Session 11

Organon Laboratories Case

Kumar Alok CIMP

 International HRM

“Human resource management issues,

functions, policies and practices that result
from the strategic activities of multinational
enterprises and that impact on the
international concerns and goals of those
enterprises.”
----- (Schuler et al., 1993, p. 270)

Kumar Alok CIMP

 Domestic HRM vs. International HRM

Parameter Domestic HRM International HRM

Functional areas  Traditional HR areas  Traditional HR areas
 Taxation, currencies and exchange rate and
compensation plan
 Direct involvement with employees’ families

Involvement in Limited and Assisting in housing in host country

personal lives ofoccasional  Assisting in selling/leasing domestic
employees accommodation
 Locating recreational and cultural activities
 Arranging and paying for school
 Locating and securing domestic help

Geography  No need for geo- Geo-adaptive HR systems are required

adaptive HR systems
External  Less complex  More complex like foreign governments,
constituencies political, religious and activist groups etc.
Exposure to risk  Relatively less  High risk caused by terrorism, AIDS etc.

Kumar Alok CIMP

 Holland, UK & China: Culture

 Culture characteristics as per GLOBE studies

Country Culture Characteristics

Holland Germanic Competitive, aggressive, result-oriented,

Europe value planning and rules

UK Anglo Competitive, result-oriented, less attached

to families or other groups

China Confucian Result-driven, encourage group working,

Asia loyal to families

Can you figure out their business environment?

Kumar Alok CIMP

 Organon Laboratories Ltd.

 83 year old company with more than 60 subsidiaries

around the world
 Now a part of Schering-Plough

A major pharmaceutical player

Over 55000 employees worldwide

Business in more than 140 countries

Net sales: $12.7 billion; R & D investment (2007): $2.9 billion

Merk and Schering-Plough merged to create the world’s
second largest pharma company by market share
 Innovation driven: Core therapeutic areas

Gynecology, fertility, neuroscience and anesthesia

Kumar Alok CIMP

 International business strategies

Global Transnational
Efficiency

International
n
it o
va
n no
I

Multinational
Local Responsiveness

Adapted from “Information Technology for Management”, Henry C. Lucas, Jr., TMH, 7th Edition, P. 129

Kumar Alok CIMP

 Approaches of IHRM
Aspect of Orientation
Enterprise
Ethnocentric Polycentric Regiocentric Geocentric

Standard setting,By home countryBy localCoordination Global as well as

evaluation andHQ subsidiary across countrieslocal standards of
control management in the region control

Communication From HQ to localLittle amongLittle betweenTotally connected

and coordination subsidiary subsidiaries, littlesubsidiary andnetwork of
between HQ, medium tosubsidiaries and
subsidiary andhigh amongsubsidiaries with
HQ subsidiaries inHQ
region

Staffing Home countryHost countryManagers mayBest people

manages managers come fromwhere they can
nations within thebe best used
region
Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 410

Kumar Alok CIMP

 “Organon aims at world-wide registration of its
products. This requires that all Organon employees,
especially the 2,600 research and development staff
at seven centers world-wide, have a global vision.
Together they form a single world-wide organisation,
in which team spirit and a collaborative approach is
more important than location.”

What does that say about their strategy?

Kumar Alok CIMP

 “There are no team-based pay policies on
either Scottish or Dutch sites. The company
have individual-based reward and bonus.”

Can you see a performance-reward congruence?

Kumar Alok CIMP

 SHRM Issues in international assignments

International Business Strategy

Local culture National culture Corporate culture

Strategic HR Issues
Managing Expats
Selection Orientation
• Performance
Purpose of Repatriation
• Employee • Employee & family
Expatriation • Compensation
• Family • Headquarter staff
• Labor relations
• Training

Level of Standardization
• Ethnocentric
• Polycentric
• Regiocentric
• Geocentric

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 407

Kumar Alok CIMP

 “In general Organon do not like expatriation, it
is too expensive. They send employees on
foreign assignments only when they need
someone they can trust in a host site. They
prefer to recruit local people when and where
appropriate.”

What are the expenses involved in expatriation?

Kumar Alok CIMP

 Purpose of expatriation
Purpose of the Organisation Purpose of the Individual

Business/Market development Skill development

Set-up/transfer/integration of IT Preparation for top management

Manage autonomous subsidiary Follow dual-career

partner/spouse
Coordinate/integrate foreign
operation with domestic operations

Fill vacant positions temporarily

Develop local management talent

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 408

Kumar Alok CIMP

 Compensating expats

 Balance sheet approach


Based on domestic pay

Additional expenses added

Suitable for short-term assignments
 Higher-of-home-or-host approach

Accounts for the higher cost of living in the host country

Suitable assignments of indefinite duration
 Localization approach

Salary converted to its host country equivalent

Suitable for permanent assignments

Kumar Alok CIMP

 Issues with repatriation
Career Issues Personal Issues

Career anxiety – current Logistics

place, future

Organization's reaction Personal readjustment

Loss of autonomy
Family readjustment
Adaptation to change

Adapted from “Strategic Human Resource Management”, J. A. Mello, TSW – 3rd Edition, 2005, P. 411

Kumar Alok CIMP

 “Schering-Plough and OBS have different key
franchises, with Organon offering new
direction in the areas of women's health and
central nervous system medicines, but one of
their shared complementary strengths is their
people.”

Comment on the future of this acquisition.

Kumar Alok CIMP
 Key takeaways from Organon

 Global business operation is as much about diverse

markets as it is about diverse work-force
 Culture is not just a customer issue; it is a business issue
 Culturally adaptive HR practices can lead to lasting
success
 Staffing, T & D, performance and compensation systems must
address the business need
 Foreign assignments as business need and not just a fad

HR must be in sync with business strategy

Kumar Alok CIMP
 Thank you!

Kumar Alok CIMP