CHAPTER 11 Strategic International HRM DISCUSSION QUESTIONS 1. Discuss with your family and/or friends all the reasons that might motivate you to accept an international assignment, and the reasons that would cause you to reject one. Compare your lists to those published in surveys (cited in this chapter). What incentives could an employer offer to encourage you to accept the assignment? Answer: Reasons I might take an international assignment are: • An attractive compensation package. • Good developmental and promotional opportunities. • A chance for a lifestyle change and experience with a new culture possibly including a new language and relationships. 2. This chapter describes three stages that companies go through as they seek to expand internationally. Describe these stages, their corresponding strategies, and the HR implications of each strategy. Answer: The Domestic State and Strategy • MNCs begin to become international by exporting goods abroad, seeking new markets. • The firm focuses on domestic markets and exporting existing products as they are. • An export manager may be assigned to control foreign sales. • Management adopts an ethnocentric attitude. The Multidomestic Stage and Strategy • The business concentrates on the development of foreign markets by selling to foreign nationals. • As firm develops expertise, the foreign market grows. • These stages mean that HRM systems must adapt as the business does. • Policies for foreign subsidiaries must be consistent with the local economic, political, and legal environment. • Resources and materials within regional branches are reallocated globally to make quality products at the lowest cost. 3. In this chapter we have discussed different forms of industrial relations. However, some countries where Canadian manufacturers outsource much work, such as Bangladesh, have no unions. Discuss the advantages and disadvantages of outsourcing manufacturing to a heavily unionized environment such as Denmark, compared to Bangladesh. Answer: Advantages: • Company reputation in both the host country and placement country may be better. • Health and safety regulations can be inspected by local unions, decreasing the need to send placement-country inspectors. • There is less chance of conflict by transgressing against the culture, norms, and dominant religion as the union will help make decisions to help the company be successful. • Workers may be easier to hire and train through the union. Disadvantages: • Higher wages are negotiated. • There is less flexibility in change and decisions for the company. • Having a part in increasing income inequality in the manufacturing country may affect the business’ reputation. • Administration processes to do with employment are often lengthier, i.e., the requirements to post a job internally before external hires are brought in. 4. This chapter introduces four major areas of focus for international workforce planning. Discuss how planners might deal with each of these issues prior to finalizing a decision to operate in a foreign market. Answer: • Research issues of political unrest/violence and how to prevent problems. • Look into economic circumstances and how it will affect employee compensation and benefit. • Research business and cultural differences. • Environment health and safety, medical care. SUGGESTED ANSWERS TO EXERCISES 1. What are some important considerations for organizations to ensure the safety and well-being of employees who are traveling internationally for work purposes? Answer: • Transportation from country. • Safety of food and water. • Be honest in communication. • Advise before and during regularly. • Give information for embassy. CASE STUDY: DANGEROUS ASSIGNMENTS 1. Was it the right decision in the first place for Terramundo to operate in a region that was well known for being controlled by FARC guerrillas and where kidnapping was a very common way to fund FARC activities? Answer: • No, it was not the right decision to risk the lives of employees by kidnapping in Columbia. • Demonstrates ignorance of local culture, and employee risks were assumed to be comparable to Canada. • The company did not understand the fundraising mechanism of the FARC from kidnapping activities, which demonstrates ethnocentrism. • Might have benefits from an integrative IHRM approach—combining home HR practices with local practices and selecting the most qualified people for the appropriate positions no matter where these candidates are from. • Did not have enough third-country nationals (TCNs) working for the company or individuals from a third country who have intensive international experience and know the corporate culture from previous working experience with corporate branches in a third country. • The company did not have external fit—refers to the degree to which the IHRM approaches respond/comply with the local legal, political, economic, and cultural factors within the country where the MNC is doing business. • Strategically, the company did not match its HR competence pool with local challenges. • The company might have provided cultural training for its employees and provided greater security if this initiative was to be successful. • The company had to rely on the Canadian government for help when negotiating with the FARC. This is a costly endeavour for Canadian taxpayers and is entirely avoidable if the company was not so opportunistic and did not go to Columbia in the first place. • The Canadian government should not be responsible for companies and their employees if they knowingly go into high-risk and dangerous countries for opportunistic reasons. It is increasingly warning employers of this. 2. Did Reinhart do the right thing to get involved in the way described above and help his employee? What were Reinhart’s alternatives and options? Answer: • Yes, it was the right thing for Reinhart to do, but he might have been better informed of the Columbian practices and that he could not rely on local government support. • He essentially had no choice; if he did nothing, the corporate reputational damage would have been so severe that the company would probably not recover. 3. What should companies operating in industries such as the mining or oil business do to protect their international assignees? What should be the role of the HRM function? Answer: • As above in question 1, companies essentially need to know the political instability of a country and choose to relocate or pull out entirely when hostilities are increasing. • They also need to fit their organizational goals and objectives with the local environment: political, social, cultural. • The role of the HRM function is to provide training to all employees for life-threatening conflict management in international venues. • Having individuals as employees or consultants with in-depth knowledge of the outsourced company. 4. When sending your employees into remote and dangerous geographic regions, should all employees (home and host-country employees) get the same employment support and workplace safety and security support? Is the reality reflecting or in line with your response? Answer: • Only those individuals working in the host country should get specialized training prior to their placement in a hostile situation. • This means that whether they are from the home country or host country, they should still be trained with the same abilities to deal with life-threatening situations. • Specialized training like this is not relevant to the home country if the employees are going to remain there. https://www.td.org/newsletters/atd-links/six-steps-for-successful-expatriate-training No. Not all employees need the country-specific training if they will remain working in the home country. ADDITIONAL SUGGESTED EXERCISES 1. Ask students to interview someone they know who has worked abroad. Students should inquire about how the person was selected to work abroad, what challenges the person faced acclimatizing to the international experience, what cross-cultural training was provided, and what that person’s experience was like returning to Canada. Students are to summarize this and post it on the online discussion forum for the course. Answer: • Language. • Culture. • Organizational structure at subsidiary. • Employment laws in the country. • Unionizing in the country. • Consider these points in relation to the assignee: – Does the employee understand the compensation and benefits package? – Is the employee receiving relocation assistance in connection with the physical move? – Is there a contact person to whom the employee can go not only in an emergency but also to avoid becoming “out of sight, out of mind”? To help the expatriate succeed, organizations are advised to invest in cross-cultural training before the relocation. The benefits of receiving such training are that it: • Prepares the individual/family mentally for the move. • Increases self-awareness and cross-cultural understanding. • Reduces stress and provides coping strategies. • Eases the settling-in process. • Reduces the chances of relocation failure. 2. Go to the International Personnel Management Association website (www.ipma-hr.org/) to view the international competency framework for HR managers. Discuss why an international standard is so important for today’s HR professionals. Answer: Relevant training for HR managers coordinating international assignments: • Public sector HR basics • Recruitment • Selection • Classification and compensation • Benefits • Labour and employee relations • Equal employment opportunity and diversity • Organizational development As businesses become more international, HR must understand the implications of laws affecting workers, how to determine a culture’s impact on business, and the ability to hire HR staff for a foreign subsidiary knowing they meet recognized requirements. CHAPTER 12 Mergers and Acquisitions DISCUSSION QUESTIONS 1. What are the reasons that a company would acquire another company? Search the business press for a recent acquisition, and rank the reasons for the acquisition as explained by the analysts and/or executives. Answer: Companies may acquire another company for various reasons, including: 1. Market Expansion: Acquiring another company can help the acquiring company expand its market reach, gain access to new customer segments, or enter new geographic regions. 2. Product or Service Diversification: Acquisitions can allow companies to diversify their product or service offerings, reducing reliance on a single product or market segment and increasing revenue streams. 3. Synergy and Efficiency: By combining operations and resources, companies can achieve synergies that result in cost savings, improved efficiency, and enhanced competitiveness. 4. Technology or Innovation: Acquiring a company with innovative technologies or intellectual property can provide the acquiring company with a competitive advantage and accelerate its own research and development efforts. 5. Talent Acquisition: Acquiring a company may also be motivated by the desire to acquire talented employees, specialized skills, or industry expertise that complement the acquiring company's existing capabilities. 6. Strategic Positioning: Acquisitions can help companies strengthen their strategic position in the market, consolidate their industry presence, or gain a competitive edge over rivals. 7. Financial Gain: Acquiring a profitable company can generate financial returns for the acquiring company's shareholders through increased revenue, earnings growth, or cost efficiencies. 8. Vertical Integration: Companies may acquire suppliers, distributors, or other partners in their supply chain to gain greater control over the production process, reduce costs, or improve supply chain management. To find a recent acquisition and rank the reasons for the acquisition as explained by analysts and/or executives, you can search business press sources such as Bloomberg, Reuters, or The Wall Street Journal for articles covering recent mergers and acquisitions. Look for statements from company executives or analysts discussing the strategic rationale behind the acquisition and the expected benefits for the acquiring company. 2. Describe the effects that a merger may have on employees. What can management do to lessen the more negative effects of a merger? What can employees do to protect themselves when they start to hear rumours of a merger? Answer: Mergers can have various effects on employees, including: 1. Uncertainty: Employees may experience uncertainty about their job security, roles, and responsibilities following a merger. They may fear layoffs, changes in management, or restructuring of departments. 2. Cultural Clash: Mergers often involve combining two distinct organizational cultures, which can lead to conflicts, misunderstandings, and resistance to change among employees. 3. Morale Impact: Morale may suffer as employees feel anxious, stressed, or demotivated by the uncertainty and upheaval caused by the merger. They may also experience a loss of trust in leadership or a sense of loss for the pre-merger company culture. 4. Changes in Compensation and Benefits: Mergers may result in changes to employee compensation, benefits, and working conditions. Employees may be concerned about potential reductions in pay or benefits as a result of the merger. 5. Job Redundancy: Some employees may face job redundancy or displacement due to overlapping roles or restructuring efforts aimed at streamlining operations and reducing costs. To lessen the negative effects of a merger, management can take several steps, including: 1. Open Communication: Management should communicate openly and transparently with employees about the merger process, including the reasons behind the merger, the timeline, and any potential impacts on employees. 2. Employee Involvement: Involving employees in the merger process by soliciting their input, addressing their concerns, and providing opportunities for feedback and participation can help mitigate resistance and foster a sense of ownership and commitment to the merged organization. 3. Support and Resources: Management should provide support resources such as counseling services, career development programs, and training opportunities to help employees cope with the changes and prepare for new roles or responsibilities. 4. Culture Integration: Proactively managing the integration of organizational cultures through cultural assessments, leadership alignment, and cultural sensitivity training can help minimize conflicts and promote a cohesive and inclusive work environment. Employees can also take steps to protect themselves when they start to hear rumors of a merger: 1. Stay Informed: Seek accurate information from credible sources such as company announcements, official communications, and industry news sources to understand the potential impact of the merger on your role and the organization as a whole. 2. Update Skills: Take proactive steps to update your skills, knowledge, and qualifications to remain competitive in the job market and enhance your value to the merged organization or potential future employers. 3. Network: Build and maintain professional relationships with colleagues, industry contacts, and mentors who can provide support, advice, and potential job opportunities in case of job displacement or restructuring. 4. Seek Clarification: If you have concerns or questions about the merger, don't hesitate to seek clarification from management or HR representatives to better understand how the merger may affect you and what steps you can take to adapt to the changes. 3. One of the urgent issues facing executives immediately after the merger is announced is the retention of key employees. How would you define or describe a key employee? What methods would you use to identify key employees? Describe some programs you might use to retain your key employees during and after the merger. Answer: A key employee can be defined as an individual who holds a critical position within the organization and whose skills, knowledge, experience, or relationships are deemed essential for the company's success. Key employees often play pivotal roles in driving business growth, innovation, and operational excellence, and their departure could significantly impact the organization's performance and competitive advantage. Methods for identifying key employees during a merger may include: 1. Performance and Contribution: Assessing employees' performance, contributions, and achievements within their respective roles to identify individuals who have consistently delivered high-quality work, exceeded performance expectations, or made significant contributions to the organization's success. 2. Critical Skills and Expertise: Identifying employees with specialized skills, expertise, or knowledge that are crucial for the organization's operations, strategic initiatives, or future growth opportunities. These may include technical skills, industry-specific knowledge, or leadership capabilities. 3. Leadership Potential: Recognizing employees who demonstrate strong leadership potential, vision, and the ability to inspire and motivate others. These individuals may be identified through leadership assessments, 360-degree feedback, or observations of their performance in leadership roles or projects. 4. Client or Stakeholder Relationships: Identifying employees who have established strong relationships with key clients, customers, partners, or stakeholders that are critical for the organization's success. These relationships may be assessed through client feedback, sales performance, or client retention rates. To retain key employees during and after a merger, organizations can implement various programs and initiatives tailored to meet employees' needs and preferences. Some retention programs may include: 1. Competitive Compensation and Benefits: Offering competitive salary packages, performance-based incentives, and attractive benefits packages to reward and incentivize key employees for their contributions and loyalty to the organization. 2. Career Development and Growth Opportunities: Providing opportunities for career advancement, professional development, and skill enhancement to help key employees further their careers and achieve their long-term goals within the merged organization. 3. Recognition and Rewards: Implementing recognition programs, awards, and incentives to acknowledge and celebrate the achievements and contributions of key employees, fostering a culture of appreciation and recognition within the organization. 4. Flexible Work Arrangements: Offering flexible work arrangements, such as remote work options, flexible hours, or compressed workweeks, to accommodate the needs and preferences of key employees and promote work-life balance. 5. Retention Bonuses or Equity Ownership: Providing retention bonuses, stock options, or equity ownership opportunities to incentivize key employees to stay with the organization during and after the merger, aligning their interests with the long-term success of the merged entity. 6. Open Communication and Transparency: Maintaining open communication channels and transparency throughout the merger process, keeping key employees informed about the progress, decisions, and potential impact of the merger on their roles and the organization as a whole. By implementing these retention programs and initiatives, organizations can demonstrate their commitment to valuing and investing in their key employees, fostering loyalty, engagement, and retention during the challenging period of a merger. SUGGESTED ANSWER TO EXERCISE 1. Dual companies—were run side by side (Best Buy and Future Shop at the time were owned by the same company). 2. The parent company dominates (Scotiabank purchases many Caribbean banks). 3. The acquired company dominates (Saatchi and Saatchi was acquired by Publicis, the world’s fourth-largest advertising and communication company, which adopted S&S’s operating systems and culture—a kind of reverse takeover). 4. Blend the best of both (this was done in the acquisition of Gillette by Procter & Gamble). 5. Build a new company (Burroughs and Sperry united to build a new company, UNISYS). Answer: Advantages and Limitations of Types of Mergers Advantages Disadvantages Dual Companies—Separation • This option is best suited to two companies that have strong cultures that need to be kept separate. • It is better for both companies to retain their cultures in order to maintain employee loyalty and commitment. • There is no one unifying culture and values that establish a cohesive workforce. • Employees from each company might continue to follow the cultures of their companies, which might conflict when trying to achieve the goals and objectives of the newly merged company. Parent Company Dominates—Assimilation • One culture allows a unified voice to be followed. • It is easy for the parent company to continue its culture, but not as easy for the acquired company to learn. • Parent company domination might instill a winner and loser culture that would demotivate the employees from the acquired company. • Changes to culture take years and the parent company might not want to devote the time or effort. Acquired Company Dominates—Deculturation • One culture allows a unified voice to be followed. • It is easy for the acquired company to continue its culture, but not as easy for the parent company to learn. • This might be suitable in situations where the parent company is in a different country, so it makes sense for the acquired company to remain status quo with its culture. • There is no integration to the parent company’s values, beliefs, and assumptions, which might create issues when strategic HR planning is being done. • This is a difficult place to be for the acquired company and ultimately will revert to an assimilation or integration. Blend Both Together—Integration • Altruistically, this is the best union of company cultures because it honours the historical past of each company. • The result is that employees might stay with the new company because of this recognition of the past. • It might be confusing to customers and other stakeholders to determine the brand of the newly merged company. • Everyone will have to learn the new culture and this will take considerable time. New Company—New Culture • A new culture for a new company is like having a brand new beginning for both organizations―where things from the past can be eliminated. • It provides an opportunity to define the important values, beliefs, and assumptions that will guide the new organization in the future. • A brand-new culture linked to a new company means that everything and everyone will be in flux. • This will create tremendous uncertainty, anxiety, and stress for managers and employees as they navigate the new course of direction. CASE STUDY: MOLSON COORS AND ACQUISITIONS 1. What were the merger goals for Molson Coors in the acquisitions of Kaiser and Creemore Springs, and how did the outcomes of each acquisition align with these goals? Answer: Merger Goals Kaiser Merger Creemore Springs Merger Access to new markets Yes No Growth in market share Yes Yes Access to new products Yes Yes Access to management talent No No Enhanced reputation No Yes Reduction in operating expenses No No Access to distribution channels No Yes Access to new technologies No No Reduction in number of competitors Yes Yes Access to new brands Yes Yes 2. HR plans under scenarios: a full integration of Kaiser, the brewery in Brazil, and the hands-off acquisition of Creemore Springs. Answer: HR Plan Kaiser Merger Creemore Springs Merger Contingency Plan • Merger coordinator should be Brazilian. • Contingency plan should outline the chain of command, communication methods, procedures, and negotiation skills training. • Merger coordination needs to be shared by Creemore and Molson. • Plan should outline the chain of command, communication methods, procedures, and negotiation skills training. HR Due Diligence • Collective agreements. • Employment contracts. • Executive compensation contracts. • Benefit plans and policies. • Incentive, commission, and bonus pl Answer: • Pension plans and retirement policies. • WSIB statements, claims, assessments, experience rating data. • Employment policies . • Complaints—Employment equity, health and safety, wrongful dismissal, unfair labour practices, certification, and grievances. • Collective agreements. • Employment contracts . • Executive compensation contracts. • Benefit plans and policies. • Incentive, commission, and bonus pl Answer: • Pension plans and retirement policies. • WSIB statements, claims, assessments, experience rating data. • Employment policies . • Complaints—employment equity, health and safety, wrongful dismissal, unfair labour practices, certification and grievances. Transition Team • Appoint a transition team to deal with: 1. Urgency—Merger needs to be swift and managed, which is difficult with excessive levels of Brazilian bureaucracy. 2. Information gaps—Language issues in Brazil would require interpreters. 3. Stress—Cultural issues need to be managed to minimize the paternalistic fear-mongering by Molson management; potential for cultural clash is significant because the merging companies come from two different cultures and countries; also need to ensure that locals are not terminated; unemployment might be high and jobs might be more difficult to find. HR policy review might uncover complementary, duplicated, or contradictory HR policies for the merger companies. Appoint a transition team to deal with: 1. Urgency—Merger needs to be swift and managed. 2. Information gaps—Need to bring Molson up to speed on the challenges of operating a microbrewery like Creemore. 3. Stress—Ensure that local experts with microbrewery skills are retained, which will minimize the stress of the transition; it should appear that operations are running as normally as possible. 4. HR policy review might uncover complementary, duplicated, or contradictory HR policies for the merger companies. Selection The two most critical issues for HR are related to: 1. Retention—Need to determine the employees who add value to the company; this is difficult unless there are Brazilian managers involved who know their employees. 2. Reduction—Need to determine who can be terminated; this is difficult unless there are Brazilian managers involved who know their employees. The two most critical issues for HR are related to: 1. Retention—Need to determine the employees who add value to the company; microbreweries have more specialized tasks and so most employees should be retained because their positions are not easily filled. 2. Reduction—Need to determine who can be terminated if there are any administrative duplications. Compensation Decisions: • Merge compensation systems? Probably not a good idea because of the country differences in wage scales; just accept these differences and maintain the status quo. • Adopt a totally new compensation system? This is a possibility but would require a significant amount of time to generate a more equitable system. • Create a new compensation system? This is a possibility but would require a significant amount of time to generate a more equitable system. • Status quo: Keep the compensation the same so that it reflects the local practices of compensation that are linked to Brazilian employment; this is probably the best approach to compensation, assuming that Kaiser does not have a unionized environment. This will prevent any issues with constructive dismissal where the new compensation package is materially different. All new benefits must be weighed out with a cost‒benefit rationalization. Decisions: • Merge compensation systems? It is quite possible that Creemore would merge its compensation system with Molson but only if Creemore is not unionized; making changes to a collective agreement initially is difficult, especially if there is perceived unfairness to compensation and job stability. • Adopt a totally new compensation system? This might be a good idea but would require Molson and Creemore to negotiate a brand new collective agreement, which could be time consuming and costly. • Create a new compensation system? This might be a good idea but would require Molson and Creemore to negotiate a new collective agreement, which could be time consuming and costly. • Status quo: probably not a good idea since compensation would not reflect the new status of managers within the merged company. This will prevent any issues with constructive dismissal where the new compensation package is materially different; all new benefits must be weighed out with a cost‒benefit rationalization. Performance • Not knowing—Remedied by more communication; this is difficult, especially with language issues to determine. • Not able—The solution is training; this is more easily remedied for individuals who were displaced in the merger who need to be trained. • Not willing −A strong case for performance management through feedback and incentives; this is difficult to determine with language issues as it reflects intended non-compliance. • Not knowing—Remedied by more communication; at Creemore, this should not be an issue. • Not able—The solution is training; displaced individuals would readily identify their need for further training. • Not willing—A strong case for performance management through feedback and incentives; this would not be an issue at Creemore since the business essentially remained intact and there shouldn’t be issues of non-compliance. Training and Development • Coaching and counselling—Managers in Brazil would not typically want this type of training and would expect the employees to change on their own. • Stress management—Managers would also not recognize the stress of employees. • Coaching and counselling—This is probably not an issue at Creemore since there were very few individuals who were displaced. • Stress management—This is probably not an issue at Creemore since there were very few individuals who were displaced. Labour Relations • As above, Kaiser may have a union in Brazil, but it is highly unlikely. • If a union exists, it will need to be involved. • Creemore is probably not unionized, so compliance to a collective agreement should not constrain relationships between management and employees. • If Creemore does have a union, it will need to have active participation with the transition team. Solution Manual for Strategic Human Resources Planning Monica Belcourt 9780176798086, 9780176570309
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