International human resource management a multinational company perspective

“International Human Resource Management, 5e by Ibraiz Tarique, Dennis Briscoe and Randall Schuler has long been regarded as one of leading resources in the field. This new edition reinforces that reputation and brings the content up to date with contemporary trends in research and practice. Written by three of the leading scholars in the area, the volume is distinguished by its combination of insights from academic research and rich insights into IHRM in practice. It is comprehensive, accessible and authoritative, and should be required reading for any student or reflective practitioner of IHRM.”

–David Collings, Dublin City University, Ireland, and Senior Editor of the Journal of World Business

“This excellent book, a leader in the field, comprehensively covers the field of International Human Resource Management and focuses on the HRM issues and challenges facing firms as they internationalise their business operations. Each chapter provides a clear exposition and critique of the specialist literature, and case studies are used to provide rich insights into current practice. The combination of sound theory and examples from practice around the globe provides an important and up to date contribution to the field. The book is well geared to students interested in the international dimensions of HRM, and the excellent links between international strategy and HRM give students an in depth knowledge of the people management challenges faced by MNC managers in a globalised business world.” –Hugh Scullion, Established Professor of International Management, Cairnes School of Business and Economics,

NUI Galway, Ireland

“This edition of the book does a wonderful job of framing IHRM issues in the evolving, strategic context of running an international business. Pedagogically, the many practical applications and graphical presentations beautifully illustrate concepts and frameworks that will help readers grasp the rich content that the book provides.”

–Wayne F. Cascio, Robert H. Reynolds Chair in Global Leadership, University of Colorado Denver, USA, and Senior Editor of the Journal of World Business

2

International Human Resource Management Fifth edition

Thoroughly updated and expanded, the fifth edition of International Human Resource Management focuses on international human resource management (IHRM) within multinational enterprises (MNEs). The book has been designed to lead readers through all of the key topics of IHRM in a highly engaging and approachable way. In addition to the key topics and rich pedagogy students have come to expect, chapters have been updated, including an expanded chapter on Comparative and National Culture. Uncovering precisely why IHRM is important for success in international business, and how IHRM policies and practices function within the multinational enterprise, this comprehensive textbook provides an outstanding foundation for understanding the theory and practice of IHRM. It is essential reading for all students, instructors, and IHRM professionals.

Ibraiz Tarique is an Associate Professor of Management and Director of Global HR programs at the Lubin School of Business, at Pace University in New York City, USA. He teaches at the executive, graduate, and undergraduate levels.

Dennis Briscoe is Professor Emeritus of International Human Resource Management at the University of San Diego, USA, and owner/consultant at International Management and Personnel Systems (IMAPS).

Randall Schuler is Distinguished Professor of Strategic International Human Resources at the School of Management and Labor Relations at Rutgers University, USA, and Research Professor at the Lancaster University School of Management, UK, as well as the University of Zurich, Switzerland.

3

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 functions 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.

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

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

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

Managing Human Resources in Latin America An agenda for international leaders Edited by Marta M. Elvira and Anabella Davila

Global Staffing Edited by Hugh Scullion and David G. Collings

Managing Human Resources in Europe A thematic approach Edited by Henrik Holt Larsen and Wolfgang Mayrhofer

4

Managing Human Resources in the Middle-East Edited by Pawan S. Budhwar and Kamel Mellahi

Managing Global Legal Systems International employment regulation and competitive advantage Gary W. Florkowski

Global Industrial Relations Edited by Michael J. Morley, Patrick Gunnigle and David G. Collings

Managing Human Resources in North America Current issues and perspectives Edited by Steve Werner

Global Leadership Research, Practice, Development Edited by Mark Mendenhall, Gary Oddou, Allan Bird and Martha Maznevski

Global Compensation Foundations and Perspectives Edited by Luis Gomez-Mejia and Steve Werner

Performance Management Systems: A Global Perspective Edited by Arup Varma, Pawan S. Budhwar and Angelo DeNisi

Managing Human Resources in Central and Eastern Europe Edited by Michael J. Morley, Noreen Heraty and Snejina Michailova

Global Careers Michael Dickmann and Yehuda Baruch

Global Leadership (2nd edition) Research, Practice, Development Mark E. Mendenhall, Joyce S. Osland, Allan Bird, Gary Oddou, Martha L. Maznevski, Michael J. Stevens, Günter K. Stahl

Manager-Subordinate Trust A Global Perspective Edited by Pablo Cardona and Michael J. Morley

Managing Human Resources in Asia-Pacific (2nd edition) Edited by Arup Varma and Pawan S. Budhwar

Human Resource Management and the Institutional Perspective Edited by Geoffrey Wood, Chris Brewster, and Michael Brookes

5

International Human Resource Management (5th edition) Policies and Practices for Multinational Enterprises Ibraiz Tarique, Dennis Briscoe, and Randall Schuler

6

International Human Resource Management

Policies and Practices for Multinational Enterprises

Fifth edition

Ibraiz Tarique Dennis R. Briscoe Randall S. Schuler

7

First published 1995 by Prentice Hall Fifth edition published 2016 by Routledge 711 Third Avenue, New York, NY 10017

and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN

Routledge is an imprint of the Taylor & Francis Group, an informa business

© 1995, 2004, 2008, 2012, 2016 Taylor & Francis

The right of Ibraiz Tarique, Dennis R. Briscoe, and Randall S. Schuler to be identified as authors of this work has been asserted by them in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this book may be reprinted or reproduced or utilised 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.

Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe.

[First edition published by Prentice Hall 1995]

[Fourth edition published by Routledge 2011]

Library of Congress Cataloguing-in-Publication Data

Briscoe, Dennis R., 1945– International human resource management : policies and practices for

multinational enterprises / Ibraiz Tarique, Dennis R. Briscoe, Randall S. Schuler. — 5th edition.

pages cm Includes bibliographical references and index.

1. International business enterprises—Personnel management. I. Tarique, Ibraiz. II. Schuler, Randall S. III. Title.

HF5549.5.E45B74 2012 658.3—dc23 2015001046

ISBN: 978-0-415-71052-7 (hbk) ISBN: 978-0-415-71053-4 (pbk) ISBN: 978-1-315-88500-1 (ebk)

Typeset in Berling Roman and Futura

8

by Apex CoVantage, LLC

9

Contents

List of Figures List of Exhibits List of Case Studies List of IHRM in Actions List of End-of-Book Integrative Cases List of Acronyms Acknowledgments Foreword

Introduction

SECTION 1: STRATEGIC CONTEXT

Introduction to Section 1

1 The Internationalization of Human Resource Management

2 Strategic International Human Resource Management

3 Design and Structure of the Multinational Enterprise

4 International Mergers and Acquisitions, International Joint Ventures, and Alliances

SECTION 2: NATIONAL AND CULTURAL CONTEXT

Introduction to Section 2

5 Country and Company Culture and International Human Resource Management

6 International Employment Law, Labor Standards, and Ethics

7 International Employee Relations

SECTION 3: GLOBAL TALENT MANAGEMENT

10

Introduction to Section 3

8 International Workforce Planning and Staffing

9 International Recruitment, International Selection, and Repatriation

10 International Training and Management Development

11 International Compensation, Benefits, and Taxes

12 International Employee Performance Management

13 Well-being of the International Workforce and International HRIS

14 Comparative IHRM: Operating in Other Regions and Countries

SECTION 4: ROLE AND FUTURE OF IHRM

Introduction to Section 4

15 The IHRM Department, Professionalism, and Future Trends

Integrative Cases Index

11

Figures

I.1 Chapter Map 1.1 Who Needs International Human Resource Management? 2.1 Basic Elements of the Strategic Management Process 2.2 Evolution of the Multinational Enterprise 2.3 Auxiliary Methods of Internationalization 2.4 MNE Business Strategy 2.5 Headquarters’ International Orientation (Senior Executives) 2.6 MNE IHRM Strategy 2.7 Integrative Framework of Strategic International Human Resources

Management in MNEs 3.1 MNE Organizational Structure 3.2 Functional Structure 3.3 Product Structure 3.4 Geographic Structure 3.5 Matrix Structure 4.1 International Mergers and Acquisitions Process of Combination 4.2 HR Issues in the Three Stages of IM&As 4.3 Four Approaches to Integration in International Mergers and Acquisitions 4.4 Four-stage Model of HR Issues in International Joint Ventures 5.1 The Three Layers of Culture 5.2 Development of Cross-cultural Competence 6.1 Umbrella of CSR Programs 8.1 The International Workforce Planning and Staffing Process 8.2 Factors that Impact International Workforce Planning 9.1 Successful Expatriate Experience 9.2 Organizational Support for Repatriates 10.1 Effectiveness of Homogeneous and Heterogeneous Teams 11.1 The Balance Sheet 12.1 A Model of IPM in an MNE

12

Exhibits

1.1 Drivers of Internationalization of Business 1.2 The World’s Top 20 Non-financial TNCs (Ranked by Foreign Assets) 1.3 IHRM Questions for International Strategy 3.1 Best Practices for the Effective Management of Cross-border and Virtual Teams 5.1 Geert Hofstede’s Cultural Dimensions 5.2 Trompenaar’s and Hampden-Turner’s Cultural Dimensions 5.3 Global Leadership and Organizational Behavior Effectiveness (GLOBE):

Cultural Dimensions 6.1 ILO Declaration on Fundamental Principles and Rights at Work 6.2 United Nations Global Compact Principles of Interest to IHRM 6.3 The Scope of Selected European Union Directives Affecting the Labor and

Social Policy of Businesses Operating in Member States 6.4 Protected Classes for Discrimination Prohibition in Select Countries 6.5 Guidance on How an MNE Might Design a Code of Conduct and Ensure an

Effective Implementation of Ethical Standards for Worldwide Operations 7.1 Trade Union Membership, Selected Countries 7.2 Seven Approaches to Labor/employee Relations in the Global Context 7.3 Local Union Environment Issues That MNEs Need to Consider 8.1 International Staffing Approaches 8.2 Traditional International Assignees and Local Nationals 8.3 Types of International Assignees 8.4 Questions to Better Manage a Global Workforce 9.1 Employment Options for International Transfers 9.2 The 21st-century Expatriate Manager Profile 9.3 Definition of Expatriate Failure 9.4 Reasons for Expatriate Failure 9.5 Best Practice in IA Selection 10.1 The Match of Training Techniques to Country Culture 10.2 Skills of the Transnationally Competent Manager Versus Those of the

Traditional International Manager 10.3 Five-Phase Process for Designing Effective CCT Programs 11.1 Hourly Compensation Costs for Production Workers in Manufacturing, 2011 11.2 Average Annual Hours Per Year Per Person in Employment 11.3 Paid Vacation Days and Legally Mandated Paid Holidays

13

11.4 Types of Equity Compensation 11.5 The 10 Most Expensive Countries/cities in the World 11.6 Balance Sheet Example 11.7 Cost Estimate for Three-year Assignment 11.8 Average Tax Wedge 12.1 Shifts in Western PM 12.2 Globalization of Key Elements in the Design, Implementation, and Evaluation

of the PM System of an MNE 12.3 Criteria for Appraisal of International Assignees 12.4 Raters of International Assignee Performance 12.5 Use of Different Types of Rater in PAs of Expatriates 13.1 Issues to Consider When Designing Expatriate Crisis Management Programs 14.1 World’s 30 Largest Cities (2015 and 2025) 14.2 Population and Labor Force Characteristics (Europe) 14.3 Population and Labor Force Characteristics (North America) 14.4 Population and Labor Force Characteristics (Asia) 14.5 Population and Labor Force Characteristics (Latin America and Caribbean) 14.6 Population and Labor Force Characteristics (Africa) 15.1 International Relocation Services 15.2 The Datafication of HR

14

Case Studies

1.1 Yarn Paradise: World’s Biggest Online Yarn Store (Turkey) 2.1 The Early Evolution of Manufacturing Firms: Ford Motor Company Goes

International* (USA) 3.1 Capgemini: A Transnational Organization (France) 4.1 BCE’s Acquisition of Teleglobe International (Canada) 5.1 Internationalization and Cross-cultural Expansion of a Local Manufacturer:

Barden (US) and FAG (Germany) 6.1 Non-Compete Agreements and Intellectual Property: Value Partners SA (Italy)

and Bain & Company (USA) Conflict in Brazil 7.1 Global Industrial Relations at Ford Motor Company (USA/Global) 8.1 Firms Woo Executives from “Third” Countries (Global) 9.1 A World Marketplace for Jobs in Project-Based Work Environment (Global) 10.1 Management Training in Africa (Malawi) 11.1 Compensation Problems with a Global Workforce (Global, Thailand,

Philippines, Japan, Bolivia) 12.1 Cross-Cultural Performance Evaluation in Thailand: The Case of Richard

Evans, Expatriate Managing Director (Switzerland/Thailand/UK) 13.1 Global Health and Safety Concerns (Global, Romania, UK, Ghana) 14.1 The Impact of HR on Innovation: A Six-Country Comparison (Global) 15.1 Becoming an HR Transnational at Germany’s OBI (Germany)

15

IHRM in Actions

IHRM in Action 1.1 Creating a Global Accounting Firm IHRM in Action 1.2 CEOs’ Perspectives on Globalization IHRM in Action 1.3 Developing a Global Appetite for Fish and Chips IHRM in Action 2.1 Implementing a Global Strategy at a Japanese Pharmaceutical IHRM in Action 3.1 Moving HR from International to Global IHRM in Action 4.1 Lessons Learned by GE in Cross-Border Acquisitions IHRM in Action 5.1 Turning McDonalds into a Global Brand IHRM in Action 6.1 Developing Global Labor Standards at Levi Strauss IHRM in Action 7.1 Cross-Border Worker Representation at Hewlett-Packard IHRM in Action 8.1 Dealing with Labor Shortages in the Netherlands IHRM in Action 9.1 Locating Near the Talent with a Global Workforce IHRM in Action 9.2 Repatriation at Monsanto IHRM in Action 10.1 Global Management Development Program at Colgate

Palmolive IHRM in Action 11.1 Developing a Global Compensation Program at Colgate

Palmolive IHRM in Action 12.1 Expatriate Performance Management at Nokia IHRM in Action 13.1 The Need for Emergency Medical on Travel in Niger IHRM in Action 15.1 IHRM in a Global Mining Company

16

End-of-Book Integrative Cases

Case 1 Fred Bailey: An Innocent Abroad Case 2 Bavarian Auto Works in Indonesia (Germany/Indonesia)

17

Acronyms

ADA Americans with Disabilities Act ADEA Age Discrimination in Employment Act APEC Asia-Pacific Economic Cooperation ASEAN Association of South East Asian Nations BOK Body of Knowledge BRIC Brazil, Russia, India, China BT Business Traveler C&B Compensation and Benefits CBT Computer-Based Training CEE Central and Eastern Europe CEO Chief Executive Officer CFO Chief Financial Officer CIPD Chartered Institute of Personnel and Development COLA Cost of Living Allowance CSR Corporate Social Responsibility EEA European Economic Area EFTA European Free Trade Agreement EPI Efficient Purchaser Index ESOP Employee Stock Ownership Plan ESPP Employee Stock Purchase Plan ETUC European Trade Union Confederation EU European Union FCN Friendship, Commerce, and Navigation Treaty FCPA Foreign Corrupt Practices Act FDI Foreign Direct Investment FTAA Free Trade Area of the Americas Fx Exchange Rate GATT General Agreement on Trade and Tariffs GEC Global Employment Company GHRIS Global Human Resource Information System

18

GI Global Integration GLOBE Global Leadership and Organizational Behavior Effectiveness GPHR Global Professional in Human Resources GUFs Global Union Federations HCN Host-Country National HQ Headquarters HR Human Resources HRCI Human Resource Certification Institute HRIS Human Resource Information System HRM Human Resource Management IA International Assignee or International Assignment IB International Business ICC International Chamber of Commerce ICFTU International Confederation of Free Trade Unions IE International Employee IHR International Human Resources IHRM International Human Resource Management IJV International Joint Venture ILO International Labor Organization ILP International Labor Organization IMF International Monetary Fund INS Immigration and Naturalization Service IPM International Performance Management IPO Intellectual Property Office IT Information Technology ITUC International Trade Union Confederation JV Joint Venture LR Local Responsiveness M&A Merger and Acquisition MNE Multinational Enterprise NAALC North American Agreement on Labor Cooperation NAFTA North American Free Trade Agreement NGO Non-Governmental Organization OECD Organization for Economic Cooperation and Development OEEC Office of European Economic Cooperation PA Performance Appraisal

19

PCN Parent-Country National PCT Patent Cooperation Treaty PM Performance Management PRC People’s Republic of China R&D Research and Development SAR Stock Appreciation Rights SEC Securities and Exchange Commission SHRM Society for Human Resource Management SIHRM Strategic International Human Resource Management SME Small- and Medium-sized Enterprises SOX Sarbanes-Oxley TCN Third-Country National T&D Training & Development TI Transparency International TNC Transnational Corporation TUAC Trade Union Advisory Committee UN United Nations UNCTAD United Nations Conference on Trade and Development UK United Kingdom US United States

20

Acknowledgments

We are grateful to many individuals who have provided valuable information, insights, cases, and assistance in completing this book. They include: Susan E. Jackson, Rutgers University; Paul Sparrow and Cary Cooper, Lancaster University Management School; Jyotsna Bhatnagar and Rakesh Sharma, Management Development Institute India; Chris Brewster, Reading University; Yadong Luo, University of Miami; Ingmar Björkman, the Swedish School of Economics; James Hayton, University of Warick; Shaun Tyson and Michael Dickmann, Cranfield School of Management; Gary Florkowski, University of Pittsburgh; Cal Reynolds, Calvin Reynolds & Associates; Hugh Scullion, National University of Ireland; Dave Collings, Dublin City University; Vlad Vaiman, California Lutheran University; Stu Youngblood, Texas Christian University; Bruno Staffelbach, University of Zurich; Bill Castellano, Rutgers University; Ed Schuler, The Schuler Group; Gerold Frick, Aalen University; Manfred Stania, Stania Management; Martin Hilb, University of St. Gallen; Christian Scholz, University of Saarlandes; Mark Saxer, Saxer Consulting; Nigel Shaw and Nadia Wicki de la Puente, Novartis; Michael Morley, University of Limerick; Charles Galunic and Isable Assureira, INSEAD; Simon Dolan, ESADE; Georges Bachtold, Blumer Machines Company; Darryl Weiss, Lockheed Martin Orincon, San Diego; Jerry Edge, RMC Consultants; Joann Stang, Solar Turbines (retired); Bernie Kulchin, Cubic Corporation; Ben Shaw, Bond University; Ed Watson, KPMG; Gardiner Hempel, Deloitte & Touche; Wayne Cascio and Manuel Serapio, University of Colorado-Denver; Bob Grove, San Diego Employers’ Association (retired), Jason Exley, MSI, Denver, CO; Shaista Khilji, The George Washington University; Akram Al Ariss, Toulouse Business School; and Elaine Farndale, Pennsylvania State University.

A special thanks to Lisbeth Claus, Willamette University, for her permission to use her contributions to the fourth and fifth editions.

Dr. Schuler thanks many students at Rutgers University in the Department of Human Resource Management for their teaching and writing suggestions, and the department’s webmaster, Renee Walker, for her work on the construction of his global website.

Dr. Briscoe thanks his graduate students at the University of San Diego and at the many other schools in the some 19 countries where he has taught IHRM, and particularly his most recent graduate assistant, Chanyu Miao, for her help in research into IHRM and country HR practices.

Dr. Ibraiz Tarique is indebted to his father, Dr. Asif Tarique, who passed away in January 2015, for teaching him the value of cultural diversity. Dr. Asif Tarique (an

21

international marine biologist by profession) was a global citizen who had a true passion for cultural diversity developed from living in numerous countries and experiencing different cultures, people from all walks of life, poetry, and languages. Dr. Ibraiz Tarique is grateful to his father for an upbringing as a “third culture kid” (a child who grows up in a culture other than that of his or her parents).

Dr. Ibraiz Tarique gives thanks to his family for providing unwavering support to work on this book. He is thankful to both co-authors for providing the guidance, encouragement, and support to contribute to the fifth edition. For Dr. Ibraiz Tarique, working with Dr. Schuler and Dr. Briscoe has been one of the best experiences. Dr. Ibraiz Tarique is thankful to all the individuals who helped in the research for this book. He would like to thank the Lubin School of Business, Pace University, and his excellent colleagues for supporting his interests in international human resource management. Finally, he would like to thank his students (both current and past) who continuously inspire him and remind him every day that learning is a lifelong process.

And last, Dr. Briscoe acknowledges the support from his wife, Georgia, who provided inspiration and example during a particularly difficult time for her during the writing of this fifth edition as well as the example being set by his son, Forrest, who is now showing his father how the role of professor can be so fulfilling. He also acknowledges how great it has been to work with his co-authors, Ibraiz Tarique and Randall Schuler. They went above and beyond the call of duty to provide the support and effort necessary to complete the project within tight deadlines. Their contributions made the final product much better.

Finally the authors thank the many great people at Routledge for their wonderful assistance and support throughout this project, in particular, the Global HRM Series senior editor, Sharon Golan.