What is the staffing policy that lenovo is pursuing

chapter 17 Global Human Resource Management

LEARNING OBJECTIVES

1 Summarize the strategic role of human resource management in the international business.

2 Identify the pros and cons of different approaches to staffing policy in the international business.

3 Explain why managers may fail to thrive in foreign postings.

4 Recognize how management development and training programs can increase the value of human capital in the international business firm.

5 Explain how and why performance appraisal systems might vary across nations.

6 Understand how and why compensation systems might vary across nations.

7 Understand how organized labor can influence strategic choices in international business firms.

opening case MMC China

It had been a very bad morning for John Ross, the general manager of MMC's Chinese joint venture. He had just gotten off the phone with his boss in St Louis, Phil Smith, who was demanding to know why the joint venture's return on investment was still in the low single digits four years after Ross had taken over the top post in the operation. “We had expected much better performance by now,” said Smith, “particularly given your record of achievement; you need to fix this, Phil. Our patience is not infinite. You know the corporate goal is for a 20 percent return on investment for operating units, and your unit is not even close to that.” Ross had a very bad feeling that Smith had just fired a warning shot across his bow. There was an implicit threat underlying Smith's demands for improved performance. For the first time in his 20-year career at MMC, Ross felt that his job was on the line.

MMC was a U.S. based multinational electronics enterprise with sales of $2 billion and operations in more than 10 countries. MMC China specialized in the mass production of printed circuit boards for companies in the cell phone and computer industries. MMC was a joint venture with Shanghai Electronic Corporation, a former state-owned enterprise that held 49 percent of the joint-venture equity (MMC held the rest). While MMC held a majority of the equity, the company had to consult with its partner before making major investments or changing employment levels.

John Ross had been running MMC China for the past four years. He had arrived at MMC China after a very successful career at MMC, which included extended postings in Mexico and Hungary. When he took the China position, Ross thought that if he succeeded he would probably be in line for one of the top jobs at corporate headquarters within a few years. Ross had known that he was taking on a challenge with MMC China, but nothing prepared him for what he found there. The joint venture was a mess. Operations were horribly inefficient. Despite low wages, productivity was being killed by poor product quality, lax inventory controls, and high employee turnover. The venture probably employed too many people, but MMC's Chinese partner seemed to view the venture as a job-creation program and repeatedly objected to any plans for cutting the workforce. To make matters worse, MMC China had failed to keep up with the latest developments in manufacturing technology, and it was falling behind competitors. Ross was determined to change this, but it had not been easy.

To improve operations, Ross had put in a request to corporate HR for two specialists from the United States to work with the Chinese production employees. It had been a disaster. One had lasted three months before requesting a transfer home for personal reasons. Apparently, his spouse hated China. The other had stayed for a year, but he had interacted so poorly with the local Chinese employees that he had to be sent back to the United States. Ross wished that MMC's corporate HR department had done a better job of selecting and then training these employees for a difficult foreign posting, but in retrospect he had to admit that he wasn't surprised at the lack of cultural training; he had never been given any.

After this failure, Ross had taken a different tack. He had picked four of his best Chinese production employees and sent them to MMC's U.S. operations, along with a translator, for a two-month training program focusing on the latest production techniques. This had worked out much better. The Chinese had visited efficient MMC factories in the United States, Mexico, and Brazil and had seen what was possible. They had returned home fired up to improve operations at MMC China. Within a year they had introduced a Six Sigma quality control program and improved the flow of inventory through MMC's factory. Ross could now walk though the factory without being appalled by the sight of large quantities of inventory stacked on the floor or bins full of discarded circuit boards that had failed postassembly quality tests. Productivity had improved as a result and after three tough years, MMC China had finally turned a profit.

Apparently this was not good enough for corporate headquarters. Ross knew that improving performance further would be tough. The market in China was very competitive. MMC was vying with many other enterprises to produce printed circuit boards for large multinational customers that had assembly operations in China. The customers were constantly demanding lower prices, and it seemed to Ross that prices were falling almost as fast as MMC's costs. Also, Ross was limited in his ability to cut the workforce by the demands of his Chinese joint-venture partner. Ross had tried to explain all of this to Phil Smith, but Smith didn't seem to get it. “The man is just a number cruncher,” thought Ross. “He has no sense of the market in China. He has no idea how hard it is to do business here. I have worked damn hard to turn this operation around, and I am getting no credit for it, none at all.”•

  Source: This is a disguised case based on interviews undertaken by Charles Hill.

Introduction

Human Resource Management (HRM)

Activities an organization conducts to use its human resources effectively.

This chapter continues our survey of specific functions within an international business by looking at international human resource management. Human resource management (HRM) refers to the activities an organization carries out to use its human resources effectively.1 These activities include determining the firm's human resource strategy, staffing, performance evaluation, management development, compensation, and labor relations. None of these activities is performed in a vacuum; all are related to the strategy of the firm. As we will see, HRM has an important strategic component.2 Through its influence on the character, development, quality, and productivity of the firm's human resources, the HRM function can help the firm achieve its primary strategic goals of reducing the costs of value creation and adding value by better serving customers.

The opening case described what can happen when the HRM function does not perform as well as it might. MMC sent two expatriates to MMC China to help the beleaguered boss of that unit, John Ross, but neither expatriate was successful. Apparently, the HR department had picked two employees who were well qualified from a technical perspective but were not suited to a difficult foreign posting. This is not unusual. As we shall see, a large number of expatriates return home before their tour of duty is completed, often because while they have the technical skills to perform the required job, they lack the skills required to manage in a different cultural context or because their spouses do not like the posting. To his credit, Ross came up with a solution to the problem: send Chinese employees to the United States to be trained in the latest manufacturing techniques. The MMC case also illustrates another problem in international HRM: how to evaluate the performance of expatriate managers who are operating in very different circumstances from those found in the home country. It is apparent from the case that John Ross was being evaluated on the basis of the performance of his unit against corporatewide profitability criteria, but these criteria failed to account for the difficult conditions Ross inherited and the problems inherent in doing business in the Chinese market. The most skilled multinationals have found ways of dealing with this problem and adjust performance appraisal criteria to take differences in context into account. MMC apparently did not do this.

Irrespective of the desire of managers in many multinationals to build a truly global enterprise with a global workforce, the reality is that HRM practices still have to be modified to national context. The strategic role of HRM is complex enough in a purely domestic firm, but it is more complex in an international business, where staffing, management development, performance evaluation, and compensation activities are complicated by profound differences between countries in labor markets, culture, legal systems, economic systems, and the like (see Chapters 2, 3, and 4). For example,

• Compensation practices may vary from country to country, depending on prevailing management customs.

• Labor laws may prohibit union organization in one country and mandate it in another.

• Equal employment legislation may be strongly pursued in one country and not in another.

Expatriate Manager

A national of one country appointed to a management position in another country.

If it is to build a cadre of managers capable of managing a multinational enterprise, the HRM function must deal with a host of issues. It must decide how to staff key management posts in the company, how to develop managers so that they are familiar with the nuances of doing business in different countries, how to compensate people in different nations, and how to evaluate the performance of managers based in different countries. HRM must also deal with a host of issues related to expatriate managers. (An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.) It must decide when to use expatriates, determine whom to send on expatriate postings, be clear about why they are doing it, compensate expatriates appropriately, and make sure that they are adequately debriefed and reoriented once they return home.