Human Resource Management in International Firms

My purpose is to reflect on some of the lessons of the past in the study of human resource management, particularly as it relates to the themes of change and innovation, before turning to present and future concerns in this field. At first, I considered making observations only about the last ten years but find that my own involvement over the period makes objectivity impossible. So I have gone back a little further and would like to offer a very personal historical overview of the various principal developments in the study of human resources that have brought us to our present point. I stress “personal”, since another academic would give a quite different, equally legitimate and, to his mind, far superior account.

None of these steps can precede the one that goes before and clearly, organizations are the last link in the chain. Newton, for example, made discoveries about the universe. These developed into industrial technologies from which we grew industrial economies, industrially-based corporations and, finally, industrial models of management and organization. Then Einstein and colleagues in his field made new discoveries about the universe. Resultant new technologies are now coming on stream, we are building new businesses, and we do not yet have new models of management and organization. To place ourselves currently, we are moving into new businesses in the new economy. Until they have developed, we are bound to use earlier models of management and organizational forms that, in fact, are no longer appropriate to the new products and services that have emerged.

The fact that we live in an era of change has developed into a truism during the last ten years. Increasingly since the late 70s, not a day goes by without feature stories in the business press of major reorganizations, massive layoffs, and strategic reorientations.

A few years ago the concept of corporate or organizational culture was hardly mentioned by anyone but a few social scientists. Today it is one of the hottest topics around because, it is alleged, a better understanding of how to build the “right” kind of culture or a “strong” culture will solve some of our productivity problems. Several recent books, most notably the Peters and Waterman (1982) report on the McKinsey study of excellent American companies, emphasize that “strong cultures” are a necessary ingredient of excellence. So the hunt is on to find strong cultures, and thereby fix our problem.

The management of organizational change can hardly exceed our capacity to conceive it. This capacity is often constrained by our premises, assumptions, and conceptions about the nature of organizations and the nature of change. Major or strategic organizational change requires a transformation of the actors’ view of the organization.

The last ten years have been perhaps the most volatile period in history for business and industry. Totally new world economic patterns have confronted the managers of companies. sweeping aside long-held assumptions about the way business is conducted.

No less than twenty years ago, the international operations of most companies were largely export activities of ethnocentric organizations. Expatriate assignments spelt career doom, distancing the exile from the headquarter politics of a successful career. Surveys in the mid-70s of Fortune 100 companies revealed that 90% of top executives had no foreign experience. There were of course a few exceptions, notably the corporations that were transnational by origin like Shell and Unilever, and firms with most of their turnover outside the smaller mother country. How many consumers realize that Nestlé is in fact a Swiss firm, though only 2% of its sales and 4% of its employees are Swiss-based?

Multinational corporations (MNCs) often operate in many different product-market segments. The employees in their far flung geographic operations represent very different social cultures. The policies and practices for human resource management that are effective in managing one product-market may not be the most appropriate for another; those that work well in one cultural setting will not necessarily function in another.

This statement from an executive at Britain’s National Westminster Bank underlines the volatility of today’s markets in the financial sector. Such rapid change is not confined to this one area, though the pace of change varies from industry to industry. If the automobile industry had undergone the same rate of technological change as in electronics, when we would now be able to buy a Rolls Royce for £1, run it for 50,000 miles on a gallon of petrol, and pay annual maintenance costs of less than £10.

Until very recently, management theorists paid scant attention to problems that are unique to the managing of engineers and scientists. Most research in management has been directed toward understanding the needs and behavior of blue collar and clerical employees. To the extent that engineers and scientists were even considered, it was assumed that principles developed through research on these other employees would apply to engineers and scientists as well.

Large firms have frequently been criticized for their lack of innovativeness, while smaller entrepreneurial firms have been hailed as paragons of innovativeness in such sectors as electronics, biotechnology, software, and services. One should not, however, jump to the conclusion that encouraging small firms (via venture capital, tax exemptions, increased mobility of managers and researchers, and more supportive networks) is the only answer to the lagging innovativeness of European industry. It would be a mistake to conclude that small firms have the edge on larger firms when it comes to innovation.¹

One underlying theme in most discussion of the challenges facing complex organizations is that of dualities. The proverbial organizational pendulum, once swinging leisurely over a generation from one desirable quality to its opposite, now gyrates from arc to arc. Organizations are besieged by the paradoxes that these dualities create. This book is full of examples, summarized in Figure 12.1.