1. Increasing Global
Competitiveness through
Effective People Management
Linda K. Stroh Paula M. Caligiuri
An overall goal of improving global competitiveness is the imperative under which managers strategi-
cally guide their organizations today. Any process orfunction that enables organizations to gain a com-
petitive advantage on a global scale is therefore considered valuable to those at the helm. Through our
research on 60 of the world’s top multinational organizations, we found that the effective management
of the people side of global business does, in fact, pay dividends in stronger bottom lines.
I n our rapidly changing global econ-
omy, an organization’s ability to
readily adapt its everyday business pro-
resources). Given that HR strategy and
an organization’s overall business strat-
egy should be closely linked, having
cedures as well as its long-term goals is adaptability in all areas of the MNCs’
a critical determinant of its success in business except human resources may
the international market (Bartlett & well threaten global competitiveness
Ghoshal, 1992). Managers of successful (Dyer, 1983; Lengnick-Hall & Leng-
multinational companies (MNCs) nick-Hall, 1988; Schuler & MacMillan,
understand that to compete effectively 1984; Tichy, Fombrun, & Devanna,
they must be adaptable with respect to 1982; Stroh & Reilly, 1994). Thus, it
their product lines, financial portfolios, should follow that MNCs that have
marketing initiatives, and the like. All effective global HR management prac-
too frequently, however, they overlook tices should be more successful on a
a critical aspect of their business in global scale.
which they must also strive for adapt- Our research, sponsored by the Inter-
ability-the management of their orga- national Personnel Association, exam-
nizations’ human assets (i.e., human ined 60 of the largest multinational
companies in the United States in an
_
Linda K. Stroh, Institute of Human Resources &
effort to study what, if any, impact their
industrial Relations, Loyola University Chicago, 820 human resource management practices
N. Michigan Avenue, Chicago, IL 60617. Paula M. and policies have on the global compet-
Caligiuri, School of Management & Labor Relations,
itiveness of these MNCs. (Appendix I
Rutgers University, 2006 Janice H. Levin Bldg., Liv-
ingston Campus, New Brunswick, NJ 08903.
lists the companies participating in the
Improving Global Competitiveness 1

2. study.) Qualitative analysis of inter- what are the barriers holding companies
views with the top global human back from successfully implementing
resource managers in these organiza- these HR initiatives? How could these
tions and a comparison of the organiza- barriers be overcome? The insight
tions’ relative success revealed that gained from our research sheds light on
effective management of the human the answers to these questions.
asset did pay dividends in stronger bot-
tom lines. This paper describes the
qualitative differences, as identified by SUCCESSFULMNCs HAVE
the global HR executives in our inter- FLEXIBLE PRACTICES, PEOPLE, AND
views, between the more successful and HR FUNCTIONS
less successful organizations. “I” you want to be around 20 years
A content analysis of the interviews from now, your people must be flexible
was conducted to identify the three and willing to make change-or the
aspects of people management that organization will be gone. ” This senti-
were most critical to the MNCs’ suc- ment, expressed by Andre Rude, an HR
cess in the global arena. These three executive at the Hewlett Packard Cor-
features were the adoption of flexible poration, summarizes well the opinions
management policies and practices shared by the managers at the success-
worldwide, the inclusion of the human ful MNCs in our study. According to
resource function as a strategic partner Rude, “Flexibility is IN” at Hewlett
in global business, and the development Packard. In the case of MNCs, flexibil-
of global leaders. Granted, these issues ity is critical with respect to the policies
may seem fundamental to the operation and practices typically developed at
of any successful MNC, but, as our headquarters and then implemented
research suggests, companies vary worldwide. Policies and practices are
greatly in how effectively they address considered flexible if they allow for
them. “More successful” MNCs had variation across nations, thereby taking
more effective initiatives to address national cultures into account. Yet, all
these issues, whereas “less successful” too often, the goal is to maintain consis-
MNCs had fewer, less effective ways to tency across nations, and rigid and
address them. (Appendix II describes inflexible policies and practices are the
the sample and the method of content result.
analysis; Appendix III outlines the To illustrate this, some of the execu-
method used to differentiate “success- tives mentioned the conflict around
ful” from “unsuccessful” organiza- diversity programs. This conflict arises
tions.) between those advocating the need for
This leads to an important question: consistency or centralization and those
if these three aspects of people manage- administering policy at the local level.
ment are so fundamental to the success- In an extreme case of centralization,
ful operation of MNCs, why hasn’t corporate headquarters may ask all the
every global organization made these managers of the organization’s foreign
issues top priorities? More specifically, subsidiaries to implement the same very
2 Journal of World Business / 3% I)/ 1998

3. structured program. International man- strongly encouraged to “get on board”
agers are likely to become frustrated with the more flexible management phi-
with the home office for being so cul- losophy.
turally insensitive and naive as to Shearer and other executives noted
believe that people worldwide hold the that technological changes (once the
same value concerning, for example, clear source of an MNC’s global com-
individualism and equal opportunity as petitive advantage) may not be the driv-
a fundamental right. Because there is ing force behind successful global
too much centralization, rather than companies in the next decade. Our cur-
sending the message that the organiza- rent environment is so sophisticated
tion views people as an important that the technological changes compa-
resource, regardless of race, gender, and nies make can be replicated in a very
so on, the message is confused with the short period of time-and in many
medium. In contrast, interviewees from countries concurrently. The sheer speed
successful multinational organizations of technological change is so rapid that
explicitly stated that they demonstrate all smart companies can very quickly
their appreciation for their employees replicate and introduce the same new
(regardless of race, gender, and so on) technology. According to Ms. Shearer,
worldwide-not only in those coun- it is only people who cannot be quickly
tries that have laws requiring EEO com- replicated or replaced. People, there-
pliance. Successful global executives fore, can become a source of competi-
noted that global management must be tive strategic advantage.
in.exibZe in conveying the message that Given that it is the people in an orga-
“discrimination will not be tolerated” nization who design and implement
butflexible in the manner in which they policies and practices worldwide, exec-
impart this core organizational value. utives must foster an organizational cul-
The same balancing act must be played ture that supports, and in fact demands,
out for each process and practice world- flexibility in its people. Shearer noted
wide (e.g., compensation, recruitment, that in the ’30s and ’40s Caltex often
rewards and recognition). threw money at its problems and used
Carrie Shearer, from Caltex Corpora- band-aid solutions to make short-term
tion, attributed her company’s excep- changes. Today, Ms. Shearer noted,
tional global success to a CEO who Caltex no longer treats employees as if
“supports movement into the 21st cen- they all came from a cookie-cutter
tury” by getting rid of management mold. For example, the company often
thinking that does not recognize the creates focus teams of expatriates or
need (or is resistant to the need) to their spouses to learn employees’ opin-
adapt and grow. Shearer noted that ions about global assignments. In the
those in Caltex’s executive suite felt past, Shearer noted, “We always
strongly about the need for change in its thought we knew what employees
organizational culture in the direction wanted and created policies based on
of more flexible management practices our knowledge. Now, we ask expatri-
and that the management team was ates and spouses what they need and
Improving Global Competitiveness 3

4. want. No question is too trivial.” often irrelevant because they are too
“Tweaking” no longer works, Ms. ethnocentric in orientation.
Shearer says. Employees at Caltex As an executive from one company
begin each problem-solving project by noted (name withheld), “Companies
throwing out the old way of doing must move away from being ‘relational’
things and start with a blank slate. [whereby decisions are made based on
As Ms. Shearer strongly suggested, who you know] to ‘transactional’
to introduce flexibility into the organi- [whereby decisions are based on what
zational culture may mean having to you know]. The pendulum eventually
“dust old mentalities” out of the man- needs to swing to the center, but for the
agement team. This can be especially time being, we must swing to the
difficult for managers involved in solv- extreme to meet current needs. Some
ing problems and establishing policy, managers at the less successful organi-
when the same approaches may have zations rationalized relational decision
been used for decades. Many managers making as a “more efficient” model for
indicated that they had been given six making decisions about company poli-
months or less to “get on board” and cies and practices. At the more success-
accept the new methods of decision ful MNCs, however, the managers
making and flexible thinking. Many of recognized that politically contrived
the organizations we studied found it decision making based on who you
necessary to let those go who could not know is a shortsighted and detrimental
get “on board.” Needless to say, this management technique.
often meant many faces changed within To overcome this mentality, execu-
the organizational hierarchy. In less tives must question the origins of deci-
successful MNCs, relational processes sions about policies and practices that
took on much greater significance. affect their organizations worldwide. If
Managers at these organizations were managers are held more highly account-
less willing to adapt new, more flexible able for soliciting input from the vari-
ways of thinking because that would ous global businesses affected by their
entail “letting go” of friends and col- policies, they will begin to make deci-
leagues who were not able to “get on sions based less on their relational net-
board.” Thus, globally diverse and pos- work and more on the true global
sibly conflicting opinions were often environment. At Amoco, recognition
ignored in favor of maintaining social of the importance of this approach
networks and the current relational con- resulted in the global HR function
tract, whereby the most important deter- totally revamping the way it worked. To
minant of decisions is who you know begin this process, the staff in Amoco’s
rather than what you know. Our global HR function spent one year
research showed that MNCs suffer accounting for the tasks they do. The
when the network for decision making initial thrust was internal, so they could
does not elicit complete information prove to themselves that they were
from the global environment. Policies undertaking “value-added” work. They
and practices get bogged down and are even developed a set of core policies
4 Journal of World Business ! 33(I) ! 1998

5. and made them consistent across all warned not to step on anyone’s toes.
global units and then created a set of There is little sharing of information-
“flexible policies” that allowed local no sincere push to make change.”
unit managers to use or delete policies Many of the less successful MNCs
based on local cultures and needs. In so referred to their global management
doing, each HR staff member became counterparts as “them,” reflecting their
more accountable for his or her time “us versus them” mentality. By con-
and unique contribution to the organiza- trast, to the managers at the more suc-
tion. Ultimately, the unit justified its cessful MNCs, “us” encompassed
existence in dollar terms, thus allowing everyone in their unified global organi-
this area of the company to better part- zation.
ner with its business units because it
To overcome this “turf protection-
now looks and acts more like the busi-
ism” requires executives to diagnose
ness units it serves.
the causes and address them directly.
Answering the following questions gen-
Managers/Units at Successful MNCs erally uncovers some common causes:
Share Power and Information
Do managers believe that relinquishing
As the HR executives from Amoco control to foreign subsidiaries will
and many other successful MNCs sug- lower their credibility or their position
gest, the best policies and practices may in the organizational hierarchy? Do
originate in countries other than the one managers believe that their position is
where headquarters is located. Truly redundant with that of others worldwide
creative ideas may come from manag- and therefore might be eliminated? Do
ers who are familiar not only with the managers possess insufficient knowl-
organization’s culture but with other edge of global business-and fear that
cultures as well (Mead, 1994). Yet, as
this will be realized when their global
interviewees pointed out, an open and
counterparts are included in decision
flexible approach to the development of
making? Do managers believe that
policies and practices that incorporate
being in headquarters equates with
ideas and input from around the world
power over foreign subsidiaries? Is a
may threaten managers who are fixed in
language or other communication bar-
the rigidity of HQ ethnocentrism. As a
result, managers at headquarters may be rier (e.g., not having e-mail worldwide)
reluctant to relinquish power and infor- hindering the open flow of information?
mation to others-both individuals and If the answer is “yes” to any of these
departments-especially managers in questions, then it is likely that turf pro-
international offices. One interviewee tectionism exists. Once diagnosed,
noted (company withheld), that “our executives can revamp reporting struc-
company is very militaristic in tures, alter managerial rewards and
nature.. . . There is a huge turf protec- accountabilities, and improve commu-
tion mentality. For example, when Z nication to facilitate more open rela-
first came [to my organization] Z was tionships among the subsidiaries and
asked to develop new programs but with headquarters.
Improving Global Competitiveness 5

6. The Monsanto organization is an worldwide basis, decisions that are
interesting case in point. Monsanto has made based on input across subsidiaries
developed an organizational strategy reflect the flexibility needed in the glo-
whereby the U.S. office is no longer the bal environment. Thus, taking into
“center of gravity.” Although this account the culture of various countries
change of power as an information and sharing power and information with
source may concern some of those people in the various host countries
working on the U.S. side of the organi- leads not only to more flexible policies
zation, Monsanto recognizes that the but to competitive advantage.
ultimate aim is to develop a stronger
organization that can sustain itself.
Monsanto is working hard to change the SUCCESSFULMNCs TREAT
existing U.S.- based paradigm by creat- HUMANRESOURCESASA
ing an HR function of specialists STRATEGICPARTNER
around the world. Thus, the global HR Although most managers would agree
function has created centers of expertise that it is the people in an organization
in different regions that handle special who determine its success (or failure),
activities. For example, Singapore is the the human resource function is often
center for cross-cultural training, criticized as being useless and bureau-
Argentina is the “Quality Center,” and cratic. For example, in an article enti-
Europe handles the bulk of Monsanto’s tled “Taking on the Last Bureaucracy,”
salary administration. in the January 1996 issue of Fortune
Other managers noted that corporate magazine, author Woods suggests, in
headquarters plays an important role in reference to HR departments,” Why not
improving communication and sharing blow the sucker up?” (p. 105). Garrish
power among international units. Jane comments aside, our research has
Prendergast, director of HR for Coca- shown that there is room for improve-
Cola, suggests the “corporate office” ment and that stronger links need to be
should act as a “symphony conductor” established between business units of
putting people together and opening the organization and global human
lines of communication worldwide. resource functions (Shenkar, 1995;
Equally important, this process must be Caligiuri & Stroh, 1995; Hendry, 1994;
orchestrated in a way that can be under- Briscoe, 1995). In other words, human
stood in each national culture where the resources, like other functional areas,
company is conducting business. must align itself with the strategic goals
Finally, it is the responsibility of head- of the organization. Many of the HR
quarters to let all employees worldwide executives we interviewed indicated
know they are appreciated, that all that often HR was not aligned with the
employees have knowledge, skills, and global business strategy.
abilities that will help to maintain the At the same time, evidence from the
competitive advantage of the MNC. past 10 years suggests that human
When communication improves and resource units have been improving in
more information is gathered on a this regard. A strong piece of support-
6 Journal of World Business / 33( I ) / 1998

7. ing evidence is found in a research arti- operating in this more reactive mode.
cle by Huselid in the Academy of By contrast, at the more successful
Management Journal (1995). Huselid organizations, the global HR function
found that strategic human resource was more proactive and strategically
practices are, in fact, having a signifi- integrated with the rest of the business.
cant positive effect on the bottom-line This lack of involvement of HR as a
economic success of organizations. Fur- strategic business partner can occur for
thermore, within their respective orga- one of two reasons: (1) because of a
nizations, greater numbers of human lack of interest on management’s part in
resource professionals have earned the having HR involved in the strategic
respect of their managerial counter- planning of the business or (2) because
parts by demonstrating the worth of HR the company’s HR professionals lack
in terms of strategic advantage and eco- the expertise to address issues on a glo-
nomic gain. As Harrison of Bristol- bal scale. The executives we inter-
Myers Squibb noted, “HR is able to viewed suggested that the latter may
contribute directly to both the expense have, in fact, caused the former. If
control and profitability of our organi-
members of other functional areas per-
zation.. . . We [in HR] are fully partici-
ceive HR as lacking in international
pating business partners and strategic
business expertise, they may opt to not
planners.”
involve HR in deternining policies and
The challenge for human resource
practices affecting global issues. Thus,
units, as relatively new strategic part-
the greatest barrier to HR units becom-
ners in the international arena, has
ing strategic on a global scale is their
increased with the inception of global
own lack of expertise of international
competition. Like the domestic HR
business-related issues (Black,
function, global HR managers need to
Gregersen, & Mendenhall, 1992;
anticipate the HR needs of their organi-
Anderson & Fenton, 1993; Stroh &
zations. Many of the executives in this
study remembered a time when their Caligiuri, 1998).
organizations’ HR departments were In a frantic attempt to respond to the
unprepared to meet the needs of the need for experts on international busi-
new human resource demands thrust ness, many MNCs outsourced their glo-
upon them: staffing foreign subsidiar- bal HR duties. This was a temporary
ies, managing multiple employment solution, but often meant that both
environments worldwide, establishing domestic and global HR efforts became
compensation rates using vastly differ- fragmented. To align domestic and
ent pay scales, accommodating to dif- international HR functions, new staff
ferent legal systems affecting with international expertise were hired
personnel decisions, and the like. Glo- and those currently in domestic HR
bal HR was, at best, functioning in a positions were retrained. Thus, the
reactive rather than a proactive, strate- more successful organizations in our
gic mode. At the less successful organi- study now have HR personnel with
zations. the HR function was still international expertise.
Improving Global Competitiveness 7

8. Based on the current study, it appears more important, must be able to com-
that the most successful MNCs not only municate the differences and similari-
have staff with international expertise ties of this environment to home office
in the HR function but that these staff executives and managers and expatri-
know how to use it to grow the global ate personnel, in addition to the local
business. Here, those in the HR func- executives, management, and work-
tion are engaged directly in interna- force. With this background, the HR
tional operations. Harrison, from executive must be able to put together a
Bristol-Myers Squibb, said, “Before hiring, training, and development plan
entering into a potential foreign market, that capitalizes on the best of both
HR conducts a full political, economic, worlds-the home company strengths
and labor recommendation.” The same while keeping in mind the host country
was true at other successful MNCs. By norms and requirements. The HR exec-
contrast, managers at the less successful utive who can do all of this has mas-
MNCs reported that the staff of their tered the fine art of global human
HR units were not even considered part resource management.
of the initial business strategy team. Along with highlighting the need for
These organizations usually had to HR professionals to develop new skills,
solve preventable HR problems in a this comment suggests a problem that
reactive manner after a global business prevents multinationals from becoming
was established. strategic on a global scale; that is,
Managers at the more successful efforts undertaken by subsidiaries and
MNCs also reported that the staff of headquarters often become fragmented.
their HR functions were actively When there is too much localization,
involved on an ongoing basis in predict- subsidiaries waste resources reinventing
ing future global HR needs. They also policies. When there is too much cen-
reported that HR had a greater number tralization, subsidiaries feel restricted-
of tasks related to international business often to the point of being unable to
and fewer administrative tasks. In addi- implement policies dictated by head-
tion, HR had active plans for develop- quarters.
ing the global skills of its staff. As described in the previous section,
D. L. Brown, a former executive with successful MNCs are able to balance
Owens Illinois and currently a partner the goal of centralization with the need
in Linden, Inc, summed up the critical for appropriate levels of localization.
role of HR in international operations: Rather than having headquarters initiate
Carrying out the normal HR func- HR policies, high-level regional manag-
tions for a foreign operation, especially ers collaborate equally in this process,
in emerging markets, requires that HR making the “home/central office” one
executives must be much more “total of several strategists rather than the
business people.” The HR executive only unit setting policy. As a worldwide
must understand the local business, team, these managers decide which
political, and social environment before aspects of various policies and practices
establishing the local plan of action and, will be dealt with locally and which will
8 Journal of World Business / 33( 1) / 1998

9. be decided upon collaboratively. In all including the education level of its
global business activities, there is some workers (e.g., literacy rates, apprentice-
optimal balance between maintaining ship programs), laws governing
consistency across all of the organiza- employment (e.g., selection, working
tions’ geographic locations and allow- hours), union relations (e.g., strength of
ing local units to dictate business the union, participation), and national
decisions and practices (Black et al., cultural norms as they relate to work
1992; Caligiuri & Stroh, 1995). When practices, among other things. Like-
the optimal balance is achieved, MNCs wise, HR should be involved from the
are able to leverage their core values beginning in the process of negotiating
and save resources otherwise wasted joint ventures. Global HR could con-
because of redundancy. duct a thorough analysis of the differ-
Sometimes the greatest difficulty ences in work practices, organizational
global HR has is letting other functional cultures, leaders, decision-making
areas know it has something to “bring methods, and so forth. Once it has a
to the strategic table.” To echo the com- base of knowledge about these differ-
ments of the executives in this study, ences, HR can then develop ways to
global HR needs to do a better job of facilitate the merger across both
marketing itself to other units. In a national and corporate cultures-
recent Fortune article (September 29, thereby avoiding problems later on.
1997), Fisher wrote that there are two These are just two examples of ways
reasons HR is not considered part of the that global HR can strategically affect
strategic team that can add value to the an organization’s bottom line.
bottom line of the organization: (1) HR
really is not able to identify how to sup-
port the strategic objectives of the orga- SUCCESSFUL MNCs DEVELOPTHEIR
nization or (2) HR is able to support the GLOBALLEADERS
strategic mission of the organization but Our study showed that the most suc-
nobody in the organization cares to lis- cessful MNCs recognize the importance
ten. Fisher suggests is that if HR were of having top managers who have a glo-
genuinely doing an effective job mak- bal orientation. Thus, a critical part of
ing “a detailed and convincing case” of the global HR function is to provide
ways it could add value to the objec- managerial talent with opportunities to
tives of the organization, the second develop a global orientation or global
possible argument for not involving HR leadership skills. Almost all the organi-
would probably be superfluous. zations in our study have as a stated
What, then, are some of the specific objective that they will send managers
skills global HR can bring to the table? on global assignments, in part to
One is that it can conduct a thorough develop this global orientation. From
analysis prior to the organization open- this perspective, global assignments not
ing a facility in a host country. Such an only fill technical or managerial needs
analysis would contain an evaluation of but are perceived as developmental
the entire HR system in the country, experiences for managers. In fact, in
Improving Global Competitiveness 9

10. many successful MNCs, having one’s this shortsightedness. ” Acknowledging
“ticket punched” on an international that talent exists and using the talent
assignment is a requirement for appropriately are two different issues-
advancement to the executive suite. The one idealistic, the other strategic.
Phillip Morris Company, for example, One way in which global HR can
views its people as “strategic weapons” support the effective use of talent on a
and recognizes the importance of both worldwide basis is through the use of
developing and retaining top global tal- international Human Resource Informa-
ent. Eunice Hamilton, director of man- tion Systems (HRIS). The executives at
agement and organization development many organizations described their use
at Phillip Morris, notes that most of of this technology as evidence that a
those who go on international assign- shift is occurring toward more strategic
ments do so for developmental rea- use of human talent on a global scale.
sons-to broaden their managerial/ Regardless of how global assignees are
leadership talent. Ms. Hamilton adds sourced (either from headquarters or
that although there is a trend among other subsidiaries), ensuring that global
those who go on international assign- assignments are truly developmental
ments to move on to yet another such experiences for managers, and a
assignment, having international expe- rewarding experience for the organiza-
rience is increasingly important for all tion, is another important part of the
managers at Phillip Morris. global HR function. Global HR needs to
The development of global leader- be responsible for managing several
ship skills should not stop with home critical aspects of cross-national assign-
country nationals. Global HR should ments. Based on our research findings,
also be involved in developing a global these include but are not limited to find-
orientation among host country nation- ing appropriate employees who have
als as well. This means, for example, the requisite skills for the assignments,
sending not only home country manag- providing cross-cultural and language
ers on global assignments but host skills training, developing career man-
national talent to the corporate office agement strategies during and after the
and to other divisions around the world. assignments, and assisting the spouses
Many of the managers at the successful of expatriates in making international
MNCs talked about how their compa- assignments fulfilling.
nies develop talent in this way. In addi- Finding people who are willing to
tion, they described a “desired state” for accept global assignments is one of the
human resources, including the ability greatest HR challenges, according to
to source talent within the company many of the managers in our study. One
from around the world. Victor Guerra, such manager was James McCarthy,
an executive at Prudential, commented: from Motorola., who said: “One of the
“We need to continually recognize that most difSicult aspects of developing glo-
there are bright, articulate people who bal leaders is getting people to move on
do not live in the home country. U.S. international assignments. Dealing with
multinationals are especially guilty of dual careers is often one of the greatest
10 Journal of World Business / 33( 1) / 1998

11. challenges. ” Many global HR execu- In addition to logistical issues, the
tives indicated that the desire to accept global HR executives we interviewed
global assignments has been “remain- acknowledged that there was a systemic
ing flat” while the need for global problem associated with finding appro-
assignees has been steadily increasing. priate people for global assignments-
This supply and demand problem is one namely, that some organizations simply
global HR can help solve in their orga- do not have enough people who have
nizations. For some organizations, the the necessary motivation or skills to
solutions are logistical; for others, the live and work in a host country. The
solutions are more systemic. more successful organizations have
Like McCarthy at Motorola, most of addressed this need by recruiting more
the managers we interviewed were managers, including in some cases
struggling with the “dual-career” issue recent college graduates, who have for-
and saw the problem of finding people, eign language skills, foreign experi-
especially married managers, who are ence, an interest in living overseas, and
willing to accept assignments as an the personality characteristics (e.g.,
impediment to developing global lead- flexibility, openness) that indicate they
ers. Research suggests that spouses who might well have global management
are unhappy overseas have a deleterious potential.
effect on the overall performance and Many successful organizations,
adjustment of the international including Coca-Cola, have recently cre-
assignee (Black et al., 1992; Pellico & ated a position called chief learning
Stroh, 1997). The most successful orga- officer (CLO). Much like a chief finan-
nizations offered several creative solu- cial officer, who is dedicated to build-
tions in this area. For example, ing the financial strength of an
Motorola actually pays spouses of glo- organization, the chief learning officer
bal assignees while they are on interna- is responsible for developing-on a
tional assignments, albeit only a worldwide scale-the organization’s
fraction of their annual domestic sala- human talent and for utilizing the
ries (Pellico & Stroh, 1997). These human knowledge present in the orga-
organizations encourage the spouses to nization. In the case of Coca-Cola, the
use the money for professional develop- CL0 is also responsible for creating a
ment, in the hopes that their overseas learning environment that allows peo-
experience will pay off for them profes- ple to take intelligent risks, even to
sionally in the long run. Based on an make mistakes-provided the mistakes
assessment of its policy, the Motorola can be turned into a positive element of
Corporation found that those spouses knowledge for the multinational com-
taking advantage of the benefits of its pany. Creating this environment on a
dual-career policy thought it helped worldwide scale can be a challenge,
them adjust better while overseas and especially given the variance across
better prepared them for repatriation nations in their norms toward risk-tak-
and employment upon their return to ing behavior and toward questioning
the United States. managers’ authority. As was noted
Improving Global Competitiveness 11

12. above, a challenge for the global HR dence of their flexibility and sound
function is to be flexible in adopting its business strategy.
practices worldwide. Global HR must Unlike those organizations that must
determine how learning can best take learn from their cultural mistakes (usu-
place in each country and manage the ally made by culturally ignorant indi-
process accordingly. The goal does not viduals), successful MNCs recognize
change, but the process might. the value in having global managers
with the expertise to anticipate the orga-
nization’s markets and to respond pro-
SUMMARY actively. These organizations have
learned that managers who are flexible
In conclusion, our research suggests
and open to the demands of the global
that to ensure a competitive advantage
market have made possible the organi-
in the global arena, MNCs should, first,
zation’s international business success.
adopt flexible management policies and
practices-in particular, question man-
Acknowledgment: An earlier version
agement practices and polices based on
of this paper was presented at the Acad-
who you know rather than what you emy of Management Meeting, Cincin-
know. Second, MNCs should include nati, August, 1996. The authors would
members of the human resource func- like to thank the membership of the Inter-
tion in decision making as global strate- national Personnel Association (IPA),
gic partners-provided they gain the and in particular, the IPA Executive
requisite strategic skills to participate. Board for their participation and finan-
Third, MNCs should think strategically cial support of the research study. The
about how to develop global leaders; Board also provided instrumental feed-
this may involve paying attention to back on the survey and interview proto-
work and family issues, in particular the col and constant support throughout the
creation of spousal assistance programs. study. A special thanks to: Glen Ander-
Successful MNCs often boast that son, Tony Annoni, Matthew Ashe, Bill
they assess their upper-management Edgley, Michael Gordon, Sven Grass-
teams on the basis of global representa- hoff, Victor Guerra, Andree Rude, James
tion-by the number of non-U.S.-born McCarthy, Luiz Jacques M. da Silveira,
executives on these teams. In divisions Raj Tatta, Linda Watson, Ed Nunez,
and functions in which a variety of Erica Fox and Brad Stroh. We also thank
countries are not represented, the devel- Loyola University Chicago, The Insti-
opment of international employees (and tute of Human Resources & Industrial
at times, new jobs) becomes a priority. Relations and Rutgers University for
This makes sense from a strategic busi- partial support for the study.
ness perspective. A common goal of
these MNCs is to align the nationalities
of their management teams with those APPENDIX I
of their markets. Their ability to The following companies participated
respond to the global market is evi- in the study:
12 Journal of World Business / 33(l) / 1998

13. Alcan Aluminum LTD. Pfizer
Allied Signal Phillip Morris International
American Cyanamid Polaroid Corporation
Ameritech International Praxair
Amoco Corporation The Procter & Gamble Company
Arthur Andersen Price Waterhouse L.L.P.
Andersen Worldwide Prudential
AT&T Rohm & Haas
Avon Products Royal Bank of Canada
Bristol-Myers Squibb Joseph E. Seagram & Son
Caltex Petroleum Corporation Schering-Plough Corporation
Campbell Soup Company SmithKline Beecham
Citibank, NA Texaco, Inc.
The Coca-Cola Company Texas Instruments Inc.
Coopers & Lybrand, L.L.P. Unilever U.S., Inc.
Digital Equipment Corporation Warner-Lambert Company
The Walt Disney Company Xerox Corporation
The Dow Chemical Company
Dresser Industries, Inc.
Dresser-Rand Company APPENDIX II
Ernst & Young
Fidelity Investments Description of Sample and
FMC Corporation Content Analysis
Ford Motor Company Participants. The sample for this
GTE Corporation study included 84 global human
W.R. Grace & Company resource executives working in 60 mul-
Halliburton Energy Services tinational U.S.-based firms. The sample
Hewlett Packard was drawn from the membership of the
Hoechst Celanese Corporation International Personnel Association (the
IBM Corporation total membership participated), an asso-
lnco Limited ciation composed of HR executives in
International Flavors & Fragrances 60 of the leading multinationals in the
Johnson & Johnson world. Members of this exclusive asso-
Kaiser Aluminum & Chemical Corpo- ciation include senior HR professionals
ration in Fortune 500 corporations and equiva-
Kraft Foods International lent organizations with significant inter-
Levi Strauss International national activities. The association is
Merck & Co. INC. representative of all major industries.
Mobil Oil Procedure. Interviews were under-
Monsanto Company taken either in person or by telephone by
Motorola Inc. the authors of the study and lasted
RJR Nabisco Inc. between 30 and 90 minutes. Each partic-
KPMG Peat Marwick, L.L.P. ipant was asked the following question:
Improving Global Competitiveness 13

14. “Over the next decade, what factors are ways. First, taking into account that
likely to enhance/impede global human these corporations represented a vari-
resources’ ability to compete success- ety of industries, a standardized profit-
fully in the global marketplace?” ability and growth score was created.
Analysis. Transcripts of the inter- Using data from Forbes’ Annual Report
views were content analyzed to assess on American Industry (January, 1996),
those factors impeding/facilitating the both industry medians and company
effectiveness of global human data were collected for all of the follow-
resources. The first step of the content ing:
analysis was done independently by
each author. Each author reread the 1. Return on equity over the past five
transcripts from the interviews and years,
developed categories to best describe 2. Return on equity for the most
the three main themes mentioned dur- recent 12 months,
ing the interviews. After this step, the 3. Return on capital over the most
authors met to discuss overlaps in their recent 12 months,
themes. Consensus was considered 4. Sales growth of the company for
reached when the same theme appeared the past five years,
on both lists or the themes on both lists 5. Sales growth of the company for
were considered similar enough except the most recent 12 months, and
for the term used to describe it. 6. Profit margin for the most recent 12
Evaluation. The next step was to months.
create an index to differentiate more
successful and less successful organiza- To handle missing data, the six dichoto-
tions (described in Appendix III). Once mous variables shown below were aver-
a list of these organizations was created, aged (M = 1.70, SD = .25). The alpha
the authors separated the transcripts coefficient for the MNC Success Index
based on whether the interviewees was .72.
worked for less successful or more suc- Next, an index of MNC success was
cessful organizations and assessed the
calculated as follows, where I = the
transcripts on the basis of the themes company’s industry median, c = com-
they contained. This method was used pany data, and A, B, C, D, E, and F =
to avoid potential bias the authors may the six growth and profitability vari-
have toward respondents from more or ables above.
less successful organizations.
Step 1. Deviations from the industry
medians were calculated for each of the
APPENDIX III
six variables.
Description of the Organizational A dev=Ac-Ai
Performance Measure
B dev = B, - Bi
Data on the financial success of each
organization were collected in two Cd,>= Cc - Ci
14 Journal of World Business / 3X1) / 1998

15. D dev = D, - Di the company was in the low group. If
the company appeared in the top third
Edr,, = E, - Ei
for both variables, then the company
F dev = Fc - Fi was in the high group. (Because these
were just rough estimates of organiza-
Step 2. Deviations were recoded, tional success, we believed it was more
reflecting whether a company was appropriate to use these data as ordered
higher than the industry median, equal categorical estimates, rather than treat-
to the industry median, or lower than ing them as interval-level data.) The
the industry median. Six scores, with data in the known groups (high- versus
values of either 1 or 2, resulted for each low-performing organizations) were
company. then examined qualitatively. From this
case study perspective, we wanted to
1. If A,, through Fdev I 0, then A,,,, see if there was any pattern of inter-
through Fscore = 2, respectively. viewee responses between the high-per-
2. If A,,, through Fdev c 0, then A,,,, forming and low-performing
through F,,,O,.e= 1, respectively. organizations. (The small sample pre-
cluded us from doing statistical mean
Step 3. The scores were added, and a comparisons; our interpretation of these
mean was calculated to form a compos- data should therefore be considered
ite MNC Success Index. The mean exploratory.)
scores ranged between 1 and 2. If, for
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