Chapter 18 Outline

Introduction

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

The strategic role of HRM is complex enough in a purely domestic firm, but it is more complex in an international business, where staffing, management development, performance evaluation, and compensation activities are complicated by profound differences between countries in labor markets, culture, legal systems, economic systems, and the like (see Chapters 2 and 3). For example,

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

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

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

If it is to build a cadre of international managers, the HRM function must deal with a host of issues related to expatriate managers. (An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.)

The opening case detailed how Coca-Cola deals with some of these issues. Coca-Cola copes with differences between countries by articulating a common HRM philosophy, but by letting each national operation translate this philosophy into HRM specific policies that are best suited to their operating environment. Coca-Cola also tries to build a cadre of internationally minded executives through its global service program, which involves the HRM function of identifying and managing the career development of a key group of executives from which future senior management will be selected. Finally, and perhaps most importantly, Coca-Cola sees the HRM function as a vital link in the implementation of its strategic goal of thinking globally and acting locally.

In this chapter, we will look closely at the role of HRM in an international business. We begin by briefly discussing the strategic role of HRM. Then we turn our attention to four major tasks of the HRM function--staffing policy, management training and development, performance appraisal, and compensation policy. We will point out the strategic implications of each of these tasks. The chapter closes with a look at international labor relations and the relationship between the firm's management of labor relations and its overall strategy.