Globalizing Human Resource Management

Paul Sparrow, Chris Brewster, Chul Chung

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317361633
• Edition: 2
• Topic: Business
• Subtopic: Human Resource Management
• Index: Business

This new edition of Globalizing Human Resource Management examines the strategic and global issues of HRM by showing how organizations address the tradeoffs between global integration and local responsiveness. Sparrow, Brewster, and Chung discuss varying methods of globalized talent management and employer branding and conclude with a multi-dimensional approach to HRM.

The second edition includes:

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• Updated analyses of talent management, employer branding, and outsourcing of HRM

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• Broader geographic focus, including a new focus on Asian firms and other emerging markets

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• Exploration of the impact of strategic management thinking on HR as well as the latest research in other areas, such as operations, marketing, and economic geography

Complementing traditional international HRM texts, this is an ideal book for any student interested in the actual strategic logics being pursued by the HR function today.

Part I Globalization and international HRM theory

Paul Sparrow, Chris Brewster and Chul Chung

Drivers of globalization and patterns of response for multinational enterprises around the world

DOI: 10.4324/9781315668611-1

1.1 Introduction

Since the first edition of this book (Sparrow et al. 2004) there have been profound changes in the world business scene. Long ago Sparrow and Hiltrop (1997), interested at the time in how HRM professionals ‘transition’ their HRM systems from one mentality to another, argued that, in reality, HRM professionals (and academic study) had to accept and manage three potentially competing realities. The first of these – still true today – is that the majority of human resource management (HRM) inside organizations remains distinctly national. Although we outline an exciting agenda and range of developments inside organizations in this book, our starting assumption is that much HRM remains geography- and country-specific. This is not territory that we shall dwell on much in this book – these topics have been aired by many of the other books in this Routledge Series on Global Human Resource Management, and of course form the basis of the cross-cultural and cross-national perspectives on international human resource management (IHRM).

The material in this book follows the structure shown in Figure 1.1. This figure reminds us that there are a range of factors – broadly to do with national culture, the local institutional context, varieties of capitalism and national business models, and the typical strategic capability and role of HRM in any one geography – that shape much HRM practice.

Figure 1.1 The globalization of HRM

However, at the same time, there are many forces at play that are creating a dynamic for greater globalization (Sparrow, Farndale et al. 2014). We do not view the globalization of HRM as some endpoint – some ultimate state that organizations might aspire to. While it is possible to compare HRM systems and assess whether some are more globalized than others, globalization is in reality a journey and a process of change. The net result of many of the forces at play – and we analyse these forces in this chapter and the next – at the very least enables organizations to change their HRM practices, making the local environment more receptive to change and to the adoption of previously unattractive HRM ideas, thus ensuring greater global integration of, and inter-dependence within, cross-national patterns of HRM within an organization. HRM has only become globalized when the new patterns or practices can be delivered across countries in a reliable and sustainable way. For us, this uncoupling occurs in particular when there are shifts in the pattern of foreign direct investment (FDI), the adoption of new and disruptive technologies, changes in the balance of global integration, local responsiveness within the HRM service model, the pursuit of so-called best practices or the creation of global HRM operating models (such as the use of business partners, centres of excellence and shared services).

Finally, HRM is ultimately a ‘political’ process. Frequently, one HRM strategy for change may be ‘piggy-backed’ on another. Change processes intended to produce one outcome may be aligned pragmatically to another strategic initiative. Senior HRM professionals make choices about which change initiatives they might choose to align with each other. There may be other change processes taking place within the organization, nothing to do with globalization, but they might decide to ‘tie’ or ‘link’ their efforts to globalize a particular HRM practice to these unrelated change efforts. We call these ‘processes of transition’ through which new patterns of HRM are developed. There might, for example, be a global merger taking place that creates the opportunity and space for the HRM function to pursue integrative efforts that otherwise would not have been politically acceptable, or a strategic drive to develop capability in a particular emerging market that affords the opportunity to undertake some workforce planning for that geography. There might be (as of late) a global financial crisis, or a reputational crisis, that creates a questioning within a workforce about global management.

In this book we focus in particular on seven important ‘processes’: business model innovation and the building of global capabilities; the development of a global mindset and leadership model; global talent management; the actions associated with the management of an international labour force; the pursuit of global employer brands; significant shifts in the global sourcing, shoring and types of strategic partnership; and the standardization and e-enablement of HRM. We shall identify some of the important activities that take place within each of these strands of global HRM strategy. By bringing together research from many fields of international management within these strands, we hope to build a more integrated and coordinated understanding of what must be done. This understanding should then be used to think about the most appropriate structures, processes and roles for a globalized HRM function within multinational enterprises (MNEs).

Returning to this opening chapter, we now:

1. Examine what we mean by globalization generally.
2. Identify a series of levels and layers across which we need to understand the link between globalization and HRM.
3. Signal the need for international HRM specialists to respond to the process of globalization.

1.2 What do we speak about when we speak about globalization?

Increasing globalization is not a new phenomenon, even in a business sense, but it has increased since the end of the nineteenth century and particularly over recent decades. The main reasons for the increasing globalization of recent years have been advances in technology and communications.

The word ‘globalization’ has different meanings depending on context and subject. Each meaning is in turn subject to dispute and debate. It can, for example, relate to ideologies, as indicated by the many religions with adherents across the world, but also by the spread of neo-liberalism as an economic orthodoxy accepted in many capital cities. It can likewise refer to the spread of different cultural approaches, as in the cases of ballet, jazz or, more recently, ‘world music’. But it is economically that changes have had the most impact.

The term globalization is most often used as short-hand to refer to economic globalization – the growing internationalization of economic systems. It is unnecessary to go as far as Friedman (2007) and argue that everything is becoming more global and that there is growing convergence around the world, but clearly economic systems are increasingly linked to each other. The fall of the Berlin Wall and the collapse of communism in central and eastern Europe was a catalyst for linking those systems to the other European and North American systems, and the continuing liberalization of the communist regimes in Asia has led to extensive linkages there too. As we write, Cuba and the USA are taking the first steps for a long time towards allowing trade linkages.

Basically, however, all discussions of globalization are centred on the notion of increasing inter-dependence and integration across national borders (see Box 1.1).

Box 1.1 Inter-dependence and new patterns of integration

Sheehan and Sparrow (2012) summarized the inter-dependence between the triad economies as follows. At the time, China had US$2.4 trillion of central bank foreign exchange reserves (these subsequently grew to $3.5 trillion by 2014) and an estimated $4–5 trillion of corporate reserves. It was financing the consumption of Chinese goods by the USA and the strength of the dollar was, to a degree, dependent on Chinese investment strategies. Yet, at the same time, China held $630 billion of euro debts. The eurozone had replaced the USA as the largest importer of Chinese goods and had become the second largest exporter to China. China had become one of Africa’s largest trading partners, and bought 33 per cent of its oil from Africa and exported $60 billion to Africa. In China the trade share of gross domestic product (GDP) has dropped, from 64 per cent in 2006 to 41 per cent in 2015, as it continues to shift away from its early manufacturing export development model.

Neither China, Europe nor the USA could really afford any one part of the global economy failing. Although there was a global shift in power taking place, there was also considerable agency left open to MNEs. There was, however, a challenge to the previously dominant US–UK view of globalization.

For example, Japanese MNEs pursued what became known as the ‘flying geese’ model of industrialization in the 1980s and 1990s, through which they led Asian development – bringing manufacturing to other, following countries as activities migrated out from Japan in a V-formation in the quest for cheaper labour and greater efficiency (The Economist 2014a). Singapore and Hong Kong have also moved their economies up the global value chain, generating far more value now from services such as banking than from manufacturing. By the 2000s China had entered the frame. Similar pressures now face Chinese coastal cities, as inland locations, such as Chongqing, or lower wage countries, such as Vietnam and Cambodia, attract manufacturing. East Asia today has become the second most inter-connected regional economy after the EU, without the benefit of free trade connections. But the production system today is a networked and inter-dependent model, sometimes called Factory Asia, and likened more to a spider’s web ( The Economist 2014a) as components move in all directions, crossing and re-crossing borders. For example, a pair of shorts made for the US market consists of buttons made in China, zips made in Japan, yarn spun in Bangladesh, but woven into fabric and dyed in China, and the garment stitched together in Pakistan. Every pair of shorts has to look as if it were made in the same factory. China is a part of this network, although not the hub of it, but has announced plans for a ‘maritime Silk Road’ to build an infrastructure of ports and shipping connections across countries such as Cambodia and Sri Lanka.

Many other examples of the changing topography of global economic activity can also be seen. A recent development has been the Chinese expansion into Latin America and Africa, creating new patterns of comparative management (as well as a new geographical demography in terms of international mobility). For example, in 2009 the China Development Bank and Sinopec lent US$10 billion to Brazil’s state-controlled oil company, Petrobras, in return for ten years’ supply of 200,000 barrels of oil a day. FDI into Brazil has helped to fund a new set of Brazilian MNEs: Petrobras, in oil, Embraer, the world’s third largest maker of passenger jets, InBev, the world’s largest brewing company, and steel makers, bus builders, food companies, textile and cosmetics firms soon expected to follow (The Economist 2009a).

Reflecting such developments, a significant proportion of MNEs was expected to come from the emerging markets – for example, the Boston Consulting Group at one point considered that, of the next 100 MNEs to emerge, many would be from the emerging economies, with 14 emerging from Brazil. A few years later there was more scepticism and concern about the resilience of emerging markets, but the general shift in attention was already clear. Chinese firms already make up some 20 per cent of the Fortune Global 500, while the share of US and West European companies dropped from 76 per cent in 1980 to 54 per cent in 2013.

Shifts in the zeitgeist of global trade occur swiftly, and generally at a pace that can rapidly date a book like ours. It is also easy to popularize trends, when a more balanced perspective is needed. An example would be the temptation to overstate the importance of the Chinese–African trade. While China as a country now has the largest volume of trade with Africa, and in the early 2010s it pursued a strategy of gaining access to resources and markets to support its own rapid growth, Africa is no longer uncontested space in trade terms. According to United Nations Conference on Trade and Development (UNCTAD) data, by 2013 China and Africa were exchanging $160 billion worth of goods a year, and between 2003 and 2013 more than 1 million Chinese labourers and traders moved to Africa. However, China remains only one of many investors and traders in the region. African trade with five European countries, France, Spain, Italy, Germany and Britain (in order of trade), amounted to $225 billion. Its trade with the USA was $7 billion, $57 billion with India, $25 billion with each of Japan and Brazil, and countries beyond these accounted for another $454 billion. By 2015 African–Indian trade represented the fastest growing, providing 7.5 per cent of all FDI into Africa. Britain was the leading investor, investing twice as much as the next country, which was the USA, and three times as much as China.

Cautions aside, the decision in 2015 to make the yuan the fifth currency (alongside the dollar, the euro, sterling and the Japanese yen) in the International Monetary Fund’s (IMF) basket of ‘special drawing rights’ (SDRs) by 2016 opened up the way for new surges of investment flows and cemented the shift in the global power balance.

While shifts in trading patterns can happen very quickly, we do seem to now be entering a different set of competitive dynamics ( The Economist 2014a; McKinsey Global Institute 2015). A ...

Table of contents

• Cover Page
• Frontmatter
• Half Title Page
• Series Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of illustrations
• List of Contributors
• Acknowledgements
• Foreword
• PART I Globalization and international HRM theory
• 1 Drivers of globalization and patterns of response for multinational enterprises around the world
• 2 Multiple layers of globalization within the MNE
• 3 Global HRM strategies and structures
• PART II Strategic objectives
• 4 Building global capabilities across multinational enterprises
• 5 Developing international management competencies
• PART III Global integration mechanisms
• 6 Global talent management
• 7 Managing the international labour force
• 8 Employer branding
• 9 The location of business and HRM By whom? where? and how?
• 10 The e-enablement of HRM in MNEs
• 11 Conclusions and future research directions
• Index