Chapter 3 The Global Environment Closing Case: Schlumberger’s Innovative HR Strategy Case Summary Schlumberger is one of the world’s largest oil field services companies. The firm offers a complete range of oil and gas services, including engineering, construction, and project management. But while the firm has little trouble finding oil these days, attracting and keeping the right people—a fundamental human resource management issue—is an ongoing challenge. Schlumberger and other large companies in energy-related industries depend heavily on a steady inflow of new employees. But an aging workforce and an unevenly distributed supply of talent continues to create challenges. More than 40 years ago, Schlumberger adopted an aggressive and innovative human resource strategy that is based on diversity and partnerships with colleges and universities. As a result, the firm has long hired in every country where it operates. In addition, it took a geocentric approach to all of its global assignments, hiring the best people regardless of where they are from and moving them to work assignments that are mutually beneficial regardless of the location of those assignments. As a result of these efforts, Schlumberger has maintained a human resource advantage over many of its key competitors. To maintain the competitive advantages Schlumberger gets from its workforce, the firm continues to develop and implement new systems, policies, and practices to retain the strong workforce it has attracted. Case Questions 1. What are the advantages and disadvantages of Schlumberger’s approach to international human resource management? Schlumberger is known for its unique approach to international human resource management (IHRM), which has both advantages and disadvantages: Advantages: 1. Standardization: Schlumberger's approach emphasizes standardization of HR practices across its global operations. This can lead to consistency in policies and procedures, making it easier to manage employees across different countries. 2. Global Talent Pool: By recruiting and developing employees from various countries, Schlumberger creates a diverse and talented workforce that can bring different perspectives and skills to the organization. 3. Knowledge Transfer: With a focus on global mobility and career development, Schlumberger facilitates the transfer of knowledge and best practices across its international locations. 4. Cost Efficiency: Standardized HR practices and global talent management can lead to cost savings, as the company can leverage its resources more efficiently. Disadvantages: 1. Cultural Differences: One of the main challenges of Schlumberger's approach is managing cultural differences. What works in one country may not be effective in another, and the company may struggle to adapt its HR practices to different cultural contexts. 2. Employee Morale: Employees in different countries may feel that their needs and preferences are not being adequately addressed by the standardized HR practices, leading to lower morale and job satisfaction. 3. Legal and Regulatory Compliance: Schlumberger must ensure that its standardized HR practices comply with local laws and regulations in each country where it operates. This can be complex and costly, especially in countries with strict labor laws. 4. Communication Challenges: Maintaining effective communication across a global workforce can be challenging, especially when employees are located in different time zones and speak different languages. In conclusion, while Schlumberger's approach to IHRM offers several advantages, such as standardization and a global talent pool, it also faces challenges related to cultural differences, legal compliance, and communication. 2. Under what circumstances, if any, might Schlumberger find it necessary to change its international staffing strategy? Schlumberger might find it necessary to change its international staffing strategy under various circumstances, including: 1. Changes in Business Strategy: If Schlumberger undergoes a strategic shift, such as entering new markets or focusing on different product lines, it may need to adjust its international staffing strategy to align with these changes. 2. Economic Conditions: Economic factors, such as changes in currency exchange rates, inflation rates, or overall economic growth, can impact Schlumberger's international staffing strategy. For example, economic downturns may lead to a need to reduce expatriate assignments to cut costs. 3. Regulatory Changes: Changes in labor laws, immigration policies, or other regulations in countries where Schlumberger operates may require adjustments to its international staffing strategy to ensure compliance and mitigate risks. 4. Technological Advancements: Technological advancements, such as the increased use of remote work technologies, may influence Schlumberger's approach to international staffing, allowing for more flexible arrangements or different skill requirements. 5. Market Demand: Changes in market demand for Schlumberger's products or services may require adjustments to its international staffing strategy to ensure that it has the right talent in place to meet customer needs. 6. Cultural Considerations: As Schlumberger operates in diverse cultural environments, changes in cultural dynamics or societal norms may necessitate adaptations to its international staffing strategy to ensure that it effectively engages with local stakeholders. In summary, Schlumberger may need to change its international staffing strategy in response to changes in its business strategy, economic conditions, regulatory environment, technological advancements, market demand, and cultural considerations. Flexibility and adaptability are key to effectively managing these changes. 3. Based on the information in this case, would you like to work for Schlumberger? Why or why not? However several factors when deciding whether to work for Schlumberger: 1. Company Culture: The case suggests that Schlumberger has a hierarchical and centralized management structure, which may not appeal to everyone. Some individuals may prefer a more collaborative and empowering work environment. 2. Career Advancement: The case raises concerns about the lack of career advancement opportunities for managers, which could be a consideration for those looking to progress in their careers. 3. Work-Life Balance: The case mentions long working hours and high stress levels, which could be a deterrent for individuals seeking a better work-life balance. 4. Job Security: Schlumberger's reputation for job security could be a positive factor for some, especially considering the volatile nature of the oil and gas industry. Ultimately, whether someone would like to work for Schlumberger would depend on their individual values, career goals, and preferences regarding company culture and work environment. The following items appear on the in-text Instructor Prep Cards. These notes and suggested talking points should help instructors conduct these exercises with the students. Discussion Questions 1. Summarize recent growth and trends in international business. Prior to the 1970s, the United States was the dominant force in the world economy (as a result of World War II and its devastation in Europe and Japan). In the 1970s and 1980s, businesses from other countries including Germany and Japan emerged as major players in the world economy, challenging U.S. firms’ dominance in the world marketplace. By the mid-1990s, global competitiveness became the norm rather than the exception of doing business. Today, the United States, Germany, and Japan remain the three leading global industrial powers. Other countries becoming increasingly important include the western European countries of France, England, Spain, and Belgium; the Asian countries of Taiwan, Singapore, Malaysia, and China; and the North American countries of Canada and Mexico. One trend is the development of attractive new markets such as China, Russia, India, and regions of South America. Another trend is that businesses may or may not sell their products and services in foreign markets, but they still are likely to obtain some resources from foreign markets and must compete with foreign businesses. 2. What are the basic international business strategies that firms can pursue? Firms can pursue one of several basic options: exporting, licensing, direct investment, joint venture, or strategic alliance. Exporting is the process of making a product in the firm’s domestic marketplace and then selling it in another country. Licensing involves a company’s granting permission to a foreign business to manufacture and/or market its products in that business’s local market. Direct investment occurs when a firm headquartered in one country builds or purchases operating facilities or subsidiaries in a foreign country. A joint venture and a strategic alliance both involve two or more firms cooperating in the ownership and/or management of an operation. A joint venture involves actual equity ownership. A strategic alliance may not involve ownership but does involve cooperation. 3. What are the basic human resource management (HRM) functions in international business? The basic human resource functions in international business are much the same as in domestic business, but with more complex issues underlying the design of human resource programs and procedures. Basic human resource functions include human resource planning, recruiting, selecting, and compensating of employees; providing employee benefits; appraising employee performance; training and developing employees; and dealing with labor relations (i.e., union) issues. These human resource activities must be adapted to fit the environment of each country in which a firm conducts business. The human resource department should understand host countries’ legal, political, and cultural environments when adapting human resource activities to these environments. 4. What are the basic HRM issues to be addressed by an international business? General human resource issues include: Customizing of hiring, firing, training, and compensation programs on a country-specific basis to adapt to differences in culture, levels of economic development, and legal systems Determining the most appropriate source and mix of employees: home-, host-, and/or third-country nationals Training and development issues such as cross-cultural training and basic educational programs for host-country production workers Assuring expatriates fair compensation, working conditions, and adjustments for cost of living 5. What are the basic domestic issues in international HRM for the firm in its home country? The basic domestic issues include local recruiting and selection issues, local training issues, and local compensation issues. An international business must develop and implement a plan for recruiting and selecting host-country employees, including an assessment of human resource needs, sources of labor, labor force skills and talents, training requirements, and special circumstances (such as hiring regulations, laws, and norms). Training and development needs of the local workforce will depend on the location of the market (i.e., industrialized or developing), which affects employee needs for basic educational or skills training. Compensation packages must be adjusted to fit local life styles, standards of living, regulations, tax systems, and benefits requirements. 6. What are the HRM implications of each strategy for international business? For firms following an exporting strategy, no meaningful differences in human resource responsibilities exist beyond hiring and managing an additional set of employees who are involved in the exporting activities. Similarly, firms following a licensing strategy will have no meaningful implications for human resource policies beyond servicing employees involved in licensing activities. Direct investment changes the human resource function substantively, in that employees will be working in foreign locations. Human resource managers will need to expand and extend the human resource function’s scope and operations to fit the mix of employees (i.e., home-, host-, and third-country nationals) in each location. Firms that enter into a joint venture or strategic alliance face a complex set of human resource challenges, including linking and coordinating among partners, as well as reconciling the relationships among human resource staff members from the various partners. 7. What do you see as the basic similarities and differences in the HR function between domestic and international businesses? The basic human resource management functions in domestic and international businesses are quite similar. Human resource managers in both settings are responsible for the recruiting, hiring, promoting, firing, compensating, and appraising of the company’s human resources. However, international businesses face a number of additional complexities in managing the human resource function in different country settings. These additional complications include adapting to each host country’s political, legal, and cultural environment; designing human resource policies and procedures that support the firm’s chosen international business strategy; choosing, training, and compensating expatriates to be successful in their assignments; and understanding labor relations issues within host countries. 8. Which do you think is more critical for international HRM: understanding the cultural environment or understanding the political and legal environment? Both understanding the cultural environment and understanding the political and legal environment are critical for international Human Resource Management (HRM), but the importance may vary depending on the context and the specific challenges faced by the organization. Understanding the cultural environment is crucial because it influences how people in different countries perceive work, interact with each other, and approach business relationships. HRM practices, such as recruitment, training, and performance management, need to be tailored to fit the cultural norms and values of the host country to be effective. On the other hand, understanding the political and legal environment is also critical because it affects the regulatory framework within which businesses operate. HRM practices must comply with local labor laws and regulations, which can vary significantly from country to country. Failure to comply with these regulations can lead to legal issues and damage the company's reputation. In conclusion, both cultural and political/legal environments are important for international HRM, and organizations need to have a comprehensive understanding of both to effectively manage their global workforce. 9. When a basic incongruence exists in the ethical context of human resource management between the foreign-country environment and a firm’s home-country environment, which do you think should take precedence, the foreign-country environment or the firm’s home-country environment? When a basic incongruence exists in the ethical context of human resource management (HRM) between the foreign-country environment and a firm's home-country environment, the foreign-country environment should take precedence. This is because ethical practices are often deeply rooted in the cultural, legal, and social norms of a country, and attempting to impose the home-country's ethical standards in a foreign context can lead to misunderstandings, conflicts, and negative consequences. Adopting the ethical standards of the foreign-country environment demonstrates respect for local customs and values, which is important for building trust and maintaining positive relationships with employees, customers, and other stakeholders. It also helps the firm comply with local laws and regulations, which are often based on the ethical standards of the host country. However, this does not mean that the firm should completely disregard its home-country's ethical standards. Instead, it should strive to find a balance between the two, taking into account the principles that are universal and applicable in both contexts. This approach can help the firm navigate the ethical complexities of international HRM while maintaining its integrity and reputation. 10. Would you be interested in an international assignment as part of your employer’s management development strategy? Why or why not? What factors would be most important to you in making such a decision? Interest in International Assignment: 1. Professional Growth: An international assignment can provide valuable opportunities for professional development, including gaining new skills, knowledge, and experiences. 2. Cultural Exposure: Living and working in a different country can offer a unique cultural experience, helping individuals broaden their perspectives and become more culturally aware. 3. Networking: An international assignment can provide opportunities to build a global network of contacts, which can be beneficial for future career opportunities. 4. Personal Growth: An international assignment can be a personally enriching experience, allowing individuals to step out of their comfort zone and grow personally. Factors to Consider: 1. Location: The location of the international assignment can be a crucial factor. Factors such as safety, quality of life, and cultural fit can impact the overall experience. 2. Duration: The duration of the assignment can also be important. Short-term assignments may be more manageable, while long-term assignments may require more consideration. 3. Career Development: Individuals should consider how the international assignment aligns with their long-term career goals and whether it will help them develop the skills and experiences needed to advance their career. 4. Family Considerations: For individuals with families, considerations such as schooling for children, healthcare, and spouse employment opportunities may be important factors to consider. 5. Company Support: The level of support provided by the employer, including assistance with relocation, cultural orientation, and ongoing support during the assignment, can impact the decision-making process. 6. Return on Investment: Individuals should consider the potential return on investment of the international assignment, both in terms of professional development and career advancement. Overall, the decision to pursue an international assignment as part of an employer's management development strategy will depend on individual preferences, career goals, and personal circumstances. Ethical Dilemmas in HR Management Scenario summary Students are asked to assume that they serve as a senior human resource executive for a large multinational firm with individual plants in Malaysia, Thailand, and Pakistan and with suppliers in Asia. A new CEO has been hired who is an advocate for rights of foreign workers, staking his personal reputation on the ethical and humane treatment of the company’s and suppliers’ employees. The senior human resource executive conducted an inspection of international operations and became concerned with less positive treatment of foreign workers in one of the company’s plants and in a supplier’s factory. The human resource executive communicated these concerns to the CEO, who asked that the human resource executive delay taking any action until after an upcoming shareholders’ meeting, to avoid a possible stock price drop and negative impact on senior management bonuses (including the human resource executive’s bonus). Questions 1. What are the ethical issues in this situation? Ethical issues include whether: Foreign employees are indeed being unfairly treated. The CEO is aware of a possible lessened quality of employee treatment overseas. The senior human resource executive should voice her or his concerns when they may not be substantiated. The investigation into these concerns should be delayed until after the shareholders’ meeting. The company should be concerned with suppliers’ employment conditions. 2. What are the arguments for and against following your CEO’s suggested approach? Some examples follow. For: Concerns are not confirmed facts Early action may cause unnecessarily harsh backlash from shareholders, customers, and employees Changing employment conditions may be controlled by economic factors Changing employment conditions in a supplier’s factory are not this organization’s concern Against: Concealment of negative information for personal and professional gain is unethical The CEO continues to boast about fair treatment when it may not be so Failure to act on information in a timely manner is unethical 3. What do you think most managers would do? What would you do? Most managers in Schlumberger or similar multinational companies would likely consider a combination of factors when making decisions about international assignments. These would include the company's strategic objectives, the specific needs of the business in different regions, the skills and experiences of employees, and the potential impact on employees and their families. Managers would also likely consider the ethical issues involved, such as fairness, equity, cultural sensitivity, and the well-being of employees and their families. They would likely strive to make decisions that balance the needs of the business with the ethical considerations involved, seeking to ensure that international assignments are fair, equitable, and beneficial for all parties involved. Assignment Purpose: The purpose of this exercise is to provide students with some critical insights into complexities associated with international human resource management. Step 1 (5 to 10 minutes): Instructor will divide the class into small groups of four to five members. Students are to begin by reading and discussing the context description that follows. Students are to assume that their group is the HRM executive team of a large electronics firm. The firm has several factories located throughout North and South America. The company has just decided to open its first Asian factory in Thailand. Plans call for the plant to open in 2 years. The plant will require a general manager, 4 associate managers, and 10 other relatively high-level managerial positions (a purchasing manager, a warehouse manager, etc.). The plant will also require 30 first-line supervisors, 600 operating employees, and 30 maintenance and custodial workers. Finally, approximately 25 office and clerical workers will also be needed. Step 2 (20 to 30 minutes): The group’s boss has asked them to develop a staffing plan for the new plant. She wants to know where each type of employee should come from, when they should be hired, and how they should be trained. Students should spend 20 minutes discussing this step as a group and outlining the basic issues that they will need to consider to meet this request adequately. In other words, their task is not to develop the actual plan; instead their task is to decide what information they need to develop the plan and where they might go to get that information. Step 3 (time will vary): Groups should report the results of their groups’ deliberations to the entire class to the entire class. Identify areas of agreement and disagreement across groups and explore why there were differences. Solution Manual for Human Resources Angelo Denisi, Ricky Griffin 9781285867571
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