worked in virtual teams on the same projects he replied by saying that they followed the sun. We found most manufacturing companies operated in this way, not only with research but also design. A leading German motor vehicle manufacturer offered this example of following the sun:
Stuttgart, Mumbai and Los Angeles in a 24-hour cycle, so we have round the clock. So there is a studio at Los Angeles, the main part is at Stuttgart, in India we have some electronic design and other design parts, Italy we have some internal design, but they are connected and they are working 24 hours a day. In India people are working when it is night in Germany and German employees pick up the direction in the morning and continue.

The rationalization and management of knowledge work Given the increasing importance of knowledge work to TNCs it is not surprising that the management of those involved in it was also being transformed. This was reected in two processes. The rst concerned the rationalization of knowledge processes. Advances in these processes made in one location can now be rapidly transferred across their global operations. This not only reduces the costs of knowledge work but also has a major impact on the nature of skill itself. While there is much talk of an explosion in knowledge work and the growth of knowledge workers, historically, productivity has not come from giving people permission to think but from imposing barriers to individual initiative and control through a detailed

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division of labour. While the management of knowledge workers poses problems for HR professionals, there is also a major shift to what we called Digital Taylorism (Brown et al. 2008; 2010). If the era of Fordism, characterized by Mechanical Taylorism, involved the transformation of craft work through scientic management (Taylor 1911; Braverman 1974), today we are witnessing the translation of knowledge work into working knowledge. Digital Taylorism enables innovation to be translated into routines that might require some degree of education but not the kind of creativity and independence of judgement that is often associated with the knowledge economy. In order to reduce costs companies have to move from knowledge work to working knowledge; that is, from the idiosyncratic knowledge that a worker has and applies, to working knowledge, where that knowledge is codied and reutilized, thereby making it generally available to the company rather than being the property of an individual worker. The second attempts to generate global competences within companies and to differentiate those with permission to think, usually referred to as those with talent from those who were responsible for the day-to-day management of knowledge work through the application of company competences. While some companies were more advanced in developing global HR policies, there was almost universal use of competency based approaches, especially for the recruitment, training and development of senior staff. The focus on behavioural competences not only reected an attempt to achieve greater transparency across national and divisional boundaries, but to align senior management to the corporate mission. Through the use of behavioural competencies TNCs sought to motivate managers to pursue the same company objectives across the globe, while having discretion to adjust their operational activities in light of local conditions. They provided a means of regulating senior managers by remote control without recourse to endless rules and regulations. This emphasis on soft skills was found in virtually all the companies we interviewed, as hard skills were assumed to be a basic requirement of the job, and while it was perceived to be relatively easy to train for technical skills, behavioural competences where a different matter. Despite the growth in college-educated graduates entering the workforce virtually all the companies interviewed in Asia as well as North America and Europe, believed they were in a war for talent (Michaels, Janes and Axelrod 2001). This had led to a focus on attracting, recruiting, retaining and developing top talent believed to be essential to taking the business forward. Although companies varied in the extent to which they sourced talent globally, all companies recognized that they could no longer rely on home grown talent. In the mid-1990s a manufacturer of car interiors supplying the big auto companies in Detroit had an American workforce of 35,000 but this all changed within a decade. While the US workforce stagnated, its global workforce increased to 115,000 across 33 countries. This transformed the way they understood managerial talent, as their global head of human resources recollected, we had to get on the stick . . . pretty quickly . . . and learn how different countries operate and build cultural sensitivity. They built a new management team with a global mind set as opposed to what we had ten years ago as they met some resistance to developing managerial talent outside of America. They wanted managers that had lived and worked in a country other than that which they grew up, as well as demonstrating high levels of performance expected of managers wherever they happen to work. They undertook a systematic review of all staff and came up with a list of 400 500 individuals they thought had what it takes. They divided staff between A, B and C players. The A players are believed to be crucial to the future of the company. Every effort is made to retain this group through generous compensation, interesting assignments and career development:

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You have just got to decide that those people are our future and whether they are kind of A players or they are kind of high potential people lower in the organization, those are the people that we are going to pay, you know, whatever.

The B players are the engine house of the company, they get things done and need to be treated with dignity and paid at a competitive rate. It includes engineering talent with extensive experience but they usually are folk that dont really want to lead the charge. The C players are the under-performers, you dont see a C player in this organization for too long, you either shape up or ship out. They also dont spend much time on helping the Cs to shape up because the problem is rarely seen as a lack of skills but about attitude, commitment and getting on with colleagues:
It usually isnt as much about technical skill it is about sort of chemistry, attitude, ability to see the bigger picture, prepared to roll your sleeves up and get stuck into things, so it is usually those reasons that it falls apart.

In the early days he believed they made an error in not sending their A players on overseas assignments. But when they started to send their A players a mutual respect was developed because then people say hey, this guy really knows what he is doing, which made the fact that it remains an American company less of a contentious issue. This is similar to the approaches of many of the companies weve spoken to who have actively pursued a talent management strategy: the idea that a talented few matter more and that talent remains in limited supply despite the rising skills of the workforce. This has led to widening pay differentials going to those dened as top talent the A players as it is believed that they are the talented few who contribute most to the bottom line. Therefore, at the same time that companies are trying to reduce their labour costs they are also trying to attract and retain top talent, so they have been keeping their overall wage bill more or less steady but giving a larger share of it to the top performers (Economist 2006, p. 12). Standardizing the classication of workers is also necessary if companies are to utilize skills on a global basis. Classifying workers according to A, B and C levels of competency immediately tells HR managers where to locate the level of talent they are looking for when considering workers for particular assignments. But this process of classication and the allied identication of talent is ongoing through appraisal systems which also have to be standardized. Conclusions: uneven development and the implications for theory Through the development of strategic skill webs TNCs have been increasingly reducing their dependence on national business systems within which they originated. We can see this in terms of their ability to manage corporate skill formation, as they are able to source high-skilled labour from different national locations, and speed-up the process of work-related learning making them less reliant on any individual country for their supply of labour. Crucially they can now shape those skills and competences to their own requirements more precisely. They now have the ability to rationalize knowledge work and routinize it across the globe through offshoring. The home base is becoming less important as a source of innovation and new knowledge while the process of management is itself becoming more global in character as similar techniques are used to differentiate the companys labour force across the globe. This is not to argue for a form of hyper-globalization. Some companies are further along the route to internationalization of their skill formation strategies than others. There are clear limits to the relocation of capital for manufacturing, for example in the auto industry some of the heavier and more complex components such as engines may

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still need to be manufactured in close geographical proximity to the assembly plants. In the service sector, Blinder (2007) has identied some of the limits to the process of offshoring. While some R&D has been relocated in the emerging countries some still remains in the country of origin. New global management systems are being introduced but are by no means universal. A senior manager in a leading German bank described the move from an MNC to a TNC in his companys human resources strategy. There had been a signicant change in the nationalities of the banks top 500 employees that now included many senior managers and executives from the US, UK, Switzerland, and India:
Ten years ago I would say 480 would have been German, and now I would say... 350 are not German... we went from a geography based structure to a business structured on divisional silos instead of country silos.

However, while this bank is making progress towards internationalization, British investment banks were less likely to do so. Among some there still appeared to be an element of a club approach to this issue. In China we talked to a regional HR manager who talked about an ethnic ceiling to promotion. We found similar problems in the electronics sector, where a German company had set a target in China of recruiting 80% of senior managers from China but had, for the time being, given up on this target. Some motor vehicle manufacturers were also nding it difcult to integrate HR globally because of the size and complexity of their business. However, the aspiration and intention to globally integrate was clear. With these provisos in mind we believe that the theory of skill webs has important implications for the two existing theories. We see the old IHRM as incapable of dealing with these new developments in the process of skill formation because of the fragmented manner in which it deals with the process. Given their managerialist orientation they fail to see the process as a whole and therefore are unaware of the new strategic signicance of skill webs. This is not so much the case with new IHRM where researchers such as Sparrow and Brewster (2006) are tackling aspects of the new strategic skill webs such as the involvement of HR in knowledge management. Indeed this is a step forward but again, and perhaps in part because of the managerialist perspective they adopt, they fail to see how these are part strategic skill webs, responsible for the process of skill formation at the global level. While the VoC school does transcend many of the problems associated with the managerialist perspective it too has failed to recognize the emergence of signicant changes in TNCs use of skills. This is partly because these theorists have focused on differences in national economic performance, and therefore tended to underplay the wider global context of technological, economic and social change. Others such as Whitley have shown an awareness of global changes but have underestimated the extent to which TNCs have been able to exploit new opportunities created by these changes to transform the process of skill formation, thereby utilizing their strategic skill webs to secure business advantage. Indeed, it is the ability of TNCs to achieve a degree of relative independence from their national business systems that generates the competitive advantage of skill webs. Acknowledgements
We would like to acknowledge the invaluable support of the ESRC who funded this project (RES000-23-0287) and for subsequent funding through the ESRC Centre for Skills, Knowledge and Organisational Performance (SKOPE). We would also like to acknowledge the input from the Journal reviewers in helping us to revise this article.

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See United Nations Conference on Trade and Development (UNCTAD), retrieved on 15 May 2009 from: http://www.unctad.org/TEMPLATES/Page.asp?intItemID 3159&lang 1

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