Strategic Human Resource Management and Overcoming Problems of Coordination - Coursework Example

To what extent is strategic human resource management possible within international firms to overcome problems of coordination and control? Research which has been done in international HRM has resulted into the production of several models that have the ability of providing linkage of HRM practices to various levels in the international development of Multi National Companies (MNCs); where the four phases associated with MNC internationalisation or the life cycle level of the MNC (Milliman et al., 1991). The stages have in turn brought about furthering of research on IHRM through the advancement of Perlmutter’s work and producing a linkage to the effect culture has on HRM as far as the stages of MNC development. Brewster, C., Sparrow, P., & Harris, H. (2005) arguments is that several factors come into play in the determination of a trade off between integration and adaption including the legal as well as regulatory constraints, parent country culture, cultural distance, industry, technology, the manpower composition, the type of subsidiary that exist and the extent to which the MNC is dependant on its host country. Pegging argument on open system approach in addition to dependence in resources and institutional theory emphasis is placed on the vital role played by the organization as well as the national environment. The view on MNC subsidiaries is that they are located in two contrasting contexts: whole organization point of view and the host country environment view. When these views are put into consideration, it is clear that subsidiaries will always be faced by varied and more often contradicting forces that arise from these two contexts. On one hand there is pressure of conforming to conditions prevailing locally and making a response that is locally inclined while there is an equal demand for integrating globally and having a reflection of consistency within the MNC. The sociocultural environment has an important role in the determination of the level of performance of the organization and this therefore makes it important for subsidiaries of MNCs to adhere to the local regulations and the local values within the host country. However, the fact that subsidiaries are a vital component of the MNC it is inevitable for them to receive some degree of control as observed by (Chang, Y. Y., Mellahi, K., Wilkinson, A. (2009a), and also they face pressures to be a replica of the organisational characteristics of their parent companies (Chow, C. W., Shields, M., & Wu, A. (1999). The view based on resources together with dependency theory give the framework upon which examination can be done regarding the impact that organizational characteristics may have on HRM practices transfer. For resource-based theory more emphasis is laid on the alignment of HRM with a keen interest on organizational competencies so as to ensure that there is sustenance of a competitive advantage (Ericksen, J., & Dyer, L., 2005). The resource dependence approach has its basis on the argument that any organization may not be able to have all the required resources to achieve its sustainability and thus the need for the organization to depend on other factors (Pfeffer & Salancik, 1978). It has also been revealed from research on International Human Resource Management (IHRM) that if there is great dependence on the subsidiary it will result in greater degree of the parent organization control. It is in recognition of this that several studies have been emphatic on the corporate –level type of organization, where factors that relate to parent company characteristics are highly considered including international competitive strategy, the experience at international level as well as management values relating to HRM in addition to some specific characteristics of the relationship that exist between the parent company and its affiliates including communication and control. In tandem with the resource theory, an MNC are always considered to be a network involving resource transactions among all the subsidiaries spread in host countries (Ferner, A., 1997). MNC’s level of international competitive strategy will determine how the resource transactions will be structured between subsidiaries and headquarters as echoed by Taylor et al. (1996). The factor has a relationship with the distinction which was made by Porter (1990) between the global industries and multi-domestic industries and a typology on MNCs that was brought into existence by Bartlett and Ghoshal (1991). When global industries are considered the competitive superiority in a country will always suffer due to competition being experienced in other countries, but for the case of muitidomestic industries the competition being experienced in each country will not depend on competition being experienced in other countries. This will always result into a situation where the international competitive strategy of companies belonging to different industries will need to be adjusted in accordance to the nature of competition with a substantial difference among them. On the other hand foreign subsidiaries of multidomestic MNCs show high level of independent from headquarters and may show a high level of reliance on inputs which originate from the local environment, will tend to be driven by the local competition from the different companies available. For this matter the resources which are developed in a section of MNC may not obviously useful source of competitive advantage in another point. The subsidiaries are under obligation to earn legitimacy in their host country and in so doing may acquire features of other firms operating in the host country and this means HRM practices being included and this gives a vital importance to national response (Garrahan, P., & Stewart, P., 1992). Foreign subsidiaries of global MNCs will always tend to display high interdependence with their headquarters and also other subsidiaries of the MNC, with regards to managerial execution, technological use, capital and as well as key personnel. They place emphasis on efficiency ensure integration and rationalization of their production so as to bring about production of standardized products at lower cost as echoed by (Gerhart, B., & Fang, M., 2005). Global firms tend to utilize resources, developed or acquired, in one part of the firm to so as create competitive advantage in other areas. In this regard they have greater coordination needs than multidomestic firms and the implication is that there is a great need for internal consistency. As a result, global subsidiaries will always show tendencies of being affected less by situation in the local environment and do not face pressure of conforming to institutional regulations faced by firms in the host countries. References Delios, A., & Bjorkman, I. (2000). Expatriate staffing in foreign subsidiaries of Japanese multinational corporations in the PRC and the United States. International Journal of Human Resource Management. 11(2): 278-293. Edwards, J. R., & Rothbard, N. P. (2000). Mechanisms linking work and family: Clarifying the relationship between work and family constructs. Academy of Management Review. 25: 178-199. Engardio, P. (2008). Chindia: How China and India are revolutionising global business. New Delhi: Tata McGraw-Hill Ericksen, J., & Dyer, L. (2005). Toward a Strategic Human Resource Management Model of High Reliability Organization Performance. International Journal of Human Resource Management. 16(6): 907-935. Ferner, A. (1997). Country of Origin effects and HRM in multinational companies. Human Resource Management Journal. 7(1): 19-37. Gamble, J. (2003). Transfering Human Resource Practices from the United Kingdom to China: the Limits and Potential for Convergence. The International Journal of Human Resource Management. 14(3): 369-458. Garrahan, P., & Stewart, P. (1992). Management control and a new regime of subordination In G. N. Gilbert, R. Burrows & A. Pollerts (Eds.), Fordism and flexibility (pp.107-117). London: Macmillan. Gerhart, B., & Fang, M. (2005). National culture and human resource management: assumptions and evidence. The International Journal of Human Resource Management. 16(6): 971. Glover, L., & Wilkinson, A. (2007). Worlds colliding: the translation of modern management practices within a UK based subsidiary of a Korean-owned MNC. The International Journal of Human Resource Management. 18(8): 1437. Portfolio question: What do you think is the main HR challenge facing Western multinational firms operating in emerging economies, and why? Human resources is considered to be a very important asset for any organization but very few organizations have been found to have the ability of generating real benefits this resource (Pfeffer, 1998). The resource view of the firm is that superior performance of results from a good and timely mix of the necessary corporate resources that includes HR. this is a clear indication that HRM practices are likely to bring about a high performance in an organization thus acting as a source of long-lasting competitive advantage owing to the fact that these practices are usually ambiguous in addition to being unique and not easily imitated (Wright, Duford & Snell, 2001). However, it has been established from some empirical research that HRM practices may not be relied upon to be a source of sustainable competitive advantage unless there is alignment with cultural as well as other contextual factors that always arise from the global operating environment on MNCs (Ahmad & Schroeder, 2003). With the high rate of globalization there has been increased transfer of product and services in addition of the management practices. It has been a common trend for HRM practices to move from developed countries to emerging economies. It is this scenario that results to the western MNCs with operations in emerging economies having the major challenge being the implementation of the western HRM practices in these new territories (Jaeger & Kanungo, 1990). The degree of having an effective implementation of HRM practices has high dependence on the extent of perception of being appropriate by the managers and the subordinates. This in reality calls for in-depth understanding of the cultural and other elements unique to the situation in which HRM practices are being applied so as to ensure that there is maximization of outcome. Even with HRM theories being believed to have universal application, the HRM practices need to carry substantial local content. As observed by Tanure & Duarte (2005) for a particular nation the HRM practices in operation will always be found to have a root the country’s political, historical, social and political differences. In contrast to the universal aspects the locally meaningful aspects of HRM have their basis on the values and attitudes of the employees that are closely related their work. These values and attitudes which are deeply rooted are found to have a strong association the employees occupational, cultural as well as their social backgrounds or simply stated the values have deep rooting in their societies. As a result of there being deep anchoring of HRM practices in the historical, economical, political, social and cultural environment of a country an attempt to import or transfer these practices from developed countries where the MNCs originate end up developing unexpected results. Another challenge faced by the western multinationals is getting of people to work for the in the foreign investments. There is always a shortage of senior global leaders who have the required level of experience and the mindsets. It is always found that the local leaders who are required to be relied upon have shortfalls in terms of skills ( English language skills) which usually of great importance locally and at the global scale. The pools in emerging markets for executive talents are small or simply stated , the number of people with knowledge of the local markets including a thorough understanding of how strategies can be executed and having credibility with senior stakeholders are very few. It is very difficult for people of these characteristics to be found, but even more challenging is for the multinational to be able to retain the few who can be found. The best executives will not prefer to working for a branch of a global company when in current world there are numerous options as a result many local companies going global. One of the reason that has been given to the early exit of is their perception that there is minimal chance moving up the ladder in the multinational of foreign origin or they do not want leave their countries to overseas so as to rise up the ladder. Poaching of the executives by the local competitors is another rampant practice. The other challenge that is worth noting is that local executives are daunted by the matrix structures that are always applied by the multinationals. Reference Pfeffer, J. (1998). The Human Equation. Boston, MA: Harvard Business School Press. Wright, P. M., Dunford, B. B. & Snell, S. A. (2001). Human Resources and the Resource-based View of the Firm. Journal of Management, 27, 701–721. Ahmad, S. & Schroeder, R.G. (2003). The Impact of Human Resource Management Practices on Operational Performance: Recognizing Country and Industry Differences. Journal of Operations Management, 21, 19 – 43. Jaeger, A. F. & Kanungo, R. N. (eds) (1990). Management in Developing Countries. London: Routledge. Tanure, B. & Duarte, R. G. (2005). Leveraging competitiveness upon national culture traits: The management of people in Brazilian companies. International Journal of Human Resource Management, 16(12), 2201–2217. To what extent do the disadvantages of outsourcing the human resource function outweigh the potential advantages When one makes a decision to have another company to take over the performance of a function of a department or single task in essence it is turning the management and the control of that function to the outsourcing company. This is means that even though there may be a contract the managerial control will definitely belong to another company. The outsourcing company is unlikely conform to same standards and missions that drive the company looking for outsourcing services (Pfeffer, J.,1998) . The outsourcing company main drive is to make a profit from the services they are providing. While outsourcing services a contract will be signed but apart from the costs indicated in the contract any other issue not covered in the contact means that an extra charge is incurred. Outsourcing services will also come with additional legal fees towards keeping aboard a lawyer who will review the signed contracts. The business being the specialty of the outsourcing company and having done it many times, they will be in charge of writing the contract and this puts the company seeking the services to be disadvantaged at the onset of negotiation. With an outsourcing company put aboard security and confidentiality of the company will be threatened. This will arise in cases involving payrolls, medical records or any other confidential materials that will need to be transmitted to the outsourcing company. Suppose the outsoucing involves sharing of data, it will be important for this to be taken into account. It is advisable to have a thorough scrutiny of the outsourcing company so as to be sure the company data is protected and include a penalty clause just in case something goes wrong (Ahmad, S. & Schroeder, R.G. ,2003). Quality problems are likely to arise in outsourcing bearing in mind that profit is the motivating factor. The contractor having fixed the price the only alternative for increasing profit is to attempt decreasing expenses. The payment agreed upon will have to be paid as long as the conditions of the contract have been met. Out sourcing services makes it impossible for the company to respond to the changing business environment. The contracts are always very specific and payments will have to be done for any changes. Engaging in outsourcing means that the company will be tied to the financial well being of another company. There is a chance the outsourcing company may end up bankrupt. There are several advantages which are always associated with outsourcing. Focus on core activities is one of the advantages. This is always experienced where in the periods of rapid growth there is proportional growth of the back-office operations. When the expansions starts eating into the company human and financial resources the company at the expense of the core activities, then outsourcing is seen to be an alternative. Outsourcing aims at cost and efficiency savings. This may involve a back-office functions that may be seen as complicated in nature but size of the company is a hindrance to their execution outsourcing is resorted to as a saviour. A good example is where a doctor may want to accept a variety of insurance plans and this may call for engaging a firm specializing in medical billing. Outsourcing also aims at reducing the overheads where overhead costs of performing a specific back-office function may be perceived to be extremely high. An example being the case where growth of the company has resulted in the need of extra office space but the current location being very expensive and there being no room for expansion. The company will resort to outsourcing some of the simple operations with the aim reducing the need of having the extra office space. It is clear from these cases where outsourcing may be resorted to that most of the shortcomings of associated with outsourcing will come into play. This is a clear indication that that the disadvantages will most of the time out way the advantages. References Pfeffer, J. (1998). The Human Equation. Boston, MA: Harvard Business School Press. Wright, P. M., Dunford, B. B. & Snell, S. A. (2001). Human Resources and the Resource-based View of the Firm. Journal of Management, 27, 701–721. Ahmad, S. & Schroeder, R.G. (2003). The Impact of Human Resource Management Practices on Operational Performance: Recognizing Country and Industry Differences. Journal of Operations Management, 21, 19 – 43. Read More