International Human Resource Management Issue of Sensortec - Case Study Example

? International Human Resource Management Contents Contents 2 Introduction 3 Discussion 4 The problems faced by Sensortec 5 Appropriate approach to HRM strategy 6 Integration 7 HR Challenges facing the firm 8 Advice to senior management 10 Conclusion 10 References 12 Introduction With the advent of the era of globalisation and liberalisation in the world, the companies now have to operate on a global scale. With the advancement of information technology, the firms are able operate much more efficiently across boundaries. Such developments have also brought the importance of human resources in focus of the management. The objective of the human resource management is to help in appropriate deployment of the human resources of an organisation so that the culture of the company can be maintained not only at the national level but also at the global level. With internationalization of business, many experts feel that it will influence the HR practices of a company. The most common way in which business enters into global market are Joint Ventures (JVs), Multi domestic operations (MDOs) and strategic Alliance (SA). Such kind of businesses demands changes in organizational structures, communication across organisation, etc. To handle these issues the organisations need different HR approaches for managing such MNCs. Globalisation of business has affected HR managers more than any other functional heads (Davis, Kerr Von Glinow, 1987, pp. 486-495). Hence with increasing interlink of business across the nations, the HR managers need to give importance to International orientation of the employees. International human resource management is managing worldwide human resources like allocating appropriate resources to utilise their skills effectively. International Human resource management refers to the process of allocating, procuring and effectively utilizing the human resources of an international organisation. In this report the international human resource management issue of Sensortec as it goes international in their operations will be discussed. Discussion Figure 1: Evolution of Organisation IHRM practices International Human resource management is the key to the success of international or multinational enterprises. For many organisations, the cost of the people who work for them represents the single largest item of operating cost. Hence new capabilities and knowledge are needed to be incorporated in the HR practices to make it work. Human resource incurs both cost and revenue to the company (Benson, 1978, pp. 21-37). Many international organisations are facing complications of dealing with many multicultural employees which are becoming an important contributor to their success. This need for human resource specialist is widely acknowledged not only for giant multinational enterprises but also for small enterprises. With economic liberalisation across Europe, reduction in the restriction on the labour movement across the European community, with the advent of new technology has all contributed to the importance of International HRM (Black, 1988, pp. 277-294). Companies now days are trying to invest outside their own country to gain competitive advantage. Due to such strategy they sometimes recruit the local staff or even third-country nationals, like individuals who are neither from home or parent country but from third country. Hence in this case it becomes important for the organisations to look at strategies managing these resources. The HR professional needs to have a deep knowledge of what will be the appropriate environment for such organisation to reach their objectives and goals. The problems faced by Sensortec Sensortec is a UK company set up in 2000 dealing mainly with development and manufacture of electronic sensors. They have their operations spread across three centres, one at Barking, the second at Stansted and another at Docklands. Each operating centre has different functions and hence their workforce supporting the operations is of different skill set. Sensortec is now facing increasing competition from other competitors from Malaysia and Czech Republic and is on the verge to decrease their price. The firms based in those countries have lower labour cost as compared to the companies in UK. While Sensortec is pricing a standard sensor for € 150, their competitors are offering the same product for € 90 which severely affects their profitability. Hence the company is thinking into restricting their cost structure. They want to sell their standard sensor business, with the money raised in the process, create new patentable technologies. They also want to employ IT engineers from India where the cost of such IT engineers are far less as compared to that in Europe. Again they wish to train new staff for 3 to 4 weeks and pay much less wages per annum as compared to semi-skilled workers employed by them. They want to enter into an agreement with an Indian or Malaysian company to produce their products at considerably low cost (Benson, 1978, pp. 41-47). Appropriate approach to HRM strategy The critical aspect in the success of any multinational organisation is translating the business objectives into strategic HRM objectives and its practices. Hence for Sensortec it needs to take a look at their strategic options described earlier and formulate appropriate strategies (Earley, 1987, pp. 685-698). The organisation is in the business of manufacturing sensor devices. It is basically a technology oriented organisation. For Sensortec it is important to achieve a best fit in relation to the global demands for the business. Hence they need to achieve global co-ordination and integration among different units across the globe. They must certainly try to enter and have their bases established in countries like Malaysia and India where the cost structure will be competitive. The global forces which the firm faces include operational requirements from their different operational units across the globe. The operational units have three different operational functionalities. Hence the employee structure is also different. Sensortec must try to adopt the different labour laws, business system and national HR practice in countries where they will set up their operations. Indian HR policies are different as compared to that of Malaysia. Again the culture is also different across the countries. Each country has its own culture which Sensortec must try to inculcate within its existing practice. The most appropriate strategy for Sensortec would be the ethnocentric approach. Here the strategic decision is mostly made at the headquarters of the company and the foreign subsidiaries mainly implement the plan. Sensortec needs to consider many aspects of HRM policies to operate on the global arena. These include selection and recruitment, training, development, performance appraisal, family considerations, compensation, spouse and family consideration and expatriate carrier issues. Sensortec’s HR practices should revolve around four core issues which are cost versus development, integration, timing and differentiation. Timing Timing is one of the most important aspects which the company needs to consider. Sensortec should decide whether it will pursue a long-term or short term orientation. The company must go for long-term strategy so that they can sustain it for a long period of time which results in more effective operations. Cost Versus Development This factor indicates whether the priority of the organization is to incur low operating cost as regards to selection and training or to focus on the long term development of the firm’s overseas operations. Sensortec must look to focus on the long term development of its overseas operations. Since its competitors are producing the sensors at much lower costs compared to them, they need to focus on setting up their bases in developing countries where the cost of the employees will be lower. They should not look at short term cost incurred at training home workers for three to four weeks which will cost them around €3,000 to €4,500 per annum. They must try to employ IT engineers from India which will cost around €10,000 as compared to €40,000 for IT engineers from UK. This development cost will last for a long period of time. They should raise money and invest in R&D to create new patentable technologies. It will enable them to give more pricing power (Barnes, 1985, pp. 46-49). Integration Integration is the degree to which the organisation tries to achieve a global corporate orientation such that it results in strong bonding between overseas offices and corporate offices in two ways. One of the ways is that the corporate office exercises strong control over its overseas offices. The second way is to create the control through informal organisation culture which can be achieved through international staffing practices (Bigelow, 1994, pp. 1-12). Sensortec needs to recruit more employees outside UK. For example if they set up their bases in Malaysia or India, they will need to recruit employees from there. Through recruitment of employees, Sensortec needs to implement strategy so that the new workers can easily accommodate themselves to the new culture. Through strong integration of the new employees they will be able to recognise themselves with the company’s polices. Once they are able to align their objectives with that of the organization they will quickly realise their goals and the company will find the way to earn more profits (Harvey, 1989, pp. 131-144). Differentiation One of the firm’s major objectives is to dictate the differentiation through which the company will try to understand the host country’s culture. Sensortec can achieve such differentiation by involving the host country nationals. It can also be achieved through three-way congruence between societal values, management and organisational structure (Milliman, Glinow and Nathanm, 1991, pp. 318-339). Sensortec can use its experienced network presence in UK to create and expand the network presence in the host countries. This can facilitate effective good communication to the overseas branches from the corporate headquarters (Hays, 1974, pp. 25-37). HR Challenges facing the firm One of the major challenges faced by any company is the process of integrating the managers of host country into the management process of their overseas subsidiaries. Sensortec needs to overcome this challenge. Generally the management style of one county is not the same as that of another country. Hence the company needs to inculcate the management practices of the company into them so that they can quickly get themselves acclimatize to the situation and start contributing towards the organisational goals and objectives. There are some problems with integration in another country which needs to be handled by the managers. Hence it is important they get to know all the important issues associated with it. Sensortec should consider this so that their managers don’t face any such issue (Lee and Larwood, 1983, pp. 657-665). Another important challenge that the firm may have to face is that of Labour law Conflict. In UK the labour laws may not be the same as that in India. Like in UK, there is “Employment at Will” which states that a company can easily terminate an employee without giving any reason. This law apparently don’t exist in India. Hence Sensortec needs to make changes in their labour laws to accommodate it from local to national level and international level which will be relevant to employees. Such labour laws will give the employees confidence that the management looks after their concern and hence will work in an enthusiastic way (Linehan and Scullion, 2002, pp. 254-267). Another challenge which the organization will have to deal with is the overcoming the conflict of interest when doing business across boundaries. The market varies across countries (Earleay, 1987, pp. 685-698). Cultural Conflict is another important issue that has to be taken into consideration. The HR personnel needs to make sure that the employees are well aware of the multi ethnic work force and cultural distinctions that is present within the workforce. In Sensortec it might happen that under a UK manager, there may be employees from India, Malaysia etc. working together in a group. Here the cultural conflict needs to be defeated so that there is understanding within each other (Perlmutter, 1969, pp. 9-18). Talent gap is also a challenge for the HR personnel. Finding right talent and retaining them for highly skilled jobs is tough in the international market. Sensortec should try to look for this kind of worker in emerging world where the cost of the employees is relatively low. India is famous for skilled personnel. Hence the company can look for such kind of employees with lower salaries. It would need the help of immigration departments from the parent nation and the host nation to leverage the talent pool. Then there is the problem of Visa associated with it. Recently India personnel were denied to have a work Visa in the USA. This kind of limitations severely hampers the workforce of MNCs (Shaffer, Harrison and Gilley, 1999, pp. 557-559). Advice to senior management A group of experienced global managers need to respond to the global threats and opportunities which Sensortec is facing and create a global long-term strategy for the business. The senior management should send the high performers overseas to send a message across the organisation that the high performers are rewarded. Such a step will increase the interest in the overseas work by the employees. The organisations and the management of the company need to be more culturally diverse and need to be more creative to formulate more effective HRM practices. Sensortec is facing trouble from rise in prices which affects their profitability. Hence the senior management should try to establish their bases of operations across the developing countries. Such a strategy will definitely improve the operational efficiency of the company. The senior management must invest more in the R&D of the business so that they can they can come out with more efficient sensors at lower prices. Conclusion It can be seen that management of expatriates is a critical issue for the international HRM. Hence the HR director needs to agree themselves on the HR strategy which needs to be formulated on the global corporate basis. Companies need to implement appropriate management styles and organisational processes for the company to carry out their operation effectively. The management must have precise answer ready for most questions which the subordinate may raise while working. The companies need to have a look at the appraisal system which is different for different countries. The company needs to understand whether a western style HR policy work in countries like India and Malaysia. It is the duty of the HR professional to take into account the implications of cultural difference in when making global HR policies. The management should decide the extent to which the HR policies must be standardised or should they be localised keeping in view the overall organisational strategy. In the context of Sensortec, it needs to take a look at the organisational strategy and deicide where it will set up their bases of operations so their price structure is optimised. Based on those decisions the company needs to take appropriate strategy. Sensortec needs to definitely need to expand their operations into other countries where the cost structure is relatively low. This will definitely give them an edge over other competitors. References Barnes, R.L. 1985. “Across cultures: The peace corps training model”, Training and Development Journal, Vol. 2 (1), pp. 46-49. Benson, P.G. 1978. “Measuring cross-cultural adjustment: The problem of criteria”, International Journal of Intercultural Relations, Vol. 2(1), pp. 21-37. Benson, P.G. 1978. “Measuring cross-cultural adjustment: The problem of criteria”, International Journal of Intercultural Relations, Vol. 2(1), pp. 21-37. Bigelow, J.D. 1994. “International Skills for Managers: Integrating International and Managerial Skill Leaming”, Asia Pacific Journal of Human Resources, Vol. 32(1), pp. 1-12. Black, J.S. 1988. “Work role transitions: A study of American expatriate managers in Japan”, Journal of International Business Studies, Vol. 2(1), pp. 277-294. Davis, J., Kerr, S. and Von Glinow, M.A. 1987. “Is the Japanese management craze over?”, International Journal of Management, Vol. 1(2), pp. 486-495. Earleay, P.C. 1987. “Intercultural Training for Managers: A Comparison of Documentary and Interpersonal Methods”, ACAD MANAGE Journal, Vol. 30(4), pp. 685-698. Earley, P.C. 1987. “Intercultural training for managers: A comparison of documentary and interpersonal methods”, Academy of Management Journal, Vol. 30(4), pp. 685-698. Harvey, M.G. 1989. “Repatriation of Corporate Executives: An Empirical Study”, Journal of International Business Studies, Vol. 20(1), pp. 131-144. Hays, R.D. 1974. “Expatriate Selection: Insuring Success and Avoiding Failure”, Journal of International Business Studies, Vol. 5(1), pp. 25-37. Lee, Y. and Larwood, L. 1983. “The socialization of expatriate managers in multinational firms”, Academy of Management Journal, Vol. 26(4), pp. 657-665. Linehan, M. and Scullion, H. 2002. “Repatraition of European Female Corporate Executives”, International Human Resource Management Jourrnal, Vol. 13(2), pp. 254-267. Milliman, J., Glinow, M.A.V. and Nathanm, M. 1991. “Organizational Life Cycles and Strategic International Human Resource Management in Multinational Companies: Implications for Congruence Theory”, ACAD MANAGE REV, Vol. 16(2), pp. 318-339. Perlmutter, H.V. 1969. “The Tortuous Evolution of the Multinational Corporation”, Columbia Journal of World Business, Vol. 4(1), pp. 9-18. Shaffer, M.A., Harrison, D.A. and Gilley, M.A. 1999. “Dimensions, determinants and differences in the expatriate adjustment process”, Journal of International Business Studies, Vol. 30(3), pp. 557-559. Read More