Global HR Practices MBHR4005

1.1 “International Business as business in an internationally competitive environment, no matter whether the
International market is domestic or foreign.” 2 imp indicators – intl trade, intl production.
Business & Domestic product is being increasingly consumed in foreign countries, and vice versa.
Globalization International Business is any bus activity that transcends national border. Some domestic txns may
contain internationalization. (Domestic Procurement because it is best source across intl market)

Intl business can take diff forms – exporting, licensing, contract manuf, foreign assembly, foreign
production, JV. Sometimes, same domestic product may be exported, or with some tweaks.

Problems in Intl Business: Bus Principles are universal. But diff exist in domestic & intl business.
1. Political & legal: Countries add complexity. Could be diff across states in domestic too
2. Cultural: domestic too
3. Economic:
4. Currency: convertibility, exchange rate fluctuations, regulations
5. Language:
6. Business infrastructure: availability, nature, success of diff medium
7. Trade restrictions: esply import controls
8. High cost of distance
9. Trade practices & customs

Need to go Intl: Pull / Push

Pull Factors: Proactive reasons, forces of attraction. Relative profitability, growth prospects
Push Factors: Reactive reasons, compulsions of domestic market like saturation
● Profit Motive: usually international is more profitable. Even if it is less, could increase total profit.
Take advantage of local cheap labor, reduce cost of production. Either entire manufacturing or
only some stages
● Growth/ Expansion Motive: developing countries income & population is increasing.

Domestic demand constraints drive internationalization for some. 1) domestic market fully tapped,
population growth negligible. 2) economies of scale by increasing market size 3) Domestic recession

Intl Mkt Problems:

● Competitive Forces: protected domestic market doesnt motivate companies to seek business
outside. After liberalization, many expanded out. Also, take an offensive international competitive
strategy by way of counter-competition. I.e., penetrate home market of potential foreign
competitors to diminish its competitive strength and to protect domestic market share from
foreign penetration.
● Govt Policies & Regulations: countries may support/ incentivize domestic companies to export,
some encourage imports & foreign investment. Earn foreign exchange to finance imports. Diff
environmental laws in diff countries. Reduced scope/ approvals in home country also a reason.
● Monopoly Power: in some cases, intl business is a corollary of monopoly it enjoys internationally.
May be from resources, patents, tech adv, product differentiation, etc
● Spin-off benefits: domestic company’s image may improve when they go international. Gain
better market share domestically, or better products for domestic market too. Forex earned may
enable import of goods/ technology. Govt may offer export incentives.
● Strategic Vision: urge to grow, be more competitive, diversify, gain strategic advantages

Globalization: future of world economic dev, inevitable, irreversible. Some think it increases inequality.
Comes with risks.
Economic globalization is historical through trade & finance flow. Also refers to movement of people,
knowledge. People movement for better employment opportunities. Skill transfer happens. Knowledge/
info exchange is integral, overlooked aspect of globalization.
Globalization encompasses:
● Doing, planning, expanding business globally
● No distinction between domestic/ foreign markets, global outlook
● Locate production/ other physical facilities on business/ market consideration, not national
● Global sourcing of factors – RM, finance, tech, machines
● Global orientation of org structure, mgmt culture
Stages of Globalization: exports, JV, subsidiaries, international, multinational, then global

Page 1 of 22
 1. Arm’s length service activity of domestic company. Enters overseas via local dealers
2. Begins these activities on own
3. Own manufacturing, marketing, sales overseas
4. Full insider position, complete business ops – engineering, R&D. HQ mentality continues
5. Full global mode, serve local customers, responsive to their needs. “global localization”
Today’s global companies are nationality-less. Dont exploit local env to repatriate profits to home
country. They invest, train, pay taxes, build infra, provide value to all customers in all countries.

Forces influencing Globalization (Driving):

1. Liberalization: fostering a borderless business world. Due to GATT/ WTO and otherwise. LPG led
to surge in cross-border M&A, greater global economic integration
2. Network of MNCs: MNCs that link their resources & objectives with world market opportunities
have been powerful.
3. Technological Growth: major factor of globalization. Usually available to everyone in the world,
unless patented/ restricted by govt. Patents also allow internationalization to exploit demand
without competition.
4. Transportation, Communication Revolution: reduced barriers greatly. Communication reach
increased, costs reduced. Air cargo, containerazation, refrigeration, fall in cost caused drastic
transformation of logistical and global distribution. Global sourcing is encouraged by trade
liberalization, tech devt, reduced transportation costs
5. Product Development costs & efforts: Cost of NPD is high, global markets help recoup costs. Tech
changes hasten product obsolescence, need short payback period, possible only w/ large market
6. Quality & Cost: better achieved with global markets
7. Rising aspirations & values: higher education, increasing exposure to e-media, people want things
that make life comfortable/ satisfying. Customer today is global – not tied down to domestic
product/ availability
8. Competition: increased competition compels org to increase efficiency, reduce costs, using global
locations
9. World economic trends: difference in growth rates of economies meant developing countries
became attractive markets. And, domestic economic growth, outside opportunities reduce
opposition to globalization. Economic liberalization – deregulation & privatization also helped
globalization.
10. Regional integration: groups like EU, NAFTA create borderless world between members
11. Leverages: adv a company enjoys because it conducts business in more than one country. 4 types:
a. Experience Transfers: draw on their tested experiences from some markets and apply in
comparable markets
b. Scale economics: cost impacts success. Scale helps keep cost low.
c. Resource Utilization: sourcing resources globally
d. Global Strategy: built on IS that scans world business env to identify opportunities, trends,,
threats, resources. Global strategy is a design to create a winning offering on a global scale.
Takes great discipline, creativity, constant effort. Reward is not just success, it is survival

Forces influencing Globalization (Restraining):

● External: govt policies, controls, social opposition against foreign business
● Internal: mgmt myopia / nearsightedness
1.2 HR & Intl Business, challenges of HR: top 3 global pressures impacting HR
Internationaliz ● Deployment: getting the right skills where we need them
ation of ● Knowledge & Innovation Dissemination: spread throughout org, irrespective of origin
Business ● Identify & develop talent on global basis
Global staffing pressures are complex - candidate selection, assignment terms, documentation, relocation
processing, vendor management, immigration processing, culture/ language orientation & training, comp
admin, payroll processing, tax admin, career planning & devt, handling spouse/ family matters.
Having a global HR perspective requires understanding diff cultures, what motivates people from diff
societies, how that’s reflected in the structure of intl assignments. Challenges are not because of distance,
but cultural, political, legal, economic differences.

Impact of Inter-country diff affecting HRM: A company operating in multiple countries has to deal
with heterogeneous political, legal, cultural backgrounds.
● Cultural factors: cultural differences across countries necessitate diff mgmt practices among
subsidiaries. US managers want job done, Chinese want to maintain harmony. HK managers fall in
between. Policies & processes on how orders are issued, distance to be maintained, addressing
people, taboo topics at work, etc

Page 2 of 22
● Economic Systems: some countries believe in free enterprise. Some have restrictions on employers’
right to discharge workers, work hours per week, etc
● Legal & IR factors: US practices employment at will. Europe doesnt make it easy to fire/ lay-off.
US uses Unions, Europe prefers work councils
● EU (similar groups): common market for goods, services, capital, labor. Employees can move freely
for jobs, single currency. Intra-EU differences remain – min wages, max work hours, holidays, min
notice of termination, contents of employment contracts. Some differences may reduce, but cultural
differences will remain. May strain relations between HQ and subsidiary personnel, or make
manager less effective abroad

Intl Perspectives of HRM: IHRM is more complex than domestic – esply in areas of staffing, mgmt
devt, perf evaluation, compensation – coz of diff betn countries in labor markets, culture, legal systems,
economic systems. Not sufficient to hire who meet skill requirements, but they should fit org culture.

Strategy, Structure, Control Systems in org modes: SKIP this!

Various diversities & impact

● Cultural: in different dimensions
o Individualism & Collectivism: Individualism where people place value on themselves, refer as
singular (not part of group). Indiv tasks more important. Collectivism is where group is more imp,
relationships more imp than tasks or indiv.
o Power Orientation: orientation to authority. Extent to which less powerful people accept unequal
distribution of power. Some countries want clear understanding of authority, never bypass. Others
are willing to circumvent.
o Uncertainty Avoidance: preference for stability. Different tolerance levels
o Masculinity: assertiveness or materialism – extent to which dominant society values emphasize
aggressiveness, acquisition of money & materials over concern for people, overall quality of life
o Time-orientation: 2 categories – Long-/ short-term orientation. People with LTO focus on future,
work on projects having distant pay-offs, persistent, thrift. Those with STO more oriented towards
past & present, respect for traditions & social obligations.
● Workforce: PCNs vs HCNs vs TCNs. Expats, Inpats, and Repats. Diversity means employees
bring their attitudes, motivation to work (or not), feelings, & other characteristics. Contingency
approach, tailor-made practices may be needed
● Language: English doesnt cover entire world. Expats can try to learn host language, but not
sufficient. Multi-lingual communications increases coverage & understanding
● Economic: per capita income of diff countries. Related to compensation mgmt. “equity in paying
to employees” difficult across countries. Parity is based on cost of living.

Implications for HRM practices: practices should be tailor-made to suit local conditions.
● Recruitment & Selection: ethnocentric (PCN) vs Polycentric (HCN) vs Regiocentric (of region) or
geocentric (merit). Only merit but no cultural adaptability causes failure. Fresh graduates from host,
trained in parent is a new practice
● Perf Mgmt: MNCs usually adopt “assess, discuss, suggest ways to improve”, MBO. Works where
superior & subordinate can discuss on equal footing. Else, insubordination.
● T&D: pre-departure training to expats (superficial). MNCs shd develop a global pool of intl mgrs
and rotate them to facilitate transfer of HRM practices, and mentor future global mgrs
● Compensation Mgmt: going-rate approach (tied to host country norms) and balance-sheet approach
(tied to home-country). Both have merits & limitations
● IR: depends on history, legal framework, power relations, ideology of mgmt/ TU in each country.
MNCs strike balance between local practices and standardization. (Lobby with local govt?)

Changing Indian Bus Env and HRM: Liberalization brought more freedom to conduct businesses in
India, brought changes to economy
● Industrial policy changes: very few need license, replacement of FERA, no control under MRTP,
diluting role of public sector, liberalization of FDI, more freedom in capital market
● International Trade Policy Changes: globalization of economy, continuous lowering of import
tariffs, more export items under general category, emphasis on export but not enough financial
incentives, convertibility of rupee
● Structural Changes: phasing out subsidies, gradual dismantling of administered price mechanism,
public sector disinvestment, exit policy for business, smoothened M&A
Changed a protected market to a competitive market.

Page 3 of 22
 Mgmt practices in pre- & post- liberalization era:
Factor Pre- Post-
Nature of market Seller's Buyers’
Competitive tools Licenses & quotas Develop competitive competence
Competitive postures Revenue gen emphasis Revenue gen thru cost cutting
Role of HR secondary primary
Growth objectives Asset creation Value creation
Concern for promoters All stakeholders

More emphasis to HRM coz of following factors:

● Emphasis on core competency: unique strength of org: people, financial, marketing, tech.
Businesses based on core competency have competitive adv – many org restructured their
businesses – divesting some, acquiring others.
● Reorganization: restructuring & reorganization too – Flat structure, expanding span of control.
Strategic BU dept instead of functional. Calls for new skills – either hire, or upskill/ cross-skill.
Latter preferred in a market where labor is being competed for.
● Competition for HR: competition for talent increased with MNCs entering India. Pressure on
domestic companies
● Tech Changes: removal of tech import restrictions, increased use of computers. Employees have to
acquire newer skills, increased training needs – HR team busier
● Need for workplace empowerment: give authority that matches their responsibilities. Change in
mindset, change in skills needed. HR is crucial for both changes.

Emerging challenges in Intl HRM: HR personnel have to identify challenges and redefine their roles &
resp to counter. 4 major categories
1. Mergers & acquisitions
2. Changing workplace profile
3. Newer org designs
4. Increasing quality consciousness
Important factors that make IHRM complex & challenging:
● Labor Market Conditions: skill levels, demand-supply, behavior of labor vary betn countries. Many
developing countries have abundance of skilled & scientific, unskilled, semi-skilled manpower.
Changing quality attributes of people in developing countries, and wage differences are causing
locational shift in business activities
● Cultural Differences: behavioral attitude of workers, social env, values, beliefs, outlooks affect IR,
loyalty, productivity etc. Labor mobility has changed too. Addressing seniors by name, respect for
designations etc.
● Changing political env: diff govt policies/ regulations
● Attitude towards employment: hire & fire vs lifetime employment (difficult to get rid of inefficient/
surplus manpower), right to change job.
● Variance in employment: system of rewards, promotions, incentives & motivation, labor welfare,
social security vary
1.3 Linkages Balanced Scorecard: new approach to strategic mgmt, what companies should measure in order to
among people, balance the financial perspective.
strategy, and Management system (not only measurement system). Retains traditional measures. Financial measures
performance – tell story of past events, adequate for old age companies. Inadequate for guiding & evaluating journey
Balanced that info-age companies must take to create future value through investment in customers, suppliers,
Score Card employees, processes, tech, innovation.

Views org from 4 perspectives:

● Learning & Growth: “To achieve our vision, how will we sustain our ability to change and
improve?” Includes employee training & corporate cultural attitudes. Employees are the repository
of knowledge. Metrics to guide managers in focusing on training funds. Learning is more than
training, includes mentors, ease of communication, tech tools
● Business Process: “To satisfy our shareholders, customers, what business processes should we
excel at?” Metrics to know how well the business is running, whether products & services conform
to customer requirements. In addition to strategic mgmt processes, 2 kinds of business processes
may be identified – mission-oriented (specific functions of govt offices), support processes
(repetitive, easy to measure)
● Customer: “to achieve our vision, how should we appear to our customers?” Customer focus,
CSAT are key

Page 4 of 22
 ● Financials: “to succeed financially, how should we appear to our shareholders?”

Management Approaches to strategic mgmt:

Proj Mgmt BusProcImprov BSC
Age of Decades DoD, 1992 1990
Approach
Prime Cust Ext Sponsor Int Director Ext IG, Int Dir
Goal Defn Proj Req, mission Cost, cycle time redn Strategic mgmt system
stmt
Focus Tech Mission Bus Proc Multiple
Scope Spl unit Unit to ent Dept to ent
plans PoA, milestones Proc Impr Plan Strategic Plan, Perf Plan
Schedule & WBS, Action Items Team directed, Focus Cross-func teams, 1-2y
Teaming Groups imp
Mgmt Team Building, BP analysis, to-be proc Define metrics, collect &
Activities Budgeting, Task design, automation analyze data, decide on
tracking, Reviews changes
Tools MS Project, TurboBPR, IDEF0 Data collection systems,
Primavera scorecards
Measures of Deliverables on Cost redn – cost of BPI Learning what strategies
Success time, budget effort work, improved results on
many metrics

Traditionally, HR function was seen as primarily administrative - benefits, payroll,.. With the realization
that improvements in indiv emp perf would automatically enhance org perf, HR is now seen as a new
source of competitive advantage.

Evolution of HR as strategic Asset

● Personnel perspective: firm hires & pays people but doesnt focus on hiring the best, or developing
exceptional employees
● Compensation Perspective: uses bonus, incentive, meaningful distinction to reward high/ low
performers. 1st step towards relying on people as competitive adv
● Alignment Perspective: Sr Managers see employees as strategic assets, but not invest in
overhauling HR capabilities. HR cant leverage mgmt perspective
● High-Perf Perspective: See HR as a system embedded in a larger system of firm’s strategy
implementation. Firm measures & manages relationship between these

HR Scorecard: Linking People, Strategy, Performance

For HR to transform to a truly strategic role, HR professionals must be able to measure perf, and to link
HR’s contribution to org mission. HR Scorecard is the mgmt system for this.

6 Core Competencies to operate a strategic HR Architecture:

1. Individual credibility: sustain by living the values, work with others, win-win relships, stay honest,
take initiative
2. Ability: be able to organize, orchestrate, manage, deliver change initiatives
3. Cultivate co. culture: weave company’s values, mission, vision, strategy into way business operates
4. Proficiency: become capable in HR practices, theories, procedures. Commit to learning & deliver
results based on learning
5. Business Knowledge: understand how your company operates, how the functions interact with each
other and with HR
6. Strategic Perf Mgmt: 4 dimensions –
a. Identify & link strategic ways HR can contrib to org strategy & success - “critical causal
thinking”
b. Identify & implement accurate ways to measure influence of HR activities on perf drivers, corp
strategy
c. Estimate potential implications of change in HR, on company’s profits
d. Communicate how HR affects overall strategy & profits for Sr Mgmt to appreciate

Creating strategic HR Architecture that incorporates HR Scorecard needs:

● Clearly define reasons for change
● Clearly outline technical elements
● Use a checklist to stay on track

Page 5 of 22
● Identify project leaders, sponsors, resp proj champion
● Get agreement on desired outcomes of change
● Assure everyone is committed to change, & desired result
● Openly share info, incl scorecard results & progress
● Establish fin support for tech, structural adjustments
● Develop systems that support & reinforce at every level
● Monitor company’s progress towards desired outcome
● Begin with small changes to achieve early success, inspire change
● Learn from & develop program as you go, adjust as needed
● Celebrate progress & successes, however small

Creating HR Scorecard:
● Ideal scorecard for HR includes 4 themes - 1. identifying HR deliverables, 2. identify & measure
high-perf work system elements that generate deliverables, 3. develop validated competency model
to focus on outcomes, 4. identify HR efficiency measures that links costs & benefits
● Scorecard will include leading indicators of High Perf Work Systems & HR system alignment,
lagging indicators of HR efficiency, HR deliverables
● Measurement system to strike balance between cost control & value creation
● HR doables are cost-focused (no impact on bottom line), HR deliverables are benefits focused
(connection to overall strategy). Both to be measured
● Measures of HPWS reflect more on what should be, than what is
● HR system alignment will link directly to specific deliverables in scorecard.
● Efficiency measures in 2 categories – core items represent expenditures (imp, but dont contribute to
strategy impl), strategy items (designed as investments that produce value)
● Measures of HR deliverables identify how HR system creates value. Focus on HR drivers and
enablers that
● represent human capital
● Avoid temptation to fill boxes, ask what you want tool to do. Each item should:
o Reinforce distinction between doables & deliverables
o Enable cost control & value creation
o Measures leading indicators
o Assess contribution to bottom line
o Let HR professionals manage their strategic resp
o Encourage flexibility & change

Transformation of HR to Strategic HR:

HR transformation to change the way to think about HR’s role in delivering value to cust, shareholders,
managers, employees, not how the services are delivered/ administered.
Moving towards centers of expertise or outsourcing, doesnt mean HR is transformed. If new delivery
mechanisms provide same old HR services, function changed, didnt transform. Transformation changes
both behavior & outputs.
Changing any single HR practice doesnt create transformation. Transfmn requires integrating various HR
practices and focusing them jointly on value-added agenda, such as customer connection, org capabilities
HR transfmn isnt strategy stmt – must shape behavior and create & ensure stakeholder value.
Attending seminars, returning with ideas isnt enough. Requires whole new agenda, thoughts, processes
across entire dept.
Gaining credibility, acceptance by mgmt isnt transfmn. Real transfmn must turn relships into results,
create value for customers, shareholders, managers, employees.
Fundamental transformation starts with definition of HR value – who the receivers are, clear stmt of what
they receive from HR services.

Values of Strategic HR:

Value is defined by receiver, not giver. Influence with impact occurs when HR professionals start with
the beliefs & goals of receivers.
HR value proposition has 5 HR elements that form integrated HR blueprint.
1. Knowing external business realities (tech, economics, globalization, demographics)
2. Serving external & internal stakeholders
3. Creating HR practices (people, perf, info, work)
4. Building HR resources (HR Strategy & Organization)
5. Assuring HR professionalism (HR Roles & Competencies)

Page 6 of 22
 External realities & stakeholder interests determine why HR matters to an org, why HR needs to focus on
what it delivers (more than what it does). HR practices, resources, professionals are elements that
encompass HR function within org.
1.4 SKIP THIS TOPIC
Developing Intl Competitive Strategies:
Competitive Competitive Adv or Strategies:
Strategies & Analysis of Competitive Strategies & Operations:
Strategic Choice of Internationalization Strategy:
Options Factors influencing changes in Strategy:

Linking Strategy, Env & Planning: International strategy must be designed to meet clear corporate
objectives - statement of what company will achieve over a known time, in the interests of all
stakeholders. Should be expressed precisely.
HR dept should plan to achieve within this strategy. In many international companies, HR dept will be
involved in/ will influence, setting up of strategy at both corporate & functional levels. Sequence will be
1) develop long-term strategy 2) determine obj & timing 3) design & develop plans to meet these obj.
Allocate resources for plans, costs. Implement plans 4) Control, review progress, amend (within limits)

Key factors in setting/ developing HR strategy for international operations:

1) Demand: elasticities, usage patterns, demand stimulation & forecasting
2) Demographic Factors: changes in profile by age, population density, socioeconomic status
3) Technology: impact on purchasing/ production/ life-cycles of products
4) Competition: direct & indirect; strengths & weaknesses in prod devt
5) Distribution: changes in channels, logistics
6) Finance: profit implications of alternate HR strategies, key fin ratios in alternate pricing
7) Environment: legal, cultural, political codes, standards, effect of regulatory laws

Operational Competitive Strategy:

2.1 HR Globalization of business touches HR manager more than other functions. Process of procuring,
Challenges & allocation, effectively using people in an intl business is IHRM.
Opportunities IHRM is interplay along 3 dimensions – HR Activities, Types of Employees, countries of operation.
1. 3 broad activities of IHRM – procurement, allocation, utilization cover all 6 activities of domestic
HRM (planning, hiring, T&D, remuneration, Perf Mgmt, Ind Relations)
2. 3 country categories – home (HQ), host (subsidiary), others (source of people/ finance)
3. 3 types of employees – PCN (parent), HCN (host), TCN (others)

Major Challenges of HRM:

● Outsourcing HR activities: hiring, T&D, payroll processing, benefits admin, maint of statutory
records usually subcontracted
● BPO & Call Centers: unbundling or vertically disintegrating activities (outsourcing). Call centers
are BPO too
● Work-Life Balance: problematic for working couples. Will increase in India from current 15%
● Ethical HR: from hiring, to setting up mechanisms to ensure ethical conduct of employees
● Manage diversity: more youth, women, ethnic minorities. More mobility, expats. Intl exp becoming
prerequisite for top positions
● Globalization: competition from MNCs in our own backyard
● Org restructuring: resulting from M&A, employee anxiety, uncertainty. Both sides employees
anxious about loss of jobs, job changes, transfers, changes in org power/ status, culture changes
● Changing demographics of workplace: relocation & dual career couples
● Changed employee expectations: not motivated by merely security, salary, housing. Expect
empowerment, equality with mgmt
While today’s HR is “safer” than few decades ago, more challenging

Future Focus Areas:

● HRM to be integral to business
● Employee empowerment
● Focus on productivity thru team building
● Dynamic/ flatter/ matrix org structures
● People-sensitive mgmt styles & practices
● Management of changing workforce skill/ gender/ turnover
● Managing changing workforce diversification
● Efficient use of IT

Page 7 of 22
 ● Strengthening org communication
● Greater focus on man-machine interface
● Institutionalizing employee involvement
● Sustaining indiv effectiveness thru perf feedback, counselling
2.2 National Areas of Differences: cultural, legal, political and other diff may impact operations overseas.
Differences Understand/ learn host country culture. Knowledge of domestic & host-country laws, international law,
Facing tax laws, liabilities, quotas/ restrictions on imports & exports – all matter. Pay attention to political
Operations instability, govt involvement in regulations. Availability of labor pool, skills, social status, religion,
gender, age to be studied. Competition, distribution channels. Measuring economy in terms of GNP, per
capita GNP, income structure.
Domestic strategy can be about cost, revenue, profit. International is different. Larger corporations more
likely to affect developing countries.
● Magnetism: ability of MNC to integrate & coordinate a global system, gives them power to affect
social, political, economic devt of host nations
● Diversity: large companies are geo-diversified, minimally dependent on one location. Increases
bargaining power with host nation.
● Flexibility: ability of MNC to adapt to changing environments, respond to threats or opportunities.

Domestic Env: composed of internal (personnel, production, finance, marketing), and external
(uncontrollable) forces (social, cultural, political-legal, economic, technological). External forces may
change with less notice. Strategic management in MNC should research all domestic laws that regulate
intl trade or transfers.

Intl Env: comprises independent multinational org – UN, World Bank, IMF, ISO, etc These facilitate,
promote, provide security for international exchange of products, services, money. these should be
integrated into strategic planning process of MNC operation.
World Bank gives loans & credit to less developed countries (LDC). Monitoring those activities helps
identify potential buyers. WB’s center for arbitration helps resolve difficulties.
ISO facilitates business relations by standardizing measurements.
2.3 Linkages SKIP! Title doesnt correspond to anything in the book!
among
countries,
stakeholders,
and their
concern of
operations
2.4 Individual Ethics are moral principles – sense of right & wrong, goodness & badness of actions, motives &
and consequences of actions. Protecting someone from harm is ethical – product recall.
organization’s
concerns on Sources of Indiv & Company concern:
ethics and Individual is influenced by 3 repositories of ethical values – religion, culture, law. Ethics control
society behavior. Ethics-driven restraints are more effective than restrictive controls/ incentives.
● Religion: oldest ethical inspiration. Great religions preach need for orderly social system,
emphasize social resp with obj to contribute to general welfare
● Culture: set of values, rules, standards transmitted among generations, aimed at modeling
acceptable behaviors. Large factories/ companies, population growth, economic doctrines,
capitalism, socialism, technology have replaced ethical standards of agrarian stage. No new/
distinct ethics created.
● Law: rules of conduct, approved by legislature, guide human behavior. Law is reactive. Society
expects businesses to abide by law. But law breaking is common – tax evasion, OH hazards, job-
related injuries – both careless emp/ employers. Poor quality/ high prices impact customers

Ethics in Business: (Especially HR)

● Ethics corresponds to basic human needs – both in personal life and in business. Most people want
to work at an org they respect and can be proud of. Compels org (and HR) to be ethically oriented
● Company seen as ethical & socially responsive will be honored & respected. Instinctive prejudice
for its products & services (or IPO)
● Values give credibility to mgmt with its employees. Values are common language.
● Perceived moral/ social uprightness can win employee credibility over business strategy/
compensation policy/ fringe benefits
● Values help better decision making – in the interest of public, employees, company’s own long-
term good – even if slow decisions. Economic, social, ethical are all considered.

Page 8 of 22
 ● Ethics & profit go together. (long run)
● Law & govt alone cannot protect society, ethics can. Tech develops faster than govts can regulate.

Difficulties in Ethical Decision Making:

1. Managers face dilemmas in deciding on course of action
2. Situations where distinction between facts (what is) and values (what ought to be) has to be made.
E.g. New drugs – cost vs price
3. Good and evil exist in tandem, simultaneously
4. Knowledge about consequences of an action is limited. If act results in greatest good of greatest
numbers, it is morally acceptable.
5. Antagonistic interests use incompatible ethical arguments to justify their intentions. E.g. Animal
lovers vs poultry farm growers
6. Ethical standards vary with passage of time. Donations to political parties (allowed now), bribes &
payments, business with family
7. Ethical behavior is moulded from clay of human imperfection. People around could be unethical
8. Newer, emerging ethical problems that are not solved easily with traditional guidelines. Human life
vs economic factors?
9. Growth of large org means committee decision making – no individual responsibility, org loyalty
vs loyalty to public interest

Ways of resolving ethical issues:

1. Consider 3 principles to resolve ethical issues – moral idealism, intuitionism, utilitarianism. Moral
idealism says some acts are good, and some bad. Pursue good ones. Intuition leaves it to individual
to sense moral gravity of situation and choose a good option. Utilitarianism seeks to establish moral
locus not on the act or motives, but consequences. If consequences represent a net increase in
society’s happiness, act is morally right.
2. Consider decision tactics that illuminate moral choices. E.g. engage in an imaginary conversation
with a hypothetical opponent. Have a debate with an intelligent person who takes a diff view.
3. Write down pros & cons as balance sheet
4. Sort out ethical priorities before problems arise (before stress)
5. Commit publicly on ethical issues. Once stance is clear, employees will be less tempted to
approach with bad intentions
6. Ethical perfection is illusionary
HR manager deals with more stakeholders than other functional managers. Interests of co., employees,
management, shareholders,... dilemma when there is a conflict of employee’s with org’s interests
2.5 career in HQ HR people handling Domestic HRM deal with employment planning (recruitment & hiring), wage &
international salary admin, benefits, T&D, labor relations, safety, personnel systems & policy, equal opportunities. For
business IHRM, 2 additional areas would be taxation, relocation & orientation
Recruitment Philosophy:
● Ethnocentric: staff all key positions with PCNs. Found in highly centralized firms, that rely on low-
cost production
● Polycentric: staff host country positions with host people
● Regiocentric: handle regionally (say, APAC, MENA, Europe). Used when similar products sold
across globe, marketing tailored to different cultures
● Geocentric: qualified people from any background/ culture

Selection Criteria: selecting manager is a major decision – in host country, manager represents MNC &
home country. Impressions could last longer.
● Technical/ Managerial Skills: past perf at mgr level
● Motives & Desires: genuine interest in host country, not money
● Social Skills: ability to interact with & understand host country people, form relships
● Diplomatic skills: interact with business associates, govt officials, political leaders
● Maturity & Stability: deal with situations logically
● Family factors: family’s ability to adapt to new env
● Other attrib: 1) age is sign of authority 2) women may be less accepted 3) fluency in host language,
awareness of traditional business practices

Executive who serves abroad represents company, is ambassador. Should have adaptive capabilities,
open mindedness, tolerance, respect for other traditions/ viewpoints, knowledge of history & culture of
host country. Sense of politics, org abilities, ability to achieve goals through acceptance & cooperation.

Page 9 of 22
 Ideal background for overseas career: Family adaptability, leadership, job knowledge, respect for laws
& people of host country, prev overseas experience, local language knowledge, managerial
understanding
Cost of screening before placement is less than cost of failure in new env
3.1 HR in HR Functions:
Global Setting ● Ensure org fulfils all statutory obligations
● Carry out job analysis
● Forecast HR requirements – no of people, skills
● Develop & plan to meet the requirements
● Recruit & select personnel to fill jobs
● Orient, train employees
● Design & implement mgmt & org devt programs
● Design systems for appraising perf
● Assist employees in developing career plans
Process of procuring, allocating, utilizing human resources in an intl business is called IHRM.
IHRM is interplay of 3 dimensions – HR activities, employee types, countries

Comparison of Domestic and Intl HRM:

1. More HR activities: intl taxation, intl orientation, relocation, admin services for expats, host govt
regulations, language translation
2. Need for Broader Perspective: coordinate pay across currencies, fringe benefits, family definition
for health insurance
3. More involvement in employees’ families: for selection, training, effective management. Help
expat understand housing, healthcare, education, all aspects of remuneration, banking, investments,
rent while away, final repatriation
4. Changes in emphasis with workforce mix: parent/ 3rd country needs decline when host country
people are trained well. HR staff working on expat taxation, relocation, orientation transferred to
selection, training, mgmt devt. High performance local staff can be brought to HQ for devt
assignments
5. Risk exposure: high risk in domestic – non-compliance of documents, strained relations with
unions. IHRM risks are more - (depending on country) - safety, terrorism/ kidnapping, financial
risks of failed expats, seizure of MNC assets
6. More external influences: more exposure to more political figures, ministers, etc than domestic.
More involved in administering benefits like housing, education

Intl HR Activities:
1. HR Planning
2. Recruitment & Selection
3. T&D
4. Perf Mgmt
5. Remuneration
6. Repatriation
7. Employee Relations

HR Planning: vital to use people efficiently. But difficult across countries. Past may have little to do
with future.
Key issues in IHRP:
1. Identify top mgmt potential early
2. Identify CSF for future intl managers
3. Provide devt opportunities
4. Track & maintain commitment to individuals in intl career paths
5. Tying strategic business planning to HRP (vice versa)
6. Dealing with multiple BUs to achieve global / regional strategies

Sources of HR:
● Home-country Nationals: from HQ, parent company, expatriates. Typically, MNCs fill key
positions with HQ. US/ Europeans use HQ for developing nations, and host nationals for developed
countries. Japanese use home-country for all. Historically, mostly men
Reasons for using HQ: 1. start operations 2. provide tech expertise 3. have financial control
● Host-country Nationals: MNCs employ locals for mid-/ low- level managers. Countries expect that
too. Using too many from HQ is expensive. US firms rely heavily on host-country 1. familiar with
local culture, 2. local language 3. less expensive 4. hiring them is good PR

Page 10 of 22
 ● 3rd country Nationals: from any other country, with expertise. TCNs cheaper than HQ, good
working knowledge of region, knowledge of local language.
Benefits of TCNs: 1) esply those who worked in HQ country can achieve corp obj easily than
expats or locals. Deep understanding of company’s policies from perspective of foreigner, can
implement better 2) during rapid expansion, TCNs can substitute for expats, can offer diff
perspectives than narrow ones of expats or locals 3) in JV, TCNs can demonstrate a global/
transnational image, bring unique cross-cultural skills to the relationship
● Inpatriates: from host country, or TCN assigned to work in HQ. Helping MNCs build a breed of
multilingual, multi-experienced, global/ transnational managers
● Subcontracting/ Outsourcing: get work done either by employing them or by contracting it.
Outsourcing can save significant costs

Recruitment: and selection for intl recruitment depends on 1) general staffing policy on key positions in
HQ & subsidiaries 2) ability to attract right candidate 3) constraints placed by host govt on hiring
● Ethnocentric Approach: using parent company nationals to fill all key positions. Usual for early
stages of internationalization. Business reasons too – perceived lack of qualified host nationals; need
to maintain good rapport with HQ. Common practice during acquisition of host company has been
to replace local manager with home manager – to ensure culture and value uniformity. Local people
may be inducted later.
Disadvantages: 1) limits promotion opportunities of HCNs, decline in productivity, high labor
turnover. 2) PCNs take time to understand local dynamics, faulty decisions 3) salary structures of
expats cause discrimination, frustration. Expats are expensive.
● Polycentric Approach: employ HCNs in host, PCNs in HQ.
Advantages: 1) no language barrier, no cultural adjustment, local dynamics handled by local people
2) managing local politics/ admin easy. 3) less expensive
Disadv: 1) rapport betn parent & host 2) difficult to imbibe original culture of company 3) host
country employees may not get adequate experience/ exposure
● Geocentric Approach: employ best people, without consideration of nationality.
Disadv: host govt’s employment policy, paperwork/ work permit if foreign national & dependents.
Expensive for T&D, benchmarking compensation
Adv: long-term, develop international core team
● Regiocentric Approach: divide into geo regions, allow transfers within region
Adv: allows interaction betn executives transferred to region HQ from subsidiaries, and HQ to
Regional HQ. Reflects some sensitivity to local condn. Effective to move from ethnocentric to
geocentric
Disadv: 1) may produce federalism at region level. 2) improves career prospects at national level,
moves barrier to region level

Selection Criteria for Intl Assignments:

● General Criteria: technical competence, human relations skills, previous overseas experience,
understanding host country culture, academic qualification, knowledge of host language,
understanding of home country culture
● Adaptability to cultural change
● Physical & emotional health
● Age, Experience, Education: younger ones are more eager, older ones more mgr exp.
● Language Training
● Motivation for foreign assignment
● Work-family issues
● Leadership ability
3.2 Tests & Interviews Process: tests & interviews commonly used to select people for intl operations.
International Adjustment model more effective. Some feel extensive interviews of candidates (& spouses) by senior
HR Selection executives is the best method. Many dont use tests.
Procedures Specialists have developed models that explain factors involved in adjusting. 2 major adjustments expats
need to make – anticipatory, in-country.
Anticipatory adj is influenced by 1) predeparture training (cross-cultural seminars/ workshops) 2) prev
exp of expat (same or similar country) Earlier, MNCs considered only tech competence.
On-site adj influenced by ability to 1) maintain +ve outlook in high pressure situations, to interact well
with host nationals, perceive & evaluate host country’s cultural values & norms correctly 2) clarity of job
expat plays, authority to take decisions, challenges of newness of work, possible role conflict 3) org
culture & how easily expat can adjust 4) non-work matters such as experiencing new culture, family’s
adj 5) ability to develop effective socialization tactics.

Page 11 of 22
Adv & Disadv of PCN, HCN, TCN
Cat Adv
PCN Familiar with HQ, goals, obj, policies,
practices
Easy org control & coord
Proven hi-performers
Have special skills, exp
HCN Familiarity with political, legal,
socioeconomic env, local business
practices
Lower cost of hiring vis-a-vis PCN, TCN personnel
Promotion opportunities, motivation &
commitment
Responds effectively to local demands
for localization of operations
No language/ culture barriers
Continuity improves, HCNs stay longer
TCN Salary, benefit needs <PCN
Better informed than PCN about host
country
Truly international mgrs
Disadv
Difficulty adapting to new language,
socioeconomic
Cost of selecting, trg, maintaining expat & family
abroad
Low promotion opportunities for HCN
PCN may impose inappropriate HQ style
Compensation for PCN, HCN may differ
Family adjustment prob (unemployed spouse)
Difficulty in exercising effective control over
subsidiary’s ops
Communication difficulties dealing with HQ
Reduced opportunities for PCN to gain
international/ cross-cultural exp
HCNs have limited career oppo outside
subsidiary
Hiring HCNs may encourage federation of
nationals than global units
Host govt may resent hiring TCN
TCN may not want to return to their country
after assignment
Host sensitivity with nationals of specific
countries
HCNs impeded in upgrading their ranks

Expat Problem: PCNs and TCNs are both expats, working outside country, with a planned return. Major
problem if premature return – expat failure. Study results:
US Firms Japanese Firms
Inability of spouse to adjust Inability to cope with intl resp
Self inability to adjust Difficulties with env
Other family reasons Personal or emotional problems
Personal or emotional maturity Lack of tech competence
Inability to cope with intl resp Inability of spouse to adjust

Culture Shock: inability to adjust – language skills, favorite foods/ supplies, home sickness, etc.
Disruption to established routines of behavior, mental energy required to adjust, higher frustration,
anxiety, anger. If they cross this and adjust, feel positive, more effective, satisfied life.

Training in Intl Mgmt:

Training to better understand customs, cultures, work habits of local env.
Have a culture integrator in each foreign operation – to guide, advise, recommend actions. Can help,
seldom sufficient.
MNCs should assemble experienced global team from diverse cultures. Else, need well-designed training
before overseas assignment. Most common topics – social/ business etiquette, customs, economics,
history, politics.
MNC’s overall staffing philosophy influences training. Ethnocentric (PCN) are from home, need
training. But have common background. Polycentric (HCN) use locals, training on HQ/ policies needed.
Regio Centric may need less training. Geocentric is global hiring.

Reasons for Training:

● Organizational: manage overseas ops more effectively. Help overcome ethnocentrism “belief
that one’s way of doing things is superior to others” of MNC PCNs. Helps overcome expat
ineffectiveness at host ops. Helps improve flow of commn between HQ & subsidiaries. Increase
overall efficiency, profitability
● Personal: improve ability to interact effectively with local people/ local employees. Dispels
myths & stereotypes
Host country employees would like to see changes in expat manager style – leadership, decision making,
communication, group work. Be more friendly, accessible, receptive to subordinate suggestions,
encourage subordinates.

Page 12 of 22
Phases of Trg Program:
1. Define overall obj (increase effectiveness of expat/ repat exec)
2. Problem recognition (relations with internal, external, govt, HQ, host govt, home govt)
3. Identify devt obj (increase cultural awareness, knowledge of host country, working knowledge of
foreign language, conflict management skills)
4. Assess devt needs (gap analysis)
5. Choose devt methods (pre-departure training, post-arrival training, reentry training)
6. Intermediate evaluation
7. Check desired result (effectiveness of trainees)
8. Reentry training
9. Effectiveness evaluation (after return)

Cross-cultural Training Programs – Types:

● Env briefing (geography, climate, housing, schools)
● Cultural orientation (value systems)
● Cultural assimilators (intercultural encounters)
● Language training
● Sensitivity training (attitudinal flexibility)
● Field experience

International Compensation Management: needs knowledge of taxation, emp laws, forex fluctuations.
Socioeconomic condns to be considered. Easy for PCNs over HCNs/ TCNs.
Broad Obj:
1. Comp policy to be in line with structure, business needs of org
2. Aim at attracting & retaining best talent
3. Enhance emp satisfaction
4. Simple to understand, easy to administer

Employee Expectations:
1. Proper comp against competency, perf level
2. Substantial financial gain for comfort of self & family
3. Take care of present & future needs – education, medical protection, housing
4. Progressive policy

Major aspects of Intl Comp Package:

● Base Salary: For international, this is the main component, allowances directly related to base,
basis for in-service benefits & pension contributions. Foundation block
● Foreign Service Inducement Premium: to compensate for hardships, encourage.
● Allowances: Cost of Living Allowance, home leave allowance, education allowance, relocation
allowance, spouse assistance
● Benefits: difficult, vary for each country. Pension, medical coverage, social security, vacation &
special leaves, rest & rehab leaves. Should expats be covered under home or host country
programs? Govt regulations?
● Incentives: ongoing premium vs one-time lump-sum. (reduced cost to company)
● Taxes: Tax equalization – firm withholds amount for home country tax obligation, pay all taxes in
host country. Tax Protection – employee pays up in home country. Employee benefits if host
country taxes are less.

Approaches to Intl Comp:

● Market Rate Approach: base salary linked to structure of host country. (benchmark against other
MNCs in that country)
Adv: Simple, identify with host country, equality with locals, equity among people from diff
countries
Disadv: variation for expats sent to diff countries, problem on repatriation (less salary), variation
betn assignments for same employee
● Balance Sheet Approach: maintains relative to parent country colleagues, compensate for costs of
intl assignment. Designed to equalize purchasing power of employees at comparable positions
levels in host or home. 4 main categories of expenditure incurred
o Goods & Services – home country outlay for food, personal care, clothing, household
furnishing, recreation, transportation, medical care
o Housing – cost of housing in host country

Page 13 of 22
 o Income tax – both home and host country
o Reserves – contribution to savings, payments for benefits, pension contrib, investments,
education expenses, social security taxes
Adv: Equity between foreign assignments, repatriation is easy
Disadv: complicated to administer esply taxation and living costs. Could cause disparities between
locals and expats in diff countries, may act as barrier to PCN acceptance

Flexible model: 3 sets of compensation – core, crafted, choice.

Core is constant, may vary acc to market, local conditions. Crafted set allows regional managers to
choose from a list. Employees can select from Choice set. May solve problems of other two.

Repatriation of Expats: Return to home from overseas engagement. Readjustment problems may arise.
Reasons for return: agreed upon duration is over, resume children’s education in home country, not
happy with overseas assignment, failure to do a good job.
Readjustment Problems: org unsure what to do with returning expats. Longer the tenure outside, larger
the problem.
Out-of-sight problem, original position may be redundant because of a restructure, skills may have
become obsolete because of tech advances
Personal problems may include lower standard of living, higher costs for housing, schooling culture
different, no relevance to international exposure.
Transition Strategies: Repatriation agreement tells how long person will be posted, promises a mutually
acceptable job on return (equal to or better than the one before)
Proactive strategy is effective support system to allay expat concerns – mentor programs, separate org
unit to take care of expats, continuous contact with HQ.
Main problems: adjusting to life back home, a lesser financial package, less autonomy than in overseas,
no career counseling from org
Steps Org can take:
1. Arrange event to welcome and recognize employee & family - formal/ informal
2. Establish support to facilitate family reintegration
3. Offer repatriation counselling or workshops
4. Assist spouse with job counseling
5. Education counseling for children
6. Thorough debriefing by facilitator
7. Offer international outplacement, reentry counseling if no positions are available
8. Arrange a post assignment interview with expat & spouse to review their view of assignment

Motivation at Work: Internal driving force that results in persistent behavior, directed towards a goal.
People are motivated to carry out assigned task to the extent – doing so, satisfies their personal needs.
Work is effort to satisfy needs and expectations.
Motivation is not a personal trait. Result of interaction between individual & situation. Willingness to
exert high level efforts towards org goals, conditioned by effort’s ability to satisfy some individual need.
Not merely high intensity, but channelized to accomplish org goals & satisfy indiv needs.

Factors to motivate employees: 3 factors – tickle the mind, touch the heart, train the hand.
● Provide for basic needs: dont let employees worry about salary, housing, job safety – wasted efforts
● Proper job design: remove job monotony. Try job rotation, horizontal loading, job enlargement
(vertical loading), job enrichment (greater stimulation & creativity)
● Proper placements: right person in right job. Determine abilities & aptitude of people, analyze jobs,
allocate suitable job
● Set example of high standards: workers tend to emulate supervisor
● Necessary info to employee: employee knows significance of job relative to overall org goal
● Sense of freedom: people need to be guided, not driven. Effective manager exercises situational
authority, explain about situation, encourages people to work independently, or interdependently in
a team. Wont interfere
● Opportunity for participation: “its my baby” mental & emotional involvement in group situations
encourages to contribute more to group goals
● Sense of accomplishment: create good understanding of relation between job and org goals –
change attitude from earning livelihood, to building cathedral. Appreciation has great value.
Praising before others, giving additional responsibilities. Praise people immediately

Page 14 of 22
 ● Org culture: create an env of respect for each other, build team spirit, provide enlightened
leadership & capable supervision, show employees are wanted. Convert from lukewarm desire for
achievement (self-oriented) to burning passion for accomplishment (org-oriented)
● Concern about employee welfare: genuine concern for welfare. Know them thoroughly. Counsel
them periodically. Be sensitive to their emotional needs
● Transparency: be fair. Justice must also appear to have been done. Merit-based only

Motivational Techniques in Practice:

● MBO: set goals for a time period, feedback on goal progress
● Behavioral modification: managers identify perf related emp patterns and intervene to
strengthen desirable behaviors
● Participative management: shared decision making power
● Employee involvement: participative process uses entire capacity of employees
● Works council: groups of nominated or elected employees who must be consulted when mgmt
makes decisions involving employees
● Board of representatives: emp reps sit in Board of Directors to present emp interest
● Quality Circle: work group of employees who meet regularly to discuss problems, investigate
causes, recommend solutions, take corrective action
● Variable Pay Programs: part of pay is based on individual and/or org perf
● Profit sharing plans: compensation based on company’s profitability
● Gain Sharing: improvement in group productivity determines total amount allocated
● Skill-based Pay: skills they have, or how many jobs they can do
● Flexible Benefits: pick from a menu of options
● Comparable worth: Jobs that are equal in value to org, should be equally compensated.

Employee Grievances: give rise to unhappiness, frustration, discontent, indifference to work, poor
morale – lead to inefficiency, low productivity.
Symptoms: sullenness, moodiness, tardiness, indifference, attitude, insubordination, decline in quality/
quantity of work
Causes: difficult to find. Often unstated too.
● Relating to labor agreement: omissions, ambiguities
● Relating to job: failure to meet job demands, no satisfaction, wrong job, no training
● Relating to personal problems: poor health, family illness, marital discord, financial
Reducing: attempt to find cause, take corrective action, change in work procedures/ conditions, proper
communication, degree of consideration shown (trust, warmth, respect)
Formal Grievance Procedures: for unionized employees, standard procedures usually exist. 2-party, or 3
party. For non-unionized, voluntary procedures to be established to hear & resolve
4.1 Change Organizational Change: organization-wide change, such as change in mission stmt, restructuring, new
Management tech, merger, major collab, rightsizing, TQM, re-engineering, etc. AKA Org transformation.
Models Fundamental & radical reorientation in the way org operates.
Change is not for the sake of change – to accomplish a goal. Mostly due to major external force. Any
factor that interferes with org’s ability to attract human, financial, material resources, or to produce/
market becomes a force of change.
Org could also undertake org-wide change to move to higher level – from reactive, entrepreneurial org to
a more stable, planned devt

External Drivers:
● Political forces: opening up economy, collapse of USSR, Gulf war
● Economic forces: fluctuating interest rates/ oil prices, productivity decrease
● Technological forces: IT, computers
● Govt forces: GATS, WTO regulations, forex regulations
● Increased global competition: relocating to developing countries to cut labor costs, outsourcing
● Changing customer needs, expectations, preferences: product innovation, customization

Internal Drivers:
● Org dynamics: internal politics, group dynamics
● Admin policies/ rigidity: inadequate admin processes, lack of autonomy, outdated rules &
regulations
● Expectations of Internal customer: career growth, individual ambitions/ insecurities, fears,
frustrations
● Structural Inadequacies: changes to reduce costs increase productivity, like downsizing / de-
layering

Page 15 of 22
 ● Technological factors: change in processes, use of IT, automation
● HR planning: acquire people with advanced skills
● Profitability issues: loss of market share, fall in revenue
● Resource constraints: shortage of money, material, machinery, manpower etc

Change Management Models: Change happens at all org at all levels. Not only inevitable, but also
required to grow & stay ahead. Org plan & implement change, using OD experts.
● Kurt Lewin’s Model: Org and people prefer to stay in state of equilibrium or steady state. Driving
forces push in desired direction, restraining forces hinder change. 3 stage change model.
1. Unfreezing: to overcome strains of resistance. Increase driving forces away from existing
situation. Decrease restraining forces. Find combination of two. Addl steps: Motivate
participants by preparing them for change, build trust & recognition for need to change, actively
participate in recognizing prob & brainstorming soln
2. Moving: move target system to new level of equilibrium. Persuade employees that status quo is
not beneficial, encourage to view problem from fresh perspective, work together for new info,
connect views of group to respected leaders who support change.
3. Refreezing: to sustain/ stick the change. Actual integration of new values into community values
& traditions. Through formal/ informal mechanisms – changed policies/ procedures.
Major criticism: assumes org operate in stable stage, suitable for small-scale changes, ignores org power
& politics, top-down

● Planning Model: (Lippitt’s Phases of Change Theory)

7-step theory, focuses more on role/ resp of change agent than on change.
1. Diagnose problem
2. Assess motivation & capacity for change
3. Assess resources & motivation of change agent (commitment, power, charisma)
4. Choose progressive change objects (action plan)
5. Ensure everyone understands role of change agents
6. Maintain change (commn, feedback, group coordination)
7. Gradually terminate from helping relationship (withdraw)

● Action Research Model: Cummings & Huse. Focuses on cyclical nature of change. Useful to
org who implement change in planned, phased manner. 8 steps
1. Problem identification (by senior)
2. Consult behavioral / OD consultant
3. Gather data, prelim diagnosis by consultant
4. Feedback to org
5. Problem diagnosis jointly
6. Joint action planning
7. Action
8. Action review, data gathering

● Integrative Model of Planned Change: Bullock & Batten. An org exists in different states from one
period to another. Planned change can be implemented to move from one to another. 4 stages
1. Exploration: key people who know need for change act as initiators. Examine need for change,
investments needed. Identify OD expert, who examines org inclination, commitment to change.
Client assesses consultant’s ability to understand situation
2. Planning: after commitment of resources to change, consultant’s exploration of situation.
Change process after diagnosis. Joint participation to decide action plan
3. Action: implementation of plan. Careful monitoring, with periodic assessment needed
4. Integration: making changes part of regular functioning. Behavior changes reinforced through
feedback, rewards, incentives. Consultant slowly moves away.

● ADKAR Model: for individual change mgmt, 5 building blocks to be obtained – awareness, desire,
knowledge, ability, reinforcement. Manager's job to create this env to go through these stages asap
o Building awareness of why change is needed
o Creating desire to support & participate in change
o Developing knowledge of how to change
o Fostering ability to implement new skills / behaviors
o Providing reinforcements to sustain change
4.2 An org’s sustainable competitive adv determined by ability to accept change and plan for it.
Appreciating Population Ecology Framework:

Page 16 of 22
Change: Population: organizations that are similar – restaurants, automobile manufacturers, ..
Industry Each org caters to a segment of populations called ‘ecological niche’. Org try to grow by making deep
Analysis impact in these niches. Org compete with each other to gain access to resources. When org fails to get
resources they require, they cant survive and may die!
3 processes leading to change – variation, selection, retention.
● Variation: what differentiates orgs – skills, org structure, culture. Created consciously by org
● Selection: way an org makes a choice and selects resources from env – process, goals, boundaries. If
org makes a wrong choice, may get selected out from competition. Underperforms, may not survive.
● Retention: processes that help org retain features required by env. When env changes, these may not
be needed any more. Org who cannot shed outdated, unnecessary systems/ features become
lethargic, fail to survive

Forces of Change: 2 major factors that influence any org strategy, and its ability to survive & grow:
business cycle, industry life cycle.
● Business Cycle: org also experience life & death based on overall economic activity. Growth in
economy may mean growth for org. All org dont respond the same way to fluctuations in economy.
Business cycle is the periodic but irregular up-and-down movements in economic activity, measured
by fluctuations in real GDP and other macroeconomic variables. Not repeating phenomenon.
Sequence of 4 phases: Contraction (slowdown), trough (lowest), expansion (speedup), peak.
(Un)employment follows. Boom is expansion, decline is recession/ depression. Combination of
boom and recession is business cycle. Easy to manage org during growth period – add new
products, enter new markets. Improper timing can be risky. Managing uncertainty is key to effective
change management.
● Industry Life Cycle: 3 major forces impact industry life cycle – competitive structure, technology,
institutional rules. Stages of lifecycle: embryonic, growth, shakeout, maturity, decline.
o Competitive Structure: disorganized in the embryonic stage, many competitors, relative position
continuously changing. Competitor with superior tech gets an edge - growth. Shakeout stage is
where some are shaken out of competition. Now fewer competitors, with larger market share. At
this maturity stage, market growth slows down. After this, markets grow smaller, and org may
go into decline stage.
o Technological Changes: major determinant of success, any equipment, machinery, info,
knowledge, activities that are involved in physical transformation of inputs into outputs. General
(like internet, electricity, steam) and specific (industry-specific, sometimes customized by org)
o Institutional Rules: formal/ informal, written/ unwritten rules, regulations, norms a company
must follow. Formal ones are statutory compliances & legislations. Informal are implied code of
conduct that evolve over a period of time. Institutional rules evolve rather slowly, change the
way business is conducted. Org should be proactive and prepare for change. In emerging
markets, rules get reduced - ‘deregulation’ - synonymous with privatization, competition,
restructuring. Second change is disciplining of marketplace, rules to protect interests of
consumers, maintain level playing field
4.3 Imp aspect of org culture is mindset - influenced by basic assumptions, core values. An org, at a point in
Appreciating time, tends to be in a psychological state, or mental mode, which, in turn, influences its functions,
Change: activities, processes.
Mental and Mental Mode: is the peak of a particular existential/ experiential state that an org gets into over time.
Business Remains there, governing its thoughts, processes, actions, until mode changes.
Models
Change in mode occurs as
● Intended (org rethinks its mission, purpose, strategy)
● Unintentional & forced (crisis response)
● Natural part of org progression
Mental modes are characterized by dimensions of time, stability, adequacy, reality.
To manage change is to identify the mental mode that prevails now. Org culture and mental mode are
closely related, significant change in one will induce change in the other.

An org is likely to be in 4 mental modes:

● Deficiency: when the threats/ problems it experiences are due to its weakness, unable to cash in on
opportunities due to weaknesses, or, core competencies are unrelated to curr business opportunities
● Inertia: clinging on to past success, not realizing how competition is moving. Also when a new
leader (not as dynamic as previous one) takes over and merely maintains successful track record.
● Problem Solving: when its core competencies are related to problems/ threats in env enabling org to
deal with them. Org has a realistic perception about itself, identified areas to be focused on. Forces
hindering/ facilitating are well-understood. Org makes efforts to bridge gap between desired &

Page 17 of 22
 actual state. They move towards greater level of decentralization. Success depends on extent its
decisions are based on performance, market, customers, tech, emp mgmt policies
● Proactivity: innovative org which focus on their core competency, look for opportunities beyond
current business boundaries. Constantly vigilant. Leaders are willing to take risks

Mental Modes & Change: SKIP THIS!

Learning Organization:
Learning org is an ideal, towards which org have to evolve, to be able to respond to various pressures
they face. Individual & collective learning are the key. LO is where people continually expand their
capacity to create results they truly desire, where new & expansive patterns of thinking are nurtured,
where collective aspiration is set free, where people are continually learning to see the whole together.

Single-loop & Double-loop learning:

Learning involves detection & correction of error. When something goes wrong, many people look for
another strategy that will work within governing variables. Given or chosen goals, values, plans, rules are
operationalized than questioned. This is single-loop learning. When an error is detected and corrected
permits org to carry on its present policies, or achieve present objectives, that error-and-correction policy
is single-loop.
Alternative is to question governing variables, subject them to critical scrutiny. This is double-loop
learning. May lead to alteration in gov variables, shift in the way strategies, consequences are framed.
Occurs when error is detected and corrected in ways that involve modification of org’s underlying norms,
policies, & objectives.

Basic Disciplines that distinguish LO from traditional Org:

1. Systems Thinking: cornerstone of LO. Discipline that integrates others, fusing them into a coherent
body of theory and practice. Ability to comprehend, and address the whole, to examine the
interrelationship between parts is incentive, and means to integrate the disciplines.
2. Personal Mastery: org learn only through individuals who learn. Indiv learning doesnt guarantee org
learning. Personal mastery is the discipline of continually clarifying and deepening our personal
vision, of focusing our energies, of developing patience, of seeing reality objectively. Goes beyond
competency & skills, involves them. Mastery is a special kind of proficiency. Personal mastery is
not something you possess, it is a process. People with high level of personal mastery are actually
aware of their ignorance, incompetence, their growth areas.
3. Mental Models: Deeply ingrained assumptions, generalizations, or even pictures and images that
influence how we understand the world, and how we take action. Also includes ability to carry on
learningful conversations that balance inquiry, and advocacy, where people expose their own
thinking effectively and make that thinking open to the influence of others. For org to develop
capacity to work with mental models, it will be necessary for people to develop new orientations.
Would be essential that institutional changes foster such change.
4. Building Shared Vision: leadership is the capacity to hold a shared picture of the future we seek to
create. When there is a genuine vision (not just vision statement), people excel and learn. Usually
discipline to translate leader’s vision to a shared vision is lacking, to galvanize an org. Not a
cookbook, but set of principles & guiding practices. Vision spreads because of reinforcing process.
Increased clarity, enthu, commitment rub off on others.
5. Team Learning: learning is process of aligning & developing capacities of a team to create results
its members desire. When teams learn together, not only org gets good results, members will grow
more rapidly

Business Models: Other than Dell-Direct, SKIP this!

Value Proposition: short statement, or phrase that sets a business apart from others. Core value /
competence that gives them an edge. Foundation of a business model.
4.4 Mobilising Org changes often accompanied by conflicting interests, political groupism, biased perceptions,
Support distortion of info, changes in work process. Transformation falls short when changes are made without
examining extent of internal support. Support has to be initiated, developed, nurtured at diff levels in org.

Management Support: commitment of top mgmt is crucial to effective change mgmt.

● Change agent: initiator/ agent – is it CEO? Head of unit? External OD expert?
● Extent of power/ authority initiator/ agent has: personal power (charisma/ expert power/ info
power), positional power (auth, coercive, reward power), political power (connections)

Page 18 of 22
 ● Extent of support for intended change within manager level: critical mass needed to communicate/
change better
Extra-Org Support: Since org change has implications for/ is influenced by external political/
economic/ legal env, it is good to seek support and goodwill of powerful political personalities & groups
Employee Support: Change is all about people, behavior. Managing change is not restructuring tasks,
but shaping human behavior.

Org change usually causes insecurity, uncertainty, confusion – coz of imbalance between managing
business & human side of change. Business side of change is logical, rational, comfortable; human side
is emotional (less rational), less understood, more difficult to deal with. Feelings and apprehensions are
less tangible, difficult to assess & manage.
3 phases to cope with change – delink from present role, enter transition zone, grapple with new role
● Delink from present role: one feels uncertain giving up work habits, attitudes, values, human
relationships. Affects personal identity. Unlearning is difficult.
● Transition zone: mid-way, impasse. Caught between unwilling to leave old role, unable to catch up
with new. Stage of retrospection, reflective thinking to understand similarities & differences betn
roles, identifying new knowledge, skills, behaviors to be gained
● Accuracy of role perception: employees must be clearly aware of new/ changed roles, what to/ how
to/ why do it.
● Grapple with new role: employee should be convinced of need for change. Knowing the short- or
long- term benefits to self/ dept/ org help reduce fear, anxiety and can change thinking. Need to
examine gaps between current & new behavior required.

Generate Employee Support: mgmt of change is not just rational mgmt, also emotional mgmt of change
● Create positive feelings about change: feeling of hope, that change is for better. Sharing excitement
leads to commitment, creativity. Trustworthy relationships facilitate collaboration, better teamwork.
Change may not have positive consequences for all (bitter pill to swallow). Employees should know
change necessitates adjustment, adoption, learning
● Create super-ordinate goal: employees tend to support org change if it is to achieve a goal that is
valued by everyone in org
● Understanding individual’s personality: response to change influenced by personality. E.g. Flexible,
open-minded
● Enhancing individual change compatibility: extent to which an individual is positive about/
supportive of change depends on
o Work/ workplace
o Contractual relationship
o Group membership
o Vague congruence
o Capacity for emotional competence
o Change initiator

Internal Support – Power Groups: Political & power groups in an org influence change process
positively or negatively, depending on change supports/ erodes their existing political/ power base. Some
may gain importance consequent to change, some may get sidelined. Building internal support is crucial.
● Assessing group/ unit readiness for change: questionnaires, interviews, observation
● Seek support of formal/ informal groups: a) assign top performers in company to implement change
process b) forming alliances & coalitions or co-opting influential groups c) social networking (even
external groups, to gain support from internal) d) allocation or reallocation of power & resources
among competing groups
● Altering power & decision making structure through org restructuring (Reorg to include supporters
of change, relegate non-supporters to less strategic positions)
4.5 Executing Resistance to change is action taken by individuals/ groups when they perceive change as threat. Threat
Change may not be real or large. Resistance can be passive/ active, overt/ covert, individual/ organized,
aggressive/ timid. Many people are afraid of change, cynical, think it is not needed.

Executing Org-wide change:

● Facilitation: work with them, help them to achieve goals. Good practice when people want to
collaborate, but are struggling to adjust to situation/ achieve
● Education: when people arent really bought into rationale for change. Give them new skills needed
● Involvement: if people arent involved physically/ intellectually, unlikely to be involved emotionally.
● Negotiation: give and take!

Page 19 of 22
 ● Manipulation: controlling a person’s env such that they are shaped by what is around them. Morally
questionable. Only short-term, only as last option
● Coercion: most extreme. Use when speed is of essence.
4.6 Building Challenge is to transform org thru change initiatives, with minimal disruption. Many change projects fail
Change because people arent committed.
Capability Carry out org-wide change:
Change must involve top mgmt – champion who instigates change by being visionary, persuasive &
consistent. Change agent role needed to translate vision to a realistic plan & execute.
Change needs team effort. Communication should be frequent, with all. Restructuring org – involving
unfreeze, change, refreeze may be needed.
Planning, replanning, increased & sustained communication & education is important, as is developing
internal capacity for change management.

To develop internal process management capability:

● Define roles in change mgmt
● Establish & implement a skills transfer work stream
● Establish measures for change, monitoring & analysis steps
● Establish owners for change
● Identify control activity to prevent reverting to old ways

Complexity of change requires a disciplined, informed, competent & structured approach, underpinned
by a highly committed, visible, & determined leadership. Quick fixes dont deliver sustained change.
“Change is ultimately all about people - if they dont change, nothing significant changes. Making the
transition in letting go of the old, and reaching out for the new happens one at a time. You cant just flick
a switch”

Six Critical Success Factors: to deliver desired business change, employees must be ready, willing, able
to change their behavior, acquire new skills, attitudes, beliefs
1. Shared change purpose: articulating, communicating & maintaining a shared purpose helps
create urgency, energy, unity.
2. Effective change leadership: people are more likely to understand & support when they see
leadership that is credible, consistent, supportive
3. Powerful engagement processes: such as communication (2-way), involvement, training,
rewards help connect people with change, overcome resistance, build commitment
4. Committed local sponsors: managers who role model new behavior, ensure individuals apply
change in their area
5. Strong people connection: when individuals affected by change recognize they cannot continue
working in current way
6. Sustained personal performance: change leaders in org should pay careful attention to how
people are reacting to change, address any resistance.
4.7 Leadership World is changing, resistance is futile. Org leaders know they need highly committed, flexible workers.
& Change Role of leader to emphasize action to make change as quickly & smoothly as possible
Failure to follow through with needed changes could mean death of organization.
● Change Acceptance: leaders need to get people to accept change, not avoid. 5 steps accompanying
change: Denial, Anger, Bargaining, Depression, Acceptance

Leadership for Change: Peter Senge says learning org require new view of leadership. Traditional view
based on assumptions of people’s powerlessness, lack of personal vision, inability to master forces of
change – deficits that can be remedied only by few great leaders. New view is subtler, more important
tasks – as designers, stewards, & teachers. Responsible for building org where people continually expand
their capabilities to understand complexity, clarify vision, improve shared mental models. First
leadership act is the start of ‘inspiring’ the vision of LO.
Organizations learn only through individuals who learn. Individual learning does not guarantee
organizational learning. But without it, no organizational learning occurs.
● Leader as Designer: functions of design are rarely visible. Org policies, strategies, systems are key
areas of design. Leadership is beyond this. Integrating the 5 component technologies is fundamental.
(personal mastery, mental models, building shared vision, team learning, and systems thinking) First
task entails designing the governing ideas – purpose, vision, core values by which people should
live. Building a shared vision is crucial early on. Leader’s task is designing the learning processes
whereby people can deal productively with the critical issues they face
● Leader as steward: ‘purpose stories’ of organization – not just tell, relate to them. ‘overarching
explanation of why they do what they do, how their org needs to evolve, how evolution is part of

Page 20 of 22
 something larger’. Leader develops a unique relationship to his/her personal vision. Becomes a
steward of this vision. Task is to manage it for others. Leaders have to learn to listen to other
people’s vision and change their own, when necessary.
● Leader as teacher: 1st responsibility of leader is to define reality. Much of the leverage leaders can
actually exert lies in helping people achieve more accurate, more insightful, more empowering
views of reality. Leaders in learning org focus predominantly on purpose and systemic structure.
They teach people to likewise.
● Manager as change agent: 2 types of managers
Reactive Manager:
1. Often influenced by env
2. Unprepared for change, reacts
3. Tends to cling to past, in fear of unknown future
4. Perceives change as negative, traumatic, tries to avoid
5. Doesnt want to face reality, expects others to deal with change
6. Rationalizes own behavior, finds excuses
7. Blames others, environment, lives behind a safe, false facade
Proactive Manager:
1. Tries to influence environment
2. Seeks change, prefers to initiate change
3. Believes way to predict future is to create it
4. Believes what was relevant past is not appropriate in present, and present may not be for future
5. Perceives change as fact of life. Believes status quo leads to failure
6. Change also is a state of mind, not just replacing
7. Looks forward to deal realistically with change

Leading isnt about teaching people how to achieve their vision. It is about fostering learning for
everyone! Leaders have to create and manage creative tension – especially around the gap between
vision & reality.
5.1 Challenge from global competition increased pressure org to improve their skills & abilities. QM
Knowledge principles accepted as means of improving org perf. QM focuses on analyzing org input, conversion, &
Management output activities to increase product quality.

Why KM?
Re-engineering followed downsizing – re-engineering was essentially a top-down approach to structured
coordination of people & info, but knowledge isnt contained in tech systems.
KM is bottom-up approach – focus is on effectiveness than efficiency. Since market is unpredictable,
KM professionals foster K by responding to the inventive, improvisational ways people do things. Org
now attempts to control intellectual capabilities & experiences of their employees. KM process
comprises ⅔ rd change, ⅓ rd understanding of human learning. KM is not stockpiling facts or figures.

Why org embark on KM programs?

● Lost knowledge after downsizing - K is human asset, Info is business asset
● Customer interface employees have info on customers
● Pressure to innovate to gain competitive edge - ability to innovate from successful KM
● Info & Comm Tech Advances - opportunities to utilize data managed within KM system
● Focus on core competencies - not products & services, but knowledge
Successful KM projects must be multi-disciplinary - bring together tech, culture, economics, politics

Core Concepts:
● Knowledge: set of insights, experiences, procedures that are considered correct & true. Guide
thoughts, behaviors, communications of people
● Org knowledge: collective knowledge of human assets, IP, infra & market assets
● Knowledge Management: Defn 1) explicit control & mgmt of K aimed at achieving company
obj 2) formalization & access to experience, knowledge, expertise that create capabilities,
enable superior perf, encourage innovation, enhance customer value.
KM Cycle: Assessment, acquisition, development, sharing, utilization, retention.
Assess what we know. Acquire what we dont know. Develop through R&D. Distribute & Share for use
by all. Ensure it is being used. Retain what is current, archive/ discard obsolete

Characteristics of KBO
● Effective leadership: visionary, values & believes in power of knowledge in competitive env,
passionate, listens to people, has +ve attitude, responsive

Page 21 of 22
 ● Effective communication system
● Enabling environment to encourage innovation & creativity
● Knowledge workers who are enthused by continuous learning, and share
● Infra that facilitates generation, storage, processing, retrieval, dissemination of K
● Use of K for creating more K, thru research, consultancy, or training
● Staff given more leverage to manage themselves
● Org culture encourages creating, sharing, use of new K – involves all stakeholders, encourages
K-workers to define tasks, contribute to org vision, goals
● Realizes paradigm of ownership changed – K-workers owns big chunk
● Considers K-workers as asset, not cost
KM is a comprehensive mgmt concept - organizational, human (psychological, sociological,..),
technological - to deliver successful business support

Page 22 of 22