RESEARCH AND PRACTICE
IN HUMAN RESOURCE MANAGEMENT

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Harvey, M. & Novicevic, M. M. (2003). Strategic Global Human Resource Management: Its Role in Global Networks, Research and Practice in Human Resource Management, 11(2), 32-51.

Strategic Global Human Resource Management: Its Role in Global Networks

Michael Harvey & Milorad M. Novicevic

Abstract

There is a growing awareness that traditional strategic international human resource management (SIHRM), which is narrowly descriptive of the impact of environment change, requires effective strategic global human resource management (SGHRM). The purpose of this paper is to develop a theoretical framework for flexible modes of strategic human resource management within a global network organisation configuration. A model of the SGHRM system, developed from a combined knowledge-based view and relational contracting theoretical perspectives, is proposed for empirical research and practical use in global organisations. In addition, specific barriers and competencies, associated with role transformation of human resource managers in global organisational networks, are identified. In conclusion, practical implications of the SGHRM system for assignments in global organisations, as well as various approaches and challenges to the empirical research of SGHRM systems, are discussed.

Introduction

The dramatic and discontinuous changes taking place in the global environment have contributed to the evolution of traditional multinational corporations (MNCs) into global organisations that are more of a network nature (Gimeno & Woo 1996, Wolf 1997, Galunic & Rodan 1998, Westney 1999). The global network form of organising roles and activities infuses into the firm a heightened need for cross-functional interdependence, which in turn, can increase role ambiguity for a human resource manager (Grimm & Smith 1997). On the one hand, an important function of a global human resource manager is to shape a culture of developing external linkages (i.e., to local organisations and critical stakeholders) for a global organisation. On the other hand, it is vital the global human resource manager facilitates the integration of internal functional (i.e., international human resource management) and crossfunctional (i.e., global marketing, R&D and operations) relationships within the various competency centres of the global organisation (Mudambi & Helper 1998). Moreover, the expanded number of relationships needed in both the internal and external global network settings further increases the complexity of establishing an appropriate global human resource system (Zucker 1987).

There is a body of academic research employing network analysis to examine the structural and relational aspects of global strategy implementation. Network analysis is a well established theory used in a variety of situations in the business literature. While at the same time, the strategic human resource aspects of creating and maintaining global organisations and networking processes have, curiously, been neglected in the past research in the strategic international human resource management (i.e., SIHRM) literature.

The purpose of this paper is to provide in five sections a theoretical explanation for the emerging modes of strategic global human resource management (i.e., SGHRM) within global networks. First, the concept of global network is defined and the multitude of changes in the associated human resource role and functions is assessed. Second, a combined knowledge-based view and relational contracting theoretical perspective is used to derive the dominant interacting dimensions, which profile the leadership options within the SGHRM system. Third, specific barriers and competency needs relative to developing an SGHRM perspective within global networks are outlined. Fourth, relevant implications for global assignments within global networks are identified. In conclusion, major challenges to the empirical research of SGHRM systems are outlined.

Conceptualisation of the Changing Role of Human Resource Managers within Global Organisations

Successful formulation and implementation of a corporate strategy for managing global operations requires a commensurate strategy for managing international human resources (Bartlett & Ghoshal 1992, Schuler, Dowling & De Cieri 1993, Beatty & Schneider 1997). Existing SIHRM frameworks describe policies and practices focused on aligning the strategic initiatives of the organisation with the development of global managers while simultaneously managing the tension between integrating global operations and achieving local responsiveness (Schuler et al. 1993, Taylor, Beechler & Napier 1996). Within these frameworks, a SIHRM system is viewed “as a way for MNCs to effectively manage and control their overseas operations” (Taylor et al. 1996: 560). Moreover, existing SIHRM models, although systematic in their assessment, inadequately address strategic international human resources management in the network form of organisation. Rather, the primary focus is on explaining the practices and policies that MNCs use to coordinate and control the hierarchy of their dispersed global operations (Welch 1994, Tayeb 1995).

Global organisational networks are viewed as dependency structures among geographically dispersed organisations that are interrelated through both formal and informal ties across varying levels of ownership. This broad definition reflects a holistic or systemic approach consistent with the integrated view of the formation of relationships across borders and the flow of goods and services to the global market place. By conceptualising a cross-border inter-organisational network beyond a set of functional and relational activities performed by downstream and upstream stakeholders in the global organisation, it can be proposed that a definition of an integrated global organisation encompasses the global network of facilities, activities, and social relationships that performs a multitude of integrated value-adding functions. Therefore, the global network construct can be used to examine not only the tangible network design elements of the global organisation (i.e., webs of facilities and product development ties and activities) (Mabert & Venktarmanan 1998), but also to emphasise the social infrastructure and human activities and relations envisioned, built and maintained by global human resource managers.

Global human resource managers are required to enact HRM systems within socially rich cross-border network structures (Welch & Welch 1993, Tung 1994, Stroh & Caligiuri 1998). The primary activities of a global human resource manager involve selecting appropriate global human resource strategies, influencing the operating context of the global organisation, and providing a leadership role in the cultural change of the organisation under conditions of accelerating strategic ambiguity. When enacting a HRM system, human resource managers within global organisations are obliged to manage collaboratively while maintaining their discretion and responsibility for human resource function within their individual organisations. Such a global network model of management and organisation of a firm’s global human resource systems facilitates operating flexibility, capacity for innovation, and development of a unique and valuable relational capability (Schneider 1988, Lusch & Brown 1996).

To sustain the culture of a dynamic global network, global human resource managers are required to possess multiple competencies that are both relational and contingent in nature (Henderson & Clockburn 1995). Moreover, because of the need for a quick diffusion of information across different sources and domains of knowledge within a global network, the global human resource manager is encouraged to promote a spirit of multicultural interpersonal and interorganisational trust, within which members of the networked organisations can learn to cooperate (Barney & Hansen 1994). While the problems of managing intercultural, crossfunctional and interorganisational dependencies and orientations has always been a challenging task dimension for the traditional international human resource manager, the transformation of these requirements into a network perspective poses a set of unique and ambiguous opportunities and challenges to the global human resource managers.

Global organisations necessitate modifying the traditional human resource manager’s role frequently found in more bureaucratic international human resource management organisations. Specifically, new dimensions of the human resource leadership role are required, some of which relate to managing conflict, power, influence and control, as well as commitment and trust building both within and beyond the firm boundary. The shift to the intangible dimensions of the strategic global human resource management’s role orientation in global networks is illustrated in Figure 1.

Figure 1
Transformation of Intangible Dimensions of Human Resource Perspectives
Traditional Hierarchical SIHRMEvolving Network Heterarchy SGHRM
AgencyStewardship
Control/monitoringTrust/commitment building
Information asymmetryKnowledge sharing
UnidirectionalityReciprocity
Structure-orientedProcess-oriented
Behavioural consistencyCognitive reference
FitFlexibility
HierarchyHeterarchy
Oriented toward costOriented toward value
Formal rulesInformal norms
HQ-initiativesSubsidiary-initiatives
FunctionalismCross-functionalism
Administrative spiritEntrepreneurial spirit

Figure 1 shows that the traditional SIHRM perspective is dominated by control and monitoring issues as well as the structural aspects of the traditional HRM hierarchy. Also, the SGHRM heterarchy is designed to share and/or have reciprocity among members of the global organisation network. The concept of flexibility and informal norms leading to a more entrepreneurial, cross-functional information sharing perspective is the dominant logic of the SGHRM system. The shift in HRM perspective is a logical extension of the movement toward a more decentralised decision-making perspective in global organisations.

Companies like 3M and TRW have performed comprehensive studies to identify the company-specific competency set (see Alldrege & Nilan 2000 and Neary & O’Grady 2000 for detailed case studies). These studies indicate that the tangible dimensions of the global HR management’s role change must also be modified to correspond to the requirements of a global network organisation. Global networks may allow independent actions by member units, but as the interdependencies among member units are transformed into an integrated network, the global human resource managers must ensure the individual decisions are integrated into a comprehensive global program. This integration arises because the global network members recognise that to reach their goals requires mutual interdependence across borders and a temporal outlook that is long-term. In effect, the focus of the global human resource manager’s role orientation shifts away from that of performing formal tasks of vertical control toward that of performing complex, multidimensional tasks of horizontal commitment and trust building throughout the global network.

The traditional hierarchical international human resource managers (i.e., managing based on strategic international human resource management model) frequently relied heavily on explicit methods of coordination and control of international relationships. In contrast, the global human resource network manager actively encourages the development of a shared mindset and commitment to the integrated whole by the network members. The strength of collaborations in the firm global network is dependent on the human resource manager’s capability to understand and elicit the unique and valuable attributes of culture in the global network. To facilitate the development of the organisation’s capability to capture this relational value of organisational culture, a global human resource manager needs to possess a repertoire of both tangible and intangible strategic leadership competencies that support integration of subsidiary social knowledge at the network level. As a result, the global HR manager’s role orientation becomes flexible so as to be responsive to the global organisation dynamics. The model, explaining the system contributing to the evolution of the HR manager’s role within a global network, is elaborated in the following section.

The Role of Strategic Global Human Resource Management within Global Networks

Rapid globalisation, turbulent technological revolution and increasing deregulation have profiled a new competitive landscape in the global context (Lei, Hitt & Bettis 1996). This new hypercompetitive environment requires strategic flexibility of an MNC and its global partners (Zander & Kogut 1995). Global strategic flexibility augments the importance of resource flexibility, where the critical resources encompass strategic leadership, human capital, technological and manufacturing advances and cooperative synergies between organisational culture and structure (Lei et al. 1996). As such, an adaptive global organisation should be oriented toward dynamic and anticipatory strategic flexibility as one of its primary core competencies. Strategic flexibility imposes the demand for strategic leadership that influences the development of the organisational relational capability (Dyer & Singh 1998) for cultural change conducive to formation of global networks with other companies in the new competitive landscape.

As a result of the turbulent and almost sequenced changes taking place in the global competitive landscape, MNCs are increasingly modifying their opportunity boundaries by pursuing cooperative commitments (i.e., webs of strategic alliances). This allows an organisation to maintain a degree of flexibility in its structure and culture, and permits feasible restructuring of strategic relationships within various global networks on an on-going basis (Poppo 1995). The resulting relational flexibility imposes unique demands upon human resource managers to design flexible human resource systems responsive to the dynamic contractual relationships with globally dispersed customers, suppliers, and competitors. These increased demands are challenging because the benefits of flexible contract design in global network management are associated with the issues of varying exchange duration, uncertain temporal orientation and synchronisation of multiple relationships, and the issues of subsidiary-subsidiary and supplier-supplier interdependencies (Mohr & Spekman 1994, Zaheer & Venkataraman 1995). In turn, these issues affect the varying demand for fit and flexibility in global human resource system design. As a result, these challenging issues require both attention and agile action by the global human resource managers who are responsible for HR effectiveness within global networks. The most challenging issue is to enact an evolutionary transformation of the traditional hierarchical SIHRM models into a heterarchical SGHRM system.

The traditional SIHRM models have been developed to capture the influence of HR programs (policies, practices, and issues) on a multinational organisation’s outcomes and vice versa. The most cited models take either a contingency perspective emphasising consistency between HRM and the organisation’s strategy (Schuler et al. 1993), or an universalistic perspective emphasising complementarily between HRM and strategy (Taylor et al. 1996). The SIHRM models seem to be appropriate under the conditions of strategic stability supported by the hierarchical structure and strong organisational culture. In these models, it is assumed multinational organisations compete primarily under low ambiguity and within clearly defined geographic and industry boundaries. In other words, it is assumed slow-cycle pressures for organisational renewal and corporate restructuring are salient. In such an environment, organisations are assumed to compete for economic surplus to achieve a structural competitive advantage by aligning their competencies with these activities. In most SIHRM models international variables are dominant like national culture (contingency) or employment systems (complementarily) (Boxall & Purcell 2000). However, De Cieri and Dowling (1999) argue against further development of specific inter-national models. Moreover, Dowling, Welch and Schuler (1999) argue that the SIHRM models fail to capture HR effectiveness within global networks. Rather, models encompassing the evolution process from SIHRM to an SGHRM system need to be developed as organisations globalise their operations (Paul 2000).

The shift from a SIHRM to an SGHRM system is crucial to occur for the evolution of these processes and mechanisms found in HRM system to match the personnel needs of global organisations. The SGHRM system shapes organisational culture in terms of cooperative traits and practices (i.e., content) rather than in values and attitudes (Gates 1994). Also, this influence is reflected in terms of the extent to which organisational culture is shaped across the organisational units (i.e., strength). The extent to which the content and strength of organisational culture are shaped by the shift to the SGHRM system is influenced by the managerial global leadership mindset. If this influence is significant, the organisation’s global performance is likely to be improved.

The SGHRM view goes beyond the SIHRM view by emphasising that HR effectiveness arises not only from the aggregate talent of the organisation’s employees, but also from the coordinated deployment of this talent across the global organisation’s network of relationships. The efficiency of this type of relational coordination is in turn a function of the global organisation’s cultural context (Beer & Eisenstat 1996). For the global HR manager to develop the leadership role modes/options and influence the major transformation of the organisation’s cultural context, the role of human resource management is to be refocused from the “traditional HR focus on attracting, selecting, and developing individuals to a new focus on developing an organisational context which will attract and develop leaders as well as facilitate teamwork” (Beer & Eisenstat 1996: 53). This new global leadership focus of HR encompasses new approaches to decision making, as well as innovative approaches to organising and managing people within global networks (i.e., global team-based management, high involvement of diverse employees, and effective and meaningful communication across cultures). In other words, the innovative global HR leadership can succeed in changing the organisation’s culture only by focusing more on the new strategic task within global networks and less on modifying traditional HRM programs. The focus on the new global strategic task requires both an effective leadership by the global HR manager and an efficient design of the SGHRM system. Specifically, the HR manager’s role transformation toward leadership within a global network is contingent upon an efficient SGHRM system design. To yield an efficient SGHRM system, the HRM processes necessitate seamless interfaces across a variety of dynamic relationships within a global network.

The purpose of the seamless interfaces is to mitigate different risks and uncertainties arising due to the interaction among members within the global network. These human resource processes must also contribute to the optimisation of knowledge integration within the global network (Salbu 1991). Therefore, it is proposed in this paper that the architecture of the SGHRM system depends upon the scope of the MNC strategic orientation relative to network members and the extent of the dynamics in the global network environment. By using the theoretical perspectives of relational contracting (Macneil 1974, 1978, 1980, 1985), and the knowledgebased view of the firm (Grant 1996), a theoretical framework for an efficient SGHRM system design supporting global HR manager’s leadership can be developed for global organisations.

Theoretical Development of Leadership Architecture within SGHRM Systems

The dynamic hypercompetitive rivalries between firms, which share markets and have dissimilar resources (Chen 1996), have shifted the sources of the global organisation’s competitive advantage from its global market positioning activities toward its internal resource base (Winter 1987). In this turbulent environment, the MNC knowledge embodied in its human resources becomes a significant strategic asset for obtaining/maintaining a competitive relative advantage. Therefore, global organisations have to achieve knowledge integration across globally dispersed internal and external knowledge sources to achieve a sustained superior performance. This emphasis on the integrated global human resource management strategy or “supply side of strategy” (Grant 1996: 376) accentuates the importance of the new strategic HR role to facilitate the development of the MNC’s “combinative capabilities” for knowledge management (Kogut & Zander 1992: 391). Knowledge management implies that the processes of knowledge creation, integration, and application across the entire global network must become a prime requisite to competitive strategy in the global market place (Nonaka 1990, Spender 1992).

A firm’s capabilities of integrating knowledge within the global network environment depend on its appropriate structuring of the transfer of the dispersed knowledge. This can occur either through the traditional hierarchy or market choice (i.e., ‘make-or-buy’ knowledge). At the same time it could happen by using a hybrid structural choice that includes knowledge transfer through relational forward and optional contracts. In this section, the conditions that contribute to the firm’s knowledge integration through different structural choices and how these structures impose diverse demands on the HR manager’s leadership role in the design of an efficient SGHRM system will be explored. In particular, how the modes of strategic human resource leadership shift as the inter-firm relational assets (Dyer & Singh 1998) are projected onto the firm’s common knowledge base to facilitate the development of a relational capability critical for the firm knowledge management process will be examined.

A major leadership goal in the development of an SGHRM system responsive to global network demands is to expand the scope of cooperation across the entire context of the global relationships (Lei et al. 1996). With this objective, all internal and external relationships contributing to the firm knowledge integration need to be synchronised in order to support the firm’s global human resource management capability. This dynamic human resource management capability reflects itself in the firm’s ability to coordinate responsibilities across the global network, facilitate two-way communication and information exchange, and strengthens market orientation (Teece, Pisano & Schuen 1997). However, the development of this organisational capability through flexible relationships with the firm constituents requires a supporting relational contracting mechanism (Conner & Prahalad 1996).

Relational contracts in a firm’s knowledge management process are used when: “First, subsidiary social knowledge, which is not embodied in formal human resource management policies and practices, cannot be transferred through market contracts. Second, dispersion of knowledge sources or uncertainty over knowledge applicability may not justify hierarchical internalisation of this social knowledge at the corporate level” (Grant 1996: 383). These conditions are most likely to emerge in dynamic environments found in the new global competitive landscape, in which discrepancies between the firm’s unstable corporate and subsidiary social knowledge bases are common thus requiring a global network structure (Eisenhardt & Brown 1998). As a result, the traditional set of static modes of hierarchical human resource management, practiced by an international human resource manager, needs to be complemented by dynamic heterarchical modes of leadership to capture the advantages of relationship contracts over the more traditional forms of subsidiary knowledge integration by directive administrative means. The four modes of SGHRM leadership, shown in Figure 2, provide the necessary flexible networking capacity needed among members in a global organisation.

The dual perspective of the global organisational environment and the scope of the strategic orientation of the global organisation provide a good backdrop to examine the role of leadership in such an organisation. In a stable environment, network member organisation situation a more traditional hierarchical form of leadership will evolve. Whereas, in the dynamic, network member specific organisation, the real-options leadership that optimises the human resource management initiatives will be more successful. It is, therefore, important to determine the nature of the environment and the strategic orientation of the organisation when developing an appropriate HRM system.

Figure 2
Modes of Strategic Human Resource Leadership Within a Global Network
Global Network Environment
Stable Dynamic
Scope of MNC’s Global Strategic Orientation Network Member-specific HIERARCHICAL LEADERSHIP
Network members assumed to be policy takers for human resource management initiatives
MARKET-BASED LEADERSHIP
Network members assumed to be opportunistic vs. human resource management initiatives
Network Member-general TRUST-BASED LEADERSHIP
Network members assumed to be trustworthy in human resource management initiatives
REAL-OPTIONS LEADERSHIP
Network members assumed to be optimisers of human resource management initiatives

Figure 2 depicts how, beyond the traditional bureaucratic (hierarchy/market) approaches, the strategic human resource leadership also needs to include more dynamic modes that support the hybrid forms of global subsidiary knowledge integration (i.e., relational contracts and real options). These two additional SGHRM modes are substantively more versatile and flexible than the traditional directive and adaptive modes commonly employed by an international human resource manager focused on emphasising fit demands. The traditional international human resource management strategy involved a binary boundary choice by a firm: (a) either to create a perfectly congruent, but operationally independent human resource management system across its subsidiaries; or (b) to impose vertically the best practice in human resource management in its hierarchy. The market boundary choice is characterised by local adaptation of human resource practice to promote independence among subsidiaries. In hypercompetitive environments, this strategy may cause long-term uncertainty in human resource management development relative to the organisation’s subsidiaries. Therefore, the subsidiaries’ long-term investments in past successful human resource management practices will increase, which, in turn, may decrease long-term firm human resource management flexibility. This leads to two key propositions:

Proposition 1: In the early stages of corporate global mindset development, the higher the rate of change in a global integrated network of an MNC, the more salient will be the shift in the SGHRM leadership role from emphasis on congruence of policies toward pursuing a worldwide input from subsidiaries for the best practice approach to be adopted across subsidiaries.

In dynamic environments, demand uncertainty about future competencies needed by subsidiaries constrains firm human resource management flexibility, thus creating rigidity in the firm human resource management strategy (Leonard-Barton 1992). As hypercompetition increases, the risk averse human resource managers are likely to tend to gravitate to the opposite boundary choice. This will further increase the firm’s strategic human resource management rigidity because of the uncertainty about the future change in the knowledge embodied in the firm’s human resource management practices. Therefore, because of the uncertain association between the firm needs for current and future human resource competencies, the two additional dynamic SGHRM modes need to be developed to complement the more traditional choices and contribute to an optimum firm knowledge architecture (Henderson & Clockburn 1995).

Proposition 2: In the mature stage of corporate global mindset development, the higher the rate of change in a global integrated network of an MNC the more salient will be the shift in the SGHRM leadership role from emphasis on differentiation of policies for each specific subsidiary toward pursuing a worldwide policy exceptions so that each subsidiary can optimise its human resource bundle in an idiosyncratic manner while maintaining compatibility with the corporate platform.

The development of complementary dynamic SGHRM modes is critical for the MNC’s responsiveness to different goals that require and optimised knowledge integration process. Such a flexible firm-level strategy imposes complex demands upon a human resource manager making strategic choices (i.e., the manager has to assess the MNC’s capacity in subsidiary knowledge integration because of the limits in the firm-level learning absorptive capacity) (Cohen & Levinthal 1989). Absorptive capacity is defined as a firm’s ability to “recognise the value of new external knowledge, assimilate it, and apply it to commercial ends” (Cohen & Levinthal 1990: 128). Moreover, in global networks, SGHRM must provide an adequate and timely assessment of the relative absorptive capacity (Lane & Lubatkin 1998) of the global network members (i.e., viewing the parent organisation’s absorptive capacity as the reference point for the contingent assessments of overall human resource management flexibility).

The effective assessment of these human resource management contingencies is particularly relevant in an evolved global organisation (Kamoche 1997). This is evident in that the parent organisation and subsidiaries often commit to future plans and designs that include a confidential type of information about competitive forces and future human resource competencies. Moreover, this internal trust needs to be shared with the external network members, who may co-specialise their R&D with subsidiaries to share the long-term strategic intentions through a virtual integration. These complex network relationships, based on complementarily of human and other assets, require strategic human resource leadership to instil socially-shared norms in human resource interactions and offset the heavy demands on the partners’ time in securing formal mutual human resource management adaptations, thus reducing ambiguities in mutual expectations. The highly social content of normative governance in this type of relational exchange is indispensable because the exchange may often result in one party sacrificing for the other as environmental dynamics and the scope of partners’ strategic orientations change. However, the flexibility inherent in the norm-based form of governance, that supports complex interorganisational relationships, raises a set of specific challenging barriers for the development of SGHRM system, which may constrain the design of flexible global assignments responsive to the dynamics within a global organisation.

Implications of the SGHRM System Perspective for International/Global Assignment Research and Practice

Relative to the evolution of international assignments into global assignments designed for future global leaders. A SGHRM system shifts the focus from strategic orientation on economising, cost-efficiency driven unidirectional international assignments. Towards assignments that focus on optimising, value-adding driven, reciprocal global assignments (i.e., developing a path to global leadership as a core competency of a global organisation facing environmental discontinuities) (Pucik, 1992, Harvey, Speier & Novicevic 1999a). As global organisations evolve from hierarchical structures toward heterarchical networks, strategic control shifts from vertical to horizontal mode, thus requiring new managerial global competencies of building trust and commitment across borders.

Harvey, Speier and Novicevic (1999b) posit that the strategic issues of an MNC network are no longer those of potential unequal distribution of information, but rather they have become challenges to mobilise and integrate fragmented and diversified forms of local knowledge and competence (i.e., shifting assignments from international to global orientation). Today, MNCs are increasingly seeking to build and reinforce their core competencies at the global level by an internal reciprocal flow of knowledge between localised sites facilitated by global assignees (Harvey & Novicevic 1999). For global assignments to be accepted as a critical milestone toward global leadership role, a SGHRM system is to be designed to provide all employees across the globe an equitable access to success in the MNC. This can be seen in programs such as those used by Dow Chemicals when it started developing its specific SGHRM system, branded as ‘People Success’, in 1992. Dow installed 35,000 global workstations that gave all employees across the globe open access to the same databases. This system, which supports Dow’s business strategy implemented through a global network structure, provides to all employees opportunities governed by the same principles and values. Currently, Dow’s worldwide-spread employees have greater freedom to plan and control their careers the primary responsibility for personal development is shifted to employees by the SGHRM system.

At Dow, people have opportunities to enhance and develop various acquiring, applying, leveraging, and visioning competencies over time. The identified eight global competencies (i.e., in addition to specific competencies for the function) include drive-for-initiative, innovativeness, interpersonal effectiveness, leadership, learning, market focus, teamwork, and value creation. As a result, Dow’s SGHRM system has moved to a competency platform. The most important feature of Dow’s SGHRM competency platform is its open access nature to previously confidential information/knowledge. This increased global relationships among knowledge sharing forces managers to focus on leadership within the multiple contingencies of the SGHRM system.

These strategic and structural shifts in globalisation of human resource management in MNCs like Dow, which arise from an evolutionary reorientation from SIHRM to SGHRM, support the growing needs of managers to make strategic choices in a knowledge-based context. Specifically, the relevant factors in the strategic decision making process of managers now include those related to the integration of localised knowledge and its structuring and communication as common knowledge within an MNC. Harvey et al. (1999b) argue that the integration of fragmented local tacit knowledge supported by global assignees stimulates both cross-functional and within-functional exchanges between globally distributed sites of local social knowledge. Arguably, integration of local tacit knowledge and its embedding within top management mindset challenges the global HR manager to open up new avenues for finding optimised and centralised global staffing solutions with interacting development, incentive and appraisal mechanisms, and relational contracting schemes that are best fitted to a knowledge-based global heterarchy (Harvey & Novicevic 1999).

With reference to global assignments and global leadership development, Harvey, Speier and Novicevic (1999a, 1999b, 2000) argue the SGHRM system requires that the theoretical developments in global assignment research go beyond the standard economic (agency, transaction cost, and control) and social (institutional and political) theories of the firm (see Wright & McMahan 1992 for a review). These traditional perspectives conceive a mature global heterarchy merely as a processor of information (Eglehoff 1984). Moreover, new theoretical perspectives should extend and supplement the current integrative SIHRM frameworks based on resource-based, resource dependence, and human capital theories (Taylor et al. 1996, Lepak & Snell 1999), which do not view the behaviour of a global organisation beyond that explained in terms of received information that leaves the cognitive competencies of assignees unchanged. By viewing a global organisation as an integrator of local tacit knowledge, rather than as merely a processor of local informational uncertainties, calls for the application of the evolutionary theories of the firm such as competency-based (Harvey et al. 1999a), knowledge-based (Harvey et al. 1999b), and dynamic capabilities perspectives (Harvey et al. 2000) to analysis of global assignments.

Central to these evolutionary theoretical perspectives of the SGHRM-based assignments is the set of mental processes through which global assignees and leaders shape their interpretation of environment. Directed at building and modifying the existing organisational routines (i.e., firm capabilities are continuously built, managed, combined, transformed, tested and selected) (Harvey, Buckley & Novicevic, in press). In this view, a firm’s SGHRM system contributes to the development of dynamic assignments because a global heterarchy is more sensitive to the creation and integration of knowledge than to the acquisition and distribution of information (Novicevic 1999). Therefore, the SGHRM orientation views a new organisational competence to emerge through learning process of the firm based on the conjunction of different tacit knowledge and skills facilitated by global assignees (Harvey & Novicevic 1999). Once this competency is routinised and internalised into an organisational capability, which can be combined with existing organisational routines in a systematic manner, a global core competency can be achieved (Harvey & Buckley 1997). In other words, within the evolutionary view of the SGHRM orientation, global staffing becomes the mechanism to help insure the development of a core competency compensating for the mismatch between existing competencies and the unstructured tasks and informal institutions in new global markets such as emerging markets.

Barriers to Strategic Human Resource Management in Global Networks

The demands for shared norms and values within a global network pose a myriad of simultaneous challenges for development of SGHRM systems: (1) frequent ambiguity about human resource management authority, (2) multiple interdependencies among subsidiaries, (3) increased uncertainty about sustainability of network flexibility and efficiency, (4) possible discontinuities in securing top level support for changes in human resource management systems, and (5) difficulties in acquiring the multiplicity of skills and competencies required for effective SGHRM in knowledge sharing (Nonaka 1990, Ring & Van den Ven 1992, 1994). Which combination of these challenges will be most salient at a particular time period or for a specific network configuration will depend upon which aspect dominates the relational content in the global network: those being, (1) communicating aspect, (2) exchange aspect, or (3) normative aspect. The communicating aspect of relational content in a global network refers to the human resource management-related information apprehension among network members. The exchange aspect is related to operating human resource management aspects supporting the flow of goods and/or services. Whereas, the normative aspect reflects shared expectations that network members have of one another based on some social feature (i.e., culture) (Aldrich & Whetten 1981). The interplay of these aspects may profile the emergence of the following potential barriers within global networks that strategic global human resource management must overcome:

1. Multiplicity of network units: The multitude of current and potential global network units requires continuous managerial mental accounting and prioritisation in selecting actual collaborating units. This requires shifting the human resource management selection criteria for personnel as well as practices as the firm’s strategic orientation changes. In other words, a global human resource manager needs to develop an informed sense of which unit’s human resource management systems are most compatible with the objectives of the network. Moreover, when operating simultaneously in multiple vertical and horizontal networks, a global human resource manager faces multiple actors with varying human resource management-related tasks, policies and resources instrumental for the fir strategic goal achievement. These multi-actor structures require managerial multi-tasking competence in the development of the firm’s dynamic relational capabilities and routines.

2. Global network instability: Though a global network offers the potential for the firm’s rapid adaptation to changing conditions, flexibility of adjustment, and the capacity for innovation, a SGHRM system must bridge the gaps of incomplete knowledge or goal conflicts in the network about human resource management flexibility. The timely managerial action is required to facilitate rapid human resource management responses of the global network to emerging profitable opportunities and successful human resource management adaptation to the current and future sets of its technologies, products and production capacities and to rapidly changing markets. The SGHRM system must direct collaborative effort and operating needs toward effective outcomes while maintaining network responsiveness, changing network memberships, and avoiding hierarchy.

3. Discontinuities in internal organisational support: The success of global networking of human resource management systems requires prior attainment of internal organisational resource coordination and top-level management support. In other words, the external networking success depends upon a previous success in the internal management coalition-building environment for human resource management flexibility. The most critical internal support mechanism for continuity of a global human resource management success is the top management team headed by the CEO.

4. Multi-dimensionality of strategic human resource leadership task: A manager developing an SGHRM system faces a complex task of multiple interdisciplinary dimensions: (1) technical dimensions (technological options) of global network, (2) legal dimensions (regulative restraints) affecting networking, (3) political dimensions (centrality bargaining) of network power distribution, and (4) economic dimensions (value capturing) of value chain streamlining. This multi-dimensionality of the strategic human resource management task imposes extraordinary time and competency demands upon global human resource managers and their ability to combine multiple dimensions into effective firm actions.

5. Multi-skill leadership demands for global network human resource management: Global networks require flexible capacities, skills, and knowledge that go beyond those of hierarchical human resource management. These multi-skill demands for managing within an SGHRM system include: (1) agile and decisive leadership behaviour expressed in continuing engagement and assertive acting on changing information base (i.e., thinking and acting in options); (2) ability to identify, access, and tap into the skills, knowledge and resources of internal and external network stakeholders (i.e., global human resource managers need to know who possesses or controls the critical resources: capital, technology, information, expertise, time, and absorptive capacity indispensable for flexible human resource management designs); (3) capability to formulate mutual benefits and engender purposeful interactions among the identified stakeholders with the objective of pursuing human resource management-related aspects of a co-operative main idea / project / program / relationship / membership; (4) building trust with the stakeholders that possess needed resources (i.e., expertise); (5) multilevel coordination across many global human resource cultures, procedures and divisions of labour incorporated into the global network; and (6) trans-disciplinary competence to quickly acquire, utilise and apply knowledge from multiple disciplinary practices.

Competencies Required for Strategic Global Human Resource Management within Global Networks

The juxtaposition of the flexible SGHRM modes (shown in Figure 1) and the identified barriers faced by a global human resource manager, reveal an array of core managerial competencies relevant for managing within an SGHRM system in global networks: (1) relational competence to navigate the global network knowledge base through consensus building, accountability charting, conflict management, performance contracting and innovation management (i.e., applying coalition-building and human relations techniques to develop the social foundation for the firm relational capability); (2) managerial competence to design creative human resource allocations, negotiate concerted strategies, and structure multiparty relationships; (3) symbolic management of global network cohesion through shared values and meanings in human resource management systems accompanied by strategic rationalisation necessary to glue the network operating context together; (4) motivational leadership in incentivising units to demonstrate and share skills at joint human resource management problem solving; and (5) cross-functional competence in auditing managerial loss of control and difficulties in assessing network accountability in terms of human resource management adaptations.

These competencies embedded in an SGHRM system enable a global organisation to extract value from the global network management and gradually transform itself into a global learning organisation. Such an SGHRM system is conducive to the development of bottom-up entrepreneurship manifested as a social process critical to sustain the advantages of the global network structure. For this process to evolve, the manager needs to secure the top level continuing support for the enactment of a sustainable entrepreneurial context in the firm’s global network. In this context, the SGHRM manager can initiate the development and diffusion of innovative activities rather than merely control and assign operating activities to the units in the global network. As a result of these network-wide initiatives and strategic human resource leadership, a climate of trust and collaboration is likely to emerge in the global network.

To identify and nurture the appropriate mode of the human resource management system that engenders the emergence of entrepreneurial project/product champions in the global network, the human resource manager needs to ensure that the prior top management support evolves into sponsoring of human resource management policies for innovative initiatives and projects. The high-level sponsoring of HRM policies legitimises the efforts of entrepreneurial championing in the global network. As a result of this continuing support for both autonomous and induced innovative initiatives, a manager can channel the energy and commitment in the global network toward a culture of sustained concerted effort. In effect, social capital is built up as the global network members continue to deal with the climate of reciprocal creativity and begin to form social clusters of trust. The resulting interorganisational and interpersonal trust, transcending national borders, broadens the global network vision while engendering cohesion and focus when multiple entrepreneurial project initiatives are pursued. In other words, the SGHRM system, enacted as the orchestration of the global network activities, maximises the action space for coherent and creative improvisation, so that its synchronisation blends into a synergetic whole of the global organisation’s action. The global human resource manager acts as a catalyst who inspires the members to re-evaluate their prior experiences and paradigms, thus changing their inclinations to being proscribers and prescribers to becoming participants and learners who create value in the global networking process.

Conclusion

As global firms are shifting from hierarchical to network governance, it has become necessary to clearly define the transformed role of a human resource manager within global networks, (i.e., to gain insights into its aspects, dimensions and emerging issues). Because the central task of the global human resource management has become leading within networks rather than managing hierarchies, the development of SGHRM system models that are value-creating in the global network economy will become the indispensable topic in the future strategic international human resource management research.

Future empirical research will face many challenges, as the HRM processes in global networks are more chaotic than orderly. The network members are trusted with increased latitude in autonomous actions, which often engenders a creative tension while knowledge is shared across the network. Therefore, the managerial efforts to nurture and contain functional conflicts as well as foster a shared mind-set by communicating the network’s vision are critical to stimulate the development of new ideas by the diverse network members. The emerging shared mind-set glues the members’ social commitment to collaborate in solving complex problems. Ultimately, success of a flexible global human resource management system rests on the human resource manager’s ability to assert leadership, identify and clarify key roles in the global network, and facilitate building the culture of increasing social capital (i.e., development of trusting interpersonal relationships across organisations and borders). A particular challenge for empirical research is to examine both the value and related costs (i.e., net-value) of developing an SGHRM system to support the HR manager’s leadership. For example, there are both cognitive and incentive aspects to coordination problems addressed by the proposed SGHRM model. In particular, the value that can be captured by the strategic global HRM system development is inherently associated with the design of more powered incentive mechanisms. Therefore, the factors and the specific contexts that contribute to the net-value maximisation of the HR leadership competencies require empirical research.

There are a number of managerial issues that need to be considered when an organisation contemplates using an SGHRM system. First, as the leadership of the organisation is dispersed throughout the global system top management must recognise the impact on the organisational hierarchy. The traditional hierarch should be transformed into heterarchy with responsibility and authority equitably disturbed in subsidiary managers. Second, the top management of the organisation must recognise that strategic initiatives may be generated by subsidiaries and shared with other subsidiaries rather than having to come from headquarters. While this proactive stance of subsidiaries is a logical extension of dispersion of top managers throughout the global system, there needs to be ex ante recognition of this likelihood to reduce conflict between headquarters and subsidiary management. Third, the selection process for subsidiary management must be modified to align it with the role of the key subsidiary managers and the modified independence of the subsidiaries. Fourth, it is possible given the skill level need to management in a dispersed global network that expatriate assignments will be lengthened in time spent overseas. Presently, it is common for assignments to have a duration of three to five years. Whereas, it will not be uncommon within an SGHRM system to find expatriate assignments lasting up to a decade or even longer. Fifth, the governance and control mechanism of the global network organisation will need to be modified to allow localised decision-making but at the same time provide for oversight of the subsidiary management. This flexibility and standardise assessment system will be difficult to develop as well as implement. And finally, SGHRM systems if properly developed could provide the competitive advantage needed to effective compete in a global marketplace. In that, the personnel as well as the decision-making authority is distributed throughout the global network but still governed by the headquarters organisation.

The SGHRM system will increase in importance as hypercompetitive, regulatory and technological changes taking place in the global environment drive more companies to adopt a global networks organisation. The organisational form of a global network requires a heightened level of cross-functional interdependence, which in turn increases role ambiguity for a human resource manager. The function of a global human resource manager in a global network will thus become a balancing act of shaping a culture that supports external linkages and at the same time facilitates the integration of internal functional and cross-functional relationships within the dispersed competency centres of the global organisation. Such a complex culture that need to be enacted and maintained in both the internal and external global network settings further entails specific challenges to establishing an appropriate SGHRM system, which are addressed in this paper.

The evolution to an SGHRM system is, however, a tenuous move for human resource. But, if organisations do not complement their global production, marketing, distribution, and service strategies with a concomitant human resource ‘network’ strategy, the ability of the top management to execute their corporate strategies will be constrained. Moreover, without the appropriate human resource system in place, most managers will be limited in their ability to act locally while remaining highly dependent on the headquarters control mechanism. Just as organisations have evolved from domestic, to international, to multinational and ultimately to a global network so to should the human resource system follow the same evolutionary process.

Authors

Michael Harvey, Ph.D, University of Arizona, teaching interests are in global business policy and international human resource management. Mike held the Puterbaugh Chair of American Free Enterprise at the Michael F. Price College of Business at the University of Oklahoma. Presently, Mike is the Hearin Chair of Global Business in the School of Business Administration at the University of Mississippi. He has published in Sloan Management Review, Journal of International Business Studies, Journal of World Business, Journal of International Intercultural Relations, International Journal of Human Resource Management, and Human Resource Management among others. Mike also serves on ten editorial review boards.

Milorad M. Novicevic, Ph.D, University of Oklahoma, is an Assistant Professor of International Management at the University of Mississippi. His teaching interests include international management, strategic management and international human resource management. His research has appeared in Journal of World Business, International Journal of Human Resource Management, Human Resource Management Journal (U.S.), European Management Journal among others.

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