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CHAPTER 17 International HRM Challenge

CHALLENGES

After reading this chapter, you should be able to deal more effectively with the following challenges:

1 Specify the HRM strategies that are most appropriate for firms at different stages of internationalization.
2 Identify the best mix of host-country and expatriate employees given the conditions facing a firm.
3 Explain the challenges of expatriate assignments.
4 Learn how to effectively manage expatriate assignments and minimize the chances of failure.
5 Develop HRM policies and procedures that match the needs and values of different cultures.
6 Consider ethical implications of HRM policies and procedures on a global basis.

At the beginning of 2010, Toyota was generally considered to be a winner in the automobile industry, pulling ahead of General Motors, Chrysler, and Ford in the production and sale of cars in the United States and abroad. Toyota’s profits were the envy of automobile manufacturers, and there seemed to be no end in sight to Toyota’s success. This was an incredible achievement for a company that just a generation ago was relatively unknown and a small industry player. Along the way, the company earned a top-notch reputation for its innovative and sophisticated principles of quality improvement, efficiency, and employee involvement, which came to be known as the Toyota Way.1

Then disaster seemed to strike suddenly in the spring of 2010, when Toyota was accused of ignoring problems in the brake system and other vehicle parts. These problems led to several accidents and multimillion-dollar suits. The image of superior vehicles was tarnished dramatically when the company was confronted with a storm of complaints about safety and widespread negative media coverage.

Source:© Marin Tomas/Alamy.

A close look at Toyota’s troubles reveals that human resource management practices were partly at fault. Prior to these problems, Toyota’s president pressured chief engineers (called shusas) to cut cost aggressively. The shusas were evaluated and rewarded for their cost reductions. Many of the customers served by Toyota and the shusas were thousands of miles away in foreign markets, and Toyota had only a skeleton crew of expatriates. Thus, information about vehicle problems did not flow back to corporate headquarters in Japan. “Those engineers [shusas] are placed in Toyota City. They are shielded from market information. . . . [W]hen Toyota customers overseas began to raise questions about the quality of their vehicles, either because they performed unsafely or just looked cheap, Toyota brushed off the complaints and delayed finding solutions.” U.S. operations were overseen by a giant Japanese bureaucracy in Toyota City, with few Toyota representatives keeping a pulse on local conditions in the United States. Lack of delegation to managers of international divisions prevented good communication and quick solutions to problems. In fact, some of the issues “discovered” in 2010 (such as improperly fitting floor mats) were causing problems in the United States as far back as five years earlier. Yet these allegations were ignored in Toyota City; instead, Toyota blamed an overly complaining U.S. culture for the purported problems.

Ignoring these issues when they could have been easily solved has been extremely costly.2 During 2010–2012, Toyota had to recall approximately 5 million vehicles: for example, 133,469 Priuses, the company’s pride car, were recalled to reprogram the antilock braking system when it was found to be too touchy for aggressive use, and 53,281 Sienna minivans were recalled after wire cables that held the spare tires in place were found to be rusting, causing the tires to fall out. Consumer Reports uncovered a major flaw in the software of Lexus sport-utility vehicles, leading to the cars rolling over in some situations, thus provoking another 9,411 recalls.3 Stories about new Toyota vehicle defects seemed to emerge weekly, which seems incredible for a company whose reputation was based on exceptional quality.4 Currently Toyota is trying to both rebuild its image as a very high-quality car manufacturer and resolve the HR issues that led to these problems.

The Managerial Perspective

As firms such as Toyota become global, many key decisions can no longer be made effectively from corporate headquarters. Thus global companies need to find ways to use certain HR practices (such as appropriate performance evaluation and incentive systems, and recruitment of expatriates) to manage this organizational complexity. Toyota centralized control in corporate headquarters and rewarded cost cutting above everything else, leading to major troubles down the road. There are at least 58,000 multinational companies with 50,000 affiliates worldwide.5 Managers must select, retain, promote, reward, and train employees to help them meet this global challenge. Even small firms trying to export their products or services via the Internet must cope with the challenges of international business. For the growing number of companies operating in various countries, the HRM system and practices must be successfully adapted to a variety of cultural, socioeconomic, and legal conditions.

Virtually every U.S. company now faces competition from abroad, and the fortunes of most U.S. firms, large and small, are inextricably bound to the global economy.6 In this chapter, we demonstrate how managers can use HRM practices to enhance their firms’ competitiveness in an era of international opportunities and challenges. First, we cover the stages of international involvement, the challenges of expatriate job assignments, and ways to make those assignments more effective. We then discuss the development of HRM policies in a global context and the specific HR concerns of exporting firms.

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Table of Contents for CHAPTER 17 International HRM Challenge

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Table of Contents for
CHAPTER 17 International HRM Challenge