Increasing global competitiveness_hr

Increasing Global Competitiveness through

Effective People Management

Linda K. Stroh Paula M. Caligiuri

An overall goal of improving global competitiveness is the imperative under which managers strategi-

cally guide their organizations today. Any process orfunction that enables organizations to gain a competitive advantage on a global scale is therefore considered valuable to those at the helm. Through our research on 60 of the world’s top multinational organizations, we found that the effective management

of the people side of global business does, in fact, pay dividends in stronger bottom lines.

I n our rapidly changing global econ- omy, an organization’s ability to

readily adapt its everyday business pro- cedures as well as its long-term goals is a critical determinant of its success in the international market (Bartlett & Ghoshal, 1992). Managers of successful multinational companies (MNCs) understand that to compete effectively they must be adaptable with respect to their product lines, financial portfolios, marketing initiatives, and the like. All too frequently, however, they overlook a critical aspect of their business in which they must also strive for adaptability-the management of their organizations’ human assets (i.e., human

_ Linda K. Stroh, Institute of Human Resources &

industrial Relations, Loyola University Chicago, 820

N. Michigan Avenue, Chicago, IL 60617. Paula M.

Caligiuri, School of Management & Labor Relations,

Rutgers University, 2006 Janice H. Levin Bldg., Liv-

ingston Campus, New Brunswick, NJ 08903.

resources). Given that HR strategy and an organization’s overall business strategy should be closely linked, having adaptability in all areas of the MNCs’ business except human resources may well threaten global competitiveness (Dyer, 1983; Lengnick-Hall & Leng- nick-Hall, 1988; Schuler & MacMillan, 1984; Tichy, Fombrun, & Devanna, 1982; Stroh & Reilly, 1994). Thus, it should follow that MNCs that have effective global HR management practices should be more successful on a global scale.

Our research, sponsored by the Inter- national Personnel Association, examined 60 of the largest multinational companies in the United States in an effort to study what, if any, impact their human resource management practices and policies have on the global competitiveness of these MNCs. (Appendix I lists the companies participating in the

Improving Global Competitiveness 1

study.) Qualitative analysis of interviews with the top global human resource managers in these organizations and a comparison of the organizations’ relative success revealed that effective management of the human asset did pay dividends in stronger bottom lines. This paper describes the qualitative differences, as identified by the global HR executives in our interviews, between the more successful and less successful organizations.

A content analysis of the interviews was conducted to identify the three aspects of people management that were most critical to the MNCs’ success in the global arena. These three features were the adoption of flexible management policies and practices worldwide, the inclusion of the human resource function as a strategic partner in global business, and the development of global leaders. Granted, these issues may seem fundamental to the operation of any successful MNC, but, as our research suggests, companies vary greatly in how effectively they address them. “More successful” MNCs had more effective initiatives to address these issues, whereas “less successful” MNCs had fewer, less effective ways to address them. (Appendix II describes the sample and the method of content analysis; Appendix III outlines the method used to differentiate “successful” from “unsuccessful” organizations.)

This leads to an important question: if these three aspects of people management are so fundamental to the successful operation of MNCs, why hasn’t every global organization made these issues top priorities? More specifically,

what are the barriers holding companies back from successfully implementing these HR initiatives? How could these barriers be overcome? The insight gained from our research sheds light on the answers to these questions.

SUCCESSFUL MNCs HAVE FLEXIBLE PRACTICES, PEOPLE, AND HR FUNCTIONS

“I” you want to be around 20 years from now, your people must be flexible and willing to make change-or the organization will be gone. ” This senti- ment, expressed by Andre Rude, an HR executive at the Hewlett Packard Cor- poration, summarizes well the opinions shared by the managers at the successful MNCs in our study. According to Rude, “Flexibility is IN” at Hewlett Packard. In the case of MNCs, flexibility is critical with respect to the policies and practices typically developed at headquarters and then implemented worldwide. Policies and practices are considered flexible if they allow for variation across nations, thereby taking national cultures into account. Yet, all too often, the goal is to maintain consistency across nations, and rigid and inflexible policies and practices are the result.

To illustrate this, some of the executives mentioned the conflict around diversity programs. This conflict arises between those advocating the need for consistency or centralization and those administering policy at the local level. In an extreme case of centralization, corporate headquarters may ask all the managers of the organization’s foreign subsidiaries to implement the same very

2 Journal of World Business / 3% I ) / 1998

structured program. International managers are likely to become frustrated with the home office for being so culturally insensitive and naive as to believe that people worldwide hold the same value concerning, for example, individualism and equal opportunity as a fundamental right. Because there is too much centralization, rather than sending the message that the organization views people as an important resource, regardless of race, gender, and so on, the message is confused with the medium. In contrast, interviewees from successful multinational organizations explicitly stated that they demonstrate their appreciation for their employees (regardless of race, gender, and so on) worldwide-not only in those countries that have laws requiring EEO com- pliance. Successful global executives noted that global management must be in.exibZe in conveying the message that “discrimination will not be tolerated” butflexible in the manner in which they impart this core organizational value. The same balancing act must be played out for each process and practice worldwide (e.g., compensation, recruitment, rewards and recognition).

Carrie Shearer, from Caltex Corpora- tion, attributed her company’s excep- tional global success to a CEO who “supports movement into the 21st cen- tury” by getting rid of management thinking that does not recognize the need (or is resistant to the need) to adapt and grow. Shearer noted that those in Caltex’s executive suite felt strongly about the need for change in its organizational culture in the direction of more flexible management practices and that the management team was

strongly encouraged to “get on board” with the more flexible management phi- losophy.

Shearer and other executives noted that technological changes (once the clear source of an MNC’s global competitive advantage) may not be the driv- ing force behind successful global companies in the next decade. Our current environment is so sophisticated that the technological changes companies make can be replicated in a very short period of time-and in many countries concurrently. The sheer speed of technological change is so rapid that all smart companies can very quickly replicate and introduce the same new technology. According to Ms. Shearer, it is only people who cannot be quickly replicated or replaced. People, therefore, can become a source of competitive strategic advantage.

Given that it is the people in an organization who design and implement policies and practices worldwide, executives must foster an organizational culture that supports, and in fact demands, flexibility in its people. Shearer noted that in the ’30s and ’40s Caltex often threw money at its problems and used band-aid solutions to make short-term changes. Today, Ms. Shearer noted, Caltex no longer treats employees as if they all came from a cookie-cutter mold. For example, the company often creates focus teams of expatriates or their spouses to learn employees’ opinions about global assignments. In the past, Shearer noted, “We always thought we knew what employees wanted and created policies based on our knowledge. Now, we ask expatriates and spouses what they need and


want. No question is too trivial.” “Tweaking” no longer works, Ms. Shearer says. Employees at Caltex begin each problem-solving project by throwing out the old way of doing things and start with a blank slate.

As Ms. Shearer strongly suggested, to introduce flexibility into the organizational culture may mean having to “dust old mentalities” out of the management team. This can be especially difficult for managers involved in solving problems and establishing policy, when the same approaches may have been used for decades. Many managers indicated that they had been given six months or less to “get on board” and accept the new methods of decision making and flexible thinking. Many of the organizations we studied found it necessary to let those go who could not get “on board.” Needless to say, this often meant many faces changed within the organizational hierarchy. In less successful MNCs, relational processes took on much greater significance. Managers at these organizations were less willing to adapt new, more flexible ways of thinking because that would entail “letting go” of friends and col- leagues who were not able to “get on board.” Thus, globally diverse and pos- sibly conflicting opinions were often ignored in favor of maintaining social networks and the current relational con- tract, whereby the most important determinant of decisions is who you know rather than what you know. Our research showed that MNCs suffer when the network for decision making does not elicit complete information from the global environment. Policies and practices get bogged down and are

often irrelevant because they are too ethnocentric in orientation.

As an executive from one company noted (name withheld), “Companies must move away from being ‘relational’ [whereby decisions are made based on who you know] to ‘transactional’ [whereby decisions are based on what you know]. The pendulum eventually needs to swing to the center, but for the time being, we must swing to the extreme to meet current needs. Some managers at the less successful organizations rationalized relational decision making as a “more efficient” model for making decisions about company policies and practices. At the more successful MNCs, however, the managers recognized that politically contrived decision making based on who you know is a shortsighted and detrimental management technique.

To overcome this mentality, executives must question the origins of decisions about policies and practices that affect their organizations worldwide. If managers are held more highly accountable for soliciting input from the various global businesses affected by their policies, they will begin to make decisions based less on their relational network and more on the true global environment. At Amoco, recognition of the importance of this approach resulted in the global HR function totally revamping the way it worked. To begin this process, the staff in Amoco’s global HR function spent one year accounting for the tasks they do. The initial thrust was internal, so they could prove to themselves that they were undertaking “value-added” work. They even developed a set of core policies

4 Journal of World Business ! 33(I) ! 1998

and made them consistent across all global units and then created a set of “flexible policies” that allowed local unit managers to use or delete policies based on local cultures and needs. In so doing, each HR staff member became more accountable for his or her time and unique contribution to the organization. Ultimately, the unit justified its existence in dollar terms, thus allowing this area of the company to better partner with its business units because it now looks and acts more like the business units it serves.

Managers/Units at Successful MNCs Share Power and Information

As the HR executives from Amoco and many other successful MNCs sug- gest, the best policies and practices may originate in countries other than the one where headquarters is located. Truly creative ideas may come from managers who are familiar not only with the organization’s culture but with other cultures as well (Mead, 1994). Yet, as interviewees pointed out, an open and flexible approach to the development of policies and practices that incorporate ideas and input from around the world may threaten managers who are fixed in the rigidity of HQ ethnocentrism. As a result, managers at headquarters may be reluctant to relinquish power and information to others-both individuals and departments-especially managers in international offices. One interviewee noted (company withheld), that “our company is very militaristic in nature.. . . There is a huge turf protection mentality. For example, when Z first came [to my organization] Z was asked to develop new programs but

warned not to step on anyone’s toes. There is little sharing of information- no sincere push to make change.” Many of the less successful MNCs referred to their global management counterparts as “them,” reflecting their “us versus them” mentality. By contrast, to the managers at the more successful MNCs, “us” encompassed everyone in their unified global organization.

To overcome this “turf protection- ism” requires executives to diagnose the causes and address them directly. Answering the following questions gen- erally uncovers some common causes: Do managers believe that relinquishing control to foreign subsidiaries will lower their credibility or their position in the organizational hierarchy? Do managers believe that their position is redundant with that of others worldwide and therefore might be eliminated? Do managers possess insufficient knowledge of global business-and fear that this will be realized when their global counterparts are included in decision making? Do managers believe that being in headquarters equates with power over foreign subsidiaries? Is a language or other communication barrier (e.g., not having e-mail worldwide) hindering the open flow of information? If the answer is “yes” to any of these questions, then it is likely that turf pro- tectionism exists. Once diagnosed, executives can revamp reporting struc- tures, alter managerial rewards and accountabilities, and improve communication to facilitate more open rela- tionships among the subsidiaries and with headquarters.


The Monsanto organization is an interesting case in point. Monsanto has developed an organizational strategy whereby the U.S. office is no longer the “center of gravity.” Although this change of power as an information source may concern some of those working on the U.S. side of the organization, Monsanto recognizes that the ultimate aim is to develop a stronger organization that can sustain itself. Monsanto is working hard to change the existing U.S.- based paradigm by creating an HR function of specialists around the world. Thus, the global HR function has created centers of expertise in different regions that handle special activities. For example, Singapore is the center for cross-cultural training, Argentina is the “Quality Center,” and Europe handles the bulk of Monsanto’s salary administration.

Other managers noted that corporate headquarters plays an important role in improving communication and sharing power among international units. Jane Prendergast, director of HR for Coca- Cola, suggests the “corporate office” should act as a “symphony conductor” putting people together and opening lines of communication worldwide. Equally important, this process must be orchestrated in a way that can be under- stood in each national culture where the company is conducting business. Finally, it is the responsibility of headquarters to let all employees worldwide know they are appreciated, that all employees have knowledge, skills, and abilities that will help to maintain the competitive advantage of the MNC.

When communication improves and more information is gathered on a

worldwide basis, decisions that are made based on input across subsidiaries reflect the flexibility needed in the global environment. Thus, taking into account the culture of various countries and sharing power and information with people in the various host countries leads not only to more flexible policies but to competitive advantage.

SUCCESSFUL MNCs TREAT HUMANRESOURCESASA STRATEGICPARTNER

Although most managers would agree that it is the people in an organization who determine its success (or failure), the human resource function is often criticized as being useless and bureau- cratic. For example, in an article enti- tled “Taking on the Last Bureaucracy,” in the January 1996 issue of Fortune magazine, author Woods suggests, in reference to HR departments,” Why not blow the sucker up?” (p. 105). Garrish comments aside, our research has shown that there is room for improve- ment and that stronger links need to be established between business units of the organization and global human resource functions (Shenkar, 1995; Caligiuri & Stroh, 1995; Hendry, 1994; Briscoe, 1995). In other words, human resources, like other functional areas, must align itself with the strategic goals of the organization. Many of the HR executives we interviewed indicated that often HR was not aligned with the global business strategy.

At the same time, evidence from the past 10 years suggests that human resource units have been improving in this regard. A strong piece of support-

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ing evidence is found in a research article by Huselid in the Academy of Management Journal (1995). Huselid found that strategic human resource practices are, in fact, having a significant positive effect on the bottom-line economic success of organizations. Fur- thermore, within their respective organizations, greater numbers of human resource professionals have earned the respect of their managerial counterparts by demonstrating the worth of HR in terms of strategic advantage and economic gain. As Harrison of Bristol- Myers Squibb noted, “HR is able to contribute directly to both the expense control and profitability of our organization.. . . We [in HR] are fully participating business partners and strategic planners.”

The challenge for human resource units, as relatively new strategic partners in the international arena, has increased with the inception of global competition. Like the domestic HR function, global HR managers need to anticipate the HR needs of their organizations. Many of the executives in this study remembered a time when their organizations’ HR departments were unprepared to meet the needs of the new human resource demands thrust upon them: staffing foreign subsidiaries, managing multiple employment environments worldwide, establishing compensation rates using vastly different pay scales, accommodating to different legal systems affecting personnel decisions, and the like. Glo- bal HR was, at best, functioning in a reactive rather than a proactive, strategic mode. At the less successful organizations. the HR function was still

operating in this more reactive mode. By contrast, at the more successful organizations, the global HR function was more proactive and strategically integrated with the rest of the business.

This lack of involvement of HR as a strategic business partner can occur for one of two reasons: (1) because of a lack of interest on management’s part in having HR involved in the strategic planning of the business or (2) because the company’s HR professionals lack the expertise to address issues on a global scale. The executives we interviewed suggested that the latter may have, in fact, caused the former. If members of other functional areas per- ceive HR as lacking in international business expertise, they may opt to not involve HR in deternining policies and practices affecting global issues. Thus, the greatest barrier to HR units becoming strategic on a global scale is their own lack of expertise of international business-related issues (Black, Gregersen, & Mendenhall, 1992; Anderson & Fenton, 1993; Stroh & Caligiuri, 1998).

In a frantic attempt to respond to the need for experts on international business, many MNCs outsourced their global HR duties. This was a temporary solution, but often meant that both domestic and global HR efforts became fragmented. To align domestic and international HR functions, new staff with international expertise were hired and those currently in domestic HR positions were retrained. Thus, the more successful organizations in our study now have HR personnel with international expertise.


Based on the current study, it appears that the most successful MNCs not only have staff with international expertise in the HR function but that these staff know how to use it to grow the global business. Here, those in the HR function are engaged directly in international operations. Harrison, from Bristol-Myers Squibb, said, “Before entering into a potential foreign market, HR conducts a full political, economic, and labor recommendation.” The same was true at other successful MNCs. By contrast, managers at the less successful MNCs reported that the staff of their HR units were not even considered part of the initial business strategy team. These organizations usually had to solve preventable HR problems in a reactive manner after a global business was established.

Managers at the more successful MNCs also reported that the staff of their HR functions were actively involved on an ongoing basis in predict- ing future global HR needs. They also reported that HR had a greater number of tasks related to international business and fewer administrative tasks. In addition, HR had active plans for developing the global skills of its staff.

D. L. Brown, a former executive with Owens Illinois and currently a partner in Linden, Inc, summed up the critical role of HR in international operations:

Carrying out the normal HR functions for a foreign operation, especially in emerging markets, requires that HR executives must be much more “total business people.” The HR executive must understand the local business, political, and social environment before establishing the local plan of action and,

more important, must be able to com- municate the differences and similari- ties of this environment to home office executives and managers and expatri- ate personnel, in addition to the local executives, management, and work- force. With this background, the HR executive must be able to put together a hiring, training, and development plan that capitalizes on the best of both worlds-the home company strengths while keeping in mind the host country norms and requirements. The HR executive who can do all of this has mas- tered the fine art of global human resource management.

Along with highlighting the need for HR professionals to develop new skills, this comment suggests a problem that prevents multinationals from becoming strategic on a global scale; that is, efforts undertaken by subsidiaries and headquarters often become fragmented. When there is too much localization, subsidiaries waste resources reinventing policies. When there is too much centralization, subsidiaries feel restricted- often to the point of being unable to implement policies dictated by headquarters.

As described in the previous section, successful MNCs are able to balance the goal of centralization with the need for appropriate levels of localization. Rather than having headquarters initiate HR policies, high-level regional managers collaborate equally in this process, making the “home/central office” one of several strategists rather than the only unit setting policy. As a worldwide team, these managers decide which aspects of various policies and practices will be dealt with locally and which will

8 Journal of World Business / 33( 1) / 1998

be decided upon collaboratively. In all global business activities, there is some optimal balance between maintaining consistency across all of the organizations’ geographic locations and allowing local units to dictate business decisions and practices (Black et al., 1992; Caligiuri & Stroh, 1995). When the optimal balance is achieved, MNCs are able to leverage their core values and save resources otherwise wasted because of redundancy.

Sometimes the greatest difficulty global HR has is letting other functional areas know it has something to “bring to the strategic table.” To echo the comments of the executives in this study, global HR needs to do a better job of marketing itself to other units. In a recent Fortune article (September 29, 1997), Fisher wrote that there are two reasons HR is not considered part of the strategic team that can add value to the bottom line of the organization: (1) HR really is not able to identify how to support the strategic objectives of the organization or (2) HR is able to support the strategic mission of the organization but nobody in the organization cares to lis- ten. Fisher suggests is that if HR were genuinely doing an effective job making “a detailed and convincing case” of ways it could add value to the objectives of the organization, the second possible argument for not involving HR would probably be superfluous.

What, then, are some of the specific skills global HR can bring to the table? One is that it can conduct a thorough analysis prior to the organization opening a facility in a host country. Such an analysis would contain an evaluation of the entire HR system in the country,

including the education level of its workers (e.g., literacy rates, apprentice- ship programs), laws governing employment (e.g., selection, working hours), union relations (e.g., strength of the union, participation), and national cultural norms as they relate to work practices, among other things. Like- wise, HR should be involved from the beginning in the process of negotiating joint ventures. Global HR could conduct a thorough analysis of the differences in work practices, organizational cultures, leaders, decision-making methods, and so forth. Once it has a base of knowledge about these differences, HR can then develop ways to facilitate the merger across both national and corporate cultures- thereby avoiding problems later on. These are just two examples of ways that global HR can strategically affect an organization’s bottom line.

SUCCESSFUL MNCs DEVELOPTHEIR GLOBALLEADERS

Our study showed that the most successful MNCs recognize the importance of having top managers who have a global orientation. Thus, a critical part of the global HR function is to provide managerial talent with opportunities to develop a global orientation or global leadership skills. Almost all the organizations in our study have as a stated objective that they will send managers on global assignments, in part to develop this global orientation. From this perspective, global assignments not only fill technical or managerial needs but are perceived as developmental experiences for managers. In fact, in


many successful MNCs, having one’s “ticket punched” on an international assignment is a requirement for advancement to the executive suite. The Phillip Morris Company, for example, views its people as “strategic weapons” and recognizes the importance of both developing and retaining top global talent. Eunice Hamilton, director of management and organization development at Phillip Morris, notes that most of those who go on international assignments do so for developmental reasons-to broaden their managerial/ leadership talent. Ms. Hamilton adds that although there is a trend among those who go on international assignments to move on to yet another such assignment, having international experience is increasingly important for all managers at Phillip Morris.

The development of global leadership skills should not stop with home country nationals. Global HR should also be involved in developing a global orientation among host country nationals as well. This means, for example, sending not only home country managers on global assignments but host national talent to the corporate office and to other divisions around the world. Many of the managers at the successful MNCs talked about how their companies develop talent in this way. In addition, they described a “desired state” for human resources, including the ability to source talent within the company from around the world. Victor Guerra, an executive at Prudential, commented: “We need to continually recognize that there are bright, articulate people who do not live in the home country. U.S. multinationals are especially guilty of

this shortsightedness. ” Acknowledging that talent exists and using the talent appropriately are two different issues- one idealistic, the other strategic.

One way in which global HR can support the effective use of talent on a worldwide basis is through the use of international Human Resource Informa- tion Systems (HRIS). The executives at many organizations described their use of this technology as evidence that a shift is occurring toward more strategic use of human talent on a global scale. Regardless of how global assignees are sourced (either from headquarters or other subsidiaries), ensuring that global assignments are truly developmental experiences for managers, and a rewarding experience for the organization, is another important part of the global HR function. Global HR needs to be responsible for managing several critical aspects of cross-national assignments. Based on our research findings, these include but are not limited to finding appropriate employees who have the requisite skills for the assignments, providing cross-cultural and language skills training, developing career management strategies during and after the assignments, and assisting the spouses of expatriates in making international assignments fulfilling.

Finding people who are willing to accept global assignments is one of the greatest HR challenges, according to many of the managers in our study. One such manager was James McCarthy, from Motorola., who said: “One of the most difSicult aspects of developing global leaders is getting people to move on international assignments. Dealing with dual careers is often one of the greatest


challenges. ” Many global HR executives indicated that the desire to accept global assignments has been “remain- ing flat” while the need for global assignees has been steadily increasing. This supply and demand problem is one global HR can help solve in their organizations. For some organizations, the solutions are logistical; for others, the solutions are more systemic.

Like McCarthy at Motorola, most of the managers we interviewed were struggling with the “dual-career” issue and saw the problem of finding people, especially married managers, who are willing to accept assignments as an impediment to developing global leaders. Research suggests that spouses who are unhappy overseas have a deleterious effect on the overall performance and adjustment of the international assignee (Black et al., 1992; Pellico & Stroh, 1997). The most successful organizations offered several creative solutions in this area. For example, Motorola actually pays spouses of global assignees while they are on international assignments, albeit only a fraction of their annual domestic sala- ries (Pellico & Stroh, 1997). These organizations encourage the spouses to use the money for professional development, in the hopes that their overseas experience will pay off for them profes- sionally in the long run. Based on an assessment of its policy, the Motorola Corporation found that those spouses taking advantage of the benefits of its dual-career policy thought it helped them adjust better while overseas and better prepared them for repatriation and employment upon their return to the United States.

In addition to logistical issues, the global HR executives we interviewed acknowledged that there was a systemic problem associated with finding appropriate people for global assignments- namely, that some organizations simply do not have enough people who have the necessary motivation or skills to live and work in a host country. The more successful organizations have addressed this need by recruiting more managers, including in some cases recent college graduates, who have foreign language skills, foreign experience, an interest in living overseas, and the personality characteristics (e.g., flexibility, openness) that indicate they might well have global management potential.

Many successful organizations, including Coca-Cola, have recently created a position called chief learning officer (CLO). Much like a chief financial officer, who is dedicated to build- ing the financial strength of an organization, the chief learning officer is responsible for developing-on a worldwide scale-the organization’s human talent and for utilizing the human knowledge present in the organization. In the case of Coca-Cola, the CL0 is also responsible for creating a learning environment that allows people to take intelligent risks, even to make mistakes-provided the mistakes can be turned into a positive element of knowledge for the multinational company. Creating this environment on a worldwide scale can be a challenge, especially given the variance across nations in their norms toward risk-taking behavior and toward questioning managers’ authority. As was noted


above, a challenge for the global HR function is to be flexible in adopting its practices worldwide. Global HR must determine how learning can best take place in each country and manage the process accordingly. The goal does not change, but the process might.

SUMMARY

In conclusion, our research suggests that to ensure a competitive advantage in the global arena, MNCs should, first, adopt flexible management policies and practices-in particular, question management practices and polices based on who you know rather than what you know. Second, MNCs should include members of the human resource function in decision making as global strategic partners-provided they gain the requisite strategic skills to participate. Third, MNCs should think strategically about how to develop global leaders; this may involve paying attention to work and family issues, in particular the creation of spousal assistance programs.

Successful MNCs often boast that they assess their upper-management teams on the basis of global representa- tion-by the number of non-U.S.-born executives on these teams. In divisions and functions in which a variety of countries are not represented, the development of international employees (and at times, new jobs) becomes a priority. This makes sense from a strategic business perspective. A common goal of these MNCs is to align the nationalities of their management teams with those of their markets. Their ability to respond to the global market is evi-

12 Journal of World Business / 33(l) / 1998

dence of their flexibility and sound business strategy.

Unlike those organizations that must learn from their cultural mistakes (usually made by culturally ignorant individuals), successful MNCs recognize the value in having global managers with the expertise to anticipate the organization’s markets and to respond pro- actively. These organizations have learned that managers who are flexible and open to the demands of the global market have made possible the organization’s international business success.

Acknowledgment: An earlier version of this paper was presented at the Acad- emy of Management Meeting, Cincin- nati, August, 1996. The authors would like to thank the membership of the Inter- national Personnel Association (IPA), and in particular, the IPA Executive Board for their participation and financial support of the research study. The Board also provided instrumental feed- back on the survey and interview proto- col and constant support throughout the study. A special thanks to: Glen Ander- son, Tony Annoni, Matthew Ashe, Bill Edgley, Michael Gordon, Sven Grass- hoff, Victor Guerra, Andree Rude, James McCarthy, Luiz Jacques M. da Silveira, Raj Tatta, Linda Watson, Ed Nunez, Erica Fox and Brad Stroh. We also thank Loyola University Chicago, The Insti- tute of Human Resources & Industrial Relations and Rutgers University for partial support for the study.

APPENDIX I

The following companies participated in the study:

Alcan Aluminum LTD. Allied Signal American Cyanamid Ameritech International Amoco Corporation Arthur Andersen Andersen Worldwide AT&T Avon Products Bristol-Myers Squibb Caltex Petroleum Corporation Campbell Soup Company Citibank, NA The Coca-Cola Company Coopers & Lybrand, L.L.P. Digital Equipment Corporation The Walt Disney Company The Dow Chemical Company Dresser Industries, Inc. Dresser-Rand Company Ernst & Young Fidelity Investments FMC Corporation Ford Motor Company GTE Corporation W.R. Grace & Company Halliburton Energy Services Hewlett Packard Hoechst Celanese Corporation IBM Corporation lnco Limited International Flavors & Fragrances Johnson & Johnson Kaiser Aluminum & Chemical Corpo-

ration Kraft Foods International Levi Strauss International Merck & Co. INC. Mobil Oil Monsanto Company Motorola Inc. RJR Nabisco Inc. KPMG Peat Marwick, L.L.P.

Pfizer Phillip Morris International Polaroid Corporation Praxair The Procter & Gamble Company Price Waterhouse L.L.P. Prudential Rohm & Haas Royal Bank of Canada Joseph E. Seagram & Son Schering-Plough Corporation SmithKline Beecham Texaco, Inc. Texas Instruments Inc. Unilever U.S., Inc. Warner-Lambert Company Xerox Corporation

APPENDIX II

Description of Sample and Content Analysis

Participants. The sample for this study included 84 global human resource executives working in 60 multinational U.S.-based firms. The sample was drawn from the membership of the International Personnel Association (the total membership participated), an association composed of HR executives in 60 of the leading multinationals in the world. Members of this exclusive association include senior HR professionals in Fortune 500 corporations and equiva- lent organizations with significant international activities. The association is representative of all major industries.

Procedure. Interviews were undertaken either in person or by telephone by the authors of the study and lasted between 30 and 90 minutes. Each partic- ipant was asked the following question:


“Over the next decade, what factors are likely to enhance/impede global human resources’ ability to compete successfully in the global marketplace?”

Analysis. Transcripts of the interviews were content analyzed to assess those factors impeding/facilitating the effectiveness of global human resources. The first step of the content analysis was done independently by each author. Each author reread the transcripts from the interviews and developed categories to best describe the three main themes mentioned during the interviews. After this step, the authors met to discuss overlaps in their themes. Consensus was considered reached when the same theme appeared on both lists or the themes on both lists were considered similar enough except for the term used to describe it.

Evaluation. The next step was to create an index to differentiate more successful and less successful organizations (described in Appendix III). Once a list of these organizations was created, the authors separated the transcripts based on whether the interviewees worked for less successful or more successful organizations and assessed the transcripts on the basis of the themes they contained. This method was used to avoid potential bias the authors may have toward respondents from more or less successful organizations.

APPENDIX III

Description of the Organizational Performance Measure

Data on the financial success of each organization were collected in two

ways. First, taking into account that these corporations represented a variety of industries, a standardized profitability and growth score was created. Using data from Forbes’ Annual Report on American Industry (January, 1996), both industry medians and company data were collected for all of the following:

1. Return on equity over the past five

years, 2. Return on equity for the most

recent 12 months, 3. Return on capital over the most

recent 12 months, 4. Sales growth of the company for

the past five years,

5. Sales growth of the company for the most recent 12 months, and

6. Profit margin for the most recent 12 months.

To handle missing data, the six dichoto- mous variables shown below were aver- aged (M = 1.70, SD = .25). The alpha coefficient for the MNC Success Index was .72.

Next, an index of MNC success was calculated as follows, where I = the company’s industry median, c = company data, and A, B, C, D, E, and F = the six growth and profitability variables above.

Step 1. Deviations from the industry medians were calculated for each of the six variables.

A dev=Ac-Ai

B dev = B, - Bi

Cd,\> = Cc - Ci

14 Journal of World Business / 3X1) / 1998

D dev = D, - Di

Edr,, = E, - Ei

F dev = Fc - Fi

Step 2. Deviations were recoded, reflecting whether a company was higher than the industry median, equal to the industry median, or lower than the industry median. Six scores, with values of either 1 or 2, resulted for each company.

1. If A,, through Fdev I 0, then A,,,,

through Fscore = 2, respectively.

2. If A,,, through Fdev c 0, then A,,,, through F,,,O,.e = 1, respectively.

Step 3. The scores were added, and a mean was calculated to form a compos- ite MNC Success Index. The mean scores ranged between 1 and 2. If, for example, a company had data for only four out of the six variables, the total was divided by 4 instead of by 6.

(A score + Bscore + cscore + DscOre + E score + Fscore) + 6

The mean for the Forbes MNC Success Index was 1.7. The second index of organizational performance represents the scores given in Fortune’s America’s Most Admired Companies (March, 1996). The Fortune scores had a mean of 6.92. The Fortune and Forbes data were then combined to form two known groups (1 = low-performing companies; 2 = high-performing companies). Two known groups were created using a split (in thirds) of both the Fortune and Forbes data. If a company appeared in the bottom third for both variables, then

the company was in the low group. If the company appeared in the top third for both variables, then the company was in the high group. (Because these were just rough estimates of organizational success, we believed it was more appropriate to use these data as ordered categorical estimates, rather than treat- ing them as interval-level data.) The data in the known groups (high- versus low-performing organizations) were then examined qualitatively. From this case study perspective, we wanted to see if there was any pattern of interviewee responses between the high-performing and low-performing organizations. (The small sample pre- cluded us from doing statistical mean comparisons; our interpretation of these data should therefore be considered exploratory.)

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