Analysis of Convergence and Divergence in International HRM - Assignment Example

Convergence and Divergence Name Course Name and Code Instructor’s Name Date Development of multinational companies Evolution of sophisticated technology is one of the factors that have led firms to develop international operations (Harris, Brewster and Sparrow, 2003). These technologies have enabled the world to be more interconnected, integrated and interdependent. As such the technologies have created enormous opportunities for firms to compete and thrive in global markets. Demographic factors have also influenced the need to go global. No single country can be able to provide markets for its locally produced products. Most of the world purchasing power is located outside the country (Dowling, Festing and Engle, 2008). Thus firms interested in competing and growing have been lured to enter global markets (Harzing and van Ruysseveldt, 2004). Thus firms are able to increase their sales and profits. This seems to be one of the factors behind Coca Cola expansion. The deregulation of markets globally also contributed to multinational company development (Burke and Cooper, 2006). When laws aimed at protecting and nurturing local entrepreneurs and businesses were struck down, multinational firms were allowed to predate on local firms (Harris, Brewster and Sparrow, 2003). Both Coca Cola and Dow chemical expansion might have been influenced by the deregulation of markets (Rowley, and Benson, 2004). Corporations have also become major players in politics (Burke and Cooper, 2006). Firm’s ability to place corporate money in politics has over the time taken over major political parties and politicians and as such able to influence legislations guiding their operations in such countries (Perkins and Shortland, 2006). Another fact that has aided in the development of international operations is the emerging markets. These markets offer lower costs of operation in addition to their rapid expansion that outweighs that seen in developed countries. As such, firms are lured to expand their ventures into these markets. HR strategies used in international operations Firms operating in international markets employ divergence or convergence HR strategies although some seem to employ both strategies. From the case Dow chemical seems to adopt a convergence strategy (Dowling, Festing and Engle, 2008). According to convergence theory, it is assumed that industrialization process and the spread of advanced technology ultimately results in different nations adopting similar economic and political systems (Harzing and van Ruysseveldt, 2004). This seems to be the logic behind Dow transferring staff from one country to another (Harris, Brewster and Sparrow, 2003). This theory argues that international competitive pressure makes differences in a national management system to be overridden and results in a convergence management practices that are most successful. Based on structural convergence argument, when all factors are held constant, HR systems would tend to look similar outwardly (Burke and Cooper, 2006). Based on this argument, the universalistic strategic human resource management (SHRM) perspective argues that the high performance work systems (HPWSs) approach is the best practice and that implementation of some aspects of HPWS can enhance performance of any firm (Perkins and Shortland, 2006). Decisional convergence can also occur when MNC and LOCs adopt similar analytical decision and analytical frameworks rules (Burke and Cooper, 2006). It is argued that decisional convergence can take place if both MNC subsidiaries’ and LOCs’ HR strategy decisions are based on business strategy and have similar weights attached to the development of their HR systems proponents of this hypothesis argue that if the business environment of both LOCs and MNC subsidiaries become alike, their HR practices and policies will converge followed by structural convergence. Unlike convergence theory, divergence theory scholars argue that national management methods are embedded in cultural and institutional context and that as such is not easy to transfer and adopt the best practices (Dowling, Festing and Engle, 2008). Coca cola seems to adopt divergence strategy since it is more responsive to local HR practices as seen its strategy of “think local act global” (Harris, Brewster and Sparrow, 2003). Proponents of divergence HRM have come up with two types of HRM divergence: cultural divergence and institutional divergence (Perkins and Shortland, 2006). The cultural HRM divergence is based on Hofstede’s national cultural dimensions. On the other hand, the institutional HRM divergence argues that the business environment determines the characteristics of the firm (Harzing and van Ruysseveldt, 2004). The institutional approach is supported by the business systems approach, the analysis of varieties of capitalism and the societal effect approach. They further argue that the traditional practices and values are embedded in the social and economic institutions of a country, which are involved in training, development and making available skilled workforce (Dowling, Festing and Engle, 2008). Thus, the available workforce and the values, skills and knowledge instilled in them during training and development may determine the kind of HRM practices adopted by both LOCs and MNC subsidiaries. Factors that favours convergence strategy in international HR practices Various factors favour adoption convergence HR strategies. One of this is country of origin effect. The home country of the firm often influences the management of the firm. This is mainly in relation to HR practices employed. In most cases, the senior management positions are held by home nationals (Burke and Cooper, 2006). Moreover research and development activities of these firms mainly focus on home country and as such the HR strategy employed tends to be similar across all subsidiaries of the firm (Perkins and Shortland, 2006). In addition, the management of employees in overseas subsidiaries tends to be influenced by home country institutional configuration. Another factor that may result in a multinational firm adopting a convergence strategy is the dominance effect. When a firm dominates the international economy or political economy, it is likely to adopt a convergence HR strategy (Harris, Brewster and Sparrow, 2003). Thus, how the firm’s economic performance is perceived across countries determines whether it is viable for it to adopt convergence strategy (Harzing and van Ruysseveldt, 2004). Strong economic performance in global economy is likely to result in adoption of convergence HR strategies. It is argued that when a firm performs strongly in one country other subsidiaries are likely to borrow business system elements from such a firm and as such resulting in convergence of HR practices (Dowling, Festing and Engle, 2008). Moreover, it is argued that firms from economically stable countries are likely able to transfer HR practices and policies to foreign subsidiaries more easily and credibly (Perkins and Shortland, 2006). Another factor that may influence a firm to adopt a convergence HR strategy is pressures for international integration (Burke and Cooper, 2006). Integration of HR practices often help firms operating in international markets to mitigate the investable problems of subsidiary behaviour control. This has been enabled by the narrowing consumer tastes, deregulation of markets, technology advancement and changes in organization structure. Factors that favours divergence strategy in international HR practices The HRM function is often forced to adopt a divergence strategy since it is usually under significant pressure to adapt to local conditions. This is mainly because MNCs depend on local labour market. Thus, MNC operating in a country where the firm’s HR practices are subject to local regulations is likely to resemble local practices. MNC often aims at attaining legitimacy in society. This requires that they adhere to values of local communities. Thus in order to be legitimate firms often employs divergence HR strategy. This is often easier where legitimacy and efficacy are in congruent with the core values of the firm. Firms may also adopt divergence HR strategy in order to comply with the institutions and business systems within the host country (Harzing and van Ruysseveldt, 2004). The power waged by labour unions differs from one country to another and as such firms may be compelled to adapt to rules and regulations laid down by labour unions to remain acceptable in the host country. Strengths and weakness of convergence strategy The globalization of markets justifies the adoption of convergence HR strategy in order to remain competitive in global arena (Dowling, Festing and Engle, 2008). Convergence strategy often results in employee empowerment and the promotion of egalitarian and diverse culture, trends toward higher customer orientation, responsibility decentralization, job assignment and decision flexibility and sharing of the firm’s goals (Burke and Cooper, 2006). The adoption of this strategy allows a firm to take advantage of technological and economic efficiency. It also ensures that firms, which have low costs but high productivity, become successful. However, convergence may result in increased conflicts with local institutions such as labour unions. It may also result in constant lawsuits due to violation of local laws and regulations that may be different from the country of origin (Harris, Brewster and Sparrow, 2003). Moreover, convergence HR strategy may come with practices, which contravene the local culture, and as such, it might not be acceptable. This may lower the competitiveness of the firm in the host country markets. Strengths and weakness of divergence strategy Divergence strategy allows multinationals to conform to local labour laws and prevailing culture. This increases the legitimacy of the firm within the host country (Dowling, Festing and Engle, 2008). In case this is aligned with efficacy, then the firm is able to be more competitive in such a market than one, which adopts convergence strategy (Harzing and van Ruysseveldt, 2004). Thus, such a firm is unlikely to find itself on the wrong side of the law. Thus, legal costs are minimized while productivity is increased to the benefit of the firm. However, adoption of divergence strategy may result in reduced efficacy due to lack of skills to use current technology (Burke and Cooper, 2006). This may force firms to have a low congruent between efficacy and legitimacy that often results in failure of the firm’s operations in the host country. Main challenges facing employees and organizations when they send employees to work overseas There are various challenges that may face employees and firms when the transfer employees to work overseas. One of these factors is the host country effect. The business system of host country may limit the transfer of employees (Harris, Brewster and Sparrow, 2003). Differences in employment laws between home country and host country may deter such transfer. Employees transferred from home country may find it difficult to work in a country where employment laws are different from what they are used to (Harzing and van Ruysseveldt, 2004). Firms may also find it difficult to operate in such countries since the host country may not approve convergence of HR strategy. Another challenge to firms and employees being transferred to another country is the role of other labour market institutions such as work councils and unions, which may impose certain rules on employment criteria. Such unions may require that upper management positions be held by locals and as such, the firm may find it hard to transfer lower cadre employees (Dowling, Festing and Engle, 2008). Cultural barriers are another challenge that may impact on the ability of multinational firm to transfer employees to another country. For instance, employees who are unaware of local cultural practices might find it hard to fit in the local environment. The decision to send an employee to work in an international subsidiary is often based on technical competence (Dowling, Festing and Engle, 2008). However, to succeed in an international mission one needs multiple skills. Such expatriates often lack language and cultural skills that can enable them to fit into the new environment. This often results in dissatisfaction and hence failure in their mission. Main challenges facing employees and organizations when they recruit local employees Employees hired locally by MNC often find it hard to be consistent with the mother company principles. Such employees are required to be responsive to the needs of the firm and at the same time act the way they are used to (Harris, Brewster and Sparrow, 2003). The organizational culture of the MNC may differ from that of the local employees and as such, they might find it hard to adapt to it. The MNC employing people from host country also faces the challenge of aligning its operations to the mother company and at the same time being responsive to local cultures (Harzing and van Ruysseveldt, 2004). Such firms are faced with challenge of focusing on activities, which are carried out at international level and at the same time decentralizing practices that are carried out at local subsidiary level (Perkins and Shortland, 2006). This requires a high level of coordination in order to balance the activities that would best be undertaken by local subsidiaries with those managed by global centres. Action plan for addressing HR issues This action plan aims at attracting, motivating and retaining high quality staff who have technical skills behaviour and values needed for MNC (Burke and Cooper, 2006). This can be attained by recruiting and developing employees with full commitment to the mission of the MNC. Such workers need to have proactive attitudes vital for adapting to the dynamic business environment. The technical skills of the staff will need to be kept current (Harris, Brewster and Sparrow, 2003). This implies that the MNC will need to provide more learning opportunities (Sparrow, 2009). The firm will also need to offer competitive conditions that are in line with those of comparator firms; implement HR actions that are based on merit and performance that are fair, transparent and practiced consistently; and provision of career development and learning opportunities to allow upgrading of skills. This action plan will be reviewed and updated periodically based on its key indicators and outputs. Organizational development initiatives that can make action plan a success For the action plan to be successful, a detailed project plan will need to be put in place. This plan will outline leadership; provide clear direction, maintenance of HR service and the change management approach to be used. The management of the firm also needs to be committed to the success of the action plan. The managers will also need to drive all change management. The board of directors will need to be involved in the work plan and budget framework. The staffs also need to be involved through constant communication from the management. References Burke, R., and Cooper, C. 2006. The human resources revolution: why putting people first matters. London: Emerald Group Publishing. Dowling, P., Festing, M., and Engle, A. 2008. International human resource management: managing people in a multinational context, 5th Ed. London: Cengage Learning EMEA. Harris, H., Brewster, C., and Sparrow, P. 2003. International human resource management. London: CIPD Publishing Harzing, A., and van Ruysseveldt, J. 2004. International human resource management, 2nd Ed. New York: Sage Perkins, S., and Shortland, S. 2006. Strategic international human resource management: choices and consequences in multinational people management, 2nd Ed. London: Kogan Page Publishers. Rowley, C., and Benson, J. 2004. The Management of Human Resources in the Asia Pacific region: convergence reconsidered. London: Taylor & Francis Sparrow, P. 2009. Handbook of international human resource management: integrating people, process, and context. New York: John Wiley and Sons Read More