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: Human resource management

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Running Head:   Human resource management

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  Human resource management

 

 

 [Name of Writer]

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Human resource management

 

Table of contents

 

 

 

Introduction                                                                                                      page # 3

 

HRM activities                                                                                      Page # 6

 

Hiring the staff                                                                                                  page # 6

  • Training & development                                                                        Page # 7
  • Performance appraisal                                                                          Page # 8
  • Rewards                                                                                               Page # 9
  • Design and development of organization                                                Page # 9

 

Alliance formation and Human resources management                           Page # 10

 

Required capabilities of alliance managers                                                          Page # 13

  • Working in teams                                                                                  Page # 15
  • Communicative abilities                                                             Page # 17

 

Career opportunities                                                                                         Page # 17

 

Developing common culture and trust                                                    Page # 19

 

Control mechanisms and HRM practices                                                           Page # 22

 

HRM policies and organizational learning                                                           Page # 23-24  

 

Policy issues for HRM in international alliances                                      Page # 25

  • Standardization                                                                                     Page # 26

 

Sino-foreign joint ventures                                                                                 Page # 26-27

 

Summary and conclusion                                                                                   Page # 27-29                

 

References                                                                                                       Page # 30

 

Footnotes given, separately, within the individual pages.

 

Introduction

As human resources are the most precious and impotent asset of any organization, the management of HR department plays a crucial part in the development of the company and achievement of its strategic goals. Accordingly, Human Resources Management has the potential of making or marring the company alliances and joint ventures, as the same depends on the people who are responsible for developing strategic alliances. Although most companies have given least priority to HRM, particularly while signing joint venture and alliance agreements, there are many instances where the alliance could not work properly due to poor management of the involved work force.

While feasibility studies for establishment of alliances find it important to discuss and evaluate the matters concerning technology, marketing, ownership and management structures; human resources is thought to be a subject that can be discussed, after the negotiations are finalized and alliance deal is signed. (Drouin, 2001). While issues of coordination between the workers and managers of two alliance partners remain unresolved, studies have confirmed that companies devote only around 4% of their time for resolving such issues. In addition, the differences between workforces of alliance partners can pose complex problems, incase people from different nationalities and ethnic background are involved. (Adler&Ghadar, 1990____________________________________________________Footnotes:

Adler, N. J. and Ghadar. F. (1990). 'International Strategy from the Perspective of People and

Culture: The North American Context', Research in Global Business Management. Greenwich, CI:JAIPress.

Drouin, N. (2001). The Integration of Human Resource Issues in the International Joint Venture

Formation Process. Unpublished PhD thesis, Judge Institute of Management, University of Cambridge.

 

 

For example, high failure rate has been recorded among the American expatriates, as American firms neglect specific procedures required for selection and training of their personnel, for working with international assignments

Alliances and joint ventures are distinctly different in working style and management as the unitary domestic companies have particular style of management and human resources functional practice. The issues arise when people from different cultures have to undertake common responsibilities for discharging required functions and job responsibilities under a joint venture functional style. According to Shenkar and Zeira , an international joint venture can have eight different employee groups that have distinct characteristics. These would include executives from host-parent headquarters, host-parent transferees, host–country nationals, third county expatriates having foreign parents, parent country expatriates, third country nationals recruited directly by the IJV, third country expatriates having parents of host country nationality and foreign headquarters executives. (Shenker Zaira, 1987).

As an alliance is formed, the partners to the joint venture carry along their cultural ethos and HRM practices, while following the particular business model. Hence, it is essential that HRM procedures are adopted for the joint venture, which consider the importance of individual work cultures in an alliance. In addition, the professional standards and legal notions followed by the different alliance partners, in their home countries, present a complex challenge for the effective human resources management, which should aim at amalgamating the different business ethos for ensuring the success of IJV. For example, many emerging economies, like China and India, would require HRM policies that suit their social environments, as they may be unfamiliar to western multinational business culture. This is truer for China.

Hence, it is essential to have carefully crafted HRM procedures, which should aim at contributing to the success of the alliance. Accordingly, such human resources management practices would include the formulation of rules and regulations that can assist the practices and cultures adopted by various partners in the joint venture, while making proper adjustments, in this direction. The key techniques adopted by HRM, for this purpose, should help the IJV in preparation of appropriate selection procedures, providing assistance in key process controls, finding ways and means for conflict resolution and mutual learning. In addition, such policies should aim at motivating and developing the workforce for enabling them to work effectively in the business culture that involves inter-organizational collaboration.

The above procedures and policies, if adopted carefully can result in a win-win situation for all partners in the alliance, while increasing the productivity of individual partners as well as the joint venture. Therefore, special attention should be paid to the HRM activities, with focus on the hiring, training and development of staff, in the required manner. Moreover, these policies should have appropriate performance appraisal procedures, with relevant and workable reward policies. However, the aim of HRM policies should be towards the overall development of organization, as human resources department can provide valuable advice, in this direction to the IJV.(Schuler, 2001)…(HRM, pages 303-4)

 

Footnotes:

Schuler, R. S. (2001). 'Human Resouree Issues and Aetivities in International Joint Ventures', International

Journal ofHuman Resource Management 12:1-52.

 

Shenkar, O. and Zeira, Y. (1987). 'Human Resourees Management in International Joint Ventures:

Direetions for Research', Academy ofManagement Review, 12: 546-57.

 

 

 

HRM activities

As mentioned above, the properly formulated activities of human resources division of any alliance can contribute largely to its success. While almost all these activities are pretty important for the IJV, the following key policies should be specifically considered for this purpose, (HRM, PP 304)

             Hiring the staff

The process of recruitment would start with the proper identification of required tasks and the job profile meant for accomplishing the same. Therefore, the initial job of HRM would be establishing the required number of mangers and workers needed in this process, while carefully drafting the job requirements of each profile. As the nature of alliance operation would, largely, decide the number and type of staff needed for accomplishing a particular task, the job of recruitment itself would mean negotiated settlement between the alliance partners for absorbing their own workers in the new system. This would be particularly true, in case one of alliance partners is trying to retain its surplus staff. In some countries, like China, social and political values demand utilization of manpower, which may be surplus, as the same becomes necessity for the stability and welfare of the society. Therefore, such countries can have an employment surplus, which they may carry forward to the joint venture.

After identification of job profiles, HRM needs utilizing the services of various agencies for recruiting the required staff. Accordingly, it is critical for the alliance corporation’s HRM to maintain the pool of talented people, while taking the help of advertising agencies, online job portals and other channels, for this purpose. While the appointments can be done, selecting the people from this pool, as per the requirement, the selection and appointment of CEO and people at the general manager’s level should remain on the top of HRM agenda. The top level managers contribute a lot to the success of HRM policies, as they help in selection of best candidates, down the line. However, the alliance partners usually have different criteria for selection and hiring of workforce, while their method of spreading information about job vacancies may also vary. In some countries, the HRM culture may favor a candidate who has recommendations from influential people, as their HRM practices allow for selection of such candidates, without considering other objectives.

Therefore, a clear mandate and vision should be formulated between the alliance partners, which could specify the responsibilities of each partner with regard to the recruitment procedure and training of staff at different levels, within the IJV.(HRM PP 305)

            Training and development

While proper training is required for incorporation and development of specific skills in the recruited staff, the relevant workforce must have learning opportunities that can increase their capabilities and understanding, over a period. This is needed for their positive development within the alliance. Hence, the development and learning process should go together, on a continuous basis, while planning for the growth of employees with the company, as individual career development needs synchronization with the overall development of the IJV. However, the scope of development and training may differ, as each partner would have different views on the specific development programs meant for particular staff. Therefore, a negotiated settlement can be a way out for resolving this HRM issue. Nevertheless, within those alliances, which have clearly specified functional areas for each partner, the training and development of human resources required for fulfilling the needs of the particular area would be comparatively easier. Hence, HRM policies in this direction have direct relation with the areas of control for each partner.(HRM PP-305-6)

             Performance appraisal

An alliance usually has agreed target of business, in terms of revenue generation and productivity, as well as quality and customer satisfaction. The performance appraisal process means evaluating the performance of the staff, against the background of such targets, as each employee has to be responsible for meeting the individual set target. However, such appraisal process being culturally sensitive, there are other factors, also, which influence the employee performance appraisal criteria. In view of this, alliance partners are more likely to agree on setting of targets that are connected with routine activities of the workforce, rather than being related to the managerial functions.

Nevertheless, it is essential to have an effective appraisal system, which can identify the opportunities for developing the capabilities and skills of staff affiliated to different partners of alliance.

            Rewards

As rewards are the tools of recognizing an employee’s contribution to his or her functional area, these can be in the form of paid money or the public recognition of the employee, for his/her job-related achievement. However, for alliances, which have employees from different cultural groups and labor markets, there could be differences, within the alliances partners over this issue. While forming an alliance between a multinational company and a local company, in a developing country, the staff of MNC may have higher salary and other benefits than enjoyed by their local counterparts, within the alliance. This could be due to the fact that the staff of MNC has been mobilized from a higher paying labor market and accordingly, the concerned employees would not be prepared to work for lesser wages, within the IJV. Nevertheless, this can create a feeling of inequality among the staff members of the alliance, particularly when there is a salary difference for the same job profile.

The process of rewards may be different for each of the alliance partners, as work culture of one partner may allow public recognition of employee’s achievements, while work culture of another partner may prefer keeping it as a secret. (HRM PP305-8)

However, a reward policy, which workers and managers consider fair and meaningful, is bound to result in the achievement of high performance by every individual worker. At the same time, an unfair reward system would bring negative results pertaining to overall performance of the alliance, while demoralizing the concerned staff. However, in the absence of any reward system the motivational element in the employee work culture would vanish, which may not be good for health of the IJV.

            Design and development of the organization

HRM policies may not be considered necessary for participating in the formation of strategy and organizational design. Yet, in many cases the contribution of personal and interpersonal impact has been noticed to be significant factor in the design and development of an organization, particularly an IJV. As organizational development means improving the general performance of the company, the quality of communication between employees and management as well as interpersonal communication plays an important role in the same. Since, many alliances aim at promoting technological innovations, HRM can make a major contribution in selecting and training of staff required for fulfilling the needs of advanced technology-related job profile.

While the HRM cycle, in an organization, starts from the recruitment function, the optimum performance of the recruited and well-trained workforce will result in the positive appraisal of the concerned staff. This cycle, if adopted and processed correctly, would result in the positive performance of the alliance. At the same time, the feed back from appraisal and reward systems can help in the direction of formulating the appropriate training and development program for the staff that can enhance the performance of alliance business. However, if the appraisal process points continuously towards the requirement of substantial developmental practices, thereby exposing the deficiencies in the recruitment and training procedures; then the selection and training techniques would need modification and correction.(HRM PP 307-8)

Alliance formation and Human resources management

For an effective alliance performance, it is imperative to discuss and negotiate HRM issues during the formation process, while resolving all pending human resources issues at the pre-operational stage. These would include some critical issues like liabilities of paying pension to the workforce, while absorbing the staff from some of the alliance partners. Hence, such HRM issues should include in the list of strategic policy formation for the alliance. (Drouin, 2001)

As recruitment for different positions, within the alliance, is a crucial matter; resolving certain major issues like allocation of job portfolios to workforce of different partners needs proper negotiation and agreement, on criteria for making such appointments. Many HRM options can be considered, in this direction, like filling the managerial, operational and technical position by transferring staff from the alliance partner that has provided technology transfer. This can be done for the initial period of, say, two/three years, until proper training and knowledge is acquired by the associated staff. The other alternative can be recruitment of staff from outside, to ensure best possible selection. An example of this could be employment of Chinese expatriates for serving as general mangers in alliances involving Chinese and international firms. By doing so, the selected management staff can contribute to the overall performance of alliance, given their background of business experience and cultural sensitivity. However, appointments for routine jobs can be filled by available local labor force. (Zaira & Shenker, 1990)

As the responsibilities of new business development mangers include selecting potential alliance partners, they can contribute significantly, during the negotiation process. However, such negotiations go well beyond the routine process of finalizing the term of contract and closing the deal. This process must aim at building trust and understanding between the alliance partners, which is important for eventual success of the IJV.

 

 

Footnotes:

Drouin, N. (2001). The Integration of Human Resource Issues in the International Joint Venture

Formation Process. Unpublished PhD thesis, Judge Institute of Management, University of Cambridge.

 

Zeira, V,. and Sbenkar, O. (1990). 'Interactive Parent Charaeteristies: Implieations for Management

and Human Resourees in International Joint Ventures', Management International Review, Spedal

Issue: 7-22.

 

Accordingly, it is essential to have in place a capable and talented business development manger, who should be able to handle the negotiation on behalf of an organization, when starting the process of alliance formation. The type of experience, which such business manger would have, will ultimately affect the outcome of IJV negotiations and its formation. Hence, it is imperative to engage a person, for this purpose, who has previous experience of handling IJVs. However, it is more important for the company to retain such business development manager, even after the IJV has been signed, as he or she can contribute significantly to the success of the alliance, after it becomes operational. (Lei et al, 1997)

As most of the business organizations in East Asia value business ethics, as well as, personal trust and understanding, it is important to continue the alliance operations with mutual trust, formed during the negotiation stage. This is particularly true for working jointly with companies of this region. However, problems could arise, in case the business development manager shifts to a new organization, once the job of alliance formation is complete. Therefore, it is imperative and an essential human resources requirement that such managers are involved at the stage of framing the policy guidelines for the alliance operations. Their competency and experience gained during negotiation stage must be utilized for the purpose, which can foster harmonious relations between workers of different alliance partners. The understanding reached during   negotiation requires to be carried forward to operational stage, for the success of IJV. (HRM P308-10)

Required capabilities of alliance managers

Corporate strategies need capable and talented managers for their perfect implementation. Therefore, it is essential to make an assessment of the required qualities of the managerial staff for smooth operation of an alliance. It is the responsibility of all alliance partners to provide their best managers for the alliance operations. However, it is observed that in most of the cases, the partners are not willing to give their specialists to the alliance, as they may not be able to assess the importance of alliance and its working.

 

Footnotes:

Lei, D., Slocum,J. W.]r., and Pitts, R. A. (1997). 'Building Cooperative Advantage: Managing Strategie

Allianees to Promote Organizational Learning', Journal ofWorld Business, 32: 203-23.

 

 

According to American Society for training and Development, certain skills were listed as the requirement of future managers, during a symposium organized by this society. (Galagan, 1990). As globalization of businesses involved many corporations, worldwide, implementing corporate strategies required certain traits, which a future executive must have.  The requirements listed by the symposium included the executives having global vision and understanding; an intuition about the future, not based on any predictions of the past; being always ready for continuous learning; being able to operate within a team; having multicultural knowledge; enjoying the trust of alliance partners and other stakeholders.

As these relate particularly to the personal characteristics of the executive, it is essential that he or she is open-minded, flexible, has experience in working in multicultural environments, self-confident and sensitive to other’s viewpoint. In addition, the concerned manager should have required technical knowledge and ability with a drive for learning and achieving more. Hence HRM divisions of all alliance partners should review these requirements, while selecting employees and managers for the alliance operation.

 

Footnotes:

Galagan, P. A. (1990). 'Executive Development in aChanging World', Training and Development

Joumal, June: 23-41.

 

 

For having a clear understanding about these requirements, Lane and DiStefano (1994) have identified certain abilities which the alliance managers should have. These include ability to develop global strategic skills, having skills for managing change and transition, ability to work with and manage cultural diversity, while being able to design and perform in flexible organizational structures. In addition, the relevant manger should be able to work with other team members, using effective communication skills. The manager should also be able to continuously learning and transferring knowledge within the organization.

The above requirements provide a good base upon which the HRM departments can work for recruiting alliance managers, while the same can  serve as the tool to assess the HRM activities of alliance partners for developing  such managerial skills. As the development of total package of these skills is a time taking process, it demands vigorous efforts by HRM for achieving the proper results. However, the exchange of skills and qualities can take place, when people from one partner share their knowledge while working with employees of the other partner.

Nevertheless, it is essential that alliance managers have the basic abilities of communicating and working with others in a culturally diverse business environment. As they are most relevant to the success of an IJV, these abilities are detailed in the following paragraphs.

 

Footnotes:

Lane, H, W. and DiStephano, J. J. (1994). 'The Global Manager', in Beamish, P. w., KiIling, J. P"

LeCraw, D. J., and Morrison, A. J. (eds.), International Management: Text and Cases. Bun Ridge, IL:

Irwin, Chapter 10.

 

 

Working in teams

Forming joint collaboration means bringing together work cultures of different organizations; it has become imperative that the employees of each partner are able to work harmoniously with other partner’s staff. The range of specific competencies that the alliance business needs, widens with geographical and product profile diversification. During such diversification, the involvement of external agencies also increases, particularly for taking permissions from Government and environmental agencies and others involved in the alliance business. The ability to work within a team can prove to be of competitive strategic advantage, as people are required to work closely together with customers and suppliers, belonging to diverse cultures and ethnicity. Hence HRM requirements would include development of such managerial functions, which can work effectively, on an international level.

Accordingly task and maintenance functions have been identified for developing efficient mangers, for this purpose, to forge a successful group working dynamics. (Cartwright  & Zander, 1960). The task function would require abilities form alliance managers towards better understanding of necessity for having objectives, targets, timetable and procedures for achieving the same, which should be agreed by all the team members. This would include working through cultural differences about value of explicit vs. implicit group norms.

 

Footnotes:

Cartwright, D and zander, A.(eds.) (1960). Group Dynamics: Research and Theory (2nd edn.). NewYork:

Harper &: Row.

______________________________________________________________________________________

The maintenance side of ability is related to the requirement of sustaining the emotional tone of the team workers, so that they are willing to work constructively with each other, on a prolonged basis, for smooth business conduction of the alliance and achievement of its objectives. Group processes, which incorporate role playing functions, are relevant. HRM assessments are done for evaluating the experience of concerned managers, while the same can be included in the training and development programs. In addition, such training program should aim at increasing the person’s team working abilities. It is possible that people working in teams may generate emotions, particularly when the tem members have diverse view, while they need working under pressure to achieve the set targets. Therefore the abilities of an alliance manger should include responsiveness to sensitivity, with respect to the inherent international and group processes, for coping with them in a positive manner.

 

Communicative abilities

Ability to effectively communicate within and outside the organization is the basic requirement of any worker or manager, working in domestic or international business environment. However, there is an increased need for fulfillment of this ability in global scenario, particularly with IJVs, as working with alliances requires multicultural and multi-lingual communication skills, while being aware of cross-cultural sensitivities. Effective and sensitive communication helps in building mutual trust, which is essential for the success of any alliance and achievement of its objectives. The current technological advancement provides communication through emails, video and audio conferencing and video phones, which can help achieving this goal, with ease, while working within a network of alliances or an individual IJV. (HRM PP 311-13)

 

Career opportunities

The perceptions of career development change as companies enter into an alliance. The alliance management would have its own perception about different career development programs. However, each partner in the alliance should discuss the same, thoroughly, to reach a unanimous decision about the common career opportunities, which the IJV can offer. Accordingly, the new appointees should not be at a disadvantage when comparing them with the in-house promotions, as the same could devalue the cooperative arrangements of the alliance. In the absence of having clear career development objectives for the employees of the alliance, it would be difficult to hire and train the right kind of people needed for the successful operations of the IJV. This is particularly truer in case of those companies, which have shifted their focus of business from domestic to global arena, by entering international collaboration agreements. Such managers may find themselves at cross roads, while shifting from international to domestic business environment and vice-versa, resulting in the danger of loosing them to the competitors. Companies involved would therefore have to bear the loss on account of the money and time invested in developing these talents.(Adler & Ghadar, 1990). Thus, the overall need is to have a HRM scenario that is truly transnational.

 

 

Footnotes:

Adler, N. J. and Ghadar. F. (1990). 'International Strategy from the Perspective of People and Culture: The North American Context', Research in Global Business Management. Greenwich, CI: JAIPress

 

 

Hence, the need is to develop cooperate networks and managers who have expertise in implementing networks of cooperative arrangements, while these mangers can have their say in finding suitable positions for themselves on their dictated terms. Accordingly, coordination of cooperate networks and regional units would open doors for effective alliance management. The cooperate cultures and career structures would become truly international with such developments in the HRM scenario.

When an alliance involves shifting of operations, in the guise of outsourcing, to countries with emerging economies, like China; many employees and managers of the parent company are required to shift to new location. However, due to problems, like communication and language, as well as, cultural adjustments; many would not opt for the new postings, even on a promotion or salary hike. In such a scenario hunting from local job market may not result in finding good managers, which can undervalue the functions and objectives of alliance. Hence, this gives rise to the need for developing a common culture and trust, within the global business environment.

 

Developing common culture and trust

Any alliance between two partners does not involve only the merging of business objectives and goals, but it must have a strategy that can forge mutual trust and a perfect match between the individual cultures and practices.

 

Footnotes:

Malnight, T. W. (1996). 'The Transition from Deeentralized to Networked-Based MNC Structures: An Evolutionary Perspective', Journal ofIntemational Business Studi~s, 27: 43-65.

 

 

 

 

Many research studies, related with IJVs, have revealed great obstacles to their smooth operations, in the form of employee loyalty towards the parent company and inhibition to join alliance operations, due to communication blockages and differences in cultural and organizational identities. (Child & Rodrigues,1996). Hence, the need would be to formulate HRM policies which can foster a shared common culture, based on goals and objectives of the alliance. Accordingly, selection criteria for hiring and developing personnel for alliance operations must consider only those candidates who are willing to adopt such common cultural practices, while pursuing the set standards of the alliance. Apart from technical and managerial competencies, candidates must have a flexible attitude that is open and compatible with working methods of employees belonging to other partners of the alliance. Performance appraisal tools, rewards and promotion techniques would come handy, in this direction, while proper training can help in developing such attitudes and behaviors. Training employees of one partner, regarding culture and language of other alliance partner is important, for this purpose. Accordingly, employees working together in an alliance operation must receive training that can enhance their understanding of partner’s ethics, culture, mind-set and national institutions. (Villinger, 1996)

 

Footnotes:

Child, J. and ROdrigues, S. B. (1996), 'The Role of Sodal Identity in the International Transfer of

Knowledge through Joint Ventures', in Clegg, S, R. and Palmer, G, (eds.), Produdng Management

Knawledge. London: Sage, pp. 46--68.

 

Villinger, R. (1996). 'Post-acquisition Managerial Learning in Central East Eurape', Organization

Studies, 17: 181-206

 

It is essential to understand in depth about the behavior of the partner’s staff, particularly when there is a divide of cultures, which is seen in western verses eastern countries. The barrier of language for effective communication between the alliance partners remains main obstacle, in this direction, especially when an alliance is formed between western company and local corporations, based in mainland China.

 

Considering the cultural sensitivities of East Asian countries, alliances involving Sino-western partners should aim at valuing the attributes of personal courtesy while matching the same with the ‘open enquiry’ attitude of the west. This would require HRM activities, which are directed towards the preparation of their staff for such situations, while briefings and role-plays would play an important role in this direction. In addition, communication policies adopted by HRM of each partner should aim at training and teaching the employees with an objective of creating awareness about other partners’ cultural sensitivities, while achieving a positive adjustment, in this direction. Regular meting between staff and management of the alliance partners would help in creating a positive and effective communication flow. However, the staff of all partners should be committed to the common goal of achieving successful operations within the alliance. While considering the individual competencies is important, it is crucial to appoint the staff for key and controlling positions, according to the formula of overall distribution of power as adopted during the alliance negotiations. Therefore the role of HRM may be limited to the supply of lists that contain the names of candidates with the requisite competencies for a particular managerial position. However, HRM can assist in the selection process also, once the criterion for same has been decided.

In any case, HRM can assist in developing mutual trust between the partners, in many ways. These would include formation of systems that can ensure proper information flow and effective communication between the partners and within the alliance. HR consultants can be useful for resolving interpersonal conflicts and misunderstandings arising due to cultural differences. Accordingly an effective conflict-resolving procedure can be formulated by HRM, for this purpose. In addition, HRM activities could include arranging regular social events, encouraging staff of the alliance to attend and interact with each other socially.

An example of effective alliance formation can be IJV between a Swedish multinational and a Hungarian company in the field of communications. For the benefit of alliance and both partners, an attempt was made to create a new organizational culture, based on mutual trust. Several HRM policies were adopted to achieve this goal, as Swedish company wanted to operate at lower cost, prevailing in Hungary, while Hungarian company wanted to gain access to the latest technology.(Cyr & Schneider, 1994).

Accordingly, after these appropriate HRM policies were adopted by the employees, a survey studying results from this exercise indicated that such IJV had a bright future as foreign and local managers had a common goal of achieving results, while due respect was shown to the prevailing cultural differences, by all concerned.

 

Footnotes:

Cyr, D, J, and Schneider, S, C. (1994). Creating Cultural Change in a Swedish-Hungarian Joint Venture.

Case Study, Fontainebleau: INSEAD, ref. 01/95-4473.

 

 

Control mechanisms and HRM practices

It is essential to have effective control mechanisms, while forming an alliance. This may be a difficult task, particularly when the joint venture involves two competitors. However, HRM practices play an important role in this direction. The control mechanism has a direct relation with the equity sharing pattern and senior positions in the joint venture may be decided according to this pattern only. Frayne & Geringer (1990) have explained the role of HRM practices in this direction, which can be of crucial importance to alliances, where areas of control between the partners become a crucial issue. In any case, the crucial control rights could be based on the equity rights for each partner, even if any one of them may have only minority ownership.(Schaan, 1988)

Therefore, the issue of staff appointments must be considered thoroughly at the alliance formation stage, while considering the HRM practices of each partner in detail. Decision taken in this direction, like selection of people for participating in negotiations, selection of people for key posts, along with the consideration of interpersonal skills and individual competencies would have an important bearing on the successful formation and management of the alliance. Accordingly, the role played by such key appointees in developing effective internal networks with their parent company and within the partners of alliance, would be crucial for the present and future operations of the IJV.  (HRM PP 313-16)

Footnotes:

Frayne, C. A. and Geringer, ]. M. (1990). 'The Strategie Use of Human Resource Management

Practices as Control Mechanisms in International Joint Ventures', Research in Personnel and

Human Resourees Management, Supplement 2: 53-69.

 

Sehaan, J-L. (1988). 'How to Contral a Joint Venture even as a Minority Shareholder', Journal of

General Management, 14: 4-16.

 

 

HRM policies and organizational learning

In the present global business scenario, the market forces play a vital part and several competitors are seen collaborating with each other, international, to form some sort of virtual organization. While the aim of such IJVs is cashing on the market opportunities, the individual partner’s objective remains attaining the position of market leadership, internationally, with the contribution of their value added competencies. Pucik (1988 a, b ) has explained the role of HRM policies, in this context. The assets, in such collaborations would include core competencies, technological know-how, organizational skills and market knowledge. As some of these assets go beyond the money value, Pucik argues that in competitive collaborations, the alliance should favor the individual partner in the form of accumulating better technical competency. Hence, the concerned company needs to achieve a perfect organizational learning capacity and HRM practices must provide the necessary support and guidance, for this purpose. In this context, Pucik studied many partnerships between US/European and Japanese companies. The results indicated a clear advantage for Japanese partners. The disappointing performance of American and European partners in such alliances has been attributed to poorly formulated HRM strategies.

Accordingly, failures for supporting competitive learning would emerge due to lack of sufficient HRM planning by the partner company for its alliance.

Footnotes:

Pueik, V. (1988a). 'Strategie Alliances, Organizational Learning, and Competitive Advantage: The

HRM Agenda', Human Resource Management, 27: 77-93.

-- (1988b), 'Strategie Allianees with theJapanese: Implieations for Human Resource Management',

in Contractor, F. and Lorange, P. (eds.), Cooperative Strategies in International Business. New York:

Lexington Books, pp. 487-98.

 

The other factors that could contribute, according to Pucik, for failure of HRM supporting competitive learning would include lack of involvement of HRM in staffing function of the alliance, low priority given to learning, training and effective communication issues being not properly addressed. In addition, the reward and performance appraisal system may not encourage learning, while clear responsibilities for leaning may not have been fully identified, particularly related to the company’s organizational design and control systems.

 Pucik has a plan for HRM functions, which are involved in such alliances. The plan includes leaning thorough exchange of personnel, between the partners; staffing the alliance with purpose of learning, clearly specifying the responsibility of learning, while having effective program for learning activities.

 

Policy issues for HRM in international alliances

HRM policies should be strategic enough to meet the objectives of the alliance. With this HRM strategy, the aim should be contributing human assets to the alliance performance, rather than looking only at the welfare of employees.(Frombrun et al, 1984). According to Drouin(2001), companies adopting strategic HRM policies have certain advantages, when entering into a collaboration. Other recent research work like CIPD (2001) have supported this view.

Footnotes:

Fombrun, C., Tichy, N. M., and Devanna, M. A. (1984). Strategie Human Resource Management, New

York: Wiley.

 

CIPD (Chartered Institute of Personnel and Development) (2001). Performance Through People.

London: CIPD.

 

Such performance benefits would result when HRM practices of the partner firms are sensitive to cultural and other needs of alliance partners, while electing their staff; pay attention to development of effective communication systems between their and alliance staff. In addition, the concerned HRM policies should encourage and foster organizational learning concepts.

 

Standardization

As HRM practices differ, when companies enter into collaboration, the crucial question remains regarding the adoption of specific policies for the alliance operations. It becomes difficult to make a choice between globalization of HRM policies and adoption of practices which suit the local conditions. While examining these pressures, Lu & Bjorkman (197) studied sixty-five IJVs, between western and Chinese firms. They found an effective understanding of HRM practices, between the partners in the areas of performance appraisal, financial rewards and promotion criteria. However, the reason for globalization of these standards could be the control of MNCs in such alliances.

Nevertheless, within the Sino-western alliances the emphasis was, as per Lu and Bjorkman, on responsiveness to local conditions, which included HRM practices for recruitment and training methods. (HRM 315-21)

 

 

Footnotes:

Lu, Y.and Björkman, I. (1997). 'HRM Practiees in China-Western]oint Ventures: MNC Standardization

versus Localization', International Journal ofHuman Resouree Management, 8: 614-28,

 

Sino-foreign joint ventures

When staff in an alliance involving Chinese partners has overwhelmingly Chinese presence, it becomes difficult to introduce western or Japanese HRM practices into the alliance operations.(Easterby-Smith, et al, 1995 ) and (warner, 2003). Normally China does not follow the practices of performance appraisal and rewards. Therefore, differences in understanding these and other HRM issues are bound to arise in such alliances.(Shore et al, 1993). However, it has been observed that many such alliances have HRM heads of foreign par