Challenges Faced by LVMH - Case Study Example

LVMH: Career development through international mobility Unit the of the unit, the full of your assessment, and identifier Contents 1. Introduction 3 2. Discussion 3 2.1.Challenges faced by LVMH 3 2.2.International Transfer Policy’ charter 5 2.3.LVMH and the issue of international adjustment 6 2.4.Recommendations 8 3. Summary 10 4. Reference List 12 5. Reflective statement 14 1. Introduction LVMH or Louis Vuitton Moet Hennesy was formed in 1987 in France. The company came into being by a merger of various brands that had significant market presence. It operates in markets that can be demarcated into 5 zones Japan, France, America, France and Asia Pacific. The company also has its very own career development program where each company within LVMH is allowed to maintain and manage its own employees. Such employee management is done by variety of ways by the human resources department. The human resource function for the company can be categorised into 4 groups as business group, company level group, regional level and the corporate level group. The department, however, faces a myriad of problems pertaining to the issue of employee mobility which has led to the formulation of a number of charters to seek permanent solutions. Due to the vast nature and geographical expanse of the company, it needs a global pool of managers to efficiently manage its operations within these countries. Despite being a large corporate, the company has not been able to attract enough of international talent this brings in a major demand supply gap for the required skill and expertise of managerial staff within the company. Hence it becomes an extremely important function for company managers to ensure and promote international mobility among its employees. 2. Discussion 2.1. Challenges faced by LVMH The company uses numerous mobility strategies to ensure employee mobility all across the globe. As opposed to expatriation LVMH uses international mobility as a tool for employee retention. Expatriation refers to permanent shift of an employee from one country to another such that he is unable to move back to home country and find work (Carl, 2011). In contrast, international mobility refers to transfer of employee for work in another country while he still retains the right to work within his home country and has the option to return home whenever he wishes. The strategy of international mobility has several challenges that were also faced by LVMH. One of the prime problems faced by LVMH which was established in the year 1987 was the issue of language barrier. In the year 1987, majority of the company employees and management found it difficult to understand and comprehend the language of the country within which they were transferred for work (Kearns and Forrest, 2000). Prior to beginning their work in the foreign country, such managers and staff had to undergo a language training program so as to be skilful enough to work in the foreign country. Such learning took up a lot of time and effort. This worked at extreme disadvantage for the company because each employee was expected to spend a certain amount of time in learning the language before beginning the actual work within the country. This also delayed the plan and implementation process. Later, LVMH tried to resolve the issue by way of sourcing employees from the home country within which the company had set up its operations. Local sourcing strategy not only proved to be time saving but also cost effective in terms of savings made in language training programs (Cerdin, 2003). The second major issue faced regarding international mobility by LVMF includes employee spouses. At the time of employment, most of the employees were young and thereby ready to shift to other locations for work (Farazmand and Pinkowski, 2007).However, as the employees started getting married and beginning their own families, they became reluctant to shift from their home country to another country for work purposes. This was primarily because no one who had a family wanted to be separated from their family. The resolution to this problem was sought by a contract method where young employees were required to not sign contracts that were meant for a time period of 3 years or more. Hence each employee was retained for their useful use. Another issue that plagued international mobility for LVMF was gender discrimination. Many of the countries where LVMF had businesses were against female working employees. In certain places female employees needed to be accompanies by a male relative and could not travel freely. This was rampant in Muslim countries. In today’s world, gender equality is being promoted everywhere and women are finding their rightful place in the society (Geyer, 2008). A last problem that troubled international mobility of employees at LVMF is adjustment to new location. Employees sent to work in other countries often found it difficult initially to adjust to the local environment including the workplace, home, culture and language. Such unfamiliarity made things difficult affecting their productivity and work efficiency (Carr, 2010). 2.2. International Transfer Policy’ charter In order to resolve the problems associated with international mobility, LVMF designed the charter known as the ‘International Transfer Charter’. The charter provided a variety of solutions to the different problems the company faced, in different countries. For example, the charter devised different labour laws that were suited to the requirements of different countries within which it had its businesses. This was essential because each country has its own labour laws that govern and protect the interest of labourer within different countries (Blakemore and Craglia, 2006). This made sure that employees were not exploited by their employers and also the employees adhered to their code of conduct (Nielsen, 2010). The charter of LVMF was to assure employees of their labour protection and code of conduct and remove any ambiguity pertaining to their labour laws. The charter also contained the numerous expatriate packages meant for employees working in different countries. Such packages were meant to focus on the rules, regulations, employment packages and country specific rules for each country where employee were transferred (Gooderham, 2003). Whenever a new employee was absorbed, he was employed based on this charter and not on the basis of company policy of the local LVMH subsidiary company. This reduced the possibility of any conflict in employment contracts in each country. The charter was also used for training purposes in each country to educate and set guidelines for the employed and the employer (Sparrow, Brewster and Harris, 2004). The charter was also being used by different subsidiary companies of LVMH as a training material for its employees including the new incumbents. The training allowed members to understand the company for which they are going to work or are working and also the places where they shall be expected to work. This made the international transfer policy charter, an inevitable document. The charter also removed the confusion that might have come in the absence of a governing charter for all subsidiaries of LVMH. In such case, each company would have had their own set of policies which would have only created immense confusion. Lastly, the charter brought about a standardisation in the company strategies of LVMH regarding international mobility in different counties where it had its operations. 2.3. LVMH and the issue of international adjustment With a view to resolve the issue of international adjustments, a company has to perform several functions to help its employees with the assignments they are given for working in new countries. One such attempt is made towards helping employees to search for their stays within the new countries. The international adjustment allows searching for the best properties available and also assists in buying household items including furniture (Deller and Maher, 2009). This also contributes towards saving a lot of time for the employees as well as the company which the employee would have wasted in looking for a stay (Heras-Saizarbitoria, 2011). A way in which employees are being helped by the organization is the intercultural training that the company conducts for the purpose of training their employees in adjusting to countries where they shall be posted. It is particularly difficult to adjust in Muslim countries which follow an extremely different culture as compared to the western countries. Specialised training is needed for such gender sensitive countries. Thus it is observed that LVMH has done whatever is possible and within their scope to train their employees in adjustment and thus reduce any conflicts that might arise due to lack of information about the cultural differences between countries. When one compares the international mobility strategy for LVMH with those of other large corporate, it is found that they stand in quite a stark difference. It has been observed that most multinationals try to source employees from the country within which they are operating (Geyer, 2007). For the purpose of training these recruits, managers from the company go to these countries only for the purpose of training the locally hired managers. Once the training gets over, these employees move back to the headquarters and into their job positions that they held in their home country and the newly recruited employee is responsible for handling the operations in the member country. In LVMH, the strategy is not to hire employees from within the country in which they are born. It is quite different. The company promotes employee movement from one country to another as a way to develop career for its employees. They train their employees on working in other countries and promote an environment where employees from different countries work in a harmony. Such is done by way of helping employees adjust to new surroundings and make packages that are so competitive and attractive that they want to make the change from their home country. Thus one can see how different the policies of LVMH are in comparison to other multinationals. 2.4. Recommendations As a consultant, I would make the following suggestions with a view to improve the career prospects in cases of international mobility. The first is that the case of international mobility must be presented before employees as an opportunity for career growth and enhancement of professional portfolio. This shall make employees keen to move away from their home countries with the plain motive of enhancing their portfolio (Ozkazanc-Pan, 2008). In order to attain this objective, the company should include additional training measures and benefits such training programs shall have on employee growth and development. Such attempts shall motivate employees to undertake international mobility and also allow smooth transfers because the employee shall now view a transfer as a growth in his personal career (Colakoglu and Caligiuri, 2008). Maslow’s need theory acts as a relevant foundation for motivating employees to work abroad. According to the theory, there is a correlation between international transfer policy for LVMH and the level of motivation among employees. It is felt that the transfer policy needs to have certain needs fulfilment criteria that shall ensure smooth transfer of employees from one country to another and thus facilitate the process of international mobility. 1. Competitive salary and food, housing and security need satisfaction. It is stated within Maslow’s need theory that the physiological is the basic need of an individual that includes food, habitat, security and such other basic amenities. The second level calls for safety need. Here the employee seeks safety and security in housing, health and family. Once these basic needs are satisfied, the employee seeks the next level of needs (Landy and Conte, 2009). 2. Matching living cost expense Transfer of employee changes their cost of living. Expatriation shall need additional expenses that would require matching salary such the any kind of demotivation on such grounds for international mobility is eliminated (Haigh, 2002). 3. Training for culture The cross cultural adjustment issues can be a major deterrent to motivation for employee transfer. Training for adjustments makes employees more confident towards movement of employees from one country to another. 4. When the basic needs have been satisfied, employees can be motivated to make transfers from one country to another only by way of satisfaction of esteem needs and self actualisation needs. This calls for recognition of good work by managers and provision of challenges at workplace. New country, new scenarios can be motivating challenges that provide managers with the scope for applying their skills, knowledge and experience (Nelson and Quick, 2007). Figure 1: Malsow’s Need Hierarchy (Source: Riley, 2012) As an additional measure, I would also like to suggest that LVMH puts in efforts that concentrate on employee well being and comfortable settlement in foreign location. Once the employees have safely adjusted to the transferred country, they will have no troubles behind their mind that would hamper their concentration in work. They should also ensure that whenever an employee moves on to another country for work, he or she enhances his career in some way so that he or she is motivated to move to other countries for work. 3. Summary The international mobility for LVMH assists employees in adjusting to the country in which they have been transferred. In addition to this the charter helps to resolve many issues that have come in the way of international mobility of employees for LVMH. The charter does this by way of providing solutions to both employees and the employer. Nevertheless, the international mobility issue or the charter for international transfer policy lacks in providing any clear indication for a policy on career development for the use of employees. The expatriate package allows for career development only in case for expatriates (Lee, 2007). Hence, it is essential that LVMH designs a career development for the use of employees at LVMH. It is important to understand here that there are certain expenses associated with local recruitment of international employees. It can be an expensive affair if the company fails to recognise the correct person for the fitting job role. Also such expatriates also need time for adjustment. Hence it become important for companies to realise that immediate solutions need to be assisted for and expatriates have to be allowed rime for development. This also calls for some room of flexibility that allows relaxed targets and ease in goal setting for new expatriates. It is commendable the LVMH has done a tremendous job in managing its international operations by successfully implementing the international mobility policy. However, it is also important that companies realise that they use their resources efficiently and refrain from overdoing anything. Right balance of foreign and local employees and efficient cost management structures are important terms of such balance. 4. Reference List Blakemore, M. and Craglia, M., 2006. Access to Public-Sector Information in Europe: Policy, Rights, and Obligations. The Information Society, 22(1), pp. 13-24. Carl, J. D., 2011. Think social problems. Boston: Pearson. Carr, S. C., 2010. The Psychology of Global Mobility. New York: Springer. Cerdin, J. L., 2003. LVMH: Career development through international mobility, in: P. N. Gooderham and O. Nordhaug., International Management. Cross-Boundary Challenges. Oxford: Blackwell Publishing. (pp. 316-335). Colakoglu, S. and Caligiuri, P., 2008. Cultural distance, expatriate staffing and subsidiary performance: The case of US subsidiaries of multinational corporations. The International Journal of Human Resource Management, 19(2), pp. 223-239. Deller, S. and Maher, C. 2009. Government, Effectiveness, Performance, and Local Property Values. International Journal of Public Administration, 32, 13, 1182-1212. Farazmand, A. and Pinkowski, J., 2007. Handbook of globalization, governance, and public administration. Boca Raton: CRC Press. Geyer, H. S., 2007. International handbook of urban policy: Volume 1. Cheltenham: Edward Elgar. Geyer, H. S., 2008. International Handbook of Urban Policy: Contentious Global Issues. Cheltenham: Edward Elgar Pub. Gooderham, P. N., 2003. International management: cross-boundary challenges. New York: Wiley-Blackwell. Haigh, M., 2002. Internationalisation of the Curriculum: Designing inclusive education for a small world. Journal of Geography in Higher Education, 26, 1, 49-66. Kearns, A. and Forrest, R., 2000. Social Cohesion and Multilevel Urban Governance. Urban Studies, 37, pp. 995-1017. Landy, F. J. and Conte, J. M., 2009. Work in the 21st Century: An Introduction to Industrial and Organizational Psychology. London: John Wiley and Sons. Nelson, D. L. and Quick, J. C., 2007. Understanding Organizational Behaviour. Connecticut: Cengage Learning EMEA. Riley, J., 2012. Motivation Theory: Maslow. [online] Available at http://www.tutor2u.net/business/people/motivation_theory_maslow.asp [Accessed 25 February 2014]. Sparrow, P., Brewster, C. and Harris, H., 2004. Globalising Human Resource Management. London: Routledge Ozkazanc-Pan, B., 2008. International management research meets the rest of the world. Academy of Management Review. 33 (4), pp 964 – 974. Lee, H., 2007. Factors that Influence Expatriate Failure: An Interview Study. International Journal of Management. 24 (3), pp 403 – 413. Nielsen, S., 2010. Top Management Team Internationalization and Firm Performance. Management International Review. 50, pp 185 – 206. Heras-Saizarbitoria, I., 2011. General Perspectives on the Leading International Management Standards. Journal of Management Research. 11 (1), pp 3 – 19. 5. Reflective statement I was happy with the reflection requirement on the international mobility aspect for LVMH after the course study. Such a deep understanding of the issue of international motivation for the company has strengthened my knowledge on the literature study in the field of human resource management. For LVMH, recruiting employees has been extremely difficult when it comes to locally hiring managers in foreign countries. However, the company has made its international mobility program quite successful. They have managed to make such mobility issues more cost effective by designing motivation and training programs apart from compensation and allowance packages as compared to local hiring process within international locations. This has provided me with an insight into how successful management can make use of theories in literature and make it work towards the benefit of the company. I feel more confident about my knowledge on various aspects of employee motivation and mobility issue management after the study. In terms of business application, the study has made me more industry ready for HR issues that can be resolved by addressing the needs theory among individuals. It is felt that most kinds of resistance and conflicts in business and employee arises because need dissatisfaction. The successful manager has to devise ways in which the issues can be tackled by way of managing individual needs. Read More