GLOBAL HRM

Submitted By:

Col Sanat Kumar Singh

Roll No 21

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Q 1. Discuss in detail the concept of Global HR/Strategic HR.
Ans 1: Synopsis:-
(a) Global Perspective
(b) Drivers of Globalization
(c) Dimension of Global HRM
(d) Multiculturalism
(e) Nature of Global HRM
(f) Conclusion
2. Global Perspective Globalization refers to the process of integration of world economics at international level. It cannot
be stopped from taking place, no matter what the political, economic or cultural compulsions are. The momentum of globalization has
been driven by several developments. The companies seek to take advantage by expanding their operations into foreign markets in a
number of ways; developing economics have huge markets. Multinational companies locate their subsidiaries in low wage and low-
cost countries.
3. Drivers of Globalizations The globalization is being driven by number of factors which are as follow :-
(a) Rapidly developing economics have huge market, for companies, mostly in developed countries which have been
operating below capacities, the emerging market, offer immense opportunities.
(b) Many MNC’s are locating their subsidiaries in low wage and low cost countries to reduce their cost of production.
(c) Changing Demography also adds to increasing globalization, Demographic changes are more visible in India.
The country has largest number young people in the world today. Indian young people can be an asset to the global
economy.
(d) Regional Trading Blocks Are adding to the pace of globalization WTO, EU, NAFTA are a few of the major
alliances among countries.
(e) The declining trade and investment barriers have vastly contributed to globalization.
(f) Technology The most powerful instrument that triggered globalization is technology.
Dimensions of Global HRM.
4. Global HRM is multi dimensional, it has to deal with following facets:-
(a) Multiculturalism
(b) Global Strategic HRM
(c) HRM in cross border mergers and Acquisitions
(d) Staffing international business.
(e) Training & development.
(f) Performance management
(g) Compensation
(h) Repatriation
5. Multiculturalism Culture is understood as the customs, beliefs, norms and values that guide the behaviour of people in a
society and that passed on from one generation to the next. There are dominant cultures, sub cultural, organizational cultures and
occupational cultures.
6. Multiculturalism means that people from many cultures interact regularly, Global firms are repositories of multiculturalism.
Managing multiculturalism, or cross cultural management is of considerable significance. Managing multiculturalism is probably the
biggest challenge faced by an organization while going multinational. It is clearly driven under the leadership of the top and senior
management of the organization, with a critical role played by the human resources group.
7. It is not the case that domestic firms have only monocultures. Domestic firms too may have employees with different
nationalities. Infosys for example has foreigners representing 9% of the total employee strength, similarly, 4% of Wipro’s employees
are foreigners. Domestic firms are having multiculturalism may be by choice, but it is by design with multinational enterprises. A
multinational corporation needs to maintain a unified culture that knits all the subsidiaries together. Each subsidiary tends to become a
stand alone unit if a unified culture does not exist.
8. Unilever for example has decentralized its operation worldwide. To knit together the decentralized organization, Unilever
worked to build a common organizational culture among it’s managers. For years the organization hired people of different
nationalities but with similar values & interest.
9. Managing multiculturalism or cross cultural management is of considerable significance as it offers the following potential
benefits:-
(a) Increasing creativity & innovation
(b) Demonstrating more sensitivity in dealing with foreign customers.
(c) Hiring the best talent from anywhere
(d) Demonstrating global perspective
(e) Creating a super organizational culture’ using the best of all cultures.
(f) Greater flexibility within the organization HR policies and practices.
(g) To evolve universally acceptable HR policies & practices.
10. The various dimensions of cross cultural management are ;
(a) Motivation across cultures
(b) Leading across cultures.
(c) Communications across cultures
(d) HR Practices

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 (e) Teams
(f) Work values
Nature of Global HRM.
11. GHRM refers do HR polices and practices applied by an international firm across all its subsidiaries located in different
countries. GHRM is the process of PROCURING, ALLOCATING & effectively UTILIZING human resource in a multinational
organization.
12. GHRM contains 3 dimensions
(a) Human Resource Activities
-Procurement
-Allocation
-Utilization
These 3 dovetail with all the activities of a typical domestic human resource function :-
(aa) HR Planning
(ab) Employer Hiring
(ac) Performance management
(ad) Training + Development
(ae) Compensation management
(af) Industrial Relation.
(b) The three country categories involved in GHRM activities:
- The Host country (Where the subsidiary may be located.
- The home country (Where the head office is located )
- Other country (that may be supplier of labour, finance and other resources)
(c) The three categories of employees of an international firm are:
- HCNs (Host country Nationals)
- PCNs ( Parent country national)
- TCNs ( Third country nationals)
(d) Examples . US multinational IBM employs Australian citizens in its Australian operations (HCNs), sends US
citizens (PCNs) to Asia pacific countries on assignment and may send some of its Singaporean employees on an
assignment to its Japanese operation (TCNs) The nationality of employees is a major factor in determining the persons
category.

13. GHRM is the Interplay among these three dimensions:-

(a) The HR activities.
(b) Types of employees.
(c) Countries of operation.
14. Definition of GHRM Morgan defines GHRM as the interplay among the three dimmers
(a) HR activities (procure, allocate, utilize)
(b) Types of employees (HCNs, PCNs, TCNs)
(c) Countries of operation (Host, Home a other)
15. Difference between domestic and Global HRM The complexities of operating in different countries and employing
different nationals categories of employees is a key variable that differentiate domestic and international HRM. The complexities of
international HR can be attributed to six factors:-
(a) More HR Activities.
(b) The need for broader perspective.
(c) More involvement, in employees personal lives.
(d) Change in emphasis as the workforce mix of expatriates and locals varies.
(e) Risk exposure.
(f) Broader external influence
Conclusion.
16. GHRM refers to the HR policies a partisan applied by an international firm across all its subsidiaries located in different
countries.
17. The nature of the HR function and activities in an international context is determined by both the parent company’s policies
and practices and the degree of customization of the HR policies to local requirement.
18. The GHR activities have a broader perspective with reference to each function of HR be it:-
(a) HR planning.
(b) Employees Hiring.
(c) T & D.
(d) Compensation.
(e) Performance management.
(f) Industrial relations.
19. In brief GHRM implies :-
(a) More involvement in employees personal lives
(b) Changes in emphases on HR policies as work force mix of PCNs and HCNs.

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 (c) Risk exposure
(d) More HR activities.
(e) The need for broader perspective.
(f) Broader external influence.
Q 2. Discuss the role of Global HR it’s ethics, value, principles and policies of business world.
Introduction
1. Globalisation for better or worse has changed the way world does business. Globalisation is unstoppable. It is the challenge
the individual & business face is “learning” as how to live with it ,manage it & take the advantage and benefits it offers.
2. Driven by the economic liberalisation, national economies are becoming more and more independent and integrated and
world economy and business are becoming more and more globalised. (Eg. European Market unification & introduction of Euro
currency has opened the front in Eastern Europe & Worked on the demand in Asia) Therefore the role of Global HR in ethics, value
principles & policies of Business World has gained importance.
Key areas on which, ethics, value, principles & policies of GHRM evolve
3. Deployment :- Easily getting the right skills to where we need them, regardless of geographical locations.
4. Knowledge & innovation disseminations :- Spreading the state of the art knowledge and practices throughout the
organisation regardless of where they originate.
5. Identifying and developing talent on a global basis :- Identifying who can function effectively in a global organisation and
developing his/her abilities in multi culture.
Ethics & Value & Global HR/Business
6. Ethics refers to a system of moral principles a sense of right & wrong and goodness and badness of action and motive and
consequence of these actions. In other words Ethics is the study of good & evil; right and wrong just and unjust action of business.
7. Business ethics does not differ from generally accepted good or bad practices. If dishonesty is considered to be unethical and
immoral in ethical society then in Global business/HR if a HR manager is dishonest then he is an unethical person.
8. Ethics are influenced by :-
(a) Religion
(b) Culture .
(c) Law
There repositories contains unique system of values that exerts varying degree of control over individual & companies
9. Since in Global HR dealing with human capital taken place on a larger canvas and culture are like different colons on
canvas. Hence the role of Global HR on ethical issues is a major concern.
ROLE OF GLOBAL HR IN ETHICS / ETHICS IN GLOBAL HR AMPLIFIED
11. The HR manager’s job in building an ethical climate in organisation is significant. The HR Manager needs to carefully
screen application for jobs weed out those who are prone to indulge in misdemeanors and hire those who can build a value driven
organization.
12. Hiring ethically strong employees is only the beginning. The HR managers need to institute, mechanism to ensure ethical
conduct of employees.
13. Managing ethnic minorities, young workers and women with care and mentoring young talent is one of the major role in
ethical parlance. Handling corporate re-org and trimming coping up with the “taking over’ and taken over along with employees gains
has important place in ethics.
14. Facing loss of joy & pleasure as communicator leader and mediator with poise even, when receiving bricks while managing
unions, demand strong ethics and Global HR has to meet this at a wider platform the role could be further summarised as:-
(a) The ethical issue should be based on moral idealism it postulates that certain acts are good and others are bad.
Pursue those act which are good and avoid the bad one.
(b) Intuition leads to individual to sense the morale gravity and if the HR manager feels that he/she is not intended to
hurt anyone the institution approach is good.
(c) If the role is based on utilitarian the consequence represents a net increase in the happiness of larger chunk.
(d) HR manager to prioritize ethical issue so that decision is taken.
(e) If HR manager can publically commit on ethical issue as role model then ethical conflict will be minimum like
opposition to padding expense, stealing supplies from company, bias in performance appraisals or unjust lay off of
employees. Once the stand is made clear; employees will be least tempted to approach with corrupt intentions.
(f) The role of advocate to the stake holder & employees solves many ethical issues.
(e) The role of modulator to influence top mgmt to bring ethical culture in organisation.
Value & Role of Global HR
15. Value driven companies are most likely to be successful in business world in long run. Value gives management credibility
because value is perceived by employees.
16. Value is defined buy ‘Receiver’ & not by giver. For HR professionals at global level their role should not be imposing their
belief, goal or actions on others, they first need to open with what other wants. If they impose without knowing other’s perspective
they would be failing at global level.
17. The goal & value of receiving stake holder to be seen by HR professionals.
18. HR professionals can show how an investment in HR practice will help the stakeholder gain value as defined by stake
holder.
19. When employee is being laid off it is the role of HR manure to demonstrate that being more productive will help the
employee stay employed.

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 20. HR professionals need to show as how investment in HR will deliver business results.
21. Needs to focus on what it can delivers more than on what it does.
PRINCIPLES & POLICIES OF BUSINESS WORLD PERTINENT TO GLOBAL HR AND ITS ROLE
22. Staffing :- Global HR is complicated by profound differences in labour market, culture legal system & economic
system. The HR profession at global stage strive for:-
(a) Staff key management posts
(b) To develop managers to have cultural literacy.
(c) To compensate people in difference nations.
(d) To deal with issue of expatriate manages.
23. Staffing Policy:- Based on company philosophy the role of GLOBAL HR depends.
(a) Ethnocentric All key management positions are filled by parent company nationals . The company see this as the best way
to maintain a unified corporate culture. May also believe that it is the best way to transfer core competencies to a foreign operation.
(b) Polycentric Requires host country nationals to be recruited to manage subsidiary, while parent company nationals occupy
key position at corporate HQ. The firms are less likely to suffer from cultural myopia.
(c) Geocentric In such staffing subsidiary operations are best managed by individuals regardless of their
nationality.
24. The role of Global HR in staffing is to augment the objective of company & promote corporate culture to attain higher
performance.
Conclusion:
29. Globalisation has opened new frontiers and Global HR has gained importance. The role regarding ethics, value, principles
and policies revolves around ‘Deployment, knowledge, innovation dissemination and dentifying & developing talent on global basis.

Q 3. What is the impact of Global HR on compensation and incentive management ?

INTRODUCTION.
1. Better work and life balance can be achieved by making flexible compensation and incentive benefits clear, manageable
and valuable. In addition, compensation and benefits can also be made a part of a larger performance management system
that motivates each employee toward high performance and business results. Various strategic approaches of flexible
compensation and benefits are covered under following headings:-

(a) A Changing scene for human resource professionals

(b) Reasons for different situation now
(c) Two new ways of compensation
(d) Six challenges in managing compensation and benefits
(e) Performance management should guide changes in the deal
(f) Test to check how well is your performance management system is working
(g) Strategies in adjusting compensation and benefits programmes

CHANGING SCENE FOR HR PROFESSIONALS

2. Not long ago benefits were similar for all employees and often based in a union contact. Further these were linked
to tenure, and perks escalated as employees climbed the corporate ladder, but choice was limited. Compensation was
primarily market based, consisting of wages, salaries or commissions. People might jump to a new organisation for a large
raise, but many would stay to protect their pensions and retiree healthcare benefits which were guaranteed.
CHANGING SITUATION DIFFERS DUE TO SEVERAL REASONS
(a) Increasing work force diversity leading to more variety in workers needs and preferences for compensation
and benefits.
(b) Increasing work mobility and weakening worker loyalty because of downsizing and desire for portable
benefits. Now portability of benefits in employment deal has become a valuable recruiting and retention tool
(c) Increasing employee consumerism especially among talented workers lifestyle dependent benefits
(d) Fatter organisations means fewer hierarchical promotions. Organisations must find ways to recognize
employees and meet their needs for status through expansion of role and responsibility rather than rank.
(e) Higher proportion of mature (older 55 years and above workers).
(f) Virtual organisations and telework mean no offices. With flexi work arrangements and dispersed workers, the
physical signs of status, such as a fancy office lose much of their power. We now need more reliance on other
forms of employee recognition.
TWO NEW WAYS OF COMPENSATION
4. As a result, today’s worker looks at the compensation and benefits ‘package’ in two
new ways:
(a) Overall employment deal, which covers dominant variables of work itself work arrangements, learning
organisation’s mission, culture and management style.
(b) Employees look for very specific elements of the employee deal and combination of benefits, for
example, flexible hours, together with child-care or elder-care support or option between pay and time- off.
5. The compensation and benefits are in transition today and some fundamental changes are given below :-

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 TREND IN COMPENSATION AND BENEFITS
ELEMENTS FROM TO
 Pay Tenure-based, mainly cash Performance based,
more equality
 Pension Defined benefit Defined contribution ,
Cash balance
 Health benefits Employer managed and Co-funded and co
provided managed
Other benefits Standard Many choices
Cafeteria style
 Recognition and reward Formal and periodic Formal and
informal on the spot
SIX CHALLANGES IN MANAGING COMPENSATION AND BENEFITS
6. Ken Dycht Wald and co-authors have identified six major challenges associated with compensation and benefits
management such as-
(a) Customization
(b) Segmentation
(c) Combination
(d) Integration
(e) Fairness, and
(f) Accessibility.

Part (b): IMPACT OF GLOBAL HR ON INCENTIVE MANAGEMENT

INTRODUCTION
1. Compensation is the key factor in every organisation’s pursuit of attracting, retaining and motivating employees who are best
qualified to achieve its goals. The challenge is to align an organisation incentive plan with that of the organisation’s strategic direction
and achievement of business goals. Incentive strategy will mainly be concerned with the direction the organisation should follow in
developing the right mix and level of financial and non-financial rewards in order to support the business strategy. Incentive strategy is
founded on the proposition that the ultimate source of value is people.
What is Incentive ?
2. An ‘incentive’ or ‘reward’ can be anything that attracts a worker’s attention and stimulates him to work. In other words, “An
incentive scheme is a plan or programme to motivate individual or group performance. An incentive programme is most frequency
built on monetary rewards (incentive pay or monetary bonus), but may also include a variety of non-monetary rewards or prizes. ”

3. An incentive plan has the following important features:-

(a) An incentive plan may consist of both ‘monetary’ and ‘non-monetary’ elements. Mixed elements can provide the diversity
needed to match the needs of individual employees.
(b) The timing, accuracy and frequency of incentives are the very basis of a successful incentive plans.
(c) The plan requires that it should be properly communicated to the employees to encourage individual performance, provide
feedback and encourage redirection.
4. Incentives can be classified into :
(a) Direct compensation includes the basic salary or wage that the individual is entitled to for his job, over- time work and
holiday premium, bonuses based on performance, profit sharing and opportunities to stock options etc.
(b) Indirect Compensation includes programmes (insurance plans, pensions), pay for time not worked, services and perquisites.
But these are maintenance factors than reward components. Science they are made available to all employees, irrespective of their
performance, they will tend to retain people in the organization but not stimulate them to greater and higher performance.
5. Thomas B. Wilson states that from the organisational perspective, the incentive are the systems, programmes and practices that
affect what people do. Incentive are the organisation’s way of systematically delivering positive consequences .Thus, there is an
opportunity for organisations to develop high-impact reward systems that are linked significantly to their strategies and that result in
competitive advantage.
COMPONENTS OF EFFECTIVE INCENTIVE STRATEGY
6. Effective incentive plan have three components:

(a) Incentive have clearly- defined goals and a well- defined link to business objectives.
(b) There have to be well-designed pay and reward programmes, tailored to the needs of the organisation and its people, and
consistent and integrated with one another.
(c) Perhaps most important and most neglected, there must be effective and supportive
HR and reward processes in place.
PURPOSE AND FEATURES OF INCENTIVE STRATEGY
7. The main objectives /features of incentive strategy can be as under:
(a) The demands of the business strategy, including cost constraints;
(b) How business performance can be driven by influencing important individual and

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 organisational behaviours;
(c) Helping to achieve culture change;
(d) Meeting objectives for ensuring the organisation gets and keeps high-quality
employees
(e) Aligning organisational core competencies and individual competence.
(f) Underpinning organisational changes e.g. introducing broadbanding.
(g) The development of competitive pay structures.
8. Thus, incentive strategy aim to develop the high balance of those incentives that will pay much.

DEVELOPING THE INCENTIVE STRATEGY.

9. A incentive plan is the integration of specific programmes that encourage and reinforce actions that lead to desired results.
Developing a incentive strategy involves five primary steps as follows :-
(a) Define the segment ( Organisation unit or department )of focus (such as sales staff specialised technical staff ).
(b) Determine what the organisation needs from these individuals.
(c) Determine what these individuals want from the organisation (e.g. healthcare , paid time off , involvement in decisions making
etc. )
(d) Select the programmes that best match the wants of the organisation with those of the individuals.
(e) Summarise these programmes that best match the wants of the organisation with those of the individuals.
10. This is essentially strategic guide to developing an integrated total incentive plan. One can develop systems and practices that
provide organisation with superior capabilities, then one can gain a winning competitive advantage. Behaviours are raw materials for
implementing a competitive strategy, and incentive plans are the core tools needed to create the conditions where people take the
initiative to change. Incentive plan helps employees know what to do and why they should do it.
CONCLUSION .
The LPG policy has changed paradigm of compensation and incentive management. The impact of Global HRM is phenomenal.
Today the world has become a global village. It is time for organisations ( even performance based ) to stop wasting resourses on
ineffective compensation and incentive plan and invest in a compensation system that will get the strategic results they really want.
This is the key to improving organisations with much real economic growth over the next decade, ensure that compensation and
incentive strategy motivates, inspires and achieves strategic organisation goals for multicultural workforce.
Q 4: What are the HR challenges in international business ? Suggest how to face such challenges.
INTRODUCTION
1. Globalization of Indian economy is compelling organization to rethink their future strategies. The transformation is a pre-
requisite to their survival and growth. For the HR function, there would not be a more existing and challenging opportunity than
managing the complexities of change and transformation. HR today is playing a lead role along with business functions in creating the
necessary momentum and internal capabilities.
2. Globalization has elevated the importance of HRM development in organization. These changes have led to the notion of the
HR system as a strategic asset. In particular, there has been a very strong marketing, corporate communication and IT influence on the
HR function. The HR function is realigning itself in response to this process of cross-function globalization (building new alliances
with these functions). Organizations devoid of a global way of thinking will not fare well in the international arena. Because human
capital is the defining competitive differentiator of most organizations, HR's commitment to the task of attracting, retaining and
managing the best talent available is its major strategic challenge.
HUMAN RESOURCE MANAGERS: THEIR ROLE IN A CHANGING ENVIRONMENT
3. Issues facing HR have changed dramatically. Thus, HR professionals must play special roles in dealing with these changes
and must develop specific competencies to support these roles.
Workplace flexibility is expected to be on the rise as the future workplace, the ‘virtual office’ is characterized by creative and flexible
work arrangements. As more employees work off-site-up to two thirds of an organization in the 21st century– there will be an increase
in emphasis on performance and results as opposed to the number of hours worked.
4. In addition, off-site employees can expect to attend fewer meetings. Specified work will become much more collaborative
and management will spend nearly all its time managing cross-functional work teams who enjoy a lot of autonomy. In essence, there
will be a movement, a trend towards a decentralized model of HR.
5. HR managers will have to accommodate employees in their virtual work locations and find ways to manage corporate
culture, socialization and employee orientation. In order to obtain and maintain a competent workforce, they must act as organizational
performance experts and shape employees behavior without face to face meetings.
6. Another expected change in HR is the ‘Global Business’ concept. Organization rely more and more organization HR
specialists as the facilitators of work across borders and among different cultures. Therefore, they must be knowledgeable of other
cultures, languages and business practices. They will be required to develop and manage an international workforce, maintain written
and unwritten corporate polices for transportability to other cultures, keep top management informed of the costs of not paying
attention to the transnational issues and provide their services to a variety of locations world wide.
7. Concerning the recruitment in the above mentioned ‘global business’ it will be important which strategy will be adopted by
the management. Globalization will impact HR managers by requiring new skills such as language capabilities. HR managers must
therefore be familiar with and understand other cultural norms to promote organization diversity. An organization that recognizes and
promotes cultural diversity will benefit because it will be employing the market that it serves. With increasing globalization and
competition within the market, a diverse workforce is conducive to attracting and retaining a strong client base. While competing in an
international market, employees from diverse national backgrounds provide language skills and understanding of other cultures. HR
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professionals will also be responsible for providing cultural sensitivity training for the organizations employees and for managers
throughout the entire organization
8. The human resource manager in a multi-national company with divisions or subsidiaries in foreign countries has all the
normal HR responsibilities plus a brace of additional tasks that are specific to offshore operations of his department. He is literally
responsible for international human resource management. International human resource management functions cover many different
activities related to a business organization’s employees and contractors. The first and most important is the staffing needs of the
company whether staff members are company employees or outside contractors. Other functions include recruiting and training
employees, ensuring that they are performing at expected levels or better, handling performance issues and making certain that
personnel and management policies conform to laws and regulations. IHR management is also involved in how the company manages
employee compensation and benefits, employee records and personnel policies and practices.
9. The primary difference between domestic human resource management and international human resource management is the
added knowledge and responsibilities required due to foreign operations. These typically include language (in non-English speaking
offshore organisations), the local and national regulations and laws governing business operations within a foreign country; currency
exchange rates, career outlooks, company benefits and incentives and, perhaps most important. The ethics and etiquette expectations of
foreign business contacts. IHR management people must understand these differences clearly and stand ready to keep other company
people informed of them to prevent embarrassing situations and unintentional ‘affronts’ from occurring
 Major differences between domestic HRM and IHRM

• Business activities e.g. taxation, international relocation, expatriate remuneration, performance appraisals, cross-cultural
training and repatriation
• Increased complexities e.g. currency fluctuations, foreign HR policies and practices, different labor laws
• Increased involvement in employee’s personal life e.g. personal taxation, voter registration, housing, children’s education,
health, recreation and spouse employment
• Complex employee mix – cultural, political, religious, ethical, educational and legal background
• Increased risks e.g. emergency exits for serious illness, personal security, kidnapping and terrorism

Main challenges in GHRM

• Different labour laws

• Different political climate
• Different stage(s) of technological advancement
• Different values and attitudes e.g. time, achievement, risk taking
• Roles of religion e.g. sacred objects, prayer, taboos, holidays, etc
• Educational level attained
• Social organizations e.g. social institutions, authority structures, interest groups, status systems
The HR Challenges of International Business are therefore---
 Deployment
– Easily getting the right skills to where we need them, regardless of geographic location.
 Knowledge and innovation dissemination
– Spreading state-of-the-art knowledge and practices throughout the organization regardless of where they originate.
 Identifying and developing talent on a global basis
– Identifying can function effectively in a global organization and developing his or her abilities.
Global Staffing Issues are--
 Selecting candidates for overseas assignment
 Assignment terms and documentation
 Relocation processing and vendor management
 Immigration processing
 Cultural and language orientation and training
 Compensation administration and payroll processing
 Tax administration
 career planning and development
Inter country Differences Affecting HRM are---
 Cultural Factors
 Economic Systems
 Legal and Industrial Relations Factors
Staffing the Global Organization
 International staffing: Home or local?
– Expatriates (expats): Noncitizens of the countries in which they are working.
– Home-country nationals: Citizens of the country in which the multinational company has its headquarters.
– Third-country nationals: Citizens of a country other than the parent or the host country.
 Offshoring
Having local employees abroad do jobs that the firm’s domestic employees previously did in-house
 Offshoring

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 – Having local employees abroad do jobs that the firm’s domestic employees previously did in-house.
 Issues in offshoring
– Having an effective supervisory and management structure in place to manage the workers.
– Screening and required training for the employees receive the that they require.
– Ensuring that compensation policies and working conditions are satisfactory.
Values and International Staffing Policy
 Ethnocentric
– The notion that home-country attitudes, management style, knowledge, evaluation criteria, and managers are
superior to anything the host country has to offer.
 Polycentric
– A conscious belief that only the host-country managers can ever really understand the culture and behavior of the
host-country market.
 Geocentric
The belief that the firm’s whole management staff must be scoured on a global basis, on the assumption that the best manager of a
specific position anywhere may be in any of the countries in which the firm operates
Why Expatriate Assignments Fail
 Personality
 Personal intentions
 Family pressures
 Inability of the spouse to adjust
 Inability to cope with larger overseas responsibility.
 Lack of cultural skills

DILEMMAS FACED BY AN HR HEAD

11.  There is a need to view HR as a partner or a business enabler. The five R’s therefore, assume utmost significance in HR
strategy. The HR team needs to get in right from the stage of defining the business strategy to Resourcing, Recruiting the right talent,
Retaining the talent, Retraining and Restructuring.
Training and development is another area. It is foreseeing and anticipating the requirements and developing suitable training so that the
employees are well-equipped to handle the challenges.
12. Another major challenge is how we are able to incorporate all the sub-systems in HR and help them in achieving the ultimate
goal – exceptional performance. Creating an environment that stimulates the creation of knowledge and its sustenance throughout the
organization is big challenge. No longer can the HR department carry on with its traditional functions. However, Human Resource
Information Systems (HRIS) is to be put in place – to build and sustain a performance – driven culture. The role will shift to that of
facilitator. HR will have to involve the whole organization in this process and act as a counselor and facilitator and that is the most
gigantic challenge the HR of any organization faces.
COMPETENCIES FOR A HR MANAGER
13. In order to effectively deal with all the changes, HR professionals must develop competencies that will allow them to carry
out their roles, competences like:
 Flexibility
 Team work
 Communication
 Decisiveness
 Leadership
 Strategic planning
 Network building
 Client service orientation
 Organizational awareness
 Self confidence
 Sharing of expertise
 Global and cultural understanding
 Multiple language competencies
HR professionals will also be required to increase their numerical and data compilations skills.

Q5 (a) Write short Note on “cross cultural management” .

Introduction
1. Countries differ widely in their cultures-in other words, in the basic values their citizens adhere to, and in the ways these
values manifest themselves in the nation's arts, social programs, politics, and ways of doing things. Cultural differences from country
to country necessitate corresponding differences in management practices among a company's subsidiaries. For example, in a study of
about 330 managers from Hong Kong, the People's Republic of China, and the United States, the U.S. managers tended to be most
concerned with getting the job done. Chinese managers were most concerned with maintaining a harmonious environment, and Hong
Kong managers fell between these extremes.

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2. The basic implication of cultural diversity for HRM is that same set of HRM practices is not suitable for all cultures;
consideration has to be given to cultural diversity. Cultural differences cause a great challenge to HRM. The behavioural attitude of
workers, the social environment, values, beliefs, outlooks, etc., are important factors, which affect industrial relations, loyalty,
productivity, etc. There are also significant differences in aspects related to labour mobility. Cultural factors are very relevant in inter
personal behaviour also. In some countries it is common to address the boss Mr. so and so but in countries like India addressing the
boss by name would not be welcome. In countries like India people attach great value to designations and hierarchical levels. This
makes delaying and organisational restructuring difficult.
3. Cross cultural management , thus deals with the management of differentiation across cultures in an international
environment and the related issues of transferability of people, management styles and techniques across various cultures.
Cultural Diversity: Hofstede’s Model
4. A classic study by Professor Geert Hofstede identified the core issues related to international cultural differences. For
example, Hofstede says societies differ in power distance- in other words, the extent to which the less powerful members of
institutions accept and expect an unequal distribution of power. He concluded that acceptance of such inequality was higher in some
countries (such as Mexico) than in others (such as Sweden).Studies show how such cultural differences can influence HR policies. For
example, compared to U.S. employees, "Mexican workers expect managers to keep their distance rather than to be close, and to be
formal rather than informal." Similarly, compared to the United States, in Mexican organizations formal rules and regulations are not
adhered to, unless someone of authority is present." In fact, the list of cultural differences is endless. In Germany, you should never
arrive even a few minutes late and should always address senior people formally, with their titles. Such cultural differences are a two-
way street, and employees from abroad need orientation to avoid the culture shock of coming to work in the United States. For
example, in the Intel booklet "Things You Need to Know About Working in the U.S.A.," topics covered include sexual harassment,
recognition of gay and lesbian rights, and Intel's expectations about behavior.
Model of Cultural diversity
5. Culture is one of the most important factors affecting HRM practices. However, when we consider international perspective
of HRM, we find countries are not alike. Cultural diversity exists on following dimensions:
 lndividualism and Collectivism. After the study of culture of sixty countries, Hofstede, a Dutch researcher, has concluded
that people differ in terms of individualism and collectivism. Individualism is the extent to which people place value on
themselves; they define themselves by referring themselves as singular persons rather than as part of a group or organisation.
For them individual tasks are more important than relationships. Collectivism is the extent to which people emphasise the
good of the group or society: They tend to base their identity on the group or organisation to which they belong. At work,
this means that relationships are more important than individuals or tasks; employer-employee links are more like family
relationships. Countries that value individualism are USA. Great Britain, Australia. Canada. Netherlands and New Zealand.
Countries that value collectivism are Japan, Columbia, Pakistan, Singapore, Venezuela, and Philippines. India maybe placed
near to collectivism.
 Power Orientation. Power orientation, also known as orientation to authority, is the extent to which less powerful people
accept the unequal distribution of power; people prefer to be in a situation where the authority is clearly understood and lines
of authority are never bypassed. On the other hand, in culture with less orientation to power, authority is not as highly
respected and employees are quite comfortable circumventing lines of authority to accomplish jobs.
 Uncertainty Avoidance. Uncertainty avoidance also known as preference for stability, is the extent to which people feel
threatened by unknown situations and prefer to be in clear and unambiguous situations. In many countries, people prefer
unambiguity while in many other countries, people can tolerate ambiguity.

Evaluating Hofstede's Model

6. Hofstede's results are interesting for what they tell us in a general way about differences between cultures. Many of
Hofstede's findings are consistent with standard Western stereotypes about cultural differences..However, one should be careful about
reading too much into Hofstede's research. It is deficient in a number of important respects. First, Hofstede assumes there is a one-to-
one correspondence between culture and the nation-state, but, many countries have more than one culture. Hofstede's results do not
capture this distinction. Second, the research may have been culturally bound. The research team was composed of Europeans and
Americans. The questions they asked of IBM employees and their analysis of the answers may have been shaped by their own cultural
biases and concerns. So it is not surprising that Hofstede's results confirm Western stereotypes, since it was Westerners who undertook
the research!

Implications For HRM Practices

7. Diversity of various types cultures, among other things, in a global company suggests that HRM practices have to be tailor-
made to suit the local conditions. Such practices can be seen in the context of some important HRM functions as given in following
paras.

Recruitment and Selection

8. A global company has the following alternative approaches to recruitment and selection of employees :-
 Ethnocentric-all key positions, in headquarters as well as subsidiaries, are staffed by parent-country nationals.
 Polycentric-key positions in subsidiaries staffed by host-country nationals and those in headquarters staffed by parent-
country nationals.
 Regiocentric-key positions staffed by host-country nationals within particular geographical regions (such as continent-
wise).

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  Geocentric-key positions in headquarters as well as subsidiaries staffed by people based on merit, irrespective of their
nationality.

9. Different MNCs adopt different approaches for recruitment. For example, a survey of recruitment practices adopted by
MNCs reveals that 50 per cent MNCs believe in geocentric approach while 35 per cent MNCs believe in ethnocentric approach and
key functionaries from parent country national are put on foreign assignments for two-three years. While selecting personnel, MNCs
generally place emphasis on technical skills. Not much emphasis is placed on skills for cultural adaptability. With the result, expatriate
failure rate is high. In order to overcome this problem, many MNCs have adopted the practice of recruiting fresh graduates from host
countries and providing training in parent country.
Performance Management
10. Performance management, that is, assessment of employee performance, discussing its results with employees, and
suggesting and working out way for improvement in performance, is based on the practices adopted by MNCs in this respect for
parent-country nationals. However, this has posed a serious limitation in the American MNCs which adopt, generally, management by
objectives (MBO). MBO works in an environment which is open and provides platform for discussion between superior and
subordinate on equal footing. In countries where people are highly oriented towards authority, any open discussion with superior by
subordinate is treated as insubordination, and MBO system does not work. Therefore, the alternatives suggested are recognising and
formally incorporating the difficulty level of operating in different countries, relying the foreign on-site manager to consult the home-
site manager before finalising assessment, and involving the expatriate in deciding on performance criteria and making them more
appropriate to the expatriate's position and circumstances.
Training and Development
11. MNCs provide pre-departure training to expatriates. However, in many cases, such training is superficial without really
addressing the issues uppermost in the minds of expatriates and their families. The depth and breadth of training can vary from a
simple information-giving approach (films/books) to effective approach (culture and language training) and impression approach.
Compensation Management
12. There are two commonly used approaches in international compensation systems – going-rate approach in which
compensation is tied to host-country norms and the balance-sheet approach in which compensation is tied to home country norms. In
both approaches, additional expenses in the form of housing and additional taxes are reimbursed. Both the approaches have their own
merits
and limitations.
Industrial Relations
13. Industrial relations depend on the history, legal framework, power relations, and ideologies of management and trade unions
in each country. Therefore, MNCs have to adopt specific industrial relations strategies to suit local conditions. However, MNCs face
pressure for standardisation in terms of productivity at least within a region if not internationally. Therefore, they have to strike a
balance between industrial relations strategies to suit local conditions and standardisation. Some MNCs lobby with local governments
to have better industrial relations.
Conclusion
14. Cultural differences cause a great challenge to HRM and thus cross cultural management assumes significance in a global
scenario. In fact, even in a national scenario, in case of big nations like USA, India and China, it assumes equal importance, where
there are diverse cultures within the nation itself. The behavioural attitude of workers, the social environment, values, beliefs,
outlooks, etc., are important factors, which affect industrial relations, loyalty, productivity, etc. There are also significant differences in
aspects related to labour mobility.
15. Cultural factors are very relevant in inter personal behaviour also. In some countries it is common to address the boss Mr. so
and so but in countries like India addressing the boss by name would not be welcome. In countries like India people attach great value
to designations and hierarchical levels. This makes delaying and organisational restructuring difficult.
16. Thus, modification to all the functions of HRM is a necessity to tide over the problems posed by cultural diversity.
Q 5 (b). Write short note on “Global Training and Development strategy” ?
Ans 5 (b)

1. INTRODUCTION: Multinational coys (MNCs) recognize that HR plays an important role in developing and sustaining a
competitive advantage in today’s highly competitive global business environment. As a result, MNCs increasingly use expatriates on
short term and long term international job assignment viz acquire and transfer knowledge, manage foreign subsidiary, staffing need,
maintain communications, coordinations etc. An expatriate’s success in the host country is largely determined by his cross cultural
adjustments to the host country. Research has shown that HR who are not prepared to confront the challenges or cannot cope up fined
it difficult to adjust in the new environment.

2. DEFINITION: Global training and development is defined as a planned programme designed to increase knowledge and skills of
HR to live and work effectively and achieve general life satisfaction in an unfamiliar host cultural

3. DESIGNING EFFECTIVE TRAINING AND DEVELOPMENT STRATERGY: The process of designing effective training and
development programme consists of five distinct phases:

(a) Identify the type of global assignment. The type of assignment should be taken onto consideration when designing the training
programme. There are four types of assignments as under :

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 (i) Technical
(ii) Functional/ Tactical
(iii) Developmental
(iv) Strategic/ Executive

(b) Conduct training need analysis. These are conducted at three levels as under:
(i) The organizational level to determine the organizational context of training and development.
(ii) The individual level to determine special needs of an individual.
(iii) The assignment level to determine knowledge and skills required t o complete the assignment.

(c) Establish training goals and measures. After need analysis short term and long term goals for the training must be
identified. The short term goals specify what the HR should be able to accomplish on the completion of the training
programme. Long term goals in contrast reflect the outcomes in the long run.

(d) Develop and deliver the training programme. Once the training needs have been determined and translated into short term and
long term goals, the next is to develop and deliver the training programme that achieves the training goals. This phase involves
determining the specific instructional content required in order to achieve the stated goal, the methods to deliver the
instructional content and the sequencing of training sessions.

(e) Evaluate training to check effectiveness. After the training has been delivered it should be evaluated against the stated
goals for effectiveness. Results from the training evaluation should help the organization whether training to be continued in its
current form or to be modified. The evaluation process involves establishing measures of effectiveness and developing
research designs to determine what changes have occurred during the training eg. Cognitive, affective and behavioral.

4. CONCLUSION: The HR has to understand the systematic process of designing, training and developmental programmes. This
process included identifying the type of global assignment for training, determining specific training needs, establishing the goals and
measures for determining training effectiveness, developing and delivering the training programme and evaluating whether the
programme is effective.

Q5 (c) Write short Note on “merger and acquisition- Implication of HR at Global level” .
INTRODUCTION
1. Companies today need to be fast growing, efficient, profitable, flexible, adaptable, and future-ready and have a dominant
market position. Without these qualities, firms believe that it is virtually impossible to be competitive in today's global economy.
2. Mergers & acquisitions (M&A), have become the most important strategic element driving business growth and excellence.
They have become the dominant mode of growth for organizations seeking a competitive advantage in an increasingly complex and
global business economy. Therefore, in an era of increasing globalization and competitiveness, they are considered as a strategic driver
for market dominance, geographical expansion, leverage in resource and capability acquisition, competence, adjusting to competition.
3. A purchase deal will be called a merger when both CEOs agree that joining together is in the best interest of both of their
companies. But when the deal is unfriendly - that is, when the target company does not want to be purchased - it is always regarded as
an acquisition. In other words, the real difference lies in how the purchase is communicated to and received by the target company's
board of directors, employees and shareholders.
4. Research shows that consistently 65% of mergers and acquisitions that fail do so because of people issues – cultural issues,
communication issues, and so forth. Historically, HR has not had a seat at the table in the mergers and acquisition process. This is
because many businesses still do not consider HR to be a business partner. They consider HR to be nothing more than a staff position
that carries out a critical, but not strategic, role. However, on analysing the failures and successes of mergers and acquisitions over
time, it is evident that companies that have a strong HR leadership & whose senior management trust HR have very successfully
implemented merger and acquisition. Therefore, the Human Resource dimension of M&A should be accorded the same emphasis and
attention given financial, legal, operational and strategic concerns.
MEANING OF MERGER AND ACQUISITION
4. Although mergers & acquisitions are often uttered in the same breath and used as though they were synonymous, the terms
merger and acquisition mean slightly different things.
5. When one company takes over another and clearly established itself as the new owner, the purchase is called an Acquisition.
From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's  stock continues to be
traded. An acquisition may be friendly or hostile. In the former case, the companies cooperate in negotiations; in the latter case, the
takeover target is unwilling to be bought or the target's board has no prior knowledge of the offer.
6. A Merger is a combination of two companies into one larger company. In the pure sense of the term, a merger happens
when two firms, often of about the same size, agree to go forward as a single  new company rather than remain separately owned and
operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new
company stock is issued in its place. A merger may be of following types: -
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 (a) Horizontal Merger - Two companies that are in direct competition and share similar product lines and markets.
(b) Vertical Merger - Vertical mergers occur between firms in different stages of production operation. In a vertical merger
two or more companies which are complementary to each join together.
(c) Market-Extension Merger - Two companies that sell the same products in different markets.
(d) Product-Extension Merger - Two companies selling different but related products in the same market.
(e) Conglomeration - Two companies that have no common business areas. It means their businesses or services, are neither
horizontally nor vertically related to each other.
(f) Concentric Mergers - Two merging firms are in the same general industry, but they have no mutual buyer/customer or
supplier relationship.

MOTIVES BEHIND MERGER AND ACQUISITION

"It is clear that you cannot stay in the top league if you only grow internally. You cannot catch up just by internal growth. If you
want to stay in the top league, you must combine."
                                                        Daniel Vasella, Chief Executive Officer, Novartis AS
7. The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. The
following motives are considered to improve financial performance:
(a) Economy of scale: This refers to the fact that the combined company can often reduce its fixed costs by removing
duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing
profit margins.
(b) Economy of scope: This refers to the efficiencies primarily associated with demand-side changes, such as increasing or
decreasing the scope of marketing and distribution, of different types of products.
(c) Increased revenue or market share: This assumes that the buyer will be absorbing a major competitor and thus
increase its market power (by capturing increased market share) to set prices.
(d) Cross-selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's
customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell
complementary products.
(e) Synergy: For example, managerial economies such as the increased opportunity of managerial specialization. Another
example are purchasing economies due to increased order size and associated bulk-buying discounts.
(f) Taxation: A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax
liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to
"shop" for loss making companies, limiting the tax motive of an acquiring company. Tax minimization strategies include
purchasing assets of a non-performing company and reducing current tax liability under the Tanner-White PLLC Troubled
Asset Recovery Plan.
(g) Geographical or other diversification: This is designed to smooth the earnings results of a company, which over the
long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the
company. However, this does not always deliver value to shareholders.
(h) Resource transfer: resources are unevenly distributed across firms (Barney, 1991) and the interaction of target and
acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce
resources.
(i) Vertical integration: Vertical integration occurs when an upstream and downstream firm merges (or one acquires the
other). There are several reasons for this to occur. One reason is to internalize an externality problem. A common example is
of such an externality is double marginalization. Double marginalization occurs when both the upstream and downstream
firms have monopoly power; each firm reduces output from the competitive level to the monopoly level, creating two
deadweight losses. By merging the vertically integrated firm can collect one deadweight loss by setting the downstream
firm's output to the competitive level. This increases profits and consumer surplus. A merger that creates a vertically
integrated firm can be profitable.
(j) Absorption of Similar Businesses under Single Management: Similar portfolio invested by two different Mutual
funds namely United Money Market Fund and United Growth & Income Fund, caused the management to absorb United
Money Market Fund into United Growth & Income Fund.
8. However, on average and across the most commonly studied variables, acquiring firms' financial performance does not
positively change as a function of their acquisition activity. Therefore, additional motives for merger and acquisition that may not add
shareholder value include:
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 a) Diversification: While this may hedge a company against a downturn in an individual industry it fails to deliver value,
since it is possible for individual shareholders to achieve the same hedge by diversifying their portfolios at a much lower
cost than those associated with a merger.
b) Manager's hubris: manager's overconfidence about expected synergies from M&A which results in overpayment for
the target company.
c) Empire-building: Managers have larger companies to manage and hence more power.

MERGER AND ACQUISITION TREND IN INDIA

9. Buoyant Indian Economy, extra cash with Indian corporate, Government policies and newly found dynamism in Indian
businessmen have all contributed to this new merger & acquisition trend in India. Indian companies are now aggressively looking at
American, African and European markets to spread their wings and become the global players. The Indian IT and ITES companies
already have a strong presence in foreign markets; however, other sectors are also now growing rapidly. The increasing engagement of
the Indian companies in the world markets, and particularly in the US, is not only an indication of the maturity reached by Indian
Industry but also the extent of their participation in the overall globalization process.
10. Indian companies have significantly increased their merger-and-acquisition activity over recent years, especially in terms of
cross-border activity. The value of deals conducted by Indian companies grew at a compound annual growth rate of 28.3 percent over
2000-07 to reach US$30.4 billion in 2007, of which US$22 .6 billion represented cross-border transactions.
MAJOR HRM ISSUES IN MERGERS & ACQUISITIONS AT GLOBAL LEVEL
11. Research shows that consistently 65% of mergers and acquisitions that fail do so because of people issues, cultural issues,
communication issues, and so forth. Historically, HR has not had a seat at the table in the mergers and acquisition process. This is
because many businesses still do not consider HR to be a business partner. They consider HR to be nothing more than a staff position
that carries out a critical, but not strategic, role. The following chart shows the number of companies that engage human resource
professionals and hold them at a high level of involvement across the various stages of a merger and acquisition are surprisingly low.
12. On analyzing the figures for US as an example we can see that in the initial planning phase, only 15% of the companies are
engaging HR. However in the investigation phase HR is engaged a little bit more. It’s easy to understand why HR is not more involved
in the negotiation phase. But surprisingly less than 30% are engaging HR in the actual integration, where all the issues concerning
people occur.
13. Let’s look at the HR issues that inevitably arise in mergers and acquisitions. The issues are given in the succeeding
paragraphs:-
(a) Lack of Communication: Lack of communication during mergers and acquisitions has long been identified as the
most critical need. On examining the HR issues involved, it is seen that people resist mergers, acquisitions, and especially
takeovers at a personal level. The reason why they resist at a personal level is because they have not been told why things
must change or how they are going to change.
(b) Lack of Training: As companies merge and acquire one another, they tend to merge technologies. They also
merge policies, processes, and procedures. In a merger situation, you end up with 50% of the people do not know the new
software, policies, processes, and procedures. If you don’t train those people, and expend some of your resources on training,
that will end up being negative influence on your outcome.
(c) Loss of Key People: Good people & the key people tend to leave organizations at this particular point in time.
People, who are talented & the exact kind of people whom you want to retain in the organization, put their resumes out and
probably go to your competitor. That is a tremendous loss for an organization.
(d) Corporate Culture Clash & Power Politics: Corporate culture, as we know, is a fundamental asset (or even
liability) for organizations. If one company with one style takes over a company with another style, that is indeed a
difference and it is a huge difference. Some people feel comfortable in the one setting and some do not. The clash of two
cultures can be so detrimental that you lose key people. Often, executives are so focused on the financial and procedural
aspects of the takeover that they ignore so-called "intangible assets," such as business culture, human capital, company
structure and corporate governance. In essence, they are so obsessed with numbers that they forget about people. Also there
is the issue of national cultures. If mergers and acquisitions occur on a global scale in which a company from Malaysia is
being taken over by a company in the India, challenges arise. People from other cultures such as Malaysia can be different –
they may have a different set of values, they may believe different things, they may or may not embrace teamwork, they may
have a longer vision of short-term and long-term paybacks, they may feel differently about authority and delegation. All of
these things make a huge difference. An American company cannot simply take over an Asian company and presume that
the Asian people are going to agree with the way your organization is structured and how you run things. This final issue is
so large, in fact, that we could literally devote an entire white paper to this topic alone.
(e) Employee Resistance: Between 40% and 80% of M&A deals fail, due to purely human resistance to change, a
problem known as "people issue” and all of these issues either stem from or lead to one thing, i.e., Employee resistance. It is
probably the single most difficult issue to deal with during mergers and acquisitions. The root causes of resistance can all be
countered if you take care to do it, and the HR is the organization that should drive this effort.

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12. How to overcome these issues: To overcome these issues, one has to focus the people on the benefits that are going to
occur. You need to involve the people in the change process. If you can get them to believe that they are going to have some input in
making the systems and the processes better, they are more likely going to want to stay on and be engaged and basically become
committed to the new organization. This is largely done by two-way communication. You must do it early. You must do it quickly.
You do not want rumors to start. If rumors start to fly, you need to keep your ear to the ground. You need to dispel the rumors because
the people who are hearing these rumors always have a connotation of something negative no matter what is being said. They must, in
fact, be corrected so that you do not lose people or have that kind of backlash going on. And, you must increase trust and acceptance
by keeping the people constantly informed and constantly asking them for their input.

HRM BEST PRACTICES FOR MERGER AND ACQUISITION

13. A set of HRM Best Practices for HR people when they are facing the daunting task of managing the complex issues involved
in mergers and acquisitions are given as under:-
(a) Leadership: One of the first things that one need to address is who is going to have the leadership positions in the
new combined organization. Successful M&A deals are mostly attributed to leadership, well-planned communication and
early management of "people issues." This helps maintain the focus on the business and it also begins to make the transition
smoother. Leaders do not always need to be from the “acquirer” company in an acquisition. As a matter of fact, this is
probably not a very good idea. If you have people in the acquired organization who see that all of their senior people are
being let go and that it appears to them that everybody from the big entity is taking all of the “big” jobs, they are not going to
feel particularly good about it. They are going to feel as if, in fact, they are playing a minor role, and they tend to leave for
those kinds of reasons. We need to recognize that talent exists in both organizations. If you start laying off the senior people
from one organization, the rest of the people are going to doubt that they have a contribution to make.
(b) Transition Team: The transition team must be identified quickly and it also must be multi-functional. The
transition team works directly beneath leadership. Obviously, the leaders of the organization will ultimately be overseeing
the transition. The transition team should include individuals from each department, division, or function of the company –
whether it be sales, marketing, engineering, quality control, manufacturing, and so on. This way, there is at least one person
in all of these groups who will be able to look at the details of how the transition would happen in their group. That is the
role of a transition team. They need to make decisions, change initiatives, and provide oversight throughout the process.
(c) Structure: One of the other major things that most of us overlook during mergers and acquisitions is what this
new entity is going to look like and how the combined organizational chart will look. We also have to see that huge
decisions have to be made from a structural perspective. We will eventually have to reconfigure the organization with all the
subdivisions within functions, and get down to detailing who is going to be the senior engineer, who is going to be the
manager, and who is going to be the lead engineer. But as you’ll see as we talk about some of the other best practices that is
probably best left for the detail level later on.
(d) Policies & Processes: Every organization has different policies, whether it is an ethics policy, a vacation policy,
or a bonus policy. The companies must combine their policies, which mean that you might take the best out of one or the
best out of the other. For example, one company’s policy was to allow their workers to work from home. And if the new
entity is not going to allow people to work at home one might lose a lot of people, and that is something a company can’t
afford to do. So one has to be very careful while formulating these policies and procedures.
(e) Workforce Rationalization: Workforce rationalization is the part of M&A that no one wants to face, because it
necessarily entails staff reductions. Staff reductions must be handled very sensitively. When a merger or acquisition is
announced, a lot of companies tend to start laying people off in phases. But as soon as that first set of layoffs happens,
especially if it is followed a couple of months later by a second set of layoffs, then you are going to have a real problem with
keeping the good people because they can see the handwriting on the wall. This is an excellent example of why you need to
keep communication going.
(f) Job Assignment: Once you have your workforce rationalized and you have your survivors, you need to make
sure that the survivors fit into the overall structure, which means that we need to give them some job assignments. One of the
most comprehensive ways of doing this is by using a Competency Assessment. Every job in the organization should have a
job description of the key knowledge, skills, and abilities necessary for that job. They key functional heads need to be
involved in assessing each individual. HR provides a critical role in this. HR can provide the functional heads with all the
information they need to know about the performance and the characteristics of each individual. This person is very strong in
this element, but a little weak in this element. But he’s always met his goals, he’s always been a provider, and he’s always
been the kind of person who comes in and works 95 hours a week if necessary. To drill down to that level of assessment, HR
will have to be engaged to a significant level.
(g) Job Grading/Banding: Another important issue is how you group people in pay brackets. This is called “grading
and banding.” As an example, let’s go back to the example of an engineering company. Every company has junior engineers,
senior engineers, consulting engineers, principal engineers, and so forth. Lots of companies have 14 or 15 (believe it or not)
grade levels within a particular function or division. HR MUST be involved with how the new, merged, or acquired entity is
going to handle this. What we see happening is what we call “broad banding.” Broad banding is where an organization

15
 eliminates many of their almost arbitrary job distinctions such as: Engineer 1, Engineer 2, Senior Engineer, etc., and bands
them in the single entity of Engineer. And within that band, of course, there is going to be a huge difference in salaries.
Instead of one range going from Rs 42,000 to Rs 50,000 and the next range going from Rs 50,000 to Rs 58,000, there is
going to be one range with a great deal of variation. This will allow you to give people compensation based more on their
performance than their seniority. HR can provide the functional heads with all the information they need to know about the
performance and the characteristics of each individual. Suffice it to say that, if you are going to do this, it must be
communicated. You must have the criteria available on the intranet someplace that allows people to understand. But please,
don’t forget that this is a very important personal issue for people. You’re talking about peoples’ wellbeing, so please know
that there’s going to be much apprehension around this issue.
(h) Compensation: Determining the compensation comparisons between the companies is obviously something that
must be done. There are people who will be unhappy about the comparisons. Sometimes, there are companies that overpay
people because they needed to because it was a driver for them. Their skills, knowledge, and abilities might not be as critical
to the new, merged organization. Therefore, their compensation might drop, and you need to make this clear to them. You
need to develop and deliver clear compensation guidelines and try not to lose your employees around these types of
circumstances. This is an area in which there needs to be a tremendous amount of one-on-one activity between HR and the
functional managers.
(i) Retention: You need to put a retention plan in place early. A retention plan first identifies the critical people. That
is not necessarily the critical people at the top, but the people who have critical skills, knowledge, and abilities that are going
to be primary drivers for the organization. For example, if you are a pharmaceutical company and you make your money by
being the most innovative and having the most creative people in R&D who are always coming up with new patents, you
need to understand that those are the kind of people that you are going to need to draw to your organization, you must retain
them.
CONCLUSION
14. Mergers & Acquisitions (M&A) has become the most important strategic element driving business growth and excellence.
Mergers and acquisitions will continue to be an ever-present characteristic of the modern corporate landscape. Merger and acquisition
(M&A) bring together different sets of people, processes and technologies with the common objective of creating a larger, unified
organization. The organization aims to benefit from the synergies of merging organizations by consolidation, rationalization and
integration of the people, processes and technologies of both organizations. Human Resources (HR) has the potential to play an
important role during all stages of M&A. However, these issues are rarely considered until serious difficulties arise. The Human
Resource dimension of M&A should be accorded the same emphasis and attention given financial, legal, operational and strategic
concerns. HR no longer plays a dormant role and is emerging as a strategic business partner where key initiatives undertaken such as
communication, training, counseling, career planning, support workshops, building trust, coaching and compensation planning, have
significant business impact.

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