Chapter 13 Employee Separation and Retention Management | 583
6. Because workers live and stay healthy longer, the work- perspective allow organizations to develop more effec-
force is aging. How might this impact an organization’s tive retention strategies?
competitive position?
Reading 13.2
7. Discuss the ways an organization might attempt to
retain its most valued employees. 9. What are some of the techniques that employers
can use to address the needs of senior workers, keep
Reading 13.1 these individuals motivated, and also ensure effective
knowledge retention and transfer from these
8. What are the most common misconceptions regarding employees?
employee turnover and how can an evidence-based
Exercises procedures to ensure knowledge retention of departing
employees.
1. Calculate the turnover costs for a university professor
who voluntarily resigns, retires, or is dismissed. Be sure 3. Visit the Web site. www.aarp.org. What unique char-
to consider both economic and noneconomic costs in acteristics and needs do older workers have? What
your analysis. How difficult is it to gain an accurate special contributions can older workers make to an
accounting of these costs? How might you recommend organization? How might organizations best strategi-
to the university president that these costs be managed? cally employ older workers?
2. Select an organization of your choice and examine the
extent to which it has established any processes or
Chapter References
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M. A. “Downsizing Effects on Survivors: Layoffs, Offshor- 8. Devine, K., Reay, T., Stainton, L. and Collins-Nakai, R.
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Economy and Society, 49, (2), 2010, pp. 275–285. Victims,” Human Resource Management, 42, 2003,
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3. Ibid.
9. Beylerian, M. and Kleiner, B. “The Downsized Work-
4. Juezens, J. “Motivating Survivors,” HR Magazine, July place,” Management Research News, 26, 2003, pp. 97–108.
2001, 46, (7), pp. 92–99.
10. Trevor, C. and Nyberg, A. “Keeping Your Headcount
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July 2001, 46, (7), pp. 46–51. Voluntary Turnover Rates and the Moderating Role of
HR Practices,” Academy of Management Journal, 51,
6. Cascio, W. F. “Corporate Restructuring and the No- (2), 2008, pp. 259–276.
Layoff Policy,” Perspectives On Work, 7, (1), pp. 4–6.
11. Cascio, W. F., Young, C. and Morris, J. “Financial
7. Glebbeek, A. and Bax, E. Is High Employee Turnover Consequences of Employment-Change Decisions in
Really Harmful? An Empirical Test Using Company Major U.S. Corporations,” Academy of Management
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pp. 270–286.; Kacmar, K., et al., “Sure Everyone Can
Be Replaced … But At What Cost? Turnover As A Pre- 12. Macky, K. “Organizational Downsizing and Redun-
dictor of Unit-level Performance,” Academy of Manage- dancies: The New Zealand Workers’ Experience,”
ment Journal, 49, 2006, pp. 133–144; Macky, K.
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
584 | Part 2 Implementation of Strategic Human Resource Management
New Zealand Journal of Employment Relations, 29, (1), Career Advancement Main Reason Workers Consider
2004, pp. 63–87. Leaving,” Society for Human Resource Management,
article 024814, published at www.shrm.org/hrnews/
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arly Analysis of a Business Phenomenon, Hyderabad,
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Leave,” AMACOM (2005).
14. Jossi, F. “Take the Road Less Traveled,” HR Magazine,
July 2001, 46, (7), pp. 46–51. 29. Daniel, T. “Managing for Employee Retention,” Society
for Human Resource Management, published at www
15. Joinson, C. “Capturing Turnover Costs,” HR Maga- .shrm.org/research/articles, March 1, 2009.
zine, July 2000, 45, (7), pp. 107–119.
30. Frase-Blunt, M. “Making Exit Interviews Work,” HR
16. Bacarro, J. P. “The Hidden Cost of Employee Turn- Magazine, 49, (8), August 2004, pp. 109–113.
over,” Grant Thornton Benefits and HR Advisor,
Grant Thornton, 1992. 31. Carpenter, D. “Looking Forward to a Long Goodbye,”
South Florida Sun-Sentinel, September 18, 2002,
17. Schlesinger, L. A. and Heskett, J. A. “The Service- p. 10D.
Driven Service Company,” Harvard Business Review,
69, September–October 1991, pp. 71–81. 32. Ibid.
18. Barrette, D. L. “Survey Highlights Retention Con- 33. Pomeroy, A. “They Keep Going (and Going…),” HR
cerns,” HR News, 19, (10), October 2000, Alexandria, Magazine, 50, (6), June 2005, p. 20.
VA: Society for Human Resource Management,
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July 2003, 48, (7), pp. 83–86.
19. Martin, D. C. and Bartol, K. M. “Managing Turnover
Strategically,” Personnel Administrator, November 35. Pomeroy, 2005, op. cit.
1985.
36. Gurchiek, K. “Workers Taking Phase Retirement: A
20. Taylor, C. R. “Focus on Talent,” Training & Develop- Special Breed,” Society for Human Resource Manage-
ment, December 2002, pp. 26–31. ment, article 015913, published at www.shrm.org/
hrnews/published/articles/CMS 016356.asp, February
21. Ibid. 23, 2006.
22. Cardy, R. L. and Lengnick-Hall, M. L. “Will They Stay 37. Gurchiek, K. “Workers Taking Phase Retirement: A
or Will They Go? Exploring a Customer-Oriented Special Breed,” Society for Human Resource Manage-
Approach to Employee Retention,” Journal of Business ment, article 015913, published at www.shrm.org/
and Psychology, 26, 2011, pp. 213–217. hrnews/published/articles/CMS 016356.asp, February
23, 2006.
23. Haines, III, V. Y., Jalette, P. and Larose, K. “The Influ-
ence of Human Resource Management Practices on 38. Hirschman, C. “Exit Strategy,” HR Magazine, Decem-
Employee Voluntary Turnover Rates in the Canadian ber 2001, 46, (12), pp. 52–57.
Non-Governmental Sector,” Industrial and Labor
Relations Review, 63, (2), 2010, pp. 228–246. 39. Herring, II, W. W. Issuing Final Payments to Depart-
ing Employees. Society for Human Resource Manage-
24. Cole, A. “Attendants Fight United Retention Plan,” ment, 2013. Available at http://www.shrm.org/hr
CBS.Market-Watch.com, July 7, 2003. disciplines/compensation/Articles/Pages/Final-Payments.
aspx
25. Leonard, B. “Inside Job,” HR Magazine, October 2001,
46, (10), pp. 64–68. 40. Tucker, M. A. “Don’t Say Goodbye,” HR Magazine,
August 2011, 56, (8), pp. 71–73.
26. Ibid.
41. Ibid.
27. MacLean, B. “Rewarding Contribution, Not Job Title:
A Base Pay Strategy to Retain Peak Performers,” Soci- 42. Leonard, S. “The Aging Workforce; As Baby Boomers
ety for Human Resource Management, article 015913, Retire, Employers Will Face New Challenges,” Work-
published at www.shrm.org/hrnews/published/artides/ place Visions, No. 1. Alexandria, VA: Society for
CMS Q20036.asp, January, 2007; Gurchiek, K. “Lack of Human Resource Management, 2000.
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 13 Employee Separation and Retention Management | 585
READING 13.1
Retaining Talent: Replacing Misconceptions
with Evidence-Based Strategies
David G. Allen, Phillip C. Bryant, and James M. Vardaman
Executive Overview importance of turnover to business there remains a gap
between science and practice in the understanding of the
Despite extensive scholarly research and organizational management of employee retention. Here we fill that gap
interest in employee turnover, there remains a gap between by developing an evidence-based understanding of the
science and practice in this area. This article bridges this gap domain.
and replaces several misconceptions about turnover with
guidelines for evidence-based retention management strate- Even when voluntary turnover rates drop because of
gies focused on shared understanding of turnover, knowledge unfavorable labor markets, it would be shortsighted to
of cause-and-effect relationships, and the ability to adapt ignore retention management. For example, there is
this knowledge and apply it to disparate contexts. We evidence that high unemployment rates have little impact
provide new tools such as an illustration of the relative on the turnover of high-performing employees or those with
strength of turnover predictors, a summary of evidence- in-demand skill sets (Trevor, 2001). Aggressive recruitment
based HR strategies for managing turnover, and a new of valuable employees still occurs, and the retention of high
framework for implementing evidence-based retention strat- performers remains critical (Smith, 2009). In fact, large-
egies. We conclude with a research agenda to build on this scale layoffs in difficult times often lead to higher turnover
evidence-based understanding. among survivors (Trevor & Nyberg, 2008). Further,
concerns remain about an eventual talent shortage in both
Employee retention remains a critical issue for organiza- the overall supply of talent and in the specialized skills and
tions and managers: the costs associated with recruiting, competencies most valued by organizations. Coupled with
selecting, and training new employees often exceed 100% the likelihood that many current employees may remain
of the annual salary for the position being filled (Cas- with their organizations only because there are fewer exter-
cio, 2006), and the Bureau of Labor Statistics reports nal opportunities, the possibility exists for substantial pent-
that the national annual voluntary quit rate in the United up turnover to occur when labor markets become more
States typically approaches 25%. The direct costs, work favorable for employees. A recent survey reported that
disruptions, and losses of organizational memory and 54% of employed adults, including 71% of those between
seasoned mentors associated with turnover are significant the ages of 18 and 29, are likely to seek new jobs once the
issues. Many organizations are also increasingly economy improves (Adecco, 2009).
concerned about their ability to retain key employees
(e.g., high performers and employees with high-demand Despite extensive research on employee turnover,
or difficult-to-replace skill sets). These concerns may there are few resources that effectively and comprehen-
also have broader implications for organizational compet- sively bridge scholarly evidence concerning employee
itiveness in an increasingly global landscape, and for retention and practitioner employee retention efforts. As
how to address social and demographic trends such as a result, many managers hold important misconceptions
an aging and increasingly diverse workforce. Despite the about turnover. For example, many managers may believe
that turnover is uniformly bad, that most employees quit
The authors gratefully acknowledge the SHRM Foundation for supporting their jobs because of pay, that job dissatisfaction is the
portions of this work, and Chuck Pierce and members of the 2010 EMBA primary reason people leave, that there is little managers
class at the University of Memphis for helpful comments and suggestions. can do to affect individual turnover decisions, or that
generic best practices are the best way to manage reten-
Copyright by the Academy of Management; all rights reserved. tion. These misconceptions can be harmful to organiza-
Contents may not be copied, e-mailed, posted to a listserv, or otherwise tions and to managerial careers because they may lead
transmitted without the copyright holder’s express written permission. managers to enact ineffective retention strategies that fail
Users may print, download, or e-mail articles for individual use only. to reduce turnover, that are not cost-effective, or even that
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586 | Part 2 Implementation of Strategic Human Resource Management
retain the wrong employees while chasing away the most Creating a Shared Understanding
important ones.
Misconception #1: All Turnover Is the Same,
Our objective is to replace these common misconcep- and It Is All Bad
tions about turnover with evidence-based retention manage- Employee turnover can certainly be problematic and in some
ment information, as summarized in Table 1. Evidence-based cases devastating for organizations. However, turnover is a
management refers to translating knowledge and principles complex phenomenon that comes in many shapes and sizes.
based on the best available scientific evidence into organiza- It is not always harmful, and in some cases may even be bene-
tion practice, enabling managers to make decisions informed ficial for organizations. Developing and implementing effective
by social science and organizational research (Rousseau, evidence-based guidelines for managing turnover requires that
2006). Effective evidence-based management requires acces- the parties involved (e.g., line managers, executives, and
sible systematic reviews of evidence such as those that we human resource managers) have a shared understanding and
present here (Briner, Denyer, & Rousseau, 2009). Figure 1 frame of reference for interpreting what turnover is and how it
illustrates our evidence-based approach.
Table 1
Five Common Misconceptions About Employee Turnover
Turnover Evidence Based Perspective
Misconception
Misconception #1 • There are different types of turnover
All turnover is the same, • Some turnover is functional
• Turnover costs vary
and it is all bad
Misconception #2 • Pay level and pay satisfaction are relatively weak predictors of individual turnover
People quit because decisions
of pay • Turnover intentions and job search are among the strongest predictors of turnover
decisions
Misconception #3
People quit because • Key attitudes such as job satisfaction and organizational commitment are relatively
strong predictors
they are dissatisfied
with their jobs • Management/supervision, work design, and relationships with others are also
consistent predictors
Misconception #4
There is little managers • Job dissatisfaction is the driving force in fewer than half of individual turnover
decisions
con do to directly
influence turnover • There are multiple paths to turnover decisions
decisions • Different paths have different retention implications
Misconception #5 • It is also important to consider why people stay
A simple one-
size-fits-all retention • There are evidence-based human resource practices associated with turnover
strategy is most • Recruitment, selection, and socialization practices during organizational entry affect
effective
subsequent retention
• Managers can influence the work environment and turnover decisions through train-
ing, rewards, and supervisory practices
• Context-specific evidence-based strategies are more effective
• Turnover analysis helps diagnose the extent to which turnover is problematic
• Organizational context matters for interpreting turnover data
• Multiple data collection strategies enable more targeted and effective retention
strategies
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Chapter 13 Employee Separation and Retention Management | 587
FIGURE 1
Evidence-Based Guidelines for Retention Management
Develop a Shared Understanding
of Turnover Among Organizational
Stakeholders
• Define types of turnover
• Develop a consensus for costing
turnover
• Develop a shared understanding of the
importance of retention
Develop Knowledge of Underlying Diagnose and Adapt to a Particular
Principles and Cause-Effect Organizational Context
Relationships
• Analyze turnover costs, rates, and
• Organizational equilibrium and functionality
the turnover process
• Conduct internal and external
• Evidence-based predictors of benchmarking and needs assessment
turnover
• Develop retention goals
• Alternative paths to turnover • Collect data on cause-effect relationships
• Job embeddedness • Design retention strategies
affects the organization. Creating a shared understanding distinction is between voluntary and involuntary turnover.
entails defining types of turnover, understanding the costs Voluntary turnover is initiated by the employee, while invol-
and benefits associated with turnover, and emphasizing the untary turnover is initiated by the organization, often because
importance of turnover to organizations. of poor job performance or organizational restructuring. Effec-
tively managing involuntary turnover is important, but the loss
Defining Turnover Employees leave organizations for a wide of these employees is generally viewed as being in the best
variety of reasons such as taking a better paying job, leaving an interests of the organization. Retention management typically
abusive supervisor, going back to school, following a relocating focuses on voluntary turnover, because these employees are
spouse, or getting fired. Although there may be shared char- often individuals the organization would prefer to retain.
acteristics and outcomes associated with each incidence of
turnover, there are different types of turnover, each with its Even within instances of voluntary turnover, however,
own implications. Types of turnover can be described across there is an important distinction between dysfunctional and
three dimensions (Griffeth & Hom, 2001). One important functional turnover (Dalton, Todor, & Krackhardt, 1982).
Dysfunctional turnover is harmful to the organization, such
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588 | Part 2 Implementation of Strategic Human Resource Management
as the exit of high performers or of employees who have rates on organizational performance may also be a function of
difficult-to-replace skill sets. Functional turnover, although who is exiting the organization. For example, research shows
disruptive, may not be harmful, such as the exit of employees that turnover among employees with high social capital (e.g.,
who are easy to replace, and may even be beneficial, such as wide relationship networks) has a strong negative impact on
the exit of poor performers. Retention management strategies firm performance (Shaw, Delery, Jenkins, & Gupta, 1998;
typically focus more on dysfunctional turnover. Shaw, Gupta, & Delery, 2005).
Finally, even if an organization invests substantially in Turnover remains important even as challenging eco-
the retention of key employees, some of those employees nomic times may temporarily make retention seem a less
would still leave. Thus, while some turnover is avoidable, pressing issue. For example, many organizations are concerned
some turnover will always be unavoidable (Abelson, 1987). about the future availability of skilled labor. In a white paper,
Avoidable turnover occurs for reasons that the organization staffing firm Manpower noted, “Demographic shifts (aging
may be able to influence, such as low job satisfaction, poor populations, declining birthrates, economic migration), social
supervision, or higher pay elsewhere. Unavoidable turnover evolution, inadequate educational programs, globalization, and
occurs for reasons that the organization may have little or no entrepreneurial practices (outsourcing, offshoring, on-demand
control over, such as health or dual career issues. The distinc- employment) are between them causing shortages, not only in
tion is important because it may make little strategic sense to the overall availability of talent but also—and more
invest a great deal in reducing turnover that is a function of significantly—in the specific skills and competencies required”
largely unavoidable reasons. (2006, p. 1). Furthermore, the effects of globalization and an
increased reliance on technology may create demand for work-
Understanding Turnover Costs When employees leave, it ers with skill sets that U.S. colleges and universities are not
costs the organization time and money. The total costs asso- providing (Gordon, 2005). There is an emerging consensus
ciated with turnover can range from 90% to 200% of annual that it may soon become more challenging for organizations
salary (Cascio, 2006; Mitchell, Holtom, & Lee, 2001). In addi- to retain their key employees. Organizations and managers
tion to the obvious direct costs associated with turnover, such who have a shared understanding of turnover effects and
as accrued paid time off and staffing costs associated with trends may achieve a competitive advantage.
hiring a replacement, there are a wide range of other direct
and indirect costs associated with turnover. Consider Table 2, Knowledge of Underlying Principles and
which identifies two primary types of costs associated with Cause-Effect Relationships
voluntary turnover: separation costs and replacement costs.
PriceWaterhouse Coopers (2006) estimates that turnover- Misconception #2: People Quit Because of Pay
related costs represent more than 12% of pretax income for It is true that compensation matters for retention, and employ-
the average company, and nearly 40% for companies at the ees often leave organizations to take higher paying jobs else-
75th percentile for turnover rate. However, as we pointed out where. However, when we consider what leads employees to
in the previous section, turnover is not always dysfunctional seek out these other opportunities to begin with, we find that
for the organization. Table 2 also illustrates some of the pay level and pay satisfaction are relatively weak predictors of
potential benefits associated with an employee’s leaving. individual turnover decisions (Griffeth, Hom, & Gaertner,
From a strategic perspective, organizations need a clear 2000). To effectively develop and implement evidence-based
shared understanding of the costs and benefits associated guidelines for managing turnover requires knowledge of
with turnover to develop an effective retention management underlying principles and cause-effect relationships. Thus, we
plan. There is no single appropriate formula to determine review the research evidence concerning how and why indivi-
turnover costs. What is more important is that there is an duals make turnover decisions and what organizations can do
internal consensus within the organization that the metrics about it. The model in Figure 2 summarizes the general pro-
used are appropriate, so that any analysis and subsequent cesses from research on why and how employees decide
conclusions and recommendations are based on a shared whether to stay with or leave organizations.
understanding and seen as credible.
Organizational Equilibrium and the Turnover Process The
Addressing the Growing Importance of Turnover Not only is idea of organizational equilibrium serves as a foundation for
turnover costly, but a growing body of research evidence most turnover research: individuals will continue to partici-
links turnover rates to organization-level performance indi- pate in the organization as long as the inducements offered
cators. For example, research shows that reducing turnover by the organization are equal to or greater than the contribu-
rates is linked to sales growth and improved employee tions required by the organization; these judgments are
morale; also, research has found that high-performance affected by both the desire to leave and the ease of leaving
human resources practices increase firm profitability and the organization (March & Simon, 1958). Note that while
market value in part by reducing organization turnover
rates (Batt, 2002; Huselid, 1995). The impact of turnover
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Chapter 13 Employee Separation and Retention Management | 589
Table 2
Voluntary Turnover Costs and Benefits
Separation Costs Tangible
Replacement Costs HR staff time (e.g., salary, benefits, exit interview)
Turnover Benefits Manager’s time (e.g., salary, benefits, retention attempts, exit interview)
Accrued paid time off (e.g., vacation, sick pay)
Temporary coverage (e.g., temporary employee, overtime for current employees)
Intangible
Loss of workforce diversity
Diminished quality while job is unfilled
Loss of organizational memory
Loss of clients
Competition from quitter if he/she opens a new venture
Contagion—other employees decide to leave
Teamwork disruptions
Loss of seasoned mentors
General Costs
HR staff time (e.g., benefits enrollment, recruitment, selection, orientation)
Hiring manager time (e.g., input on new hire decision, orientation, training)
Recruitment
Advertising
Employment agency fees
Hiring inducements (e.g., bonus, relocation, perks)
Referral bonuses
Selection
Selection measure expenses (e.g., costs of RJP, work samples, selection tests)
Application expenses
Orientation and Training
Orientation program time and resources
Formal and informal training (time, materials, equipment, mentoring)
Socialization (e.g., time of other employees, travel)
Productivity loss (e.g., loss of production until replacement is fully proficient)
Savings may be achieved by not replacing leaver
There is an infusion of new skills or creativity into the organization
Vacancy creates transfer or promotion opportunity for others
Cost savings may be achieved by hiring a replacement with less experience or seniority
Replacement could be a better performer and organization citizen
Replacement could enhance workplace diversity
Departure may offer the opportunity to reorganize the work unit
Source: Adapted from Fitz-enz (2002) and Heneman & Judge (2006).
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590 | Part 2 Implementation of Strategic Human Resource Management
FIGURE 2
Voluntary Turnover Model
Shocks/Scripts Embeddedness
Turnover Drivers Key Attitudes Withdrawal Process Turnover
On-Boarding
Job Characteristics Alternative
Leadership and Relationships Opportunities
Work Environment
Individual Characteristics
inducements can be specific, tangible rewards such as pay, external environment, individual demographics, job perfor-
there can also be other types of inducements such as working mance, and the withdrawal process. Meta-analysis is a tech-
conditions, relationships, or future opportunities. Further, nique used to summarize the results of numerous individual
these inducements are evaluated in light of the attractiveness studies into a single useful estimate of the strength of a rela-
and attainability of alternative opportunities affecting the tionship. Figure 3 summarizes the results of the most recent
ease of movement. Thus, organizations and managers can and comprehensive meta-analyses of relationships with turn-
actively manage individual turnover decisions by managing over (Bauer, Bodner, Erdogan, Truxillo, & Tucker, 2007;
the inducements-contributions balance. Griffeth et al., 2000; Phillips, 1998). These studies provide
the best available research-based estimates of the relative
Evidence has also shown that many turnover decisions importance of a wide variety of turnover predictors. In Fig-
involve a process in which individuals evaluate their current ure 3, positive values indicate that as the predictor increases
job against possible alternatives, develop intentions about the likelihood of turnover increases; a negative value indicates
what to do, and engage in various types of job search behavior that as the predictor increases the likelihood of turnover
(Hom & Griffeth, 1991; Mobley, 1977; Steel, 2002). In general, decreases. Although these estimates represent summaries, and
specific organizational and individual factors that cause turn- some relationships may differ depending on each unique con-
over have direct effects on key job attitudes such as job satis- text and setting, there are implications that generally apply
faction and organizational commitment that can initiate the across settings.
withdrawal process. This withdrawal process typically involves
thoughts of quitting, job search, evaluation and comparison of The strongest turnover predictors tend to be related to the
alternative opportunities, turnover intentions, and eventually withdrawal process, such as turnover intentions and job search;
turnover behavior. Organizations and managers can monitor it is critical for organizations to monitor and manage these
and manage key aspects of the work environment that influ- variables (e.g., via employee surveys) and to understand the
ence employee desire to stay or leave, while also considering the causes of these variables in their context. Organizational com-
availability and attractiveness of alternatives. When alternatives mitment and job satisfaction are two of the most important
are plentiful and employees perceive many options, they tend turnover drivers; organizations need to monitor and manage
to evaluate the work environment and their own attitudes these key attitudes. The relationship an individual employee
against a higher standard than when options are sparse. Thus, has with his/her immediate supervisor/manager plays a critical
plentiful opportunities become an especially difficult issue for role in many turnover decisions; organizations that better pre-
retention: not only do employees have high ease of movement, pare supervisors and managers for these relationships may
but they may also be more difficult to keep satisfied. improve retention. Role clarity and role conflict are important;
organizations need to work to ensure that roles and expecta-
Turnover Predictors Numerous studies have been conducted tions are clearly defined, communicated, and supported. Job
to determine the specific drivers of turnover, examining design and the work environment matter: work satisfaction,
issues related to the work environment, job design, the job scope, promotion opportunities, communication, and
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 13 Employee Separation and Retention Management | 591
FIGURE 3
Meta-Analytical Relationships with Turnover
On-Boarding –0.14 0.31
Weighted Application Blanks –0.06
0.22
Socialization Tactics –0.24 0.12
Realistic Job Previews 0.11
–0.16
Job Characteristics –0.14 0.16
Role Clarity
–0.11 0.06
Role Conflict –0.08 0.02
Promotion Opportunities
–0.25 0.34
Job Scope 0.31
Role Overload –0.13 0.29
Routinization –0.13 0.15
–0.13
Pay
Pay Satisfaction –0.14
–0.13
Leadership & Relationships
Leader-Member Exchange –0.11
Supervisor Satisfaction
Co-worker Satisfaction –0.23
Work Group Cohesion –0.16
–0.11
Work Environment –0.1
Stress
–0.05
Communication –0.03
Participation in Decision Making
–0.02
Distributive Justice
–0.27
Individual Characteristics –0.22
Tenure
0.45
Children
Age
Kinship Responsibilities
Education
Married
Sex
Cognitive Ability
Race
Key Attitudes
Organizational Commitment
Job Satisfaction
Withdrawal Process
Turnover Intentions
Job Search Intentions
Job Search Behaviors
Thinking of Quitting
Perceived Alternatives
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592 | Part 2 Implementation of Strategic Human Resource Management
participation in decision making are moderately related to be driven by external market forces, and may be initiated by a
turnover; organizations that can design jobs and the environ- shock such as an unsolicited job offer. Retention strategies in
ment consistent with these findings may realize improved this case focus on ensuring the workplace is externally com-
retention. Coworker relationships matter: workgroup cohesion petitive in terms of rewards, opportunities, and the work envi-
and coworker satisfaction are moderately related to turnover. ronment, and having a strategy for responding to external
Organizations that foster a supportive and cohesive culture opportunities for valued employees.
may realize improved retention.
A third path involves individuals who have scripts or
Pay may not matter as much as many managers expect. plans in mind that involve considering quitting in response
Although compensation is clearly important, pay level and to certain events, such as completing a particularly marketable
pay satisfaction are typically relatively weaker predictors of training program, or after receiving a retention bonus (e.g.,
individual turnover decisions; pay increases may not always planning to find a new job when one completes an MBA).
be the most efficient way to address turnover issues. Demo- Although it may be difficult for organizations or managers to
graphics are relatively weak predictors: education. marital directly affect individual scripts, some scripts may be influ-
status, sex, and race are only weakly related to turnover; orga- enced by linking rewards to tenure (e.g., service requirements
nizations may instead want to focus on how members of dif- after paying for an educational program, or retention bonuses
ferent groups might respond differently to various tied to length of service). Further, organizational research may
organizational interventions. For example, research could uncover particularly prevalent scripts in a particular context
uncover that the turnover decisions of a particular subgroup that may be amenable to a tailored response (e.g., revised
of employees (e.g., women) are more strongly influenced by maternity and family-supportive policies for large numbers of
certain issues or interventions (e.g., changing work-life bal- family-related scripts) (Mitchell et al., 2001).
ance policies and resources).
Finally, a fourth path involves individuals who quit
Misconception #3: People Quit Because despite being relatively satisfied, without having a script in
They Are Dissatisfied with Their Jobs place, and perhaps even without searching for an alternative.
It is true that job dissatisfaction is one of the most consistent These are likely impulsive quits, typically in response to neg-
attitudinal predictors of turnover. However, research is showing ative shocks such as being passed over for a promotion.
that job dissatisfaction might be the driving force in fewer than Retention strategies in this case focus on investigating the
half of individual turnover decisions (Lee, Mitchell, Holtom, types and frequencies of shocks that are driving employees
McDaniel, & Hill, 1999). Understanding underlying principles to leave, providing training to minimize negative shocks
and cause-effect relationships also entails knowledge of the (e.g., on how to provide negative feedback and on minimiz-
multiple pathways to decisions about whether to stay or leave. ing harassment or perceptions of unfair treatment), providing
employees realistic job previews and clear communication to
Alternative Paths to Turnover Not everyone follows the tra- minimize unexpected shocks, and providing support
ditional path to quitting. The unfolding model of turnover mechanisms to help employees deal with shocks (e.g., griev-
identifies four primary paths to turnover, and suggests that ance procedures, flexible work arrangements, and employee
these paths to turnover are often initiated by a shock: an assistance programs) (Mitchell et al., 2001).
event that leads someone to consider quitting his or her job
(Lee & Mitchell, 1994). Shocks can be expected (e.g., com- Job Embeddedness Just as important as why people leave
pleting a professional certification) or unexpected (e.g., may be why they stay. The concept of job embeddedness
being mistreated by a co-worker); job-related (e.g., being involves the multiple ways that employees become embedded
passed over for a promotion) or non-job-related (e.g., spouse in their jobs and their communities over time (Mitchell, Hol-
offered an opportunity in another location); and positive tom, Lee, Sablynski, & Erez, 2001). Over time, employees
(e.g., receiving a job offer), neutral (e.g., a merger or acquisi- develop connections and relationships both on and off the job
tion announcement), or negative (e.g., receiving a negative that form a network. To the extent that leaving a job would
performance evaluation) (Mitchell et al., 2001). require severing or rearranging these connections, employees
who have many connections are more embedded in the orga-
One path involves leaving an unsatisfying job, and is nization. There are three types of connections: links, fit, and
characterized by the traditional view of the turnover process sacrifice. Each of these connections may be focused on the
described earlier. Retention strategies in this case would focus organization or on the surrounding community.
on common retention management activities such as asses-
sing workplace conditions and attitudes and managing com- Links are connections with other people, groups, or orga-
mon causes of dissatisfaction and turnover. Some employees, nizations, such as coworkers, work groups, mentors, friends,
however, leave jobs with which they are quite satisfied. A sec- and relatives. Fit represents the extent to which an employee
ond path involves leaving for a more attractive alternative. sees himself as compatible with his job, organization, and
Because this path may not involve dissatisfaction, it tends to community. For example, an employee who values community
service would be more embedded in an organization and
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Chapter 13 Employee Separation and Retention Management | 593
community that provided extensive opportunities to get requiring tuition reimbursement to be repaid if the employee
involved in community service. Sacrifice represents what leaves within a certain time frame) helps the organization
would be given up by leaving a job, and could include financial retain the competencies acquired. In addition to making
rewards based on tenure, a positive work environment, pro- rewards market-competitive, perceived fairness of reward deci-
motional opportunities, and community status. Employees sions, flexibility in tailoring rewards to individual preferences,
with numerous links to others in their organization and com- and linking some rewards to tenure reduce the likelihood of
munity, who fit better with their organization and community, turnover. Given the important role of supervisors in many
and who would have to sacrifice more by leaving are more turnover decisions, providing effective leadership training,
embedded and more likely to stay. incorporating retention metrics into manager evaluations,
and effectively managing toxic or abusive supervisors can
This research leads to several practical implications also reduce turnover. Finally, more engaged employees are
(Mitchell et al., 2001). To foster links, organizations should less likely to quit, so designing work to foster employee
design work in teams, provide mentors, encourage employee engagement can also be effective. Specific approaches include
referrals, and support community involvement. To foster fit, providing autonomy and task variety, fostering a team envi-
organizations should provide realistic information during ronment, providing and supporting specific challenging goals,
recruitment, incorporate organization fit into employee selec- and recognizing employee contributions.
tion, provide clear communication about organization values
and culture, recruit locally when feasible, provide relocating Misconception #5: A Simple One-Size-Fits-All
employees with extensive information about the community, Retention Strategy Is Most Effective
and build organization ties to the community. To foster sacri- It is true that there are best practices likely to be associated
fice, organizations should tie financial incentives to tenure, pro- with improved retention across organizations, such as those
vide unique incentives that might be hard to find elsewhere, identified in Table 3. However, investing significant resources
encourage home ownership through home-buying assistance, in retention initiatives without understanding the nature of
and develop career paths that do not require relocation. turnover in a particular context is unlikely to maximize the
return on these investments. Effective evidence-based man-
Misconception #4: There Is Little Managers Can do agement requires integrating multiple sources of data within
to Directly Influence Turnover Decisions a particular context (Briner et al., 2009). Designing a strate-
Many managers believe that most voluntary turnover is gic, evidence-based approach to addressing turnover requires
unavoidable. They may think that most people quit in the ability to diagnose the extent to which turnover is a prob-
response to external job offers that the organization can do lem and adapt an understanding of underlying retention
little about, or because of events unrelated to work such as principles to a particular organizational context. Effective
moving with a relocating spouse. It is true that some instances retention management requires ongoing diagnosis of the
of turnover are unavoidable; however, there is evidence regard- nature and causes of turnover, a strategic approach to deter-
ing specific cause-effect relationships and human resource mining in what human capital markets retention has the larg-
management practices that can help organizations manage est impact on organizational success, and the development of
turnover. Table 3 summarizes some of the most robust find- an appropriately targeted and organized bundle of retention
ings, which we discuss in terms of two phases: managing orga- initiatives.
nization entry and the work environment.
There are two primary types of retention strategies: sys-
There are specific evidence-based practices managers can temic strategies are based on general principles of retention
employ in terms of the recruitment, selection, and socialization management and are intended to help reduce turnover rates
of new employees entering the organization. Recruitment across the board; targeted strategies are based more specifi-
practices that provide applicants the most comprehensive pic- cally on organization-specific turnover drivers and are
ture of the organization, such as realistic job previews and intended to address organization-specific issues and often to
referrals by current employees, reduce the likelihood of subse- influence turnover among certain populations of employees
quent turnover. Selection methods that assess applicant fit (Allen, 2008, Steel, Griffeth, & Hom, 2002). These are not
with the job and organization, as well as the use of weighted mutually exclusive: general retention best practices can help
application blanks, enable the hiring of individuals more likely retain specific employees and determine which organization-
to remain with the organization. Socialization practices that specific turnover drivers to measure; at the same time, data
provide connections to others, positive feedback, and clear collected on organization-specific drivers can help reduce
information also reduce the likelihood of turnover in the criti- overall turnover rates. Strategically, though, it is advanta-
cal first year after organizational entry. geous to focus on the types of data collection and retention
efforts that are most closely tied to an organization’s compet-
There are also specific evidence-based practices managers itive strategy and the nature of its particular turnover
can employ in managing the work environment. Training and problem.
development opportunities tend to reduce the desire to leave
an organization, and linking these opportunities to tenure (e.g.,
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594 | Part 2 Implementation of Strategic Human Resource Management
Table 3
Evedence-Based HR Management Strategies for Reducing
Turnover
Recruitment • Providing a realistic job preview (RJP) during recruitment improves retention.
(Breaugh & Starke, 2000) • Employees hired through employee referrals tend to have better retention
Selections than those hired through other recruitment sources.
(Griffeth & Hom, 2001; Hunter &
• Biodata (biographical data) and weighted application blanks (WAB)
Hunter, 1984; Kristof-Brown, can be used during the selection process to predict who is most likely
Zimmerman, & Johnson, to quit.
2005)
Socialization • Assessing fit with the organization and job during selection improves
(Allen, 2006; Kammeyer- subsequent retention.
Mueller & Wanberg, 2003)
• Involve experienced organization insiders as role models, mentors, or trainers.
Training and Development • Provide new hires with positive feedback as they adapt.
(Hom & Griffeth, 1995) • Structure orientation activities so that groups of new hires experience them
Compensations and Rewards together.
(Griffeth & Hom, 2001; • Provide clear information about the stages of the socialization process.
Heneman & Judge, 2006) • Offering training and development opportunities generally decreases the
desire to leave; this may be particularly critical in certain jobs that require
Supervision constant skills updating.
(Aquino, Griffeth, Allan, & Hom,
• Organizations concerned about losing employees by making them more
1997; Griffeth, Hom, & marketable should consider job-specific training and linking developmental
Gaertner, 2000; Tepper, 2000) opportunities to tenure.
Engagement • Lead the market for some types of rewards and some positions in ways that
(Ramsay, 2006; Vance, 2006) fit with business and HR strategy.
• Tailor rewards to individual needs and preferences.
• Promote justice and fairness in pay and reward decisions.
• Explicitly link rewards to retention.
• Train supervisors and managers how to lead, how to develop
effective relationships with subordinates, and other retention management
skills.
• Evaluate supervisors and managers on retention.
• Identify and remove abusive supervisors.
• Design jobs to increase meaningfulness, autonomy, variety, and coworker
support.
• Hire internally where strategically and practically feasible.
• Provide orientation that communicates how jobs contribute to the
organizational mission and helps new hires establish relationships.
• Offer ongoing skills development.
• Consider competency-based and pay-for-performance systems.
• Provide challenging goals.
• Provide positive feedback and recognition of all types of contributions.
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Chapter 13 Employee Separation and Retention Management | 595
Dealing with turnover, like many other issues, requires and functionality. The second step is to interpret this analysis
managers to make decisions with incomplete and uncertain through the lens of a particular organizational context. A
information. One major barrier to good decision making is slightly increasing turnover rate is difficult to interpret with-
the tendency to use a narrow decision frame that minimizes out considering past, present, and future trends (both inter-
uncertainty and ambiguity by pretending that knowledge is nal and external to the organization) that provide a broader
complete (Larrick, 2009). To improve decision making, man- range of possible outcomes that could arise. The third step is
agers should broaden their decision frames in three ways: to collect data to diagnose and adapt cause-effect relation-
they should consider multiple objectives and issues, not ships in a particular organizational context. Relying on one
only those that are most salient at a particular point in source of data (e.g., exit interviews) and one immediately
time; evaluate alternative expected outcomes that could accessible alternative (e.g., changing compensation) may be
arise; and consider multiple alternatives, not just the first to too narrow a decision frame—consider that most of the
arise (Larrick, 2009). Consider a manager who is told that employees who don’t quit could also be dissatisfied with
turnover rates are up slightly and exit interview data indicates their pay. Evidence-based retention strategies sit at the inter-
that 75% of quitting employees are dissatisfied with their pay. section of turnover analysis data interpreted through the lens
Concluding that turnover is a concern, that pay is the major of context and turnover diagnosis. Each step is discussed
issue influencing turnover, and that increasing compensation more fully below.
is the best strategy would suggest a narrow decision frame.
Developing the Ability to
Alternatively, Figure 4 presents the major steps in devel- Diagnose and Adapt
oping a strategic evidence-based approach to retention man-
agement that encourages a broader decision frame and Turnover Analysis to Diagnose the Extent to
multiple sources of information (Briner et al., 2009; Larrick, Which Turnover Is a Problem
2009). The first step is to conduct a thorough turnover anal- The first step in adapting knowledge of underlying turnover
ysis to diagnose the extent to which turnover is a problem. principles and cause-effect relationships is to diagnose the
Instead of focusing on only the most currently salient con- extent to which turnover is problematic in a particular orga-
cerns (e.g., the data showing increased turnover and exit nizational context. Recall that turnover is not necessarily dys-
interviews indicating pay dissatisfaction), this analysis functional for the organization, and some turnover is likely
encourages a wider consideration of turnover costs, rates,
FIGURE 4
Developing Strategic Evidence-Based Retention Management Strategies
Interpret Turnover Analysis Through the Lens of Context Diagnose Why Employees
Stay or Leave
Turnover Analysis Organizational Context Evidence-Based
Costs vs. Benefits Benchmarking Retention Data Collection and Diagnosis
Turnover Rates Needs Assessment Strategies In General
Functionality
Retention Research
Best Practices
Benchmarking Surveys
In a Particular Organization
Exit Interviews
Post-Exit Surveys
Stayer Focus Groups
Employee Surveys
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596 | Part 2 Implementation of Strategic Human Resource Management
inevitable. It would be extremely expensive, and in most cases methods for assessing turnover data in relation to both inter-
impossible, to prevent every employee from leaving. As such, nal and external circumstances. Benchmarking provides a use-
most organizations expect and may even encourage some ful standard of comparison for evaluating turnover rates.
turnover. However, turnover becomes problematic when the External benchmarking compares organization turnover rates
wrong people are leaving, or when the turnover rate becomes against industry and competitor rates. If organization turnover
high enough that the costs and instability outweigh the ben- rates are significantly higher than those of competitors, that
efits and harm organizational competitiveness. Thus, deter- could place the organization at a competitive disadvantage;
mining the extent to which turnover is a problem involves alternatively, low turnover rates may be a source of competi-
conducting an ongoing turnover analysis addressing three tive advantage. Internal benchmarking considers organization
issues: turnover rates, turnover costs, and the functionality turnover rates over time, enabling the organization to track
of which employees are leaving. trends. If turnover is increasing, either overall or among par-
ticular groups or locations, retention may be a larger concern
The turnover rate over a given time period (e.g., monthly, than if turnover rates are stable or decreasing. There are some
yearly) can be calculated as the number of employees leaving cases where stable or even decreasing turnover could be con-
divided by the average number of employees (Heneman & sidered problematic, such as if the organization is retaining too
Judge, 2006). In addition to measuring the overall turnover many poor performers, or if organizational plans call for
rate, in many cases it is also useful to track these data in changing the makeup of the workforce.
terms of types of turnover (e.g., avoidable or unavoidable),
job category, job level, geographic location, relative impact, Needs assessment is a function of workforce planning,
or any other categorization that may be of interest (e.g., per- and enables an evaluation of turnover in the context of future
formance level). These breakout data enable an evaluation of labor demand and availability. External needs assessment con-
whether turnover rates in different locations or among partic- siders trends in labor markets that may affect supply and
ular types of employees are especially problematic. demand of human capital. Trends likely to increase demand
for employees valued by the organization (e.g., industry
Diagnosing the extent to which turnover is a problem growth) or restrict supply (e.g., slowing rates of labor supply
also requires a consideration of turnover costs. Many reten- growth or retiring baby boomers) would tend to make relative
tion initiatives require investment of time, money, or other turnover levels more problematic than the same levels under
resources; thus, a clear idea of turnover costs and benefits is trends likely to decrease demand (e.g., industry contraction) or
needed to design interventions that will have a positive bene- increase supply (e.g., growth in relevant educational pro-
fit at a reasonable cost. Incorporating the costs and benefits grams). Internal needs assessment considers the future strate-
outlined earlier, it is possible to determine a cost formula that gic direction of the organization and how that influences
enables the calculation of total turnover costs as well as costs supply and demand for labor. Plans leading to increased
per incidence of turnover. Formulae need not be identical for demand (e.g., expansion) would tend to make relative turnover
every job, but often vary based on factors such as job type or levels more problematic than those likely to decrease demand
level, employee type, and employee performance level. (e.g., outsourcing, offshoring, contraction). Plans designed to
influence supply may require more targeted consideration.
In addition to analyzing turnover rates and costs, the For example, plans to decrease the size of the workforce
issue of who is leaving is particularly important for assessing through offering early retirement or severance packages are
the extent to which turnover is functional or dysfunctional. designed to encourage turnover among some employees,
Not every employee is of equal value to the organization. The while simultaneously placing an emphasis on retaining certain
retention of certain positions or individuals may be particu- other key employees (Allen, 2008).
larly important for organizational success; however, improv-
ing retention beyond a certain point may present diminishing Turnover data analysis viewed through the lens of orga-
marginal returns (Boudreau & Ramstad, 2007). Thus, turn- nizational context enables the organization to develop data-
over beyond a certain rate would be highly dysfunctional; based retention goals. These goals could be system-wide (e.g.,
however, turnover rates below the point of diminishing mar- decrease turnover by 5%) or targeted (e.g., increase the reten-
ginal returns, although perhaps not ideal, might not represent tion rate of minority scientists by 12%), or consist of multiple
an optimal focus of resources. For highly pivotal positions or systemic and targeted goals. The criteria of turnover costs,
individuals, changes in retention continue to have a signifi- rates, and functionality can be used to identify the appropri-
cant impact on organizational success. ate strategic investment required (Allen, 2008). For example,
when turnover costs are tolerable, turnover rates are accept-
View Turnover Analysis Through the Lense able, and turnover is functional in terms of who is leaving,
of Organizational context retention is not a critical issue and it is appropriate to focus
Because turnover rates vary greatly (e.g., by industry), inter- on monitoring the situation. When costs are tolerable, but
preting turnover data requires a careful consideration of con- those quits are dysfunctional, low investment strategies tar-
text (Allen, 2008). Benchmarking and needs assessment are geted at leavers are appropriate. When costs are tolerable, but
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Chapter 13 Employee Separation and Retention Management | 597
it is the number or rate of quits that is problematic, low with key employees suggest that departing computer scientists
investment but more system-wide strategies to reduce turn- are particularly unhappy with their compensation. As a result,
over rates are appropriate. When both the turnover rate and the organization may be able to address its compensation
who is leaving are problematic, both types of strategies are structure with a focus on the engineering labor market,
warranted. When turnover costs are too high to tolerate, which may be more cost-effective than adjusting compensa-
the same approaches apply, except it may be appropriate to tion system-wide.
consider a range of both targeted and systemic strategies that
may be resource-intensive to implement but still provide a Putting It Into Practice
positive return on investment. When neither the rate nor Consider an example of how a manager might follow the
who is leaving is problematic but turnover costs are too steps in this framework, and contrast it with the common
high, the most appropriate option may be to attempt to approach of deciding that turnover is an organization-wide
streamline exit and replacement processes and reduce the problem and focusing on increasing job satisfaction across
costs associated with each quit. all employees. A human resource manager at a large hypo-
thetical corporation suspects that employee turnover may be
Collect Data to Diagnose and Adapt a problem in her organization. Wanting to approach the
Cause-Effect to a Particular Context problem from an evidence-based perspective, she begins
Recall that systemic strategies such as across-the-board market- with a turnover analysis to determine if turnover is really a
based salary increases or improving the work environment are problem. She arrives at departmental turnover rates by divid-
broad-based retention strategies directed at the entire organiza- ing the number of employees who leave the department dur-
tion or at large subsystems, and are intended to address overall ing a given month by the average number of employees in the
retention rates (Steel et al., 2002). However, an evidence-based department during the same period. She also implements a
approach to identifying the appropriate strategy requires col- reporting structure for department managers to identify who
lecting data on the systemic strategies that are most likely to left and why and to give a brief estimate of the costs and
be effective. The data to help organizations determine an benefits associated with each turnover incident in their
appropriate strategy can come from several sources, including respective departments. From these data, she is able to assess
the retention research summarized earlier on the strength of the turnover rates, costs, and functionality by department
relationships with turnover and on specific human resource and by job type.
practices, best practices drawn from the experiences of other
organizations, and benchmarking surveys. She then interprets these results through the lens of her
particular context. She finds that the overall departmental
Organizations often desire to determine more specific turnover rates are largely in line with industry norms; how-
drivers of turnover in their context, or drivers of turnover ever, she also identifies two particularly problematic issues.
among specific subpopulations of employees (e.g., highly First, turnover rates among new hires are somewhat higher
important or pivotal ones). The data to help organizations than those of competitors and have been rising. Second, there
determine an appropriate strategy can come from several is a particularly pivotal position largely housed in one depart-
sources, including exit interviews, post-exit surveys, current- ment that is experiencing high and dysfunctional turnover.
employee focus groups, linkage research, predictive survey This leads her to conclude that it is appropriate to maintain
studies, and in-depth qualitative studies. One result of the the status quo and monitor turnover in most departments
data collection and diagnosis process may be finding that and job types, develop a blanket strategy to address new
some groups or types of employees leave for different reasons hire turnover, and develop a targeted strategy to reduce turn-
than others. For example, turnover analysis may show that a over in the problematic pivotal job.
particular division has more dysfunctional turnover than
others; linkage survey results may show that high-performing Next, she collects data to develop specific strategies. She
employees of that division report less positive relationships turns to data collected from exit interviews, employee sur-
with supervisors and lower satisfaction with promotional veys, and focus groups of key employees (all of which she
opportunities, and that these differences are related to differ- designed based on her knowledge of turnover frameworks
ences in turnover rates. As a result, the organization may and research). She discovers two key findings: new hires rou-
decide to target an intervention (e.g., supervisor training or tinely report being unpleasantly surprised at certain elements
high potential mentoring) at that particular division or loca- of the work environment (she recognizes this as a shock), and
tion, which may be more cost-effective than implementing it the high-turnover pivotal employees in particular report
system-wide. Alternatively, turnover analysis may uncover that these unpleasant surprises, along with difficulty becoming
a particular type of employee with a high demand and hard- integrated into work groups (she recognizes this as an ele-
to-replace skill set (e.g., computer scientist) has particularly ment of embeddedness). Based on her knowledge of turnover
high and costly turnover; exit interviews and focus groups research, she develops and implements a simple realistic job
preview during the recruitment process to reduce negative
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598 | Part 2 Implementation of Strategic Human Resource Management
shocks among all new hires, and she redesigns the socializa- approaches could provide important evidence as to whether
tion process just for employees in the high-turnover pivotal scholarly research on turnover adds significantly to manage-
job to emphasize embeddedness. rial experience and judgment in retention management.
Future Directions REFERENCES
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600 | Part 2 Implementation of Strategic Human Resource Management
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Chapter 13 Employee Separation and Retention Management | 601
READING 13.2
Knowledge Management Among
the Older Workforce
Floor Slagter
Introduction Knowledge Management: Definition and
Processes
The world is never standing still. The world is quickly
changing; internationalization increases, regulations change There exists a lot of discussion about what the proper definition
and costumers demand flexibility, speed and quality. This of knowledge management is or should be. Scholars, practi-
makes it difficult for an organization to keep up with its tioners, and others in field of business management are still
environment, or even be competitive. Literature has devoted debating about the concepts and definitions related to knowledge
a lot of attention to these topics and new concepts made management (KM) and its definition is currently still evolving.
their entry, like total quality management, business process To give an impression of what kind of concepts are used in the
reengineering and learning organizations. It becomes more different definitions, below a few of them will be discussed. One
and more obvious that the optimal generation and applica- definition of KM is one by Groff and Jones (2003):
tion of knowledge is one of the most important keys to suc-
cess. An organization needs to be flexible in order to keep Knowledge management is the tools, techniques, and
up with their competitors and knowledge is needed to strategies to retain, analyze, organize, improve, and
obtain that flexibility. Knowledge management is a disci- share business expertise.
pline that recognizes the importance of knowledge and
assists organizations in optimally using the knowledge that This definition places the emphasis on the KM processes that
is present in the organization. take place within an organization and especially the IT facili-
ties that support these processes. This definition is more
Another issue that is being extensively discussed in about managing explicit knowledge, by the use of IT. The
journals now a day is the ageing workforce; between 2005 human factor is not mentioned.
and 2015 the so-called baby boomers are going to retire en
masse. A well-planned and effective knowledge transfer Another widely accepted definition is the following of
between the different generations of the workforce is of Dr. Yogesh Malhotra:
great importance. Knowledge about the organization, the
processes within the company, and much more critical Knowledge management caters to the critical issues of orga-
organizational knowledge need to be transferred to the nizational adaptation, survival, and competence in face of
other generation of employees. If this does not happen increasingly discontinuous environmental change … Essen-
then this knowledge will disappear and the knowledge tially, it embodies organizational processes that seek syner-
level of many organizations will become unbalanced. Espe- gistic combination of data and information processing
cially in knowledge intensive industries this can have capacity of information technologies, and the creative and
disastrous consequences. Knowledge management is an innovative capacity of human beings (Dr. Yogesh Malhotra).
activity that can help organizations to overcome these
threats. This definition is more encapsulating the human factor that is
needed to manage knowledge. This leads us to the following
This article will bring these two topics together; the definition of Rastogi (2000), who really emphasizes the impor-
senior employee and knowledge management. First the two tance of the human factor in his definition. This definition
topics will be discussed separately in order to create clarity focuses on the ability of individuals and groups to enable
about their content and meaning. Secondly, the issues will be knowledge creation, use and sharing. The definition is:
combined and aligned. Furthermore this article will provide a
number of guidelines for human resource (HR) managers, Knowledge management as a systematic and integrative
which they can use as a starting point when coping with process of coordinating organization-wide activities of
this problem. acquiring, creating, storing, sharing, diffusing, developing,
and deploying knowledge by individuals and groups in
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602 | Part 2 Implementation of Strategic Human Resource Management
pursuit of major organizational goals. It is the process FIGURE 1
through which organizations create and use their institu-
tional and collective knowledge. The four Basic Processes of
Knowledge Management
This article will use this definition of KM, since this definition
recognizes the importance of the human factor in KM by focus- Development
ing on the ability of individuals and groups to enable knowledge of new
creation, use and sharing. This article will focus on KM among
senior employees and places its emphasis on how KM can be knowledge
optimized among this group of employees. The human factor is
therefore very important to take into account. Combine Knowledge Guarantee
available knowledge
Although there exist not yet agreement about what the knowledge
definition of knowledge management should be, researchers
agree that KM is an important activity for an organization to Distribution
undertake. of knowledge
But why is KM so important? To stay, or even become Source: Wiig (1991), Nonaka (1992), van den Broeck (1994).
competitive it is extremely important for organizations to be
flexible and to be able to adapt quickly. Knowledge is thereby article will use the definition of employees within the age
an important factor. group 54–60 years. This because a lot of studies and research
concerning the senor worker use the same definition and in
Knowledge management focuses on ways of sharing, this way it is easier to apply the knowledge gained in those
storing and maintaining knowledge, as a means of improving researches to the problem discussed in this article.
efficiency, speed, and competency of individuals within an
organization, and therefore increasing the profitability, flexi- The Managers’ Perspective on the Senior Worker
bility and adaptability. There is of course no single “managers’ perspective” on senior
workers, and it is important to emphasize that, in all different
Within literature a lot of different processes that form KM literature that exist about this issue, there is evidence of both
can be distinguished. However it is possible to bring these activ- positive and negative images of senior workers, and of good
ities back to four processes in which the basic operations of KM practice and bad. However there are some themes that often
are realized. In Figure 1 these processes are depicted. come to the fore, when discussing senior workers with man-
agers. To illustrate this, the findings in this area within the
This article is mostly concerned with the processes of 1990s and some current findings will be discussed.
guaranteeing existing knowledge and the distribution of
knowledge, since these are the first two processes that come Two studies performed in the 1990s (Institute for Man-
to the front when employees leave the organization (in case power Studies, 1990; Lynn and Glover, 1998) of manager atti-
of this article the senior employee). tudes to senior workers suggested that managers associated
certain characteristics with age. These are shown in Table 1
The Ageing Workforce and can be seen in both a positive and negative way.
To be able to clarify why this article is focusing on knowledge A recent study performed by Remery et al. (2001) found
management among the senior employee and why this is out that a lot of managers tend to associate an increase in the
becoming so increasingly important it is necessary to take a average age of their workforce with higher labor costs. Man-
look at the recent developments within the labor force and agers also tended to lock upon senior staff as employees with
the characteristics of the senior employee. a high level of absenteeism and a resistance to change. But
managers also associate an older workforce with higher levels
The percentage of employees in the age group 50 to 60 of experience and an increase in know-how.
increased significantly the last ten years. The increase of
senior employees within organization has certain conse-
quences for managers, and it also means that the upcoming
years many of the senior employees will retire. Most organi-
zations are not fully aware of the serious consequences that
the loss of this large source of labor can have (Ekamper et al.,
2001). Research has shown that individual managers do not
seem to have a sense of urgency that they need to anticipate
and act on this development (Ekamper et al., 2001). How-
ever, there is a need to act and anticipate since these employ-
ees have a great pool of knowledge at their disposal.
After discussing these developments it is necessary to
discuss how to define the senior employee exactly. This
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Chapter 13 Employee Separation and Retention Management | 603
Positive Characteristics Table 1
Positive and Negative Characteristics of Senior Employees
Responsibility and maturity According to Managers
Commitment to work
Experience Negative Characteristics
“Staying put” in a job
Lack of flexibility
Slow to adapt or resistance to change
Outdated skills, particularly in relation to new technology
Lack of mobility
Difficult to retrain
Prone to ill-health
These presumptions narrow the mindsets of managers; Characteristics of the Senior Employee
when they think mainly negatively about the senior
employee, they will not initiate activities for these employees Senior employees have other characteristics than younger
that demand flexibility, change, etc., since managers are con- employees. This part of the article will discuss the most
vinced that this age group is incapable of living up to these important differences.
demands. In this way the senior employee never gets a
chance to “prove” him/herself. Motivation and Job Satisfaction
There are a lot of theories about what motivates employees.
It might be the case that managers bring all these pre- One of the earliest ones was Maslow’s (1954) theory. He
sumptions to the fore to cover their true reason why they do explains a certain hierarchy of human needs; five levels of
not like to employ senior employees; the high costs. But needs that can be visualized in a pyramid (see Figure 2).
when managers want to get rid of senior employees as
soon as possible, because of the high costs, they tend to In order to motivate employees a manager needs to satisfy
overlook one important thing; by firing the employee the their needs. The satisfaction of these needs can be realized by:
knowledge gained by the employee over the years go with
him/her. • money (material needs; level 1 and 2);
• a say in things and involvement (level 3 and 4); and
From the information above we can conclude that the • a certain degree of autonomy or independence (level 5).
perspective that managers have on senior employees has not
changed significantly over the years. But what is actually true As a human being grows to maturity, the need
about these presumptions? Different studies (McIntosh, 2000; for experiencing respect increases, implying both respect for
Society for Human Resource Management, 1998) affirmed others and self-respect. The same is true for the needs
that, in general, senior workers: for self-actualization. Both needs function as a motivator for
the senior worker (Keuning, 1998).
• had low turnover rates;
• were flexible and open to change; Also, as employees grow older, interesting work becomes
• possessed up-to-date skills; more of a motivator. A report by Heymann and Terlien shows
• were interested in learning new tasks; that senior employees want work that has a meaning; they want
• had low absentee rates; and to feel useful on the work floor. These researchers also empha-
• had few on-the-job accidents. size that respect and recognition are highly valued by senior
employees. Managers should keep these changes among adult-
The only area where professionals expressed their con- hood in mind, to be able to employ their employees as efficient
cern was the area of senior employees and new technology and effective as possible through all stages of life. Research per-
(McIntosh, 2000). formed by Diekstra (2003) also recognizes the importance of job
significance among senior employees.
It is interesting to see the contradictions that exist. But
how do we find out what is true? This issue will be addressed Job satisfaction shows consistently that work-related atti-
under “recommendations”. tudes are more positive with increasing age in surveys of
employed adults. Senior workers may have a different perspective
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604 | Part 2 Implementation of Strategic Human Resource Management
FIGURE 2
Maslow’s Pyramid of Needs
Actualization
Esteem
Love/Belonging
Safety
Physiological
on work than younger adults. For senior workers, survival needs Knowledge of the Senior Employee
are less likely to be urgent as they will probably have reached the A study of Kanfer and Ackerman (2004) explains that there exists
maximum income for their jobs. Senior workers report that job a strong positive association between adult age and knowledge
satisfaction is more closely related to intrinsic or internal rewards level. Tacit knowledge needs to be transferred from the senior
of work (Sterns and Miklos, 1995). This theory supports the find- employee to the younger one, since senior employees have built
ings of Keuning, related to Maslow’s theory. up a lot of experience and organizational know-how. Senior
employees can be reticent in sharing their knowledge with youn-
As people grow older they find it important to reach a ger employees, being afraid to become redundant afterwards.
certain balance between their work and their private life. This
is also linked up with their changing needs. Senior workers Currently a lot of organizations are thinking about how
demand for flexible working hours, also keeping health issues to convince their senior workers to stay longer, because
in the back of their minds. The degree to which the employer employers might face the loss of a significant amount of
can adjust to these needs affects the level of job satisfaction of knowledge and know-how. However, several recent studies
the senior employee. have shown (Henkens, 1998) that a vast majority of the
senior workers themselves would like to withdraw from the
Self-development among Senior Employees labor force at the earliest possible opportunity. A well known
Today’s society has self development high in its standard. question among senior employees is: “How long do you still
The younger generation is used to setting goals for them- have to work?”. It is therefore important that managers start
selves with regard to what they want to achieve. A lot of considering how they can transfer the knowledge that is pres-
managers are of opinion that employees are responsible ent in these senior employees before they leave. This leads us
themselves for their development and career. However, a lot to the problem definition of this article.
of senior employees expect their managers to come up with
initiatives concerning their development and career path Problem Definition
(Heymann and Terlien, 2003). They are not used to taking
initiative in this area. A coaching leadership style would be From all the information above we can draw a couple of
very appropriate for this age group. In that way the manager interesting conclusions. The first conclusion is that a lot of
can show the different possibilities and the employee gets a managers do not see the urgency of taking measures with
better overview of what is possible for him/her and can sub- regard to their ageing workforce and that they are not
sequently make his/her decision. aware of the serious problems the massive retirement can
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Chapter 13 Employee Separation and Retention Management | 605
cause with regard to the loss of knowledge. Another conclu- organizations are far too diverse, and unique. Other limitations
sion we can draw is that KM is an activity that can contribute due to organizational culture and business sector are therefore
to the preservation of knowledge and the distribution of it. also relevant to mention; specific organizational cultures and
When we combine these two findings we see that KM can business sectors may require different approaches.
serve as a tool to help managers to transfer the knowledge
that is present in the senior employee in order to overcome In addition, national or society cultures can have their
the imminent loss of knowledge. The question is how this can influences. For example, in Asian countries senior employees
be done adequately. To determine this, we need to take a look are much more respected since values of respect for the elderly
at the factors that determine the success of KM and how are ingrained in Asian cultures. While the level and forms of
these factors can be applied to the senior employee. This respect are swiftly changing, the value of older persons is still
brings us to the goal and problem definition of this article. recognized in most Asian and Pacific region societies (ESCAP,
2001). These cultural differences between nations and societies
The goal of this article is to come to a number of guide- can have influence on how processes of KM take place.
lines in which the specific characteristics of the senior employee
are coupled to the critical success factors (CSFs) of knowledge This article explores the opportunities for HR managers
management. By using these guidelines as a starting point the in a broad context and its intention is to provide a number of
human resource manager will be able to manage knowledge general guidelines to HR managers how they can prevent the
among this particular age more effectively than before. loss of knowledge when senior employees leave the company;
a starting point where they can begin to address this issue.
This brings us to the following problem definition:
which critical success factors of knowledge management can This article is based on extensive literature review and
be aligned to the senior employee to enhance the effective- conversations in the field with MA M. Diekstra, she is the
ness of this activity (among this age group)? project leader of the project “Exploration of labor prospects
by senior employees’ (see Appendix for further details). This
This problem definition is going to be discussed by project had the main focus to develop a route for senior
using the following sub-questions: employees to assist them in their self development, by looking
at their past experiences, discovering where they are now and
1. What are the CSFs of KM? where they want to go in the future.
2. How can these CSFs be aligned to the senior employee?
3. What are the implications for the HR manager? The information from the literature review and the conver-
sations were used to come to the characteristics of senior employ-
Before starting to answer the problem definition, the limita- ees and the critical success factors of knowledge management.
tions of this article need to be discussed.
Critical Success Factors of Knowledge
Limitations Management
Knowledge management is a broad concept and definitions The success of a KM initiative depends on many factors, some
of KM are still developing. This article will focus on the within human control, some less or not at all. A critical success
human factor of knowledge management, using the defini- factor is a performance area of critical importance in achieving
tion provided by Rastogi. consistently high productivity. There exist two categories of
critical success factors: business processes and human pro-
A lot of studies (e.g. Abou-Zeid, 2002; Malhotra and cesses. This article will focus on the human processes.
Galletta, 2003) argue that information technology can assist
KM in an important way. Although this article recognizes the Theorists do not completely agree on what the critical
importance of information systems within KM it will not success factors of KM are. Below several views will be dis-
address this aspect of KM. It will focus on the human and cussed, thereafter the final five will be presented, which will
social processes of KM. be used in this article.
A lot of different processes are incorporated in KM; this Bixel’s Four-pillar Model and Davenport’s
article will focus on guaranteeing knowledge and distributing and Probst’s List
knowledge, since these are the two basic processes of KM that Different theorists describe different CSFs for KM. Bixler
come to the front when employees leave the organization. (2002) is one of them. He developed a four-pillar model to
These basic processes involve underlying processes, which describe success factors for KM implementation. These four
includes knowledge sharing. Knowledge sharing is one of pillars consist of: leadership, organization, technology, and
the most important processes when knowledge needs to be learning. Leadership is concerned with the fact that managers
transferred, since these processes are mutually exclusive. develop business and operational strategies to survive and
position for success in today’s environment. The pillar “orga-
Furthermore it is important to stress the intention of this nization” stresses the fact that the value of knowledge
article. This is not to provide managers with a recipe that
needs to be followed to solve the problem. Therefore
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606 | Part 2 Implementation of Strategic Human Resource Management
creation and collaboration should be intertwined throughout Attention to Motivation, Trust, Reward and Recognition
an organization. Operational processes must align with the It is important that the contributors of knowledge and re-users
KM framework and strategy, including all performance of knowledge are assured that they have nothing to fear or be
metrics and objectives. Technology enables and provides the anxious about being discarded when giving knowledge “away”
whole infrastructure and the tools where KM can rely on. or by using “other people’s” knowledge; a trustful environment
Furthermore Bixel stresses the fact that without learning a is therefore an important goal to achieve. In business organi-
KM strategy will not survive; managers must recognize that zation, trust has been identified as an essential condition for
knowledge resides in people, and knowledge creation occurs people to share knowledge and expertise (Nottingham, 1998).
in the process of social interaction and learning.
The knowledge provider has to be specifically rewarded
Davenport and Probst developed a similar, but a more and compensated for doing something that is not explicitly
extensive list of CSFs. Their CSFs are leadership, perfor- stated in his or her contract. It is therefore important to
mance measurement, organizational policy, knowledge shar- reward sharing of knowledge. The reward system should be
ing and acquisition, information systems structure, and in balance with regard to intrinsic and extrinsic motivators.
benchmarking and training.
Establishing the Right Culture
The Five CFSs of KM Creating the right culture for KM, considering the factors
After the literature review of above and after consulting addi- mentioned above, is very important, especially since other
tional articles and research (Holowetzki, 2002; Chourides success factors are influenced by the organizational culture.
et al., 2003) this article will use the following five CSFs that Establishing a culture that enhances KM is a process and
emphasize the human factor within knowledge management: cannot be achieved overnight; it might take several years to
adapt an organizational culture. However, when the right cul-
1. Coaching leadership style. ture has been established KM can take place very effectively.
2. Structure, roles, and responsibilities. Wah (1999) suggests that no KM program can succeed a shift
3. Emphasis on learning and education. in the culture of the organization.
4. Attention to motivation, trust, reward and recognition.
5. Establishing the right culture. Alignment of the Senior Worker
to the CSFs of KM
Below these different success factors will be discussed in
more detail. In this part of the article possibilities to tailor the critical suc-
cess factors to the senior employee are discussed, so that KM
Coaching Leadership Style among this age group can take place as effective as possible.
Management support is essential for the success of KM initia-
tives. Coaching leadership shown by the managers enhances A coaching Leadership Style
the value and strategic quality of KM initiatives and sends a This leadership style is important for knowledge manage-
signal to all employees that managers view KM as an impor- ment since employees become conscientious about the fact
tant activity in their organization to undertake. It is impor- that management values knowledge sharing. On the other
tant that the leader fosters open knowledge sharing by side a coaching leadership style (as discussed earlier) has
creating an environment that is built on trust. also a positive influence on the self-development of senior
employees. When a manager sits down with his/her employee
Structure, Roles and Responsibilities and reflects on things achieved in their lives and what is still
The organizational structure has to support sharing of knowledge. possible in the future, senior employees can regain their
The collection and validation of knowledge, the availability of the enthusiasm and start to feel more committed to the organi-
appropriate IT infrastructure, and “help systems” that enable zation (again). This increases job satisfaction and also bene-
employees to share knowledge, all require appropriate structures fits knowledge sharing. Career planning is often only done
within the organization. The organizational structure should also with younger employees (Zetlin, 1992), but this can be also
encourage the formation of teams, work groups, and communi- an important tool to motivate the senior employee.
ties of practice. Furthermore it is important that knowledge shar-
ing is encouraged across role and functional boundaries. Structures, Roles and Responsibilities
Senior employees value the feeling of usefulness in their daily
Emphasis on Learning and Education activities at work. This possibility could be created by letting
By focusing on (earning and education, new knowledge is the senior employee actively share their experience and
created, which can help an organization to develop new inno- know-how with younger employees. By giving senior
vative ideas. But during a learning process knowledge is also employees responsibility and an active role in knowledge
shared among individuals and they can learn from each transfer and sharing they feel useful at work. This again
other. In this way a bonding process between senior and increases the motivation (the senior employee experiences
the younger employee is initiated.
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Chapter 13 Employee Separation and Retention Management | 607
the intrinsic rewards) which also benefits knowledge sharing. Managers should start talking with senior employees
By creating this opportunity the knife cuts two ways. about what their self development needs are and where they
want to go with respect to their careers. They should show
Emphasis on Learning and Education their senior employees that they value them and encourage
Senior employees are willing to learn and want to develop them to undertake new activities.
themselves, but they need an active approach from their man-
gers, who help them to see where their area of interests lays. Managers should establish teams or work groups that
Most of the time this active style is absent and seniors are not contain both senior and junior employees. In this way the coop-
offered the opportunity to engage in new projects or trainings. eration between the younger and the more experienced
A lot of HR managers do not really offer senior employees edu- employee is stimulated and they can inspire each other and
cational trainings, since they do not see the benefits this can learn from each other, by sharing their knowledge. Developing
deliver to the company. This critical success factor of KM mentor relationships is also a possibility, in these relationships
needs a lot of improvement with regard to the senior employee. specific organizational know-how can be transferred and shared.
Attention to Motivation, Trust, Rewards and Recognition Managers should also reward knowledge transfer
Older employees are motivated in a different way, as between generations. This means creating confidence that
described earlier in this article. They value the intrinsic experienced employees who pass on their knowledge to
rewards of work, life experiencing feelings of respect and rec- younger colleagues not need to be afraid of being replaced
ognition. This could be achieved by creating opportunities for by them. This also has to do with building up a certain
senior employees in which they can feel appreciated and level of trust within the organization.
respected, for example, in a mentor relationship with a youn-
ger employee. I will come back to this possibility later on. Managers must be aware of the fact that senior employ-
ees have other needs and therefore maintain a life-phase ori-
Trust is an important factor to reassure that people share ented HR development strategy. This strategy should make
their knowledge and know-how. It is important that the envi- clear that senior employees have needs for flexible working
ronment in which the senior employee works feels safe, so that hours and a balance between work and private life.
they do not have the idea that when they share their knowledge
they will became superfluous in the eyes of their managers. A culture which fosters the senior employee and in
which KM can prosper needs to be created. Figure 3 visua-
Establishing the Right Culture lizes this culture.
A senior employee needs an organizational culture where
there exists trust and respect. A culture in which there are This culture entails factors that are important for stim-
possibilities for flexible working hours and where their ulating knowledge sharing among senior employees, but also
knowledge and know-how is recognized and appreciated. In entails factors that are critical to the success of KM in
a lot of organizations this is not the case and managers have general. By establishing a culture as depicted above KM can
negative images and ideas about the senior employee, this start to take place in a more effective way among senior
makes it difficult to create a culture that stimulates KM employees.
among this particular age group. A study performed by
Taylor and walker (1998), also acknowledges the importance An organizational culture is, of course, not only created
of establishing the right culture, since the culture of an orga- by HR managers, the whole organization needs to contribute
nization acts as a key factor in shaping orientations towards to its establishment. However, a lot of activities that are under-
senior employees. taken by the HR manager can add to the right culture for KM.
Implications for the Human Resource Conclusion
Manager
This article has quite extensively discussed the issues of KM
In order for managers to effectively manage all the knowledge and the developments within the workforce that took place
that is present in the senior worker, it is first important that over the last couple of years. The main reason for doing this
these managers become conscientious of the value of senior is the lack of understanding that turns out to exist among
employees. They should step out the mindset that holds all managers about the impact the great loss of organizational
the negative images and presumptions about the senior knowledge and know-how, that is threatening many organi-
employee. A positive vision that senior employees can still zations, can have within the upcoming years. By discussing
be of great importance to the organization and that they are the issues in more detail the author hopes HR managers start
a great value should replace the old, negative vision. Only to become conscientious about the possible problems.
after this goal is obtained the next (more practical) steps
towards effective knowledge management can take place. In today’s literature, the two topics (KM and the senior
employee) discussed in this literature review, have received
only little attention from researchers; this literature review
is one of the first scientific articles that does explicitly link
the senior employee to the process of KM.
However, some organizations are starting to understand
the need for knowledge transfer among their own senior
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608 | Part 2 Implementation of Strategic Human Resource Management
FIGURE 3
The Ideal Culture for Effective KM among Senior Employees
Business and Recognition of Flexible job
leadership know-how design
transfer
strategy which
recognizes the
value of the
senior employee
Vision of a work Organisational Work/private-
environment Culture life balance,
where co-operation health
between considerations
generations
leads to success
Training, (self ) Teams with both
development senior and junior
employees and
and career mentor relationships
possibilities for
senior and junior
employees
employees and the one’s of their customers, like IBM (IBM The last factor comprises a significant part of the other
Consulting Services, 2006). Several other authors address the factors; the other factors all have their influence on the orga-
issue of the ageing workforce and the impact on the knowl- nizational culture.
edge industry (Bradly, 2005). Others stress the factors of how
to deal with senior employees in terms of human resource The second sub-question was: “how can these CSFs be
development and training (Rhebergen and Wognum, 1997; aligned to the senior employee?”. It appears to be the case that
Armstrong-Stassen and Templer, 2005). the CSFs of KM can be aligned very successfully to the senior
employee. Mainly, because a lot of the critical success factors of
This article has investigated how KM can take place in KM contain aspects that are valued highly among the senior
an effective way among senior employees, by looking at the employee (attention to recognition, trust) or aspects where this
CSFs of KM and aligning these CSFs to this particular age age group can benefit by (a coaching leadership style; emphasis
group. This first sub-question was: “what are the CSFs of on learning, education; and assigning responsibility).
KM?”. Different theorists mention different critical success
factors of KM, but when looking specifically at the ones The third sub-question was: “what are the implications
that emphasize the human factor, five CSFs come to the fore: for the HR manager?”. The most important implication for
the HR manager is that they should take a more proactive
1. Coaching leadership style. management style towards the senior employee. They should
2. Structure, roles, and responsibilities. guide them in their self-development and assist them with
3. Emphasis on learning and education. deciding on their goals. When this happens, the senior
4. Attention to motivation, trust, reward and recognition. employee experiences the feeling of being appreciated again
5. Establishing the right culture. and than more practical steps that will benefit KM more
directly can be taken.
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Chapter 13 Employee Separation and Retention Management | 609
The problem definition of this article that had to be formed and presumptions that might exist can be eliminated.
answered was: “which critical success factors of Knowledge Management also becomes more conscientious about the sit-
Management can be aligned to the senior employee to enhance uation in their organization.
the effectiveness of this activity? (among this age group)”. Dur-
ing the writing of this article the author discovered that there The next step the HR management should take is to
exist a lot of synergetic opportunities between a more proac- actively involve the employees themselves in the process.
tive management style towards senior employees and effective This can be done by asking them about the bottlenecks they
KM among this group of employees. Therefore, the implica- experience and other experiences they have with regard to
tions and recommendations for the HR manager point mainly the management of personnel, but also by individual inter-
towards an approach that stimulates this leadership style. views between HR manager and senior employee in which
When this management style is initiated by the HR manager self development issues are discussed. In this way the aware-
the critical success factors of KM can be very well aligned to ness among employees about the issue will increase and man-
the senior employee and the level of effectiveness of KM agement will also demonstrate that it is undertaking some
among this age group will be able to increase significantly. “real” action. This is also a knowledge sharing activity,
However, further research in this area is recommended, also which positively influences KM.
because the level of impact can differ for each organization.
It will not be easy to establish a complete change in
Furthermore it has become clear that there exist lot of lit- organizational culture. In today’s society a lot of prejudices
erature that comes to a negative image of the senior employee, exist about senior employees and a lot of regulations are
but also a lot that comes to a positive image. Mapping out the aimed at resignment of senior employees (although this cur-
real situation at micro-level is therefore important. rently starts to change). It is therefore important that a basis
for structural cultural change is created and HR managers
This article is not extensively based on the direct empiri- should take an active position in this process. They should
cal findings, therefore further research is needed to verify, fal- appoint the value of senior employees, refute the presump-
sify, specify and complete the recommendations made in this tions that exist and change their personnel policy.
article and the conclusions that can be drawn from it. Under-
taking further research in this area is strongly recommended, When senior employees experience that management is
especially since the significant social relevance of this issue. really changing their point of view, their trust in management
Further (empirical) research should point out how the effec- increases and management can then start to implement activ-
tiveness of KM can be stimulated among senior employees and ities that facilitate KM, like mentoring relationships and
which theories are relevant to consult in this area. Maybe after mixed teams. Subsequently, knowledge sharing and transfer
more research and bringing the findings into practice HR can take place and the organizations can begin to work
managers are able to turn the question among senior employ- towards effective KM.
ees: “How long do you still have to work?” into: “how long do
you still can work?” and will it be possible to optimize the Source: Journal of Knowledge Management, 11, (4), 82–96 (2007).
effectiveness of KM among this age group. Reprinted by permission.
Recommendations REFERENCES
The implications and conclusions mentioned above point Abou-Zeid, A. (2002), “A knowledge management reference
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Armstrong-Stassen, M. and Templer, A. (2005), “Adapting
HR managers should start to map out the current situa- training for older employees: the Canadian response to an
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assigned to the different age groups present within the orga- Bixler, C.H. (2002), “Applying the four pillars of knowledge
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filled this task, it should start looking at which trends can be work”, Foresight: The Journal of Future Studies, Strategic
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determine if action is needed. By doing this an honest and Chourides, P., Longbottom, D., and Murphy, W. (2003),
sincere view of the different groups of employees can be “Excellence in knowledge management: an empirical study
to identify critical factors and performance measures”,
Measuring Business Excellence, Vol. 7 No. 2, pp. 29–36.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
610 | Part 2 Implementation of Strategic Human Resource Management
Diekstra, M.C.W.M. (2003), Project Arbeidstoekomstverken- Maslow, A. (1954), Motivation and Personality, Harper &
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Henkens. K. (1998), “Older workers in transition: studies on
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Heymann, F.V. and Terlien, M.H.D. (2003), Spelen met je Proceedings of the 36th Hawaii International Conference on
toekomst, 50-plussers op weg naar zingeving, (“Playing with System Sciences.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
14C H A P T E R
Global Human Resource
Management
LEARNING Global Human Resource Management at Reebok
OBJECTIVES
In 1998, athletic shoe global industry leader Nike was hit by a wave of negative publicity
• Gain an appreciation of regarding the conditions in many of its overseas factories. Growing reports of strikes,
how global human resource unsafe working conditions, poor wages, worker abuse, and the use of child labor aroused
management differs from a fury within the United States. Although Nike’s market share remained constant, its stock
domestic human resource price sagged with each new report of labor abuse in Asia.
management
Reebok, one of Nike’s main competitors and a company with a history of strong sup-
• Understand different port for human rights, acted quickly to ensure that there were no similar problems at
dimensions and models of overseas sites owned by Reebok or those in which subcontractors produced goods for
national culture and how Reebok. Reebok contracted with a respected nonprofit social research group in Jakarta,
they influence effective Indonesia, for thorough inspections of two of its shoe factories that employed more than
human resource 10,000 workers. The researchers interviewed and surveyed workers, performed health and
management practices safety tests, and discussed operations with managers. These audits marked the first time
that a U.S. company allowed truly independent outsiders with expertise in labor issues to
• Appreciate the challenges inspect their factories and make their findings public.
involved in selecting
individuals for international The report found a range of problems including poor ventilation, the presence of
assignments as well as the harmful chemicals, inadequate toilet facilities, and sex bias. Reebok took immediate action
purposes of expatriation but found some cultural challenges in addressing the problems. These problems were
largely because of the difficulty of introducing industrialized-world work and culture envir-
• Describe the various levels onments. Workers did not report sexual harassment largely because they did not under-
of standardization of global stand the concept of it. There was also a thriving local market for empty hazardous
human resource practices and chemical containers. Reebok’s vice president for human rights was relentless in his attempt
the pros and cons associated to force Western values on the reluctant Indonesians. Workers and managers were trained
with each in gender awareness and harassment; requirements were set for the safe disposal of chemi-
cal containers; and workers were educated as to the reasons and personal benefits for the
• Gain an awareness of the protective clothing they were required to wear. Reebok’s two Indonesian contractors were
challenges associated with forced to spend more than $250,000 to address these issues or lose Reebok’s business.
repatriation and associated
knowledge retention Reebok led the way in ensuring that oppressive sweatshop operations were curtailed.
Within days, both Liz Claiborne and Mattel followed suit in having outside independent agen-
• Understand some of the critical cies review their operations and those of their subcontractors. Although these initiatives
human resource-related issues clearly show good business sense, particularly in light of what happened to Nike, they also
involved with doing business in show a sensitivity to basic human rights and the ethical treatment of their global labor force.1
select foreign countries in the
European Union, North
America, and Asia
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612 | Part 2 Implementation of Strategic Human Resource Management
T he strategic business decisions being made by modern organizations increasingly involve some
plan to conduct business that was previously conducted domestically in the global arena. In some
cases, this may involve a minimal physical presence in another country; in others, it may involve
setting up operations that will eventually exceed the size of domestic operations. We no longer live in a
domestic economy, as evidenced by diminished trade barriers and regional economic alliances, such as
the North American Free Trade Agreement (NAFTA) and the European Union (EU) as well as the
acceleration of global financial markets and information networks. Tremendous opportunities exist to
market goods and services abroad, particularly in less-developed countries; to participate in joint ven-
tures with foreign organizations; and to outsource operations to other countries as a means of lowering
costs. When one considers that less than 10 percent of the world population resides in the United
States and that many domestic consumer markets are saturated, it should not be surprising that an
increasing number of organizations are developing strategies to expand internationally.
These strategic opportunities are resulting in employers sending an increasing number of
employees abroad to start up, manage, and develop their global operations. While a greater
percentage of the U.S. workforce is being moved abroad, an increasing number of U.S. domestic
workers are natives of other countries. These trends are not just limited to larger organizations as
they once were; small- and medium-size employers are taking advantage of international
opportunities, and their workforces are becoming more culturally diverse.
An organization might focus on expanding globally for a number of reasons. Foreign countries
may present enhanced market opportunities. In addition, expanding the scope and volume of
operations to support global initiatives could result in economies of scale in production as well as
in the administrative side of the organization. Competitive pressure may require an organization to
enter foreign markets to keep pace with industry leaders. Finally, acquisition activity may result in
the ownership of a foreign-based organization or subsidiary.
Regardless of the reasons a company may have for expanding operations globally, human resource
(HR) management is critical to the success of any global endeavor. If one adopts the perspective that HR
strategy must be derived from corporate strategy and that people do determine an organization’s success
or failure, then the HR function needs to be a key strategic partner in any global undertakings.
Ironically, HR is often neglected in the planning and establishment of global operations.
Strategic Global HR at McDonald’s
When fast-food king McDonald’s initially expanded outside the United States, it followed a very
ethnocentric approach to going global. U.S. expatriates were sent abroad to develop the new sites
and maintain as much consistency as possible with domestic operations. Locals were
“McDonaldized”—taught the specific operations and business plans developed back in the United
States. This approach has evolved over the years to one that is now very polycentric. When open-
ing locations outside the United States, expatriates are rarely used and HR professionals at
McDonald’s partner closely with locals to develop an operation that fits with local culture, cus-
toms, and lifestyles. A four-phase approach is used in which HR has a specific and critical role to
play at each step. The first phase, development preparation, usually begins 18–24 months prior to
the actual opening. During this phase, HR researches issues such as compensation and benefits,
considers recruiting strategies, and secures a labor attorney or consultant. The second phase,
resources selection, takes place 8–12 months prior to opening. HR takes the information gathered
in phase one and begins to develop specific HR programs and plans and determines staffing
needs and compensation levels. The third phase, resource development and strategy implementa-
tion, takes place 3–8 months prior to opening. HR puts together employee handbooks, considers
the effects of local labor laws on operations, and begins to implement its staffing plan by hiring
employees. The final phase, preopening preparation, begins 90 days prior to opening.
Here, HR conducts training and lays the groundwork for the performance review sys-
tem. McDonald’s strategy for its global operations includes HR as a key strategic partner,
facilitating the implementation of the human and cultural dimension of the operation for
maximum success.2
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Chapter 14 Global Human Resource Management | 613
How Global HRM Differs From Domestic HRM
Despite the fact that the core principles of strategic HR management also apply to global HR man-
agement, global HR presents some unique contingencies. First, managing people in global settings
requires HR to address a broader range of functional areas. These areas include clarifying taxation
issues; coordinating foreign currencies, exchange rates, and compensation plans; and working
directly with the families of employees who may be accepting overseas assignments. Second, it
requires more involvement in the employee’s personal life. The employee is usually assisted with
acquiring housing in the host country; selling or leasing domestic accommodations; locating recre-
ational and cultural opportunities for the employee and family; arranging and paying for school
for the employee’s children; and locating and securing domestic help for the employee. Third, the
organization must often set up different HR management systems for different geographic loca-
tions. Fourth, the organization is often forced to deal with more complex external constituencies,
including foreign governments and political and religious groups. Finally, global assignments often
involve a heightened exposure to risks. These risks include the health and safely of the employee
and family; legal issues in the host country; possible terrorism; and the human and financial con-
sequences of mistakes, which may greatly exceed the costs of those made domestically.
The threat of terrorism has added to many of the anxieties employees face when considering
and undertaking a global assignment. A recent survey found that expatriates need and want more
support from headquarters than they are receiving regarding health and safety concerns; only
20 percent responded that their employers were keeping them sufficiently informed about health
and safety issues.3 Dissatisfied expatriates can be expensive for an organization: The average cost
of a three-year assignment abroad is $1.3 million.4 In addition, concerns about the employee’s
and/or family safety can diminish productivity and cause stress. Consequently, employers need to
communicate with—and provide the needed support for—expatriates about their safety to ensure
that the assignment is a success.
The decision to expand globally first involves determining the appropriate strategy for
involvement in the host country. For example, the organization may decide to simply export its
goods to a foreign country; this might require very limited presence on the part of domestic
employees. The organization might also decide to subcontract or license certain goods and services
to a foreign partner. On a slightly more involved scale, a joint venture might be undertaken
abroad with a foreign partner. Finally, the organization could decide to establish a significant pres-
ence abroad by setting up operations in the form of a foreign branch office or subsidiary.
Assessing Culture
Several factors will influence the level of involvement an organization might choose in its foreign
operations. Economic, market, social, and political conditions will certainly play a significant role
in any decision to go abroad. A larger issue might be the culture of the host country and how it
compares to the national culture of the organization’s home. National cultures differ on a variety
of dimensions, and many global undertakings fail because of a lack of understanding or apprecia-
tion of cultural differences.
One of the most popular models of cultural differences among countries was developed by
Hofstede, who explained cultural differences along four dimensions.5 The first dimension is the
extent to which a society emphasizes individualism or collectivism. Individualistic societies value
the development of and focus on the individual; collectivistic societies value togetherness, har-
mony, belongingness, and loyalty to others. The second dimension is power distance. This dimen-
sion looks at the extent to which a society is hierarchical, with an unequal distribution of power
among its members, as opposed to one where there are few distinctions and power is more evenly
distributed among individuals. The third dimension is uncertainty avoidance, which refers to the
extent to which the society feels comfortable with ambiguity and values and encourages risk
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614 | Part 2 Implementation of Strategic Human Resource Management
taking. The fourth dimension is the extent to which the society displays “masculine” or “feminine”
tendencies. A masculine society is one that is more aggressive, assertive, and focused on achieve-
ments; the feminine society is one that emphasizes interpersonal relationships and sensitivity
toward the welfare and well-being of others. Although many are uncomfortable with the sexist
connotations of masculine and feminine and the stereotypes they encourage, this dimension does
significantly explain many differences in cultural behavior in societies. Some researchers who
have applied Hofstede’s work have substituted quantity of life for masculinity and quality of life
for femininity. Exhibit 14.1 illustrates how a number of countries fit Hofstede’s model of culture.
Another well-known model that explains differences in culture was developed by Hall, who
characterized culture by the patterns with which we communicate.6 His work focused on the
more subtle means by which we express and display our culture. These means might not be evi-
dent to someone from outside the culture, but they are understood and accepted by insiders. Hall’s
model describes culture in terms of five silent “languages”: time, space, material goods, friendships,
and agreement.
The language of time considers how we use time to communicate and how we use it to man-
age our daily lives. For example, how much do individuals in the culture rely on schedules,
appointments, and deadlines? Is it considered appropriate to keep someone waiting for a meeting?
Do meetings usually have a timed agenda? Are meetings and appointments scheduled with an
ending time or are they open ended?
The language of space considers how we communicate through space and distance. For
example, what is considered the appropriate physical distance between two people engaged in a
conversation? Friendship, formality, and even intimacy are often communicated by distance. How
are spaces in organizations arranged to communicate rank, power, and status? Does an organiza-
tion have private offices and/or designated parking spaces? Are some offices larger than others?
EXHIBIT 14.1 Examples of Hofstede’s Cultural Dimensions
Country Individualism- Power Distance Uncertainty Quantity of Life*
Australia Collectivism Small Avoidance Strong
Canada Individual Small Moderate Moderate
England Individual Small Low Strong
France Individual Large Moderate Weak
Greece Individual Large High Moderate
Italy Collective Moderate High Strong
Japan Individual Moderate High Strong
Mexico Collective Large High Strong
Singapore Collective Large High Moderate
Sweden Collective Small Low Weak
United States Individual Small Low Strong
Venezuela Individual Large Low Strong
Collective High
*A wek quantity-of-life score is equivalent to a high quality-of-life score.
Source: G. Hofstede, “Motivation, Leadership, and Organization: Do American Theories Apply Abroad?” Organizational Dynamics,
Summer 1980, pp. 42–63.
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Chapter 14 Global Human Resource Management | 615
The language of material goods can be similarly used to signify power, success, and status. In
some cultures, these indicators are of critical importance in establishing one’s personal and profes-
sional identity. In an organizational setting, this language might be communicated through gener-
ous perks such as a company car and might be further evidenced by executive salaries that are
many times those of lower level workers. Organizations that establish and maintain pay compres-
sion plans are attempting to silence this kind of language.
The language of friendships considers how we form interpersonal relationships. For example,
are friendships formed and dissolved quickly or are they built on a foundation over a long period
of time? Is there a mutual sense of ongoing obligation in interpersonal relationships or are they
more transient and maintained only as long as both parties see some benefit? Some cultures com-
municate status via material goods; other cultures communicate status through one’s network of
friends and the support this network provides.
The language of agreement considers how consensus is reached among people. For example,
are formal, written contracts signed under an oath of law the norm in business negotiations or is a
simple handshake sufficient guarantee? Is it acceptable to debate someone with whom you do not
agree and, if so, is it acceptable to debate in front of others?
A key issue that impacts an organization’s success in the global arena is an awareness of
cultural differences and the development of both a business strategy and corresponding HR
strategy that is consistent with the culture of the host country. Although it is beyond the scope
of this chapter to detail how cultural differences might impact people management systems, a
culture in which negotiations are based on trust and friendship that is built over time might
pose some difficulty for an American, who might be used to getting down to business and nego-
tiating without developing any kind of interpersonal connection. Also, the candor and outspo-
kenness for which Americans are known could conflict with the styles of those from other
cultures. In short, when cultures come together in organizational settings, special consideration
must be paid to managing processes such as power dynamics and relationships, norms of partic-
ipation and decision making, and performance management and compensation systems to pre-
vent misunderstandings.
Much as societies have cultures, organizations also have their own cultures. As a result, deci-
sion makers need to examine the interface between the culture of the organization and the culture
of the host country in determining whether an appropriate fit exists and, subsequently, in develop-
ing an optimal business strategy and appropriate HR management strategies. For example, if the
organization strongly values diversity, what will be done when a host country’s culture fails to sup-
port these values? In many cultures, it is acceptable to discriminate on the basis of gender, race,
ethnicity, age, disability, and sexual orientation. Does the organization extend its ban on smoking
to all overseas locations? Will it prohibit facial hair on employees or prohibit employees from
enjoying a glass of wine with their lunches? What will happen in a culture in which bribes are an
accepted and expected means of conducting business?
In going abroad, an organization needs to decide what HR policies will be implemented in
the host country and needs to make these decisions prior to arrival. These decisions will force
top managers to confront a number of ethical decisions and may test the strength of the organiza-
tion’s culture. Conflict issues will need to be resolved relative to incompatible local and corporate
cultures. Decision makers need to understand which values the organization holds so deeply that it
will not compromise, even in the face of significant financial consequences. Although these ethical
decisions can present difficult choices, they can help to strengthen the organization’s mission,
strategy, and employment practices.
National culture can have a significant effect on an organization’s ability to utilize strategic
HR. A culture that is oriented toward tradition, for example, might not understand the logic of,
or resist, any kind of planning. Certain cultures have stringent rules regarding staffing and may
require the organization to employ individuals assigned to it by a centralized labor bureau. Indivi-
duals in some very strict hierarchical cultures would probably not respond well to upward perfor-
mance feedback programs. In some cultures, it is considered inappropriate for a worker to report
to a manager who is younger than the subordinate. The inappropriateness of using direct eye con-
tact in conversation in some cultures might bias the results of the employment interview process.
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616 | Part 2 Implementation of Strategic Human Resource Management
Where a culture fits on the individualism–collectivism continuum would influence how it defines
acceptable performance and appropriate compensation. Consequently, in managing across cul-
tures, it is critical to have a strong sense of cultural self-awareness yet remain aware that oversen-
sitivity to cultural issues can be as detrimental as undersensitivity. Reading 14.1, “In the Eye of the
Beholder: Cross-Cultural Lessons in Leadership From Project GLOBE,” examines the similarities
and differences of the cultures of five major world countries and the implications for both Ameri-
can executives in each of these countries and for the development of effective global leaders.
Reading 14.2, “Cross-Cultural Management and Organizational Behavior in Africa,” expands this
discussion to include Africa.
Strategic HR Issues in Global Assignments
An organization can use several different approaches in managing the process of sending workers
abroad. An administrative approach involves merely assisting employees with paperwork and
minor logistics—for example, hiring movers, ensuring that taxes are paid, and obtaining a work
visa for the employee and travel visas for family members. A tactical approach involves managing
the risk or failure factor—for example, handling the administrative paperwork while also providing
limited, usually one-day, training for the employee. This approach does only what needs to be
done to prevent failure. A strategic approach to global assignments, however, involves much
more support and coordination. In addition to those items cited previously, strategically managing
such a process would involve adding extensive selection systems; ongoing, integrated training; a
specific performance management system; destination services; and a strategized repatriation pro-
gram at the end of the assignment.
A model that outlines the strategic HR issues in global assignments is presented in
Exhibit 14.2. The first step in the strategic management of global assignments is the establish-
ment of a specific purpose for the assignment. There may be numerous reasons for the assign-
ment, including business or market development; the setup, transfer, or integration of
information technology; management of an autonomous subsidiary; coordination or integra-
tion of foreign with domestic operations; a temporary assignment to a vacant position; or the
development of local management talent.
After the purpose of the assignment has been identified, the process of selecting an appropri-
ate employee for the assignment can commence. Much as there is an organizational purpose for
the assignment, there should also be an individual purpose for the assignment, as indicated in
Exhibit 14.3. An employee could be chosen for and accept an international assignment to prepare
that employee for a top management position, develop further technical or interpersonal skills, or
allow an employee to follow a dual-career spouse/partner.
Both the organizational and individual purposes for the assignment must be identified and
matched. The assignment needs to be conceptualized as a win–win proposition. There should be
clear articulated gain for both the organization and the employee as a prerequisite to success on
the assignment.
After an appropriate individual has been identified, it is important to assess the adaptabil-
ity to the host culture of both the employee and any family members who will be accompa-
nying the employee on the assignment. The single greatest reason for failure on an overseas
assignment has to do with adaptability skills rather than technical skills and is usually a conse-
quence of the adaptability of the employee’s family to the host culture. Individuals and their
families should be screened to determine their ability to be comfortable in the host culture.
This might include sending the employee and family members to the host country for several
weeks to test their adaptability. Among the areas that an organization will need to assess are
the technical abilities of the employee; the adaptability, willingness, and motivation to live
overseas; tolerance of ambiguity; communication skills; patience and openness to differences
in others; and willingness to interact with both the employee and accompanying family
members.
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Chapter 14 Global Human Resource Management | 617
EXHIBIT 14.2 Strategic HR Issues in Global Assignments
Global Business Strategy
• Export
• Subcontract/license
• Joint venture
• Subsidiary
Local Culture National Culture Corporate Culture
(values, ethics)
Purpose of Selection Strategic HR Issues Managing Expats Repatriation
Expatriation
• Employee Orientation • Performance
• Family • Employee and family management
• HQ staff
• Compensation
• Employee and
labor relations
• Ongoing training
(as necessary)
Level of © Cengage Learning
Standardization
• Ethnocentric
• Polycentric
• Regiocentric
• Geocentric
Expatriate Selection at Kellogg Co.
Given the high cost of most global assignments, it is critical for organizations to get some
return on their investment in sending employees abroad. Battle Creek, Michigan–based
breakfast cereal manufacturer Kellogg saw its turnover rate among expatriates reach 40 per-
cent. Kellogg viewed the retention problem as being rooted in poor selection of candidates
for global assignments. To remedy this problem, Kellogg first implemented a selection strat-
egy for its global assignments, including a pilot program that identified the best candidates
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618 | Part 2 Implementation of Strategic Human Resource Management
based on assessments from managers. HR and senior management partnered to narrow the
list down to 16 individuals who were then given assessment tests that examined work styles,
habits, values, interests, and lifestyles. Employee spouses were also given the assessment. Key
personality traits critical to assignment abroad, such as flexibility, willingness to learn, open-
ness, sense of humor, adaptability, ability to handle ambiguity, and interest in others, were
measured. The information was then analyzed and the results given to employees and their
spouses to explain potential risks and areas of concern that needed to be addressed prior to
any assignment. This new process has had a 100 percent success rate for Kellogg in its expa-
triate assignments.7
EXHIBIT 14.3 Purposes of Expatriation
Organizational Individual
• Business or market development • Skill development
• Setup, transfer, or integration of information • Preparation for top management
• Follow dual-career partner/spouse
technology
• Manage autonomous subsidiary © Cengage Learning
• Coordinate or integrate foreign operation with
domestic
• Fill vacant position temporarily
• Develop local management talent
Once an employee has been selected for the overseas assignment, the organization then needs
to provide the appropriate training for the employee and family members. The initial training
should begin at least six to nine months prior to the start of the assignment. Longer training per-
iods will reflect the need to learn language skills necessary in the host country. Prior to departure,
the employee and family, if possible, should be allowed a trial period living overseas (if this was
not done as part of the selection process). Although this may involve significant costs, it should
be viewed as an investment; the costs incurred for such a trip will be much less than the monetary,
political, and reputation-damaging costs of a failed overseas assignment.
Also prior to departure, the employee and family should receive cross-cultural training in the
norms and values of the host country, workplace and business practices, language training (as nec-
essary), health and safety issues, and realistic expectations of what day-to-day life in the country
will be like. This training should not be considered completed when the employee and family
depart for the host country. A critical mistake made by many organizations is the lack of follow-
up, once employees have gone abroad, to provide additional support to ensure that there have
been no unexpected surprises or consequences.
While the employee and family are being trained, simultaneous training should be conducted
for headquarters staff who will be supervising and/or interacting with the employee who is abroad.
Clashes between local culture and headquarters are common on overseas assignments, and head-
quarters personnel should be provided with some sensitivity training. Sensitivity training will
(1) help headquarters staff understand how and why local decisions are being made and (2) allow
them to give the expatriate employee the necessary support and empathy while keeping the expa-
triate informed as to what has been happening at headquarters.
After employees have been relocated to the host country, the day-to-day issues in managing
expatriates are not dramatically different from those involved in managing domestic employees.
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Chapter 14 Global Human Resource Management | 619
The same principles and practices of general HR management apply with a few additional con-
cerns. First, it is critical to assess the ongoing training needs of the expatriate employee and family
after they have arrived at the host country. Particularly if this is the first time an employee of the
organization has been assigned to a particular country, it is likely that some unanticipated events
that require additional support and training could materialize. Second, performance management
will be more of a challenge; the expatriate’s functional boss is usually located domestically, and
others in the organization may not be aware of how economic, social, and political conditions
and everyday living situations impact the expatriate’s performance. Third, many aspects of
employee and labor relations will be localized. The expatriate may have to manage a local work-
force under far more challenging conditions than those presented domestically. The expatriate
may also have to manage the dynamics of being a foreign manager of local employees. Finally,
compensation for the expatriate will be different. It is costly to send an employee overseas, usually
amounting to as much as three times the employee’s annual domestic salary. Income tax payments
for the employee may be complicated and costly. Benefits such as armed security guards or private
schooling for the employee’s children may be necessary. Although compensation for expatriates is
often outsourced, organizations need to be very careful in this regard; compensation is a key stra-
tegic issue not only from a cost perspective but also in impacting the employee family’s ability to
live in the host country. Outsourcing compensation to a third party who does not fully understand
the organization’s overall strategy or have a holistic appreciation of all of the organization’s HR
systems could result in disaster.
There are three traditional approaches to determining expatriate compensation. The first is
the balance-sheet method. With this approach, salary is based on home country pay, and addi-
tional expenses associated with relocation and the assignment itself are added to arrive at an over-
all reimbursement and compensation level. These expenses might include the cost of housing in
the host country, furniture, household help, a car and driver, or spousal/partner assistance. This
approach ensures that the expatriate gains a sense of equity and fairness in the compensation
package; however, the local employees, particularly if they are poor, may sense some inequity.
This system can be complex to administer, but it is still widely used, particularly for short-term
or temporary assignments.
The higher-of-home-or-host approach takes into account the employee’s salary at home and
adjusts it upward, as necessary, to account for a higher cost of living in the host country. This
approach is usually accompanied by standard perquisites for executives in the host country and is
used most commonly for intermediate term assignments of indefinite duration.
When the employee is assigned to a host country on a permanent basis, the localization
approach is usually used. Here, the employee’s salary is converted to the host country equivalent.
Depending on the country, salary structures, and the cost of living, this approach can initially
result in a salary decrease for the employee. Localization has become an increasing popular
approach for organizations now used by upward of 78 percent of employers.8
Expatriate selection assignments are some of the most critical decisions that organizations make
relative to their global operations. The success or failure of an expatriate assignment can easily deter-
mine the fate and success of an organization’s entry into a new global market. Much of the focus of
expatriation has traditionally been concerned with the selection and training of expatriates and their
accompanying family members. However, this focus has been expanding to involve the active and
ongoing management of the expatriate assignment after the relocation has taken place.9
In establishing general HR policy for the day-to-day management of all employees abroad—
locals as well as expatriates—the organization also needs to make a strategic decision as to the
level of standardization it desires across locations. Heenan and Perlmutter identified four different
approaches an organization can take in setting and enforcing policy: ethnocentric, polycentric,
regiocentric, and geocentric, as illustrated in Exhibit 14.4.10
An ethnocentric approach involves exporting the organization’s home country practices and
policies to foreign locations. This strategy is often used by organizations whose competitive strat-
egy is focused on creating an image. An ethnocentric approach can be beneficial in allowing stan-
dardization, integration, and efficiency. However, if it is forced on another culture that does not
subscribe to the values on which the practices are based, there can be severe problems. Some
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620 | Part 2 Implementation of Strategic Human Resource Management
EXHIBIT 14.4 Four Approaches to IHRM
Orientation
Aspect of the Ethnocentric Polycentric Regiocentric Geocentric
Enterprise By home country By local subsidiary Global as well as local
headquarters management Coordination across standards and control
Standard Setting, countries in the
Evaluation, and From HQ to local Little among region Totally connected
Control subsidiary subsidiaries, little network of subsidiar-
between subsidiary Little between ies and subsidiaries
Communication and and HQ subsidiary and HQ, with headquarters
Coordination medium to high
Host country among subsidiaries Best people where
Staffing Home country managers in region they can be best used
managers
Managers may come
from nations within
region
Source: Heenan, D. A. and Perlmutter, Howard V., Multinational Organizational Development, Addison-Wesley, pp. 18–19 (1979).
turnover can and should be expected and even encouraged when using this approach. It can also
help to make expatriate assignments more attractive to the organization’s domestic employees.
A polycentric approach involves allowing each location to develop its own practices and poli-
cies that are consistent with the local culture and workforce characteristics. Management practices
are localized to suit the existing needs of the marketplace, and adaptability to customer tastes is a
key strategic initiative facilitated by this approach. Although this approach can be costly, it is also
extremely responsive to local market and labor conditions and can help to reduce employee turn-
over in an acquisition, particularly if there are antiforeign ownership attitudes among locals.
A regiocentric approach involves developing standardized practices and policies by geo-
graphic region; therefore, there is some consistency and efficiency within operations. At the same
time, there is some variation among regions to support the local markets. This approach com-
monly involves establishing autonomously managed regional subsidiaries within a geographic
region.
A geocentric approach involves developing one set of global practices and policies that are
applied at all locations. This approach differs from the ethnocentric approach in that although
the ethnocentric approach exports its one set of management systems based on home country cul-
ture to all locations, the geocentric approach considers the global workforce in all its areas of
operations as well as the numerous local cultures in which it operates and attempts to develop
practices and policies that transcend cultural differences. This approach can be very difficult to
implement, given different host government policies and regulations and the need to address
them simultaneously. Compensation plans and standards of living can be difficult to unify in an
equitable way across different cultures.
Repatriation
The final issue in managing international assignments is repatriation of returning employees. This
function is probably one of the most neglected areas in global HR management. Ironically, it is the
one that has the greatest impact on the return on investment made in employees sent abroad.
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Chapter 14 Global Human Resource Management | 621
Very few companies deal successfully with the issue of repatriation. Retention rates of repatri-
ates during the first year of return are often as low as 50 percent in many companies. This is not
surprising in light of the fact that only 27 percent of expatriates are even guaranteed a position
upon return from their international assignment.11 Employers typically make no plans for any
post-return assignment, and expatriates are left to fend for themselves in finding a position within
or outside the organization upon their return. Despite the fact that expatriates usually undertake
international assignments with career development and advancement in mind, only 33 percent of
those who return to their employers are promoted. Fifty-eight percent of expatriates remain at the
same level of responsibility, and 9 percent end up accepting positions with lesser responsibility.12
Organizations need to establish a strategy that allows them to take the valuable experience
abroad and (1) integrate it with what is happening at home and (2) allow coworkers to learn of
the repatriate’s experience to enhance their own performance. As a prerequisite, repatriates need
to be considered from an investment perspective. In many cases, the organization has invested a
sizable amount of time and money in the global assignment of the employee, during which time
the employee has further developed both personally and professionally. If the organization fails to
develop career management programs that allow those returning from abroad to share their
knowledge and insights—rather than leave the organization and share that knowledge with
competitors—then the investment has a negative return. An employee who has worked in another
country may be of great value to a competitor who would like to start up overseas operations.
Many repatriates return from overseas assignments and either have no job assignment waiting
for them or receive a job that is considered a demotion. Expatriates often have high-ranking auton-
omous positions overseas and are forced to assume positions that strip them of this autonomy upon
their return. It is not surprising that some expatriates choose to move to another expatriate assign-
ment with the same employer or with a different employer rather than return to headquarters.
Any strategy for repatriation has to address the purpose of the expatriation. The process of
repatriation can be greatly facilitated if a clear purpose for the assignment was established ahead
of time based on the needs of both employer and employee.
A specific repatriation process needs to address several critical career and personal issues, as
outlined in Exhibit 14.5. The first career issue is resolving career anxiety by helping the employee
returning from abroad find an appropriate place that is connected with a career path for the
future. The second career issue is the organization’s reaction to the return. Is the repatriate made
to feel welcome? Is any value placed on the global experience? Are new skills that have been devel-
oped being put to use? The third career issue is the loss of autonomy. In planning repatriation
programs, some consideration must be given to the level of autonomy the repatriate enjoyed over-
seas and the correspondingly appropriate types of responsibilities, work assignments, and supervi-
sion for the return assignment. The fourth career issue is adaptation. During the expatriation
period, there were probably some significant changes taking place at the home office. The repatri-
ate needs to be provided with assistance in adapting to those changes to facilitate maximum per-
formance in the new assignment.
EXHIBIT 14.5 Issues to be Addressed in a Repatriation
Process
Career Personal © Cengage Learning
• Career anxiety—current place, future • Logistics
• Organization’s reaction • Personal re-adjustment
• Loss of autonomy • Family re-adjustment
• Adaptation to change
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622 | Part 2 Implementation of Strategic Human Resource Management
On a personal level, three major issues need to be addressed in repatriation. The first is logis-
tics. Personal savings will need to be transferred, currency converted, personal belongings inven-
toried and shipped, automobiles and homes possibly purchased and sold, school transfers
arranged, and possibly spousal employment assistance arranged. The more logistical details with
which the employee has to contend, the more he or she will be distracted from work. The second
personal issue is readjustment and integration into the community for the employee. The third
personal issue is readjustment and integration into the community for the employee’s family.
Although it may seem logical that the return home should be a welcome and easy process, experi-
ence has shown that it often is not. Much as the workplace has changed, and the community in
which the employee’s family lives or is moving to may have changed dramatically during the
time abroad. Support for such transition for the employee and family can greatly facilitate the
repatriation process.
Repatriation at Colgate-Palmolive
One of the biggest problems with the traditional high attrition rate among repatriates is the loss
of experience, skills, and knowledge that accompany the employee’s departure. To address this,
Colgate-Palmolive has established a global succession database. Used primarily for succession
planning purposes, the database—available to the organization’s management team
worldwide—also contains information on experiences and skills related to work abroad in vari-
ous cultures. Because Colgate-Palmolive operates over a widely dispersed global area, detailed
information about local markets is critical to ongoing success. Seventy-five percent of the com-
pany’s $9.5 billion annual sales comes from outside North America. At any time, approximately
300 expatriate global managers are on assignment. Seventy-five percent of these managers have
had two or more global assignments and 40 percent of these managers have had four or more.
Because foreign assignments are seen as critical to an individual’s career success within Colgate-
Palmolive and the necessary track to senior management, global assignments are in demand. By
collecting information related to success in a particular location, Colgate-Palmolive is not only
able to provide assistance to managers going on a new assignment but also ensures that its
investment in skills, knowledge, and experiences stays with the organization, given the longer
“shelf life” of cultural information over market data.13
The European Union
Employers who choose to do business in the European Union (EU) do not have the option of tak-
ing an ethnocentric approach to HR in their operations there. As the world’s largest economy with
27 member states, the EU has the challenge of establishing some consistency in and minimum
standards across laws across the region while allowing individual member countries flexibility
based on culture and values. Laws related to employment are enacted as directives that bind mem-
ber countries and set minimum standards that must be met. Directives are usually issued as objec-
tives or desired outcomes and allow individual countries to determine how best to meet those
objectives. Hence, the actual laws related to employment may vary from one EU country to
another, requiring foreign organizations to be particularly astute when setting up European opera-
tions. These laws generally provide workers with far more protection than their counterparts in
the United States. The common intent of these laws is an employment relationship that is not
adversarial or confrontational but one that protects the rights of workers via more collectivist
social policy. As an example, Directive 2010/18/EU requires that a minimum of four months
parental leave by provided to each parent following the birth or adoption of a child yet individual
countries are free to provide more generous leave.
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Chapter 14 Global Human Resource Management | 623
Unlike the United States, the EU does not follow the employment-at-will policy. Terminating
an employee can be a very difficult and expensive undertaking, and the laws regulating the ability
to terminate, the notification period, and required severance vary from country to country. In The
Netherlands, court approval may be needed to terminate an employee; even termination for cause
requires very rigid and specific documentation. Germany requires three months’ notification
before terminations can take effect; Sweden requires up to six months’ notice. In Belgium, where
terminations are very difficult, employers may be required to pay up to four years’ salary to an
employee as severance.14 Spain requires nine weeks of severance pay for each year of service.15
Other areas of the employment relationship are also regulated in various EU countries. Most
require a minimum of four weeks of paid vacation, but France requires five weeks, with an addi-
tional week for employees between 18 and 21 years of age. Maternity leave in France is a mini-
mum of 16 weeks, 10 of which must be taken after the child is born, and can extend up to 26
weeks for a third pregnancy. For any pending layoffs, Germany requires a “social plan,” which
outlines the specific selection criteria used and performance and education levels of workers. Ger-
man employers must also report employee ages and the number of dependants, as older workers
and those with more dependants enjoy a greater level of job security than others.16
One major way in which the employment relationship in the EU differs from that of the
United States is the level of worker involvement seen in European organizations. U.S. employers
generally have a unilateral right to make decisions that affect employees, but European employers
are required to communicate and negotiate many of these decisions with employees as part of the
EU’s Directive on Information and Consultation. Works councils, composed of employee-elected
worker representatives, are required to meet monthly with senior management to discuss all
employment policy issues. Works councils operate at individual work sites and in Germany,
France, and The Netherlands must approve many of the decisions that employers hope to imple-
ment. Employers who do not consult with their works council are subject to fines and possible
recision of the decisions implemented. Germany requires works councils in organizations with
five or more employees. France requires them in organizations with 50 or more employees. Larger
employers, with at least 1,000 employees and at least 150 in each of two member countries, must
also form an EU-wide works council. Decisions that affect workers in more than one country must
be presented to these groups, which are employer funded. U.S. employers operating in the EU are
faced with a dramatically different mandate relative to how they manage their employees than
what they are used to domestically. Works councils formalize the employment relationship far
more than is seen with a typical collective-bargaining agreement.
Mexico and Canada
Even though Mexico and Canada are border countries with the United States and primary trade
partners, HR management in these countries is often carried out in stark difference to HR man-
agement in the United States. Employment discrimination that would be illegal in the United
States is rampant and ingrained into hiring practices in Mexico. A recent recruiting advertisement
in a Mexico City newspaper for retail managers for Office Depot Mexico requested applicants who
were no younger than 26 and no older than 38 and preferably married.17 The ad cautioned that it
was useless to apply if one did not meet these requirements. Despite the fact that Mexico’s consti-
tution strictly forbids such discrimination, enforcement is lax. Employers frequently mandate that
applicants be of a specified age, gender, marital status, height, or satisfy other personal nonwork
related criteria. Female applicants are frequently asked to submit photographs as evidence that
they possess a “nice appearance.” Gender bias in employment runs rampant—consistent with
focus on masculinity in the national culture.
On the other hand, Canada is known to vigorously enforce laws that prohibit discrimination in
employment and also provide extensive protections for arbitrary or unjust dismissal of employees.
While 90 percent of the Canadian population lives within 60 miles of the U.S. border, these indivi-
duals receive far more protection in the employment relationship than do their American counter-
parts. Canada does not subscribe to the doctrine of employment-at-will and requires reasonable
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624 | Part 2 Implementation of Strategic Human Resource Management
notice of termination as well as legally mandated severance pay based on years of service with the
employer. The usual standard is one month per year of service of notice from an employer of pend-
ing termination. This amount can be higher if a court feels that the termination was not handled
fairly. Employees also are entitled to one week’s severance pay per year of service. Most Canadian
employers must also provide employees up to 52 weeks of parental and maternity leave; employers
in Quebec must provide up to 70 weeks. Noncompete clauses for departing employees are frowned
upon, as is a former mandatory retirement age of 65. The province of Quebec amended its Labour
Standards Act in 2004 to prohibit bullying or “psychological harassment” in the workplace. Within
four years, more than 10,000 charges had been filed under this law.18
China
With a population of 1.3 billion people and its 2001 accession into the World Trade Organization,
which eliminated the requirement that foreign organizations partner with state-owned Chinese part-
ners, China has seen tremendous economic growth, largely through foreign organizations that have
set up operations there. Those organizations seeking to take advantage of the rich economic oppor-
tunities offered by China have been confronted with significant challenges relative to HR manage-
ment. Indeed, it has been noted that China’s deep historical and cultural heritage mandates an
approach to HR management that uniquely fits the Chinese context.19 While Chinese universities
produce nearly 5 million graduates annually, many of these individuals are not suitable for employ-
ment in Western-style multinational organizations. In fact, one survey found that only 10 percent of
Chinese university graduates were employable in multinational organizations because of deficiencies
in language, interpersonal skills, ability to work in teams, and basic literacy.20 Even more problem-
atic is the lack of middle- and upper-level manager candidates, many of whom were victims of the
Chinese Cultural Revolution that stymied the Chinese education system from 1966 to 1976.
The tremendous demand for workers capable of working in a multinational organization—
combined with the short supply of such individuals—has created an employment market in which
those with sufficient skills can demand high salaries and expect fast upward mobility. Expatriates
typically expect very high compensation, yet many remain unaware of the key dimensions of
Chinese culture that affect business relations. Recruiting returnees—Chinese citizens who have lived
and/or studied abroad—allows an organization the advantage of having employees who are bilingual
and bicultural, but many of these individuals have become assimilated to and enjoy Western lifestyle
and culture and have no desire to return to China.21 Even if an employer is successful in hiring
qualified applicants, the strong demand for individuals capable of conducting business in China
within a multinational organization makes retention of such employees an ongoing challenge.
There are a number of key factors that influence an employer’s ability to retain such indivi-
duals. The first of these is supervisory relations. Because Chinese society is very hierarchical, shows
respect for elders and authority, and is family centered, employees who have good relations with
their supervisors and feel that they “belong” in an organization are less prone to risk this dynamic
by seeking employment elsewhere.22 A second factor is employer prestige. Because China has such
a brand-conscious culture, 75 percent of Chinese employees prefer to work for a well-known for-
eign organization rather than a domestic Chinese organization.23 This brand consciousness
extends beyond consumer goods to the workplace. A third factor is development opportunities.
A primary component of Chinese culture is learning and growing through one’s lifetime. Chinese
employees enjoy challenges and the opportunity to discuss what they are learning and projects on
which they are working not only with coworkers but also with friends and family members.
A fourth factor is compensation. Chinese employees with sought-after skills know their market
value and expect to be compensated accordingly. While performance-based bonuses are relatively
new to China, employees—particularly younger ones—have been very receptive to incentive-based
compensation plans.24 A fifth factor that can aid in retention is job title. Because the Chinese are
very status-conscious, job titles—regardless of associated responsibility—are very meaningful to
employees. While Chinese workers do seek opportunities for growth and development, a change
in job title can often be a sufficient reward for performance.25
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Chapter 14 Global Human Resource Management | 625
India
In some ways similar to China, with a population of 1.5 billion people and a rapidly growing
economy, India has become a major player in global economic development and a target of
many multinational organizations. However, India presents some significant challenges for
employers related to HR management, which distinguish it from its Asian counterpart.
Unlike China, India has a sizable population of citizens who are well equipped to work in a
multinational organization. India has more than 22 million university graduates, a third of whom
have backgrounds in science and engineering, and produces 2.5 million new graduates annually.26
Hence, India has been a leader in information technology and business process outsourcing.
Despite India’s large technically trained workforce, demand for skilled labor exceeds supply. Com-
petition among employers for talent remains intense, and job hopping and poaching of employees
are standards of doing business in India.
One of the greatest challenges to doing business in India is the onerous legal system, which
involves more than 100 different noncodified and ambiguous laws as well as joint federal and state
government oversight of laws related to employment and labor.27 These laws require employers to
maintain registers and provide annual filings to regulatory authorities. Every employee must receive
a formal letter of appointment that outlines all terms and conditions of employment and serves as a
legally binding contract. Termination of employees in India can be difficult and requires that multi-
ple procedures be followed, which include appropriate cause and notification as well as arbitration.
While misconduct is generally accepted as a valid ground for termination, poor performance is not
necessarily an acceptable basis. Employers are also required to provide employees with a flexible
benefit plan, which accounts for 35 percent of overall compensation. Employers and employees
jointly contribute to social security, called the “Provident Fund,” whereby each party contributes
12 percent of the employee’s wages.28 The Shops and Establishments Act mandates paid annual
leave for all employees, which can be carried forward to subsequent years.
Employment discrimination based on religion, race, caste, sex, or place of birth is specifically
banned in the public sector by India’s constitution. Gender-based pay disparities are prohibited by
the Equal Remuneration Act of 1948, while the Maternity Benefit Act of 1961 provides employees
with 12 weeks paid maternity leave. However deeply embedded cultural mores in this male-
dominated society have limited the career and general employment-related opportunities for
women whose role has largely been tending to the home and family.
Much as in China, retention of skilled workers in India is a challenge because of the demand
that exceeds supply. India also has a pronounced shortage of sufficiently experienced and trained
middle managers to oversee employees. Because the HR function in most organizations needs to
spend an inordinate amount of time on recruiting, compliance, and other associated transactional
activities, there is little involvement in strategic issues.
Retention at Prudential Process Management Services
Prudential Process Management Services (PPMS) is a Mumbai, India–based organization that
provides customer service for Prudential’s financial services customers in the United Kingdom.
With 1,200 employees, PPMS had quickly adapted to doing business in India and enjoys a
20 percent annual attrition rate in a customer service industry that has a norm of 45 percent.
PPMS’s success can be attributed to its workers in India and its appropriate workplace
policies and programs. PPMS hires an average of 25 employees per month but is able to
streamline its hiring process so that a candidate can pass through five successive levels of
screening in a single day, resulting in an offer of employment letter being extended at the
end of the day. Once an employee is hired, training consumes the first 16–20 weeks on the
job, where employees learn about the company history, values and culture, industry, and pro-
ducts. Because PPMS hires young entry-level workers with an average age of 23 at the time of
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626 | Part 2 Implementation of Strategic Human Resource Management
hire, opportunities are provided to move laterally and cross-train in other areas of the busi-
ness. PPMS also offer its own in-house MBA program, developed in partnership with top-
rated business schools in India. The workplace is also literally designed to be a family-type
environment where friends and family members are invited to visit employees at work. This
builds the organization’s culture and goodwill in the community as well as affords PPMS
with an additional opportunity to recruit employees.29
Conclusion
Although the principles and processes of strategic HR management are universal and apply to all
organizational settings and cultures, an organization whose strategy involves multinational operations
faces some additional challenges in ensuring the success of global assignments. The model for strate-
gically managing global HR presented in this chapter is independent of the larger model for the book
for this very reason; it addresses a different set of issues and challenges that present themselves in the
global arena. However, the underlying theme of strategic HR management in looking at human assets
as investments remains quite apparent when looking at global HR management. Employees on global
assignments represent valuable assets who need to be managed more systematically and strategically
than they traditionally have been to ensure greater probability of success in global markets.
Critical Thinking 5. How can employers be more successful with retention
of repatriates?
1. How does global HR management differ from domes-
tic HR management? Reading 14.1
2. Explain the organizational and individual purposes for 6. What differences need to be taken into account by
expatriation. Why do these need to be incorporated as American managers who oversee employees in Brazil,
part of a strategic approach to managing global France, Egypt, and China, and what are the implications
assignments? for American managers in each of these countries?
3. Describe the four levels of standardization of global Reading 14.2
HR practices. For what strategic objectives might
each level of standardization be best suited? 7. What are the critical social cultural practices that impact
business relations in Africa? What specific strategies can
4. Explain how each of Hofstede’s cultural dimensions be used by American organizations that attempt to con-
might result in specific kinds of HR programs and duct business and/or set up operations in Africa?
practices.
Exercises stresses individualism when dealing with someone
from a collectivist culture?
1. Examine the four dimensions of culture presented in
Hofstede’s framework. What strategies would you rec- 2. What challenges does doing business in the EU pres-
ommend in dealing with a different culture that is ent to an employer? In small groups, have each
polar on each of the dimensions? For example, what
advice would you give to someone from a culture that
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Chapter 14 Global Human Resource Management | 627
member investigate the HR environment in a different and one from China operating in each of the other
EU country and then compare and contrast your find- countries, including the United States).
ings, making recommendations to U.S. organizations
considering doing business there. 4. You have been asked to design a Web site that would
assist expatriates in getting ready for their overseas
3. Apply the concepts presented in the Javidan reading assignments. What kinds of information would you
on Project GLOBE across all the countries discussed include on the site? Locate appropriate Internet sites
n the reading (i.e., consider the examples of one man- that provide either useful information about culture
ager from Brazil, one from France, one from Egypt, in general or guidance in how culture affects business
relationships with citizens from a particular country.
Chapter References
1. Anonymous. “Business; Best Foot Forward at Reebok,” 14. Hirschman, C. “When Operating Abroad, Companies
The Economist, October 23, 1999, p. 74; Bernstein, A. Must Adopt European-Style HR,” HR News, 30, (3),
“Sweatshops: No More Excuses,” Business Week pp. 1, 6.
November 9, 1999, pp. 104–106; Gilley, B. “Sweating
It Out,” Far Eastern Economic Review, December 10, 15. Falcone, P. “Learning From Our Overseas Counterparts,”
1998, pp. 66–67. HR Magazine, February 2004, 49, (2), pp. 113–116.
2. Overman, S. “HR Is Partner in ‘McDonaldizing’ Employ- 16. Ibid.
ees in New Countries,” HR News, May 2002, p. 7.
17. Cox News Services. “In Mexico, Discrimination Is
3. Britt, J. “Expatriates Want More Support from Home,” Ingrained,” Baltimore Sun, 18 July 2004, p. 17A.
HR Magazine, July 2002, 47, (7), pp. 21–22.
18. Hassell, J. and Poysa, S. “Canadian Employment Law:
4. Ibid. A World Apart from Its U.S. Counterpart,” Society for
Human Resource Management, article 023972, 24
5. Hofstede, G. Culture’s Consequences: International Dif- January, 2008. Published at www.shrm.org/hrnes/
ferences in Work-Related Values, Beverly Hills: Sage, published/articles/CMS 023972.asp.
1984.
19. Liang, X., Marler, J. H. and Cui, Z. “Strategic Human
6. Hall, E. T. “The Silent Languages in Overseas Busi- Resource Management in China: East Meets West,”
ness,” Harvard Business Review, May-June 1960, 38 Academy of Management Perspectives, 26, (2), 2012,
(2), pp. 87–96. pp. 55–70.
7. Poe, A. “Selection Savvy,” HR Magazine, April 2002, 20. Fox, A. “China: Land of Opportunity and Challenge,”
47, (4), pp. 77–83. HR Magazine, 52, (9), September 2007, pp. 38–44.
8. Dwyer, T. “Localization’s Hidden Costs,” HR Maga- 21. Gross, A. and Connor, A. “Recruiting, Retention Strat-
zine, 49, (6), June 2004, pp. 135–144. egies Can Save HR Managers’ ‘Face,’ ” Society for
Human Resource Management, article 052107,
9. Toh, S. M. and DeNisi, A. S. “A Local Perspective to May 2007. Published at www.shrm.org/global/ news/
Expatriate Success,” Academy of Management Execu- published/XMS 052107.asp.
tive, 19, (1), 2005, pp. 132–146.
22. Fox, A. “Developing Managers Key Retention at All
10. Heenan, D. A. and Perlmutter, H. V. Multinational Levels,” HR Magazine, 52, (9), September 2007, p. 41.
Organizational Development, Reading, MA: Addison-
Wesley, Inc., 1979. 23. Fox, A. “China: Land of Opportunity and Challenge,”
HR Magazine, 52, (9), September 2007, pp. 38–44.
11. Tyler, K. “Retaining Repatriates,” HR Magazine, 51,
(3), March, 2006, pp. 97–102. 24. Gross and Connor, 2007, op. cit.
12. Ibid. 25. Gross and Connor, 2007, op. cit.
13. Connor, R. “Plug the Expat Knowledge Drain,” HR 26. Gross, A. and Minot, J. “Workforce Issues in India
Magazine, October 2002, 47, (10), pp. 101–107. That HR Needs to Understand,” Society for Human
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
628 | Part 2 Implementation of Strategic Human Resource Management
Resource Management, article 019786, January, 2007, published at www.shrm.org/hrresources/lrptpublished/
published atwww.shrm.org/global/news/published/XMS_ CMS026877.asp.
019786.asp.
28. Gross and Minot, 2007, op. cit.
27. Iyer, R. and Shroff, V. “Ensuring Compliance with
Employment Laws in India,” Society for Human Resource 29. Grossman, R. “HR’s Rising Star in India,” HR Maga-
Management, article 026877, October-November, 2008, zine, 51, (9), September 2006, pp. 46–52.
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 14 Global Human Resource Management | 629
READING 14.1
In the Eye of the Beholder: Cross Cultural
Lessons in Leadership from Project Globe
Mansour Javidan, Peter W. Dorfman, Mary Sully de Luque, and Robert J. House
Executive Overview Notwithstanding Tom Friedman’s astonishment about
Global leadership has been identified as a critical success the global world in Jakarta, the fact is that people are not
factor for large multinational corporations. While there is
much writing on the topic, most seems to be either general generally aware of the tremendous impact that national cul-
advice (i.e., being open minded and respectful of other cul-
tures) or very specific information about a particular coun- ture has on their vision and interpretation of the world.
try based on a limited case study (do not show the soles of
your shoes when seated as a guest in an Arab country). Both Because culture colors nearly every aspect of human behav-
kinds of information are certainly useful, but limited from
both theoretical and practical viewpoints on how to lead in a ior, a working knowledge of culture and its influences can be
foreign country. In this paper, findings from the Global
Leadership and Organizational Behavior Effectiveness useful to executives operating in a multicultural business
(GLOBE) research program are used to provide a sound
basis for conceptualizing worldwide leadership differences. environment. It is a truism by now that large corporations
We use a hypothetical case of an American executive in
charge of four similar teams in Brazil, France, Egypt, and need executives with global mindsets and cross-cultural lead-
China to discuss cultural implications for the American
executive. Using the hypothetical case involving five different ership abilities. Foreign sales by multinational corporations
countries allows us to provide in-depth action oriented and
context specific advice, congruent with GLOBE findings, for have exceeded $7 trillion and are growing 20 percent to
effectively interacting with employees from different cultures. 30 percent faster than their sales of exports.1 But while the
We end the paper with a discussion of the challenges facing
global executives and how corporations can develop useful importance of such business grows, 85 percent of Fortune
global leadership capabilities.
500 companies have reported a shortage of global managers
Impact of Globalization with the necessary skills.2 Some experts have argued that
Almost no American corporation is immune from the impact most U.S. companies are not positioned to implement global
of globalization. The reality for American corporations is that strategies due to a lack of global leadership capabilities.3
they must increasingly cope with diverse cross-cultural
employees, customers, suppliers, competitors, and creditors, How can companies best use the available information
a situation well captured by the following quote.
for executive development and, moreover, what is the validity
So I was visiting a businessman in downtown Jakarta the
other day and I asked for directions to my next appoint- and value of such information? U.S. and European executives
ment. His exact instructions were: Go to the building with
the Armani Emporium upstairs—you know, just above the have plenty of general advice available to them on how to
Hard Rock café—and then turn right at McDonalds. “I just
looked at him and laughed, “Where am I?” perform in foreign settings. During the past few years much
Thomas Friedman, New York Times, July 14, 1997 has been written about global leadership, inducing several
books.4 Journals are also getting into the global action as
seen in The Human Resource Management Journal which
recently published a special issue on global leadership.5 Nev-
ertheless, in a recent review of the literature, Morrison con-
cluded that despite the importance of global leadership,
“relatively little research has thus far been carried out on
global leadership characteristics, competencies, antecedents,
and developmental strategies.”6
Advice to global managers needs to be specific enough
to help them understand how to act in different surround-
ings. For example, managers with an overseas assignment are
frequently exhorted to have an open mind and to show
respect for other cultures.7 They may also be told of the
importance of cross-cultural relationship management and
communication. Some will wrestle with the idea that they
need to develop a global perspective while being responsive
to local concerns.8 Or they may wonder if they have the
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630 | Part 2 Implementation of Strategic Human Resource Management
“cognitive complexity” and psychological maturity to handle we will examine common cultural dimensions that characterize
life and work in a foreign setting. And they are likely to hear nations and discuss why these dimensions are important for
or read that they must “walk in the shoes of people from dif- the development of global leaders.
ferent cultures” in order to be effective.9 There is nothing
wrong with such advice, and the scholars and writers who Common Cultural Dimensions
proffer it have often been pioneers in the field. But it is insuf-
ficient for a manager who is likely to assume, mistakenly, that To be open minded and to understand the cultures of the
being open minded in Atlanta, Helsinki, and Beijing will be different countries, managers need to be able to compare
perceived identically, or that walking in someone else’s shoes their own cultures with those of other countries. After a review
will feel the same in Houston, Jakarta, and Madrid. Because of of the available literature, especially the work of Hofstede,
the lack of scientifically compiled information, businesspeople Trompenaars, and Kluckhohn and Strodtbeck,11 GLOBE con-
have not had sufficiently detailed and context-specific sugges- ceptualized and developed measures of nine cultural dimen-
tions about how to handle these cross-cultural challenges. This sions. These are aspects of a country’s culture that
is a particular problem for those in leadership positions. distinguish one society from another and have important
managerial implications. While a few of these dimensions are
Although there are universal aspects of leadership, infor- similar to the work of other researchers, the manner in which
mation about which will be presented shortly, people in differ- we conceptualized and operationalized them was different.12
ent countries do in fact have different criteria for assessing their We reconceptualized a few existing dimensions and developed
leaders.10 The issue for the American manager is whether the a few new dimensions. In all cases, the scales designed to cap-
attributes that made him or her successful as a leader in the ture and measure these cultural dimensions passed very rigor-
United States will also lead to success overseas, be of no value ous psychometric tests. A brief description of each cultural
or, worst of all, cause harm in the foreign operation. Using the dimension is provided below along with the basic research
findings from an extensive research effort known as the Global design of GLOBE. Further details can be found on GLOBE’s
Leadership and Organizational Behavior Effectiveness website, http://www.thunderbird.edu/wwwfiles/ms/globe/.
(GLOBE) project, this article provides a few answers to the
questions about the universal and culture specific aspects of It might be noted that the GLOBE Project has been called
leadership. We will present specific information about key cul- “the most ambitious study of global leadership.”13 Our world-
tural differences among nations and connect the “dots” on how wide team of scholars proposed and validated an integrated
these differences influence leadership. This information should theory of the relationship between culture and societal, organi-
help a typical global executive better understand the leadership zational, and leadership effectiveness. The 170 researchers
challenges s/he faces while managing operations outside the worked together for ten years collecting and analyzing data
United States. It will also provide suggestions on how to on cultural values and practices and leadership attributes
more effectively cope with such challenges. from over 17,000 managers in 62 societal cultures. The partic-
ipating managers were employed in telecommunications, food,
To make the GLOBE findings come alive, we will follow and banking industries. As one output from the project, the 62
a hypothetical American executive who has been given two cultures were ranked with respect to nine dimensions of their
years to lead a project based in four different countries: Bra- cultures. We studied the effects of these dimensions on expec-
zil, France, Egypt, and China. This hypothetical project tations of leaders, as well as on organizational practices in each
involves developing a somewhat similar product for the society. The 62 societal cultures were also grouped into a more
four different markets. The project team in each country is parsimonious set of ten culture clusters (list provided in the
tasked with the marketing of a new technology in the tele- next section). GLOBE studies cultures in terms of their cultural
communications industry. The executive will work with local practices (the ways things are) and their cultural values (the
employees in each location. Success will be determined by way things should be). The nine cultural attributes (hereafter
two criteria: the executive’s ability to produce results and to called culture dimensions) are:
show effective leadership in different cultures and settings.
Performance Orientation The degree to which a collective
The four countries represent different continents and very encourages and rewards (and should encourage and reward)
diverse cultures. Brazil is the most populous and economically group members for performance improvement and excellence.
important South American country. France is the largest, most In countries like the U.S. and Singapore that score high on this
populous, and most economically developed Latin European cultural practice, businesses are likely to emphasize training
country. Egypt is the largest and most populous Arab country. and development; in countries that score low, such as Russia
China is the fast growing giant economy with unprecedented and Greece, family and background count for more.
growth in its economic and diplomatic power in the world. We
chose these countries to provide context specific analysis lead- Assertiveness The degree to which individuals are (and
ing to general recommendations for global executives. Our should be) assertive, confrontational, and aggressive in their
choice of countries was guided by our efforts to cover a wide relationships with others. People in highly assertive countries
range of cultures. Before turning to our hypothetical scenario,
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Chapter 14 Global Human Resource Management | 631
such as the United States and Austria tend to have can-do Uncertainty Avoidance The extent to which a society, orga-
attitudes and enjoy competition in business; those in less asser- nization, or group relies (and should rely) on social norms,
tive countries such as Sweden and New Zealand prefer har- rules, and procedures to alleviate unpredictability of future
mony in relationships and emphasize loyalty and solidarity. events. The greater the desire to avoid uncertainty, the
more people seek orderliness, consistency, structure, formal
Future Orientation The extent to which individuals engage procedures and laws to cover situations in their daily lives.
(and should engage) in future-oriented behaviors such as Organizations in high uncertainty avoidance countries like
delaying gratification, planning, and investing in the future. Singapore and Switzerland tend to establish elaborate pro-
Organizations in countries with high future oriented prac- cesses and procedures and prefer formal detailed strategies.
tices like Singapore and Switzerland tend to have longer In contrast, firms in low uncertainty avoidance countries
term horizons and more systematic planning processes, but like Russia and Greece tend to prefer simple processes and
they tend to be averse to risk taking and opportunistic deci- broadly stated strategies. They are also opportunistic and
sion making. In contrast, corporations in the least future ori- enjoy risk taking.
ented countries like Russia and Argentina tend to be less
systematic and more opportunistic in their actions. Regional Clustering of GLOBE Nations
Humane Orientation The degree to which a collective GLOBE was able to empirically verify ten culture clusters
encourages and rewards (and should encourage and reward) from the 62-culture sample. These culture clusters were iden-
individuals for being fair, altruistic, generous, caring, and tified as: Latin America, Anglo, Latin Europe (e.g., Italy),
kind to others. Countries like Egypt and Malaysia rank very Nordic Europe, Germanic Europe, Confucian Asia, Sub-
high on this cultural practice and countries like France and Saharan Africa, Middle East, Southern Asia, and Eastern Eur-
Germany rank low. ope. Each culture cluster differs with respect to the nine cul-
ture dimensions (e.g., performance orientation). Table 1
Institutional Collectivism The degree to which organizational shows a summary of how the clusters compare in terms of
and societal institutional practices encourage and reward their scores on cultural practices. The clusters that are rele-
(and should encourage and reward) collective distribution vant to this paper are in bold. For instance, clusters scoring
of resources and collective action. Organizations in collectiv- highest in performance orientation were Confucian Asia,
istic countries like Singapore and Sweden tend to emphasize Germanic Europe, and Anglo (U.S. and U.K. among other
group performance and rewards, whereas those in the more English-speaking countries). Clusters scoring lowest in per-
individualistic countries like Greece and Brazil tend to formance orientation were Latin America and Eastern Eur-
emphasize individual achievement and rewards. ope. The Appendix shows the actual country scores for the
six clusters in this paper.
In-Group Collectivism The degree to which individuals
express (and should express) pride, loyalty, and cohesiveness Managing and Leading in Different Countries
in their organizations or families. Societies like Egypt and
Russia take pride in their families and also take pride in the Given the differences found in cultures around the globe,
organizations that employ them. what does an effective American manager need to do differ-
ently in different countries? Everything, nothing, or only cer-
Gender Egalitarianism The degree to which a collective mini- tain things? From a leadership perspective we can ask
mizes (and should minimize) gender inequality. Not surpris- whether the same attributes that lead to successful leadership
ingly, European countries generally had the highest scores on in the U.S. lead to success in other countries. Or are they
gender egalitarianism practices. Egypt and South Korea were irrelevant or, even worse, dysfunctional? In the following sec-
among the most male dominated societies in GLOBE. Orga- tions, we will answer these questions. We will examine some
nizations operating in gender egalitarian societies tend to similarities and differences among cultures regarding man-
encourage tolerance for diversity of ideas and individuals. agement and leadership practices. We then assert that many
of the leadership differences found among cultures stem from
Power Distance The degree to which members of a collective implicit leadership beliefs held by members of different
expect (and should expect) power to be distributed equally. nations.
A high power distance score reflects unequal power distribution
in a society. Countries that scored high on this cultural practice Expatriate managers working in multinational compa-
are more stratified economically, socially, and politically; those nies hardly need to be reminded of the wide variety of man-
in positions of authority expect, and receive, obedience. Firms agement practices found around the world. Laurent, and
in high power distance countries like Thailand, Brazil, and more recently Trompenaars and Briscoe and Shuler,14 docu-
France tend to have hierarchical decision making processes ment the astonishing diversity of organizational practices
with limited one-way participation and communication.
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632 | Part 2 Implementation of Strategic Human Resource Management
Table 1
Cultural Clusters Classified on Societal Culture
Practices (As Is) Scores
Cultural High-Score Mid-Score Clusters Low-Score Cluster-Average
Dimension Clusters Southern Asia Clusters Range
Confucian Asia
Performance Latin America 3.73–4.58
Orientation Germanic Europe
Anglo 3.66–4.55
Sub-Saharan Africa Eastern Europe
Assertiveness Germanic Europe Latin Europe 3.38–4.40
Eastern Europe Nordic Europe Nordic Europe 3.55–4.71
Middle East
Future Orientation Germanic Europe Sub-Saharan Africa Middle East 3.86–4.88
Nordic Europe Latin America Latin America
Anglo Eastern Europe
Humane Orientation Southern Asia Middle East Latin Europe
Sub-Saharan Africa Confucian Asia Germanic Europe
Latin Europe
Institutional Nordic Europe Southern Asia Germanic Europe
Collectivism Confucian Asia Confucian Asia
Anglo
Southern Asia
Sub-Saharan Africa
Latin Europe
Middle East
Anglo
Nordic Europe
Latin America
Confucian Asia
Eastern Europe
Anglo
Southern Asia Latin Europe
Sub-Saharan Africa Latin America
Middle East
Eastern Europe
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