ArticlePDF Available

The Role of Corporate HR Functions In Multinational Corporations: The Interplay Between Corporate, Regional/National And Plant Level

Authors:

Abstract and Figures

The HR literature has been abundant in providing typologies of the roles of HR professionals in their organisation. These typologies are largely related to the changing nature of HRM over time, and the context in which empirical work was carried out. In this paper we focus on the context of the increasing internationalisation of firms and how this has an effect upon modern-day typologies of HR roles. We explore these roles by focusing on the way in which HRM practices come about. Especially in a MNC setting of increasing internationalisation of firms the issues of coordination, shared learning and standardisation versus leeway for adapting to the local context (customisation) are prominent. These issues present themselves both at the corporate and regional level and at the national and local (plant) level. On all these levels HR practitioners are active and find themselves amidst the interplay of both (de-)centralisation and standardisation versus customisation processes. This paper thus explores the way in which HR practices come into being and how they are implemented and coordinated. These insights help us understand further the roles of international corporate HR functions that are being identified. Our data is based on 65 interviews, which were held (as part of larger study of HR-function excellence) with HR managers, line managers and senior executives of six multinational companies in eight countries from September to December 2004. This data reveals new classifications of processes by which HR activities are developed, implemented and coordinated, both in terms of who is involved and how these processes are carried out.
Content may be subject to copyright.
Cornell University ILR School
DigitalCommons@ILR
CAHRS Working Paper Series Center for Advanced Human Resource Studies
(CAHRS)
3-1-2005
The Role of Corporate HR Functions In
Multinational Corporations: The Interplay
Between Corporate, Regional/National And Plant
Level
Elaine Farndale
Erasmus University
Jaap Paauwe
Erasmus University
This Article is brought to you for free and open access by the Center for Advanced Human Resource Studies (CAHRS) at DigitalCommons@ILR. It
has been accepted for inclusion in CAHRS Working Paper Series by an authorized administrator of DigitalCommons@ILR. For more information,
please contact jdd10@cornell.edu.
Farndale, Elaine and Paauwe, Jaap, "The Role of Corporate HR Functions In Multinational Corporations: The Interplay Between
Corporate, Regional/National And Plant Level" (2005). CAHRS Working Paper Series. Paper 477.
http://digitalcommons.ilr.cornell.edu/cahrswp/477
Cornell University
School of Industrial and Labor Relations
Center for Advanced Human Resource Studies
CAHRS at Cornell University
187 Ives Hall
Ithaca,
NY 14853-3901 USA
Tel.
607 255-9358
www.ilr.cornell.edu/CAHRS
W ORKING P APER S ERIES
The Role of Corporate HR
Functions In Multinational
Corporations: The Interplay
Between Corporate, Regional/
National And Plant Level
Elaine Farndale
Jaap Paauwe
Working Paper 05 10
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
The Role of Corporate HR Functions In
Multinational Corporations:
The Interplay Between Corporate,
Regional/National And Plant Level
Elaine Farndale
farndale@few.eur.nl
Jaap Paauwe
Erasmus University Rotterdam
The Netherlands
Vth International HRM Workshop
Universidad de Cadiz/Sevilla
Spain
19-21 May 2005
paauwe@few.eur.nl
March 2005
http://www.ilr.cornell.edu/cahrs
This paper has not undergone formal review or approval of the faculty of the ILR School. It
is intended to make results of Center research available to others interested in preliminary
form to encourage discussion and suggestions.
Most (if not all) of the CAHRS Working Papers are available for reading at the Catherwood
Library. For information on what’s available link to the Cornell Library Catalog:
http://catalog.library.cornell.edu if you wish.
Page 2
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Abstract
The HR literature has been abundant in providing typologies of the roles of HR
professionals in their organisation. These typologies are largely related to the changing
nature of HRM over time, and the context in which empirical work was carried out. In this
paper we focus on the context of the increasing internationalisation of firms and how this has
an effect upon modern-day typologies of HR roles. We explore these roles by focusing on
the way in which HRM practices come about. Especially in a MNC setting of increasing
internationalisation of firms the issues of coordination, shared learning and standardisation
versus leeway for adapting to the local context (customisation) are prominent. These issues
present themselves both at the corporate and regional level and at the national and local
(plant) level. On all these levels HR practitioners are active and find themselves amidst the
interplay of both (de-)centralisation and standardisation versus customisation processes.
This paper thus explores the way in which HR practices come into being and how
they are implemented and coordinated. These insights help us understand further the roles
of international corporate HR functions that are being identified. Our data is based on 65
interviews, which were held (as part of larger study of HR-function excellence) with HR
managers, line managers and senior executives of six multinational companies in eight
countries from September to December 2004. This data reveals new classifications of
processes by which HR activities are developed, implemented and coordinated, both in
terms of who is involved and how these processes are carried out.
This paper is not yet finalised and, for this reason, the authors request that it is not
quoted without permission. However, the authors warmly invite requests to do so or
discussion about any issue in connection with this
paper.
Dr Elaine Farndale & Professor Jaap Paauwe
Faculty of Economics, H15-10
Erasmus University Rotterdam
PO Box 1738
3000 DR Rotterdam
The Netherlands
Email:
farndale@few.eur.nl ; paauwe@few.eur.nl
Page 3
The Role
Of
Corporate
HR
Functions
In
MNCS CAHRS WP05-10
The Role
of
Corporate
HR
Functions
In Multinational Companies
Introduction
The
HR
literature
has
been abundant
in
providing typologies
of the
roles
of HR
professionals
in
organisations. These typologies have focused primarily
on the
strategic
involvement
of HR
departments,
the
management
of
change
and
organisational culture,
the
relationship between employer
and
employee,
and
transactional personnel administration
(see,
for
example: Caldwell, 2003; Guest, 1990; Legge, 1978; Monks, 1992; Paauwe, 2004;
Storey, 1992; Tyson
&
Fell,
1986; Ulrich, 1997). More recently
we
have also seen increased
attention paid
to HR
roles
in the
more knowledge based economy, identifying
the
importance
of context
in the
interpretation
of
role typologies (see,
for
example: Lengnick-Hall
&
Lengnick-Hall, 2003).
The different roles chart
the
progression
of the HR
profession over time.
In
this paper
we focus
on the
question: what roles
can be
identified
for the
current
day HR
department
in
the context
of
increasing globalisation
of the
corporate domain? Very often
the
boundaries
of
organisations
are not
limited anymore
to the
domestic setting. Crossing borders
has
become
normal,
which gives rise
to the
issue
of HRM in
multinational settings
and how the HR
function
and
related roles manifest themselves
at the
various plant, country, regional
and
corporate levels.
How
issues
of
coordination, shared learning (both top-down
and
bottom-up)
and standardisation versus leeway
for
adapting
to the
local context (customization) become
critical
in
this context.
As
a
result
of
this international environment,
a
number
of new
roles
of HR
departments operating
in
multinational corporations
are
emerging based
on
different
HRM
strategies
for
internationalisation (Taylor,
et al.,
1996).
At the
corporate
HR
level, these focus
on designing
and
monitoring
the
implementation
of
corporate
HR
policies especially
for the
company’s
top
management
and
expatriates. These activities require
new
roles such
as
“effective influencer (Novicevic
&
Harvey,
2001:
1260), “network leadership
and
“process
champion (Evans,
et al.,
2002: 471-2), “constructive fighting
(ibid:
487), “guardian
of
culture (Sparrow,
et
al., 2003:
27) and
“knowledge management champion
(ibid:
24).
Page
4
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Before exploring further what these roles entail, this paper first outlines existing
typologies of HR department roles, exploring their association with the period in which they
were devised. The modern day context of multinational organisations operating in a global
market is then considered. Subsequently, the emerging roles of HR departments in such
organisations are highlighted. We then present the results of six in-depth case studies of
multinational corporations designed to identify the activities of corporate HR departments,
and the processes through which these activities are designed, developed and implemented.
Conclusions are then drawn in terms of a contextually-based model for HR departments
within multinational corporations.
HR Department Roles In Context
There are multiple typologies of HR department roles in the literature which consider
the extent to which departments are either reactive or proactive for example, Legge’s
(1978) conformist or deviant innovator roles and the level of involvement in corporate
strategy such as Tyson and Fell’s (1986) architect (strategic), contracts manager
(operational) and clerk of works (administrative) roles, later modified by Monks (1992) to
include a fourth innovative/professional role which falls between the contracts manager and
architect roles and those that combine the two dimensions for example, Storey’s (1992)
change-makers (proactive, strategic), advisers (reactive, strategic), regulators (proactive,
operational) and handmaidens (reactive, operational). Guest (1990) also included the
unitarist/pluralist and conservative/traditional dimensions in his model of HRM roles, whilst
Ulrich (1997) focuses on the people/process and future/operational dimensions of the HR
role:
strategic partner (future/process), change agent (future/people), administrative expert
(operational/process) and employee champion (operational/people).
We must consider the relevance of context to the creation of these role typologies. In
addition to considering the content of the roles, the typology of HR department roles
presented by Monks (1992) suggests that in stable environments, a simple model of HRM
practice will suffice. It is only in complex organisations particularly undergoing substantial
change where a more sophisticated approach to practice is required. Other commentators
Page 5
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
support this linkage between the nature of HRM practices and the needs of the
organisational context (Carroll,
1991;
Guest, 1991). Indeed, the typologies themselves show
the range of roles which HR has developed in a historical context. The initial role of a focus
on employee welfare, and increasingly a means of controlling employee absence, developed
into the bureaucratic element of the HR role we see today. The rise of the power of trade
unions at local company level resulted in the negotiator role, which has since declined again
in line with further changes in the industrial relations context. In the 1980s, the rise of HRM
turned attention to the strategic role of HR and its role in helping organisations manage
change as the business environment became more competitive.
Recently, Caldwell (2003) has also suggested a review of the models proposed by
Storey (1992) and Ulrich (1997). He suggests that advisory roles offer no more to HR
practitioners than a consultancy role lacking in real influence, administrative resource and
power. The ‘handmaiden or service provider role has become synonymous with cost-
efficiency issues and outsourcing. The regulator role is in decline due to the changes in the
employee relations environment, however it is also rising in importance due to increasing
employment legislation. Finally, the change agent role is the one perceived by HR
practitioners most often as being their new role, although in practice this is not necessarily
being recognised. The HR department has been shown to be unlikely to initiate
organisational change, although they are frequently invited to comment on the human
resource implications of planned change at board level (Evans & Cowling, 1985; Hiltrop, et
al., 1995; Purcell & Ahlstrand, 1994).
Lengnick-Hall & Lengnick-Hall (2002) introduce four new roles for HR, which may be
interesting to consider in the global economy context, based on what they describe as the
knowledge economy in which many organizations are now working: (a) human capital
steward:
acting as a guide and facilitator in partnership with employees with the aim of
achieving the highest return possible on a company’s human capital investments; (b)
knowledge facilitator: facilitating both knowledge capital (held in explicit and implicit sources)
and knowledge flows; (c) relationship builder: managing relationships between individuals
Page 6
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
and groups both internal and external to the organization to enhance social capital across
the total value chain; and (d) rapid deployment specialist: taking responsibility for the
development of flexible human capital resources with an emphasis on adaptability, tolerance
and capacity to learn.
MNC Context
Having considered the relevance of context-specificity, it is essential to understand
more about the multinational corporation (MNC) context. We will do so by first focussing on
the different stages of internationalisation in general, then continue with different
international HR strategies and then finally focus on the different HR roles (see Figure 1).
Figure 1:
The context of the HR function in a multinational setting
Internationalisation strategies: ethnocentric/global;
polycentric/multi-domestic; geocentric/transnational
International HR strategies:
adaptive; exportive; integrative
International HR roles: dependent on
context and level of operation
Internationalisation Strategies
Multinational organisations have varying reasons for global expansion, largely aiming
to increase competitive advantage by realising economies of scale or economies of scope
(Harzing & Ruysseveldt, 2004). There are however stages in the process of
internationalisation, and choices in the strategies and related structures adopted by MNCs.
The range of MNC subsidiary strategies are described in Perlmutter’s (1969) and Bartlett
and Ghoshal’s (1989) well-known classifications:
ethnocentric, global
strategy:
control is centralised and subsidiaries resemble the
parent company;
polycentric, multi-domestic
strategy:
control is decentralised and subsidiaries
conform to local practices;
geocentric (or regiocentric as added by Perlmutter & Heenan, 1974),
transnational
strategy:
subsidiaries and headquarters alike adhere to worldwide
(or regional) standards as part of the organisational network.
Page 7
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Based on this classification, subsidiaries can have differing roles such as the local
adaptation of products or the provision of specialised expertise in a particular
field,
or they
can have a worldwide mandate to provide a particular product or service (Dicken, 2003).
Corporate strategy therefore varies based on the extent to which firms want or need to adapt
practices to local conditions. MNCs have the option of applying the practices they are most
familiar with or which appear to promise high returns in performance, regardless of the
location of their subsidiary (Gooderham & Nordhaug, 2003). The standardisation of HRM
practices within a company across the globe thus creates cross-border equity and
comparability, and alignment of systems internationally to facilitate an internal labor market
(Almond,
Edwards, & Clark, 2003). However, this standardisation can lead to conflict
between company practices and local prevailing conditions in terms of national cultural
phenomena, institutions and business systems. The extent of adaptation of HRM practices
required is thus largely related to the extent of differences that exist between the parent and
host country in terms of national regulations, institutions and culture as well as corporate
strategic choice (Taylor, Beechler, & Napier, 1996).
There is also substantial evidence in the literature of variations in MNC practice
based on the nationality of ownership of the MNC (Bird & Beechler, 1995; Ferner, 1997). For
example, US MNCs are often centralised and formalised, and innovators in industrial
relations in avoiding union recognition. In contrast, Japanese MNCs have strong but informal
centralised co-ordination with a network of Japanese expatriate managers, yet are likely to
adapt HRM practices to local conditions due to the perceived periphery status of
subsidiaries. Country-of-origin factors can also be divided into core and periphery values, the
former being more consequential in determining company practice than the latter (Lachman,
Nedd,
& Hinings, 1994). Thus if there is a clash between the core cultural values of the
parent and subsidiary countries, this is where the most effort will need to be focused to reach
a congruent solution. Cultural values are related to organisations achieving legitimacy in
society by adhering to these values, therefore legitimacy and hence efficacy may be under
threat where congruence with these core values is not achieved.
Page 8
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Of all the management functions, the HRM function is under the most significant
pressure to adapt to local conditions as it is highly dependent on the local labour market.
The most high profile and visible HRM practices for employees and those subject most to
local regulation, are most likely to resemble local practices, whereas issues concerning
internal equity are most likely to conform to parent country practices. For example, industrial
relations systems are often clear examples of how country-of-origin practices give way to
local regulation, but senior management development is more likely to follow centralised
policies and practices (Ferner, 1997).
International HR strategies
As we have seen, the MNC is based in a particular context, and as such it has an
HRM heritage based on the resources and competencies available at head office and
subsidiary levels. This HRM competence can be considered as context specific or context
generalisable, depending on its usefulness outside the location in which it was developed
(Taylor, et al., 1996). Based on this usefulness, there is a choice to be made by top
management on the approach to the design of the overall international HRM system:
adaptive: low internal consistency with the rest of the firm and high external
consistency with the local environment little transfer of practices;
exportive: high integration of subsidiary HRM systems across the company
replicating practices developed at head office;
integrative: substantial global integration with an allowance for some local
differentiation two-way transfer of HRM practices between head office and
subsidiaries.
This choice of HRM strategy is largely dependent on the internationalisation strategy
adopted by the firm discussed earlier:
multi-domestic: subsidiaries are seen as an independent business therefore
the adaptive approach to HRM systems is most appropriate;
global: subsidiaries are managed as dependent businesses, therefore an
exportive approach to HRM systems is most appropriate;
transnational: subsidiaries are managed as interdependent businesses,
therefore an integrative approach to HRM systems is most appropriate.
Page 9
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
For firms starting the internationalisation process, or those changing from a multi-
domestic to a trans-national strategy, the demands for internal consistency will generally
outweigh the demands for local responsiveness. The context generalisability of HRM
systems will therefore change over time as the company, top management and the HRM
systems themselves change (Taylor, et al., 1996).
If we consider the variation of cultural and business system environments in which
MNCs operate, there is also likely to be a tendency to take an exportive approach to HRM
systems where there is the highest degree of similarity between the head office and the
subsidiary’s environment. Equally, this will be the case where the most dependency exists
between the subsidiary and HQ in order to maintain control over a critical resource within the
company (Taylor, et al., 1996). This means that the HRM strategy adopted may not be the
same for all subsidiaries in a firm HQ may wish to be more exportive or more adaptive with
some subsidiaries than others based on the many factors discussed here. Likewise, when a
greenfield-site operation is established, it is most likely that HQ will export its HRM practices,
and possibly senior managers, to set up the operation. Over time, this dependency
relationship may change and a more adaptive or integrative approach to HRM may be
adopted.
Ultimately, there is a fundamental goal for HR to achieve a balance between
centralised control of international HRM strategy and responsiveness to local circumstances.
Evans and colleagues (2002: 465) suggest that there are three approaches to achieving this
aim:
centralisation, coordination and decentralisation. Centralisation refers to focusing on
activities carried out at global level, and decentralisation on activities carried out at local
subsidiary level. Coordination refers to a middle ground, balancing those activities that would
best be undertaken by local subsidiaries with those managed by global or regional centres.
This is dependent on the degree of integration or differentiation desired (Ulrich 1997).
Earlier research showed that the role of HR departments in multidivisional companies
was more ambiguous as a result of increasing decentralisation (Purcell & Ahlstrand, 1994).
The corporate HR department was often small, with a minor controlling role through a limited
Page 10
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
number of high-level employment policies. More recently, a trend towards re-centralisation
has been observed (Arkin, 1999) and global companies operating in a large number of
countries have been shown to have a high degree of co-ordination and integration of their
international operations, and have large well-resourced corporate HR departments (Scullion
& Starkey, 2000). However, in research by Kelly (2001), irrespective of a centralisation or
decentralisation strategy, all MNC subsidiaries surveyed were found to exercise some
degree of autonomy in formulating their own HR policies but may require head office
permission for significant developments involving major expenditure. Local subsidiaries were
found to develop proactively strategic proposals and persuade head office to adopt these, as
well as the corporate head office looking to subsidiaries to learn new ideas and fill gaps in
corporate policies
(ibid.:
555).
International HR roles
In general, there has been limited attention paid to the role of the corporate HR
function (Scullion & Starkey, 2000: 1061) and it has been assumed to be relatively weak
given the literature on board membership which emphasises that HR is not typically a key
player in the development of corporate strategy (Hunt & Boxall, 1998:770). There is also the
danger that the HR function is not perceived as a full partner in the globalization process due
to the burden of bureaucratic central procedures and ethnocentric and parochial HR systems
and policies (Evans, et al., 2002: 465). However, the rapid pace of internationalisation and
globalisation is argued to lead to a more strategic and influential role for the HR department
(Novicevic & Harvey,
2001;
Scullion & Starkey, 2000).
There are a number of activities of the corporate HR department in the international
MNC context discernable. These focus particularly on high-grade management positions and
high potential staff worldwide, managing issues such as employer branding, talent
development, performance management, project team-working, and rewards and
succession planning to develop a cadre of international managers (Kelly,
2001;
Novicevic &
Harvey,
2001;
Scullion & Starkey, 2000; Sparrow, et al., 2003). Organisations often operate
with a centralised policy for top managers and high potentials, but a more decentralised
Page 11
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
policy for other employees (Scullion & Starkey, 2000). These centralised activities are seen
as a major determinant of international business success or failure (Stroh & Caligiuri, 1988),
and as such provide an arena for HR involvement in corporate strategy formulation and
implementation (Novicevic & Harvey, 2001).
Corporate HR can also play a significant role in monitoring the implementation of
corporate HR policies throughout overseas subsidiaries (Kelly,
2001:
543). HR can thus
become “champions of processes (Evans, et al., 2002: 472), building the commitment of top
management, providing training for managers, and monitoring these processes. Equally, HR
has a social responsibility to ensure future leaders are sensitive to and equipped to deal with
global challenges. This creates a new role for HR as ‘guardian of culture’, overseeing the
implementation of global values and systems (Sparrow, et al., 2003).
The extent of decentralisation of the organisation structure impacts on the uptake of
these activities. Decentralised companies (most popular in 1980s) have a smaller corporate
head office, hence a limited number of corporate HR executives with a more limited range of
activities, but still with the primary focus on an elite set of top management and expatriates
(Purcell & Ahlstrand, 1994; Scullion & Starkey, 2000). The result is less of a strategic role for
HR and more reliance on informal and subtle management processes. Particularly in this
environment, but also in centralised organisations, there is thus a need for HR to become an
“effective political influencer (Novicevic & Harvey,
2001:
1260) to be able to manage the
internal labour market for global managers. Network leadership is a further requirement for
HR: having an awareness of leading edge trends and developments (being well networked
internally and externally), the ability to mobilise the appropriate resources (bringing people
together to work in project teams), and a sense of timing and context (sensitivity to what is
going on at both local and global levels) (Evans, et al., 2002: 471).
The stage of internationalisation also has an effect on the required HR role. Evans
and colleagues (2002) suggest three progressive stages of HR roles: the builder - building
appropriate HRM basics at the start of the internationalisation process; the change partner -
realigning HRM to meet the needs of the changing external environment as the company
Page 12
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
increases its overseas operations; and the navigator - developing the capabilities of the
organisation and its people, managing the balance between short-term and long-term, global
integration and local responsiveness, change and continuity in the global environment. The
complexity of the corporate HR role thus increases as a company moves closer towards an
integrative HR strategy.
Fundamental to HR being able to carry out these roles and activities is the
departments own level of expertise. Should an exportive or integrative approach to HRM
systems be desired, the actual transfer of HRM systems can only occur when sufficient
mechanisms are put in place (Taylor, et al., 1996). Appropriate mechanisms include
regional/global meetings of subsidiary HR directors, the transfer of HRM materials and tools,
and the mobility of HR directors between the HQ and subsidiaries. HR excellence and
knowledge transfer are thus essential factors in HR globalisation efforts (Sparrow, et al.,
2003). Global knowledge transfer is coordinated through creating global centres of HR
excellence as forms of knowledge networks, facilitated by the choice of the most effective
technological platforms and agreement about the content of knowledge to be shared. This
global horizontal and vertical networking is critical to sharing information about both local
conditions and best practices.
Reflecting on the above range of HR roles and typologies and the contextual factors
having an impact, there is a pressing need to supplement this theorising with empirical data
on how the HR function at different levels manifests itself in an increasingly international
business setting, and how it is involved in sharing and coordinating HR knowledge.
To explore this further, we do not focus here on how HR managers see themselves
in respect to the aforementioned typologies and roles; instead, we focus on how HR
managers at different levels are involved in initiating, implementing and coordinating HR
policies and practices. Based on these insights and analyses, we can identify the different
roles at the various corporate, regional, national and local/plant levels and the varying
degree of involvement in sharing knowledge and coordinating HRM activities. Based on the
Page 13
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
explorative nature of this study, in-depth case-study research has been carried out among
MNCs displaying wide variation in degrees of internationalisation and the related strategies.
Methodology
So the way in which HR practices come into being and how they are implemented
can help us understand further these corporate HR roles that are being identified. To explore
this further, a series of in-depth case studies in multinational firms has been undertaken. The
cases reported here form part of a larger study of nineteen multinational corporations from
across the globe (including well-known brands in engineering, financial services, aerospace,
telecommunications, utilities, information technology, electronics, FMCG, automotive, and
petrochemical industries). The study has been funded commercially, designed to explore
HR-functional excellence in MNCs, and is a collaborative research project between four
universities based in the USA, Asia, UK and continental Europe. This paper draws on the
continental European sub-sample from this larger study.
During the period September to December 2004, interviews were held with 65
interviewees in six multinationals based in eight countries across Europe. A multiple
respondent approach was adopted, including interviews with 40 HR professionals and 25
senior executives and line managers. 16 of the interviews were carried out at corporate
headquarters, 36 at either country or divisional head office level, and 13 at plant level within
a specific business division. The majority of interviews were carried out face-to-face, with
only around five being conducted by telephone due to time restrictions. Two interviewers
were present at each interview, and where permitted the interview was recorded. The
content of the interviews has been summarised in individual case studies, which were
checked for accuracy by all the companies involved.
The interviews were semi-structured, based on a schedule designed and piloted by
the four academic partners to the research study. The questions covered issues around the
company context, HRM practices, HR learning and knowledge sharing, HR alignment, and
the role of the HR department (see Appendix for a fuller overview of the questions used).
Companies were selected for inclusion based on superior business performance and
Page 14
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
reputation for HRM and as an employer. Letters were sent to the head of HR at corporate
headquarters inviting the company to take part in the study. Based on subsequent
discussions at either headquarters or country level, companies were then invited to confirm
their participation. One contact person per company was established, and this person
provided an appropriate list of interviewees for the study, including HR professionals, senior
executives, line managers and employee association representatives. Interviews, which
lasted between one and two hours, were arranged at convenient times at the interviewee’s
office location.
The companies in this sample (see table 1) display a range of different
internationalisation strategies and size in terms of employee numbers. All have headquarters
based in Europe except for P&G (which is headquartered in the USA).
Table 1:
Case Companies
Company Sector Employees Internationalisation strate
ABB
EDF
IKEA
P&G
Siemens
Unilever
Engineering
/ electrical
engineering
Power
generation &
distribution
Retail
FMCG
Electronics /
electrical
engineering
FMCG
116,000
167,000
84,000
98,000
417,000
234,000
Formerly highly decentralised, now
increasing central control
A holding company increasing its
internationalisation
Highly decentralised but with a
strong corporate culture
Operating as a transnational
company, but with a history of
decentralisation
Recently increasing its transnational
focus,
shifting from a global strategy
Currently undergoing major
restructuring to focus more on
regional and global operations
The case studies were analysed looking for themes identified from the literature
affecting the role of corporate HR departments. Specifically, the data was coded based on
issues of centralisation/decentralisation, subsidiary leeway, internationalisation strategy, the
size of the HR resource, head office/subsidiary interaction, knowledge sharing, the nature of
HRM policy areas, the initiation and coordination of new initiatives. The data was then
Page 15
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
collated under each of these headings and analysed further. The results are presented
below.
Findings
The most centralised companies in the study were P&G, Siemens and Unilever: all
three have been operating in the international market for many decades and are now
operating to varying degrees as transnational corporations. But all three companies have
also shown a shift to this centralised position, moving from highly decentralised operations in
previous years. P&G has seen a shift from an absolute country focus to a global focus to
take more corporate control of the firm’s longer-term strategy. Consequently, the corporate
HR department has grown in both size and influence at both global and regional levels. The
regional level is seen as important for the translation and coordination between the global
and local levels, and HR at this level must have a great deal of personal credibility to have
an impact on this process. The philosophy now is to focus on communalities in HRM
practices, only localising where absolutely necessary. This is not easy for subsidiaries to
accept, and can lead to a feeling of ‘not invented here’.
Likewise in Siemens there has been a recent conscious shift to become more
international, rather than German, in outlook, changing relationships between the corporate
head office and subsidiaries. Although there is now more centralised HRM policy-making
and less local adaptation, countries are involved in the policy-making process to facilitate
acceptance across the company. Unilever is again an example of an MNC looking to reap
the benefits of its global position and is restructuring to develop a stronger regional and
global approach to operations. Local subsidiaries are no longer developing their own HRM
policies, but are being encouraged to adopt and adapt those issued from global or regional
level as necessary.
The corporate HR departments in all of these companies have complex structures
with representatives from all areas of the business. The personnel administration function is
also largely in-sourced (at country level in Unilever and Siemens) or outsourced (at global
level in P&G), leaving HR with more of a business partner role in the business units at the
Page 16
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
same time as cutting costs and improving efficiency. The underlying reason for this form of
centralisation is to bring together a centre of expertise to address the fundamental need for
high quality personnel administration in order for the HR department as a whole to be valued
within the company. The corporate HR functions have grown in size and scope of activity as
more centralised control of HRM has been implemented. This central function is also
supported by flexible international project teams or networks.
In the decentralised organisations of ABB, EDF and IKEA, there was evidence of a
much smaller corporate HR department and the vast majority of HR staff being country
based (rather than in global divisions or regional centres). In EDF, there are around ten
people active in the international HR department which was set up in 2002 as the company
started its moves towards increasing internationalisation. IKEA again has around ten
members of the global HR department, but is supported by other international HR teams and
networks. In ABB which has been operating as a decentralised multinational from much
longer, there are still only around twenty corporate HR members, and again the department
was only established in 2002. There are however central shared services centres in some
countries which is changing the role of HR managers locally by becoming more strategic
rather than transactional. Since HR recently gained a position on the Executive Committee in
ABB,
the significance of HR strategic influence within the company has increased and there
is a growing HRM focus from the top level.
In these companies, the current lack of control from the centre is seen as a
deficiency in guidance but also as respect for local contexts. In all three companies, there is
however evidence of some increase in control from the corporate centre. In ABB,
standardisation is being increased in order to address the current fragmentation of the
company and to leverage economies of scale. Some common processes are being
introduced to replace a system in which every HR manager was doing their own thing. In
IKEA, the aim is to focus on similarities between locations and to provide general support
and guidelines from the centre. This is perceived locally not as an imposition of policies but
as helpful guidelines for coordination with business strategy. The case of IKEA shows very
Page 17
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
clearly how centralised policies can be used as a means of supporting the corporate culture.
IKEA has a very strongly centralised corporate culture and product range, despite its very
decentralised approach to store management and HRM. The IKEA “HR Idea provides a
central philosophy underlying all HRM activities, rather than prescribing particular HRM
activities which stores must undertake.
As we might expect, in the case of EDF which is currently operating predominantly as
a holding company, subsidiaries have complete freedom with regard to HRM practices. Only
in the one subsidiary which is 100% owned by EDF outside of France is there now starting to
emerge some control over HRM coming from corporate head office. In the other
decentralised companies, we see variations in leeway for subsidiaries, but in both cases the
extent of leeway overall is more than the extent of corporate control. In ABB, there is
evidence of varying speeds of implementation of global policies in different countries. From
the local subsidiary perspective, there is considerable freedom for HR to establish its own
local priorities, however central guidance on how to link HRM to corporate strategy is
appreciated. In IKEA, it is the philosophy underlying the practices which is the same in all
locations, providing a common platform, however actual practices vary considerable based
on numerous factors, such as the age of a store, how active the HR manager is, how
advanced HRM is, trade union influence, employment legislation, and local culture.
In the more centralised MNCs, the subsidiary leeway is considerably reduced. Of the
companies interviewed, this was most obvious to see in P&G. Global, standardised HR tools
and systems provide the backbone for all HRM activities in an attempt to create a global
employment experience whereby employees are treated the same everywhere in the world.
The only leeway that exists is for countries where adaptation is absolutely necessary due to
business needs. Corporate HR provides subsidiaries with the definition of initiatives,
marketing materials, tools and training for implementation. Countries then develop their own
local language translation where this is necessary, and decide how best to implement
locally. This does mean that a degree of local interpretation is incorporated, and that the
Page 18
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
adoption of global policies varies between countries from only implementing the basics of an
initiative, to having a full understanding and buy-in at the local level.
In Siemens, there is a collection of guiding principles across the range of HRM
practices, made up of both mandatory standards and recommended principles which allow
country-specific localisation in different markets. Variations in implementation in different
countries are seen as inevitable due to local contexts. In Unilever, the only HRM practice
which is not centralised is that of industrial relations, as this is so context specific. From the
subsidiary’s perspective, this centralisation of policy can be difficult to accept due to the
previous practice of complete freedom for all units.
The variation in extent of leeway is also evidenced in the relationship between the
HR departments of the corporate office and the local subsidiary. In the case of EDF, there is
no controlling relationship; exchanges take place of ideas and of managers for their
development. In ABB, the way to get HRM issues on the corporate agenda is for HR
managers in subsidiaries to contact the corporate office, and to convince them that the issue
should be raised at board level. Corporate HR decides which initiatives to take forward and
which to drop. In Siemens, there is a more structured approach to sharing ideas between
head office and subsidiaries through a structure of HR councils at global, regional and group
levels. These councils are forums for discussing ideas and progressing them to board level.
This approach has been adopted as it creates ‘buy-in at the local level to new initiatives, as
corporate HR does not have the power to dictate what all HR departments must do.
Despite all the variations discussed here particularly in terms of centralisation and
decentralisation, there are some basic similarities across all companies interviewed in terms
of the HRM responsibilities of the corporate HR departments. All companies report
leadership/top management development and succession planning, and expatriate
management, as areas of activity. The more decentralised companies then have one or two
other areas of responsibility but not the full range of HRM policies. For example, corporate
HR in ABB and EDF also focus on health and safety, and in IKEA it has some
responsibilities for ensuring basic guidelines are in place for compensation and benefits,
Page 19
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
induction,
performance evaluation and mobility. This is compared to Siemens and P&G, for
example, which both have extensive policies and tools in place for the full range of HRM
activities including recruitment and sourcing, compensation and benefits, training and
development, and organisation development.
Another common theme across all companies is recognition of the importance of
sharing knowledge and skills across the HR community, although the actual extent of
practice varies. In EDF, the most decentralised company, HR managers move between
head office and subsidiary locations as part of their development. There is also an initiative
currently underway to encourage HR staff to network, starting with an annual convention for
the top 200 HR managers to exchange best practice. In IKEA the emphasis is more on HR
sharing knowledge with and learning from line managers. There are however IT-based tools
in place to support knowledge exchange, although there is currently still little activity in this
area.
At ABB, HR managers are encouraged to work on an ad hoc basis in specialist teams,
and there is an annual global HR conference which aims to build links across countries as
well as sharing best practice.
In the more centralised companies, the level of knowledge sharing within the HR
community is considerably more advanced. In P&G, one of the priorities for HR at global
level is to develop HR capability. This is being achieved by creating interdependencies within
the HR community across the company. A sophisticated network of ten communities of
practice, each focusing on a different area of HRM activity (such as remuneration or
employee relations) has been established. These communities are international, and are
resulting in less difference between countries in HRM policies due to the collaborative nature
of policy development and implementation. A similar system is also in place in Siemens,
although perhaps more divided into global and regional levels of activity. Corporate HR
collects examples of best practice and disseminates these from this central point to create
multiple centres of competence. This is largely achieved through a system of world, regional
and group level HR councils. These councils are forums for HR heads to meet to discuss
and decide on HR strategy and the development and implementation of new initiatives. The
Page 20
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
councils are also supported by international working groups of HR staff. Surprisingly
however, within Unilever there is currently little activity of this nature aside from four HRM
themed expertise teams, largely due to the current restructuring. This was recognised at the
time of writing as a priority area to be addressed.
Discussion
We noted earlier that the HR function in every MNC faces the challenge of achieving
a balance between centralised control of international HR strategies and activities and
responsiveness to local circumstances. Evans and colleagues (2002) suggest three
approaches to achieving this balance: centralisation, coordination and decentralisation. In
line with but expanding upon this work, the data collected here has shown evidence of the
centralisation, decentralisation and coordination of HRM roles and activities. However, we
argue here that the coordination approach can be further divided into two different subsets
which we term ‘standardisation and ‘harmonisation’. These different approaches to
international HRM strategy are defined further below based on the interview data.
The first approach is that of centralisation: where HR policy is designed by the
corporate HR function and is then fed out to all subsidiaries. This is particularly true for ABB.
The corporate HR function decides what issues are discussed at board level, and retains
control of certain HRM policies, in particular top management development. New initiatives
are limited in number, but are dictated to all subsidiaries with little room for leeway. This is
typical of an exportive HRM strategy as the company is shifting from a multi-domestic to a
global mode of operation (cf. Taylor, et al., 1996).
A variation on this approach is for the corporate HR function to involve subsidiaries in
the design of HR policy, but then to ensure consistency of practices by deciding on the
standardisation of policy for all subsidiaries to implement. This again is an exportive
approach to HRM strategy, but with increasing participation of HR departments at subsidiary
level.
Siemens and Unilever could both be described as examples of this mode of operation,
although constantly moving towards a more integrative strategy. There is strong control from
the centre to ensure that HRM policies are consistent regardless of where they may have
Page 21
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
originated.
Corporate HR is therefore not dictating HRM policy, but is coordinating very
closely its diffusion across the company. A broad range of HRM activities are covered, and
some mechanisms are in place for sharing knowledge across the HR community.
The most integrated HR role found in global companies is where HR policy is
continually developed by sharing practices amongst the different subsidiaries and head
office together, and then implemented jointly across the whole organisation irrespective of
where the policy originated. This results in the harmonisation of HR policies and practices.
Arguably P&G is an example of such a company, adopting an integrative approach to HRM
strategy. The strong system of communities of practice within P&G, supported by powerful
HR departments at regional and corporate levels, ensures maximum control of HRM activity.
Yet even in this environment it is acknowledged that there will still be some variation in HRM
due to local contexts.
The final approach is at the other extreme, where HR policy is designed in each
individual subsidiary independently of other subsidiaries and head office. This results in the
decentralisation of HR strategy, in which the role of the corporate HR function is minimal.
This resembles the approach taken by IKEA, adopting an adaptive approach to HRM
strategy in support of its multi-domestic internationalisation strategy. EDF is also operating in
this mode, but is looking to increase the exportive approach to HRM as it continues to
internationalise its operations.
Whilst this classification focuses on who gets involved in designing HR activities, i.e.
is it all done by head office or all by the subsidiary or somewhere in between, it is also
important to consider how the process works. Four methods of practice development were
observed:
formal proactive design, incremental design, reactive design and value-driven
design.
A formal proactive design approach to HR policies and practices starts with the
corporate HR function deciding on what policies are needed and then disseminating these
formally out into the organisation (observed in ABB). An incremental design approach is
more about learning including an iterative, incremental approach to improving HR policies
and practices on an ongoing basis (such as that in place in P&G, Siemens and Unilever). A
Page 22
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
reactive approach to HR occurs where corporate HR addresses issues only as they arise,
with no deliberate overall global HR policy (for example, as in EDF). Finally, a value-driven
approach focuses less on actually producing written HR policies and guidelines, and more
on developing a strong organisational culture which encourages appropriate behaviour in
employees. This was observed particularly in IKEA where a lack of global HRM policy is
substituted by an immensely strong corporate culture which is woven into all activities across
the company.
Each of these approaches in terms of who is involved and how the process is driven
can also be related to the different activities of the corporate HR function identified earlier in
the literature. There is certainly evidence of the primary tasks of the corporate HR function
being related to top management development and managing expatriate policy (cf. Kelly,
2001;
Novicevic & Harvey,
2001;
Scullion & Starkey, 2000; Sparrow, et al., 2003). In the
harmonisation process, there is also evidence of the corporate HR function playing a
significant part in creating an incremental approach to HR practice development, being a
‘knowledge management champion (cf. Sparrow, et al., 2003; Taylor, et al., 1996), ensuring
the mechanisms for sharing best practice in HR across the whole company.
In a standardisation or value-driven approach, the corporate function takes a more
controlling role, as the ‘guardian of culture (cf. Sparrow, et al., 2003) ensuring an
appropriate balance between local input and global design of policy. In a centralisation role
the task of the corporate HR function is much more focused on the proactive design of global
policies and monitoring compliance. This involves being a ‘champion of process (cf. Evans,
et al., 2002). In the completely decentralised situation, the corporate HR function is more
likely to act in a reactive manner as there is very little requirement for global policy (aside
from expatriation and top management development). It is here though that HR may need
the strongest skills as an ‘effective political influencer (cf. Novicevic & Harvey, 2001) as the
coordination of top management development in particular will be more complex in this
highly decentralised environment.
Page 23
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Summary and Conclusion
By way of summarising the aforementioned data and as a first step towards
developing a more contextually based model for HR departments in MNCs we present the
following overview in which we combine both our theoretical reasoning and explorative
empirical findings (see Figure 2).
Figure 2
Towards a contextual model of the HR function and roles in MNCs
Internationalisation
strategy
International HRM
system
Approach
Ethnocentric/
Global
Exportive
Centralisation
Example companies
Main locus of power
Degree of leeway for
subsidiaries
Process of
knowledge sharing
Dominant corporate
HR roles
ABB
Corporate HR
Small
Formal
proactive
Champion of
processes
Geocentric/
Transnational
Integrative
Coordination
Standardisation
Siemens,
Unilever
Corporate HR
Harmonisation
P&G
Corporate HR /
Subsidiary HR
Limited but with
possibilities for input
Incremental, iterative design
approach
Champion of processes/
Knowledge management
champion
Polycentric/
Multi-domestic
Adaptive
Decentralisation
EDF,
IKEA
Subsidiary HR
Considerable
Reactive (EDF) /
value driven (IKEA)
Effective political
influencer/ network
leadership
This framework clearly depicts the interrelationships between the various
internationalisation strategies, related HRM strategies and approaches and how that has an
effect upon power relationships between the various levels of corporate, regional and
subsidiary and upon the process of generating and sharing knowledge and related HR roles.
In this respect we have moved beyond mere typologies of HR roles in an MNC setting. We
did so in an explorative way based upon 6 in depth case-studies. 5 out of the 6 participating
companies have their origin in Continental Europe. The next stage in our research
endeavour will be to include the data and analysis of the other case-studies stemming from
the USA, Asia and United Kingdom. This will involve 15 more in-depth case-studies among
MNCs, which will allow us to deepen our analysis and substantiate our results and insights.
However, the framework so far already indicates interesting results and relationships.
Page 24
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Implications for practice:
Much of the work of HR practitioners in a multinational setting is heavily influenced by
past practice, experience and tradition of the company, which influence the present profile of
the HR function at corporate level.. At the same time we notice that the different companies,
we studied, all are in transition: IKEA emphasises in a more strict way its adherence to
certain values; Siemens wants to become a truly transnational company; EDF faces the
challenge of how to respond to an increasing degree of internationalisation; ABB wants to
standardise its HR operations etc. Practitioners can benefit from our framework by seeing
how different approaches and different tendencies towards either more centralisation or
decentralisation have an effect upon the process of initiating, implementing and coordinating
HR practices and the kind of involvement allowed for at the different levels of region, country
and subsidiary. Moreover, every approach will also have its consequences for the kind of
capabilities and role emphasis (champion of processes, political influencer, guardian of
culture etc) of the HR managers working at corporate and regional level. So practitioners can
establish for themselves how their company and its HR operations fit in the scheme and/or is
moving from for example decentralized to centralized (ABB) and how that has an effect upon
the various mechanisms/approaches to knowledge generating and sharing in HR.
Page 25
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
References
Almond,
P., Edwards, T., & Clark, I. 2003. Multinationals and changing national business
systems in Europe: towards the 'shareholder value' model? Industrial Relations
Journal, 34(5): 430-445.
Arkin,
A. 1999. Return to centre. People Management, 6 May: 34.
Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: the transnational solution.
Boston:
Harvard Business School Press.
Bird,
A., & Beechler, S. 1995. Links between business strategy and human resource
management strategy in US-based Japanese subsidiaries: an empirical investigation.
Journal of International Business Studies, 26(1): 23-46.
Bjorkman,
Ingmar. 2003. The roles played by the HR function in large-scale mergers and
acquisitions: the case of Nordea. 7th Conference on International Human Resource
Management. University of Limerick, Ireland.
Caldwell,
R. 2003. The changing roles of personnel managers: old ambiguities, new
uncertainties. Journal of Management Studies 40, no. 4: 983-1004.
Carroll,
Stephen J.
1991.
The new HRM roles, responsibilities, and structures. Managing
human resources in the information age. Editor Randall S Schuler, 204-26.
Washington DC: Bureau of National Affairs.
Dicken,
P. 2003. Transnational corporations. In P. Dicken (Ed.) Global
shift:
reshaping the
global economic map in the 21st century (4th ed.): 212-237. London: Sage.
Evans, Alastair, and Alan Cowling. 1985. Personnel's part in organisation restructuring.
Personnel Management January: 14-17.
Evans, P, Pucik, V and Barsoux, J. 2002. The global challenge. Frameworks for International
Human Resource Management. New York: McGraw-Hill.
Ferner, A. 1997. Country of origin effects and HRM in multinational companies. Human
Resource Management Journal, 7(1): 19-37.
Gooderham, P. N., & Nordhaug, O. 2003. International management: cross-boundary
challenges. Oxford: Blackwell Publishing.
Guest, D E. 1990. Human resource management and the American dream. Journal of
Management Studies 27, no. 4: 377-97.
Guest, David E.
1991.
Personnel management: the end of orthodoxy? British Journal of
Industrial Relations 29, no. 2: 149-75.
Harzing,
A., & Ruysseveldt, J. van (Eds.) 2004. International human resource management
(2nd ed.) London: Sage.
Hiltrop, Jean-Marie, Charles Despres, and Paul Sparrow. 1995. The changing role of HR
managers in Europe. European Management Journal 13, no. 1: 91-97.
Hunt, J., & Boxall, P. 1998. Are top human resource specialists ‘strategic partners’? Self
perceptions of a corporate elite. International Journal of Human Resource
Management 9(5):
767-781.
Kelly, J.
2001.
The role of the personnel/HR function in multinational companies. Employee
Relations 23, no. 6: 536-557.
Lachman,
R., Nedd, A., & Hinings, R. 1994. Analyzing cross-national management and
organizations: a theoretical framework. Management Science, 40(1): 40-56.
Legge,
K. 1978.
Power,
innovation and problem-solving in personnel management. London:
McGraw-Hill.
Lengnick-Hall M L and Lengnick-Hall, C A. 2003. Human Resource Management in the
knowledge
economy.
San Fransisco: Berrett-Koehler.
Monks, K. 1992. Models of personnel management: a means of understanding the diversity
of personnel practices? Human Resource Management Journal 3, no. 2:
29-41.
Novecevic, Milorad M, and Michael Harvey.
2001.
The changing role of the corporate HR
function in global organizations of the twenty-first century. International Journal of
Human Resource Management 12, no. 8: 1251-68.
Paauwe, J. 2004. Changing HRM roles: towards a real balanced HRM scorecard, chapter 9
in:.
HRM and performance: unique approaches for achieving long-term
viability,
pp.
217-51.
UK: Oxford University Press.
Page 26
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
Perlmutter, H. V. 1969. The tortuous evolution of the multinational corporation. Columbia
Journal of World Business, 4(1): 9-18.
Perlmutter, H. V., & Heenan, D. A. 1974. How multinational should your top managers be?
Harvard Business
Review,
52(6): 121-132.
Purcell,
J, and Bruce Ahlstrand. 1994. Human resource management in the multi-divisional
company.
New York: Oxford University Press.
Scullion,
Hugh, and Kenneth Starkey. 2000. In search of the changing role of the corporate
human resource function in the international
firm.
International Journal of Human
Resource Management
11,
no. 6:
1061-81.
Sparrow, P, Harris, H and Brewster, C. 2003. Towards a new model of globalizing HRM. 7th
Conference on International Human Resource Management. University of Limerick,
Ireland.
Storey, J. 1992. Developments in Human Resource Management. Oxford: Blackwell.
Stroh,
L. K., & Caligiuri, P. M. 1988. Increasing global competitiveness through effective
people management. Journal of World Business 33(1): 2-16.
Taylor, S, S Beechler, and N Napier. 1996. Toward an integrative model of strategic
international human resource management. Academy of Management Review 21,
no.
4: 959-85.
Tyson,
S, and
Fell,
A. 1986. Evaluating the personnel function. London: Hutchinson.
Ulrich,
D. 1997. Human Resource Champions. Boston, USA: Harvard Business School
Press.
Page 27
The Role Of Corporate HR Functions In MNCS CAHRS WP05-10
APPENDIX:
Outline Interview Schedule
Business context: What are the corporate strategy, structure, culture and vision?
How do these differ across divisions and countries? What is the history of the corporation
and what challenges does it face?
HRM practices: What are the most critical HRM practices for driving excellence and
value? What are the company’s best practices (against which others would benchmark)?
What are the HRM areas which continue to raise challenges? Are practices standardised
globally within the entire company or unique to a location/division?
HR learning: How is HRM knowledge and learning transferred? What are the
inhibitors and facilitators in sharing best practice in HRM with others globally and across
divisions?
HR alignment: What are the key internal and external relationships that are central
for executing the HRM practices and achieving functional excellence? How well are HRM
practices aligned internally and externally? How is commitment gained from senior
executives and line managers? How are HRM initiatives implemented and coordinated
worldwide?
HR department: What is the role of HR the function? How is the HR function
perceived with the organisation? How does the firm define and evaluate the effectiveness of
HR function?
Page 28
... The use of term, the war for talent, by McKinsey andCompany in 1997 (Mehdiabadi andLi,2016)has made talent a popular term among business leaders. It has been argued that the more rapid pace of internationalization and globalization leads to a more strategic role for Human Resource Management (HRM) (Farndale and Paauwe, 2005). Economic difficulties, demographic changes in the workforce, and the need for continuous innovation have also contributed towards making Talent Management a strategic issue (Mehdiabadi and Li, 2016). ...
... Managers today do understand the potential value added by talent to organizations; they often struggle to deploy their key talents effectively (Farndale and Paauwe, 2005). To quantify this fact, a study of 40 global companies found that virtually all the companies in sample size identified a lack of a sufficient talent pipeline to fill strategic positions within the organization, which considerably constrained their ability to grow their business (Farndale and Paauwe, 2005). ...
... Managers today do understand the potential value added by talent to organizations; they often struggle to deploy their key talents effectively (Farndale and Paauwe, 2005). To quantify this fact, a study of 40 global companies found that virtually all the companies in sample size identified a lack of a sufficient talent pipeline to fill strategic positions within the organization, which considerably constrained their ability to grow their business (Farndale and Paauwe, 2005). Talent has also been discussed to be predominantly an innate construct or mostly acquired, or a result from the interaction between nature and nurture components; an organization's position on any of the three stands, decides its course of talent management (Meyers et al, 2013). ...
Conference Paper
Full-text available
The paper focuses on the study of talent management practices in a business services organization in India. The study encompasses in-depth analysis of processes involved in carrying out the talent management function with major focus was on promotion practices which fall under the realm of talent management. Study was conducted in two parts, the first part comprised of analysing the talent management process and its interlinks with other HRM processes, with special focus on acquaintance with promotion cycle as well as the current stage of promotion cycle in the organisation as also the usage of Assessment Centre (AC) and Behavioural Event Interviews (BEI) as tools for employee assessment. The second part was conducting an external benchmarking for promotion practices across business services organizations. The study was conducted for 10 organizations and similarities, differences amongst them were analysed. The outcome was revelation of the impact and importance of talent management in an organisation, importance of using assessment centres and Behavioural Event Interviews in talent development process. Also the varied kinds of promotion practices across the industry were brought to light. The entire study was conducted only in the Indian perspective and for business service organisations.
... This means a strategic role does not necessarily require the same processes at the level of the corporate HR department and at the level of the subsidiary HR department. Despite this the roles of the two departments are likely to be influenced by each other, depending at least partly on the design of the MNCs overall international HRM system (Farndale and Paauwe, 2005). Accordingly, a literature review about the transformation of headquarters-subsidiary relations by Ferlie and Pettigrew (1996, p. 496) emphasizes that "the ever-swinging pendulum thus seems currently to be moving from centralisation to decentralisation". ...
... Furthermore, the research that has been conducted on the role of the HR department in MNCs was concentrated almost exclusively on the role of the corporate HR department (Novicevic and Harvey, 2001;Scullion and Starkey, 2000;Minbaeva, 2005), whereas the subsidiary HR function has received less research attention. Although the role of corporate HR is undoubtedly important, the role of the subsidiary HR department should be considered nonetheless as it plays an important part in helping the MNC balance its activities between local and global needs (Truss et al., 2002;Farndale and Paauwe, 2005). Accordingly, this paper seeks to explore that particular perspective of HR work in (Central-Eastern) European subsidiaries. ...
Article
Full-text available
Foreign-owned firms enter foreign markets for traditional reasons (market acquisition, securing resources, and diversification), but lately they have also been seeking better economies of scale and a more rational allocation of expenditures, via shifting processes and activities to lower-cost countries. The aim of this paper is to analyse the major foreign direct investments (FDI) and impacts on Human Resource Management through seven case studies in Austria, Czech Republic, Hungary and Slovakia. Multinational Corporations are considered the driving force behind the internationalization of business. The shift from a domestic to a global business perspective also has a profound impact on corporate human resources management activities. The analysis confirms the general viewpoint in literature that HR work in subsidiaries of MNCs has shifted from an administrative role to a strategic contributor role. The strategic impact is especially big when it comes to fields which need to be "culturally translated": recruitment, compensation and benefits, and talent management. However, that influence is still limited to national HR work on a national level.
... For example, evidence shows that US owned MNEs are more likely to export significant elements of their home country HRM practices to subsidiaries in host countries, such as the provision of quality training, internal promotion, and greater employee autonomy in the work organisation (Almond, 2011; Fenton- O'Creevy, Gooderham, & Nordhaug, 2008). Furthermore, MNEs are more likely to utilise HR shared service centres and international HR information systems (Belizon, Gunnigle, & Morley, 2013; Farndale & Paauwe, 2005; Stiles & Trevor, 2006) due to their focus on central control and coordination of global HRM policies. Given these contextual factors, it is expected that overseasbased MNEs are more likely to promote a strategically focused HR department and standardisation of HRM practices through internally shared learning across their subsidiaries and HR data reporting mechanisms (Farndale & Paauwe, 2005; Pudelko & Harzing, 2007), and deemphasise localised functional HRM expertise In summary, while most HR competency studies that have adopted a universalist perspective, this study presents an investigation of the contextual nature of HR competencies by examining their relative perceived importance for domestic firms and MNEs. ...
... Second, parent organisations of overseas-based MNEs may exert influence over the setting of local HRM policies by transferring parts of their home country or global HRM policies and practices to their domestic workplace (Edwards & Kuruvilla, 2005; Farndale & Paauwe, 2005). For instance, it is well established in the literature that US MNEs are more likely to adopt a formalised and centralised approaches to HRM, which in turn may reduce the discretion their subsidiaries have over HRM policy formulation (Almond, 2011; Fenton-O'Creevy et al., 2008; Ferner et al., 2011). ...
Article
This study examines the competency requirements for successful performance, and their perceived importance, for human resource (HR) practitioners in domestic firms and multinational enterprises (MNEs). In contrast to most HR competency studies that have adopted a universalist perspective, this study presents an exploratory investigation of the contextual nature of HR competencies by differentiating generic HR competencies from those that are context-specific to domestic firms and MNEs. This differentiation has important implications for the HR competency literature as it provides a nuanced perspective on the competencies required by HR practitioners. Using a concept mapping research design, our findings demonstrate that HR Acumen competencies shift in perceived importance between domestic firms, domestically-based and overseas-based MNEs. This supports the argument that HR practitioners' job success is underpinned by their ability to build a reputation for HR delivery. The findings of our study also indicate that context-specific HR competencies have been a neglected area in HR competency research and require greater attention. Theoretical implications and recommendations on selection and development programmes for HR practitioners are discussed.
... The needs of a multinational enterprise in human resources are influenced by the decision-making process. The choice of centralization or decentralization is also influenced by the organizational structure of the business (Farndale and Paauwe, 2005). When the structure of the international business segment favors centralization then decisions are made at the headquarters of the business. ...
Article
Full-text available
The rapid increase of multinational companies over the last years created the need to understand better the development, diffusion and implementation of international competitive strategies and their effect on human resource management. This study makes an attempt to link international strategic management theory to human resource management examining the alternative competitive strategies for multinational companies, the characteristics of the each strategy, the factors affecting the choice of strategy, the main advantages and disadvantages of the strategies and the evaluation of alternative international strategic options. The second section of the study examines the operation of human resources management in multinational corporations and presents the main functions and activities of the International Human Resources Management, the strategic activities, goals and challenges of International Human Resources Management and the impact of different international competitive strategies on human resources management.
... A potentially important by-product of using people-based mechanisms is that increased engagement between corporate and subsidiary actors may develop trust between actors, a key enabler of knowledge-sharing (Willem et al., 2006). Consequently, in line with the people-based perspective, an internationally integrated HR function may be characterised by a high degree of cross-country networking between HR practitioners (Farndale & Paauwe, 2005). ...
Article
The human resource (HR) function plays a critical role in how multinational companies (MNCs) centralise decision-making or coordinate and exploit expertise internationally. However, there has been limited attention on the extent to which the HR function in MNCs is integrated internationally and the influencing factors behind this. Using nationally representative, cross-country comparative data, this paper identifies the degree to which internationally integrated HR functions exist and test the extent to which this is shaped by the strategy, structure and nationality of the MNC. We demonstrate the multidimensionality of an internationally integrated HR function; with the structural configuration, level of inter-dependencies between MNC operations and country of origin each partially impacting its nature. A key implication concerns the need to move beyond solely focusing on either nationality as per institutionalist theory, or corporate strategy and structure as characterised in the strategic international HRM literature, towards an integrated explanation that incorporates both sets of factors.
... Basically all the studies done in this area show that competences, skills and talent have very beneficial impacts in organizations. And, quite crucially many of these studies have been done in large companies, corporations and multinationals (Farndale & Paauwe, 2005;McGraw, 2014). Therefore, the companies billionaires own are themselves the definitive example and sometimes the case study which proves that companies and organizations as a whole benefit from human resources. ...
... A third structure identified in the literature is a shared services centre for the HR function. Farndale and Paauwe (2005) found that such a shared service centre altered the role of local HR management, whereas the absence of such coordination was an indication of greater subsidiary autonomy. ...
Article
Full-text available
This article uses two parallel large-scale surveys in Ireland and Spain to test explanations of the variation in the autonomy of foreign subsidiaries of multinational companies over industrial relations policies, in particular regarding trade union engagement and employee consultation. We bring together three strands of literature: home- and host-country effects, organizational context and international human resources structures. Our results call attention to the significance of institutional effects, along with mode of entry of the subsidiary and the trajectory of new investments.
Article
Full-text available
Multinational enterprises (MNEs) conduct international business operations around the globe. For the MNEs, operating in today’s global business environment demands human resource departments to be engaged in a variety of activities, including attracting talents, training and development, relocation, repatriation, among others. To contend with the increasing number of issues and challenges in international business environment, MNEs’ must strive to improve their international HRM strategies. As organizations manage subsidiaries across different countries, the approach to human resource management functions must consider the dictate of the local environment where the subsidiary has to operate in order to survive and prosper. The researchers applied a multi-criteria decision making algorithm known as the analytic hierarchy process (AHP) to model the challenges and issues that MNCs’ face as well as the factors impacting the HRM practices. The study explore the challenges by way of literature review and interview of some of the MNEs’ C-level executives.
Chapter
This chapter addresses three issues. First is related to exploring the nature of the international HR function where there is a fairly high degree of international integration. The literature had hinted at this and highlighted some of the structures and processes that can constitute an international dimension, but the review of the INTREPID evidence has shed light on the detail and prevalence of a variety of structures in the function. Second, there is a variation in the extent of the international dimension to HR and one has established certain contingent factors that explain this variation. The INTREPID findings confirm the importance of nationality as an important source of variation. The third issue addressed in this chapter concerns why it matters which form the IHR function takes. It seems HR function, which is internationally integrated, is present in firms in which control over foreign subsidiaries is exercised more tightly and which has a stronger potential to engage in transnational learning and crosns-border diffusion.
Article
The authors examine whether U.S. multinational companies (MNCs) are distinctive in the degree to which they exert direct control over policy on human resources and employment relations (HR/ER) in their foreign subsidiaries. The results confirm the distinctiveness of U.S. MNCs in their greater degree of direct control of policy, compared not only with non-U.S. firms but with every other major nationality or national grouping of MNCs: France, Germany, the Nordic group, the rest of Europe, and Japan. U.S. control of HR/ER policy is greater not just in the aggregate, but for most individual items. Finally, while levels of control over subsidiaries vary among host countries studied (Canada, Ireland, Spain, and the United Kingdom) the greater U.S. orientation to control relative to non-U.S. MNCs holds regardless of host.
Article
Full-text available
This article builds on previous work in international human resource management by drawing on concepts from the resource-based view of the firm and resource dependence to develop a theoretical model of the determinants of strategic international human resource management (SIHRM) systems in multinational corporations. The article then offers propositions concerning the relationships between a number of key determinants and the multinational corporation's overall SIHRM approach the design of a particular affiliate's HRM system. and the HRM system for critical groups of employees within the affiliate.
Article
This study examines linkages between business strategy and human resource management (HRM) strategy in Japanese subsidiaries in the U.S. It investigates whether or not fit between a subsidiary's business strategy and its HRM strategy is associated with higher performance. The data show that subsidiaries with matched strategies performed better than unmatched ones in terms of HRM-related performance measures such as rates of promotion and turnover. Japanese subsidiaries with a business strategy/HRM strategy match were also more likely to experience better business performance versus competitors than were unmatched ones.
Article
There has been considerable research on the issues of board-level representation by personnel/HR directors and senior HR managers' involvement in strategic decision making. Since the early 1990s there has been a growing interest in international HRM, reflecting the growing recognition that the effective management of human resources internationally is a major determinant of success or failure in international business. There is also evidence that HR constraints often limit the effective implementation of international business strategies. More recently, it has been argued that the more rapid pace of internationalization and globalization leads to a more strategic role for HRM as well as changes in the content of HRM. Yet, while there have been some attempts to integrate international corporate strategy and human resource strategy, surprisingly, the role of the corporate human resources function has been neglected, particularly in the context of the international firm. This article seeks to redress the balance. The question addressed is: what is the role of the corporate HR function in the international firm? To answer these questions empirical research was conducted in thirty UK international firms. We found an emerging agenda for corporate HR in international firms which focuses on senior management development, succession planning and developing a cadre of international managers. We conceptualize this as a strategic concern with developing the core management competences of the organization, and argue that it can be usefully analysed from the perspective of the learning organization.
Article
The 1990s literature portrays the corporate personnel/HR function as in decline due to the decentralisation and delayering of large organisations. As a result personnel’s presence on boards of directors and participation in the formation of corporate business and HR strategies cannot survive. This paper challenges this view arguing that strategies do not originate at main board of director level but at the CEO executive group level in most cases. Research has shown the personnel/HR function’s involvement at this level to be higher than on main boards. Other recent evidence has accorded personnel a higher strategic role in MNCs, especially regarding the staffing and development of an international cadre of managers. This evidence however supports the view that personnel’s corporate presence declined from the mid 1980s to the mid 1990s before picking up, whereas the paper’s argument favours a steady growth thesis from the early 1970s. Additionally the dominant perspective contains an overly top down view of strategy formation whereas this paper argues for a counter-balancing bottom up influence on strategy formation.
Article
Despite the existence of various large-scale surveys of human resource specialists, there has been little research focusing specifically on the top cohort of HR practitioners. In addition, the surveys offer little insight into the ambiguous, but important questions associated with the strategic management process in large, complex corporations. This article reports a study of the qualifications, work histories, role orientations and strategic contributions of the most senior HR specialists in the New Zealand business sector. These elite practitioners typically demonstrate a 'dual background' in specialist HR activities and line management, and strongly subscribe to Legge's notion of 'conformist innovation'. As in the United Kingdom, they tend to focus primarily on the management of managers and, to a lesser extent, the management of industrial relations. Their work is increasingly integrated with other spheres of the business such as quality management. Whether their contribution is regarded as 'strategic' depends on the model of strategic management that informs the question. This paper argues that the survey-based studies have inappropriately adopted 'outside-in' models of strategic management which privilege marketing notions and assume that 'formulation' is more strategic than 'implementation'. The work of these senior HR specialists is more fairly assessed under a conception of the strategic problem which balances external and internal concerns. Given the present realignment of strategy theory, the challenge facing these HR specialists is that of developing frameworks for corporate planning and performance analysis which attribute a more central role to the critical elements of HRM.