BMGT 463:

Cross-Cultural Challenges
in Business
© 2008 Robert H. Smith School of Business
University of Maryland
 International Human Resource
Management

© 2008 Robert H. Smith School of Business

University of Maryland
McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
 Learning Objectives

1. Understand the major functions of HRM

2. Understand how High Performance Work
Systems affect employee and
organizational performance
3. Understand the strategic options for
MNCs’ international HRM and which
option to use

© 2009 Robert H. Smith School of Business

University of Maryland
 The Enterprise is the people
• Organizations: why do they exist and how
do they work?

• Can you imagine an organization without

people?

© 2009 Robert H. Smith School of Business

University of Maryland
 What is HRM?
• HRM involves all management decisions
and practices that directly affect or
influence the people, or human resources,
who work for the organization.

© 2009 Robert H. Smith School of Business

University of Maryland
 What does HR do?
• Human resources planning
– Forecasting demand for labor
– Job analysis
• Acquiring human resources
– Equal employment opportunity
– Recruiting and job search
– Assessing job candidates: tools for selection
• Training and development
– Needs assessment
– Designing training procedures
– Evaluating results

© 2009 Robert H. Smith School of Business

University of Maryland
 What does HR do? (Continued)
• Performance Management &Rewarding employees
– A formal, structured process used to measure, evaluate, and
influence employees’ job-related attitudes, behaviors, and
performance results.
– Evaluating market wages/salary surveys
– Performance appraisal
– Performance feedback for individuals and teams
– Incentive compensation and benefits
• Labor relations and collective bargaining
– Treat employees as an asset that requires investment instead of an
expense to be minimized
– Resolve grievance and complaints
• Organizational safety and health
– Design of work (work enrichment, etc.)
– Maintain safe pleasant work environment
© 2009 Robert H. Smith School of Business
University of Maryland
 High Performance Work Systems (HPWS)
• Strategic HRM: A System Approach
– Aligned with organizational strategy
– Internally coherent work practices
– Control oriented  Commitment, involvement,
performance-oriented Systems
– High Performance Work System (HPWS)
• “Including comprehensive recruitment and selection
procedures, incentive compensation and performance
management systems, extensive employee involvement
and training” (Huselid, 1995; p. 635)
• Aims to improve employee competencies, motivation,
and performance

© 2009 Robert H. Smith School of Business

University of Maryland
 HPWS and Organizational
Performance
• Lower employee turnover rates (e.g., Huselid,
1995)
• Higher labor productivity (e.g., Datta, Guthrie, &
Wright, 2005)
• Lower injury rates (e.g., Zacharatos, Barling, &
Iverson, 2005)
• Better company financial performance (e.g.,
Huselid, 1995)
• Better customer service and customer satisfaction
(e.g., Liao, Toya, Lepak, & Hong, 2009)

© 2009 Robert H. Smith School of Business

University of Maryland
The Golden Triangle for MNCs’ HRM:

• Standardization towards Headquarters

Practices?
• Standardization towards Global Best
Practices?
• Localization?

© 2009 Robert H. Smith School of Business

University of Maryland
 Study by Pudelko & Harzing
(Organizational Dynamics, 2008)
• Surveyed the HR VPs of 849 Multi-National
Companies regarding their HR practices
– HQs in the USA, Japan, & Germany
– Subsidiaries of Japanese and German MNCs in
the USA
– Subsidiaries of American and German MNCs in
Japan
– Subsidiaries of American and Japanese MNCs
in Germany
© 2009 Robert H. Smith School of Business
University of Maryland
 Results (1)

• HRM at Headquarters: Expected outcome –

Clear Country Differences
– 20 statements about HR practices
– For 16 statements, USA and Japan at the
opposites, Germany in the middle
– For 13 statements, the differences were
statistically significant

© 2009 Robert H. Smith School of Business

University of Maryland
 Results (2)
• HRM at Subsidiary Level: Surprising Outcome –
Standardization Towards American HRM
Practices
– Expected subsidiary practices to be positioned in
between parent and host country. But this was not
always the case.
– E.g., German subsidiaries in Japan did not adopt either
their own German model or the Japanese model, but
followed more American style practices. Similarly,
Japanese subsidiaries in Germany adapted more of the
HRM practices of the USA
– E.g., American subsidiaries in Germany were adapting
to a sig. extent to German practices, while American
subsidiaries in Japan were half way “in between” those
of American and Japanese HQ practices.
© 2009 Robert H. Smith School of Business
University of Maryland
 The Bottom-Line: Standardization
Towards Global Best Practices
• American HRM practices were perceived as
global best practices by the study participants
• There seems to be a trend that some HRM
practices, particularly recruitment, training,
assessment, promotion and incentives, become
increasingly standardized towards global best
practices.
• Always consider contingency!

© 2009 Robert H. Smith School of Business

University of Maryland
 Practical Implications for MNCs:
When to Implement Which Strategy?
• Consider two factors
– Internal core competencies
– External environment
• If the practice involves core competence of, then
standardization towards the HQ practices
• If the practice does not involve core competence and the
subsidiary has to adapt to specific local cultural and/or
institutional circumstances in order to be successful in the
environment they are operating in, than use localization
strategy
• For most cases, standardization towards global best
practices, which in principle could derive from any country
model
© 2009 Robert H. Smith School of Business
University of Maryland
 Team 7 & Team 8 Presentations:
Four Seasons Goes to Paris
• Everyone (not just Teams 7 & 8) needs to read the case
before the class, think about the questions, and attend the
presentation:
– What is it like to stay at a Four Seasons hotel?
– What has made Four Seasons successful over the last 30 years?
– Does corporate culture play a role in Four Seasons’ success? If so,
how and why?
– Do human resource strategies play a role in Four Seasons’
success? If so, how and why?
– What is Four Season’s approach to international growth?
– How do you feel about the way Four Seasons entered the
Paris/French market? What was good and / or bad about the entry
strategy? Why?
– Comparing Four Seasons’ and Disney’s experiences in Paris. Why
is Four Seasons successful but Disney is not?
– Do the lessons from this case study apply to firms entering
markets other than France? If not, why? If so, how, and to what
© 2009 Robert types of markets?
H. Smith School of Business
University of Maryland