Potential Strategic Problems Facing Human Resource Managers (HRM) Operating in Multi-National Companies (MNC) - Assignment Example

Potential strategic problems facing Human Resource Managers (HRM) operating in multi-national companies (MNC) By Presented to Instructor Course Date Potential strategic problems facing Human Resource Managers (HRM) operating in multi-national companies (MNC) Introduction A multi-national company is a company that has been formed to operate across known international physical boundaries (Cooke, 2003). These companies are often located to other international countries apart from the parent country in which it was originally founded. These multinational companies specialize in the production of a variety of goods or services that are distributed to their other branches in other countries. In addition, there are also those companies that deal with provision of services that are also spread out in a number of countries all over the world. These include companies engaged in the finance and property investment sector. Banks are often located in various locations all over the world such as Barclays which has its parent country in the United Kingdom but has got branches all over the world (Doz, 1986). These multinational companies have got high annual sales likely to surpass the economic output of some medium sized countries. This is realized in the example of General Motors and Shell which have got annual sales higher than the economic output of countries like South Africa and Nigeria (Banfield & Kay, 2012). There are about 63,000 multinational companies currently in operation in various locations in the world. These companies contribute to about two thirds of the global trading activities injecting 80 percent of the investment currently circulating in the money market. Multinational companies enjoy a variety of benefits while operating in other host countries. These include physical proximity to markets whereby they are exposed to larger markets owing to their local and international presence (Cooke, 2003). They also receive host country incentives that are aimed at increasing investment in these countries hence internationalizing production of their products and services. Thesis There are numerous challenges that HRM faces when managing members of staff in an organization (Briscoe, Schuler & Claus, 2008). Human beings, owing to their cultural, social, political and economic diversity have presented challenges not only to HRM but also among themselves as they seek to interact. The situation is thus made more complex by the relatively higher staffing requirements of MNC. Potential Problems facing HRM managers in MNC Complex Organizational Structure However, such multinational companies pose significant challenges to the human resource managers (HRM) resulting to the complex structures involved in the development of multinational companies (MNC) (Scullion & Collings, 2006). Authority, responsibility and decision making is distributed within the organizational structure of these companies. Bureaucracies are thus likely to occur because of the levels of management that have to be traversed before a decision can be made. Because of the array of personalities involved in daily work and management, there are various attitudes and perceptions that must be considered before HRM can effectively achieve success (Storey, 2007). Globalization Globalization also has a significant influence on the activities of HRM being that these MNC are faced with different economic structures in the world. There is thus increased pressure on the HRM for local responsiveness (Reilly & Williams, 2012). They are often faced with the challenge of selecting local workers from the host countries who may not be sufficiently able to manage activities in the MNC as would staff from the host country. Hence they may have to upset a delicate international relationship by recruiting staff from their parent country or another international country. In addition, local workers from the host country also have to be given an opportunity to participate in the MNC operations in order to be able to reciprocate the local incentives that they have been given by the host country (Reilley & Williams, 2012). Workforce Cultures Workforce cultures are also different in various countries owing to the different social cultures in those countries (Silverthorne, 2005). Hence HRM is faced with the challenge of incorporating these cultures into its operations. These cultures may at times prove detrimental especially if they advocate for lesser working hours or forbid work on certain days of the week apart from the conventional weekends in most countries. Hence organizational performance may be affected or reduced in such countries as HRM seeks to create a balance between employing local workers and recruiting staff from overseas, most of who may not be subject to such workforce culture. The members of the workforce may also be inclined towards uncertainty avoidance. In so doing, they are threatened by unknown situations which may prevent them from accepting the MNC products and services. Staffing is also greatly affected by a workforce culture of uncertainty avoidance because staff will be less likely to try out new type of work because they have created belief systems against this kind of work (Silverthorne, 2005). MNC that seek to venture into feminine sanitary products may find difficulty accessing an appropriate workforce because most workers may feel threatened by unknown situations as relates to feminine culture. HRM will thus have a problem allocating staff to such departments especially when these departments are opened up as an addition to an existing line of masculine products. Legislation and Public policy Different countries have got different legislations that govern their labor force and the minimum wage policies that must be implemented by any company operating there (Sangal, 1981). Hence HRM managers have to take into consideration varying legislation by various countries in order to determine the suitable wage level that staff in different countries will be provided. Minimum wage has often been the source of great contention between MNC and local governments because some level of wages and salaries would reduce the revenue realized. Hence HRM have to negotiate with such governments and ensure that they are operating within the wage policies in place. In addition, legislation may also affect work culture in those countries through the establishment of labor markets that further control business activities in the country. Some countries require their employees to be part of labor movements in order to regulate the activities of their employers effectively (Dorrenbacher & Geppert, 2011). Hence HRM may face significant challenges from such countries characterized by legal strikes and negotiations by labor unions that may hamper their activities in those countries. Employer councils and unions also exist in various countries which have their own requirements of how staffing should be done. These councils should also be factored in by HRM managers as they are developing their staff and incentive structures owing to their influence. The World Trade organization is another important aspect of trade among MNC whose rules and aspects should be considered by HRM for MNC (Dorrenbacher & Geppert, 2011. This trade body seeks to streamline trade operations all over the world by improving trade relations between different countries. It also sets various rules and regulations that affect aspects of employee relations and host relations that may be fundamental to companies operating across international boundaries. The World Trade organization presents global laws that need to be adhered to by all companies operating in the world. The European Union is another trade entity that has got one of the most developed economic trade treaties for MNC operating in their jurisdiction. The European Union is in effect in several countries in the world though its mandate does not extend to various other countries. Other more regional trade agreements are developed among countries that are closely located in a geographical region. This includes the Latin America and Asia Trade Agreements that govern trade operations between these continents (Dorrenbacher & Geppert, 2011. It is thus important for HRM to understand the various trading bodies presenting trade laws and legislations that will eventually govern their operations in the host country. And because they may be several trade bodies operating in an area, HRM are faced with the challenge of meeting the requirements of all of them while maintaining productivity. Recruitment and Retention Management HRM face significant challenges in recruiting qualified staff that are able to meet the demands of the work place and achieve high productivity for the organization. Proper selection mechanisms are thus required in order to ensure that key competencies and skills of employees are captured during interviews and other selection procedures (Doz, 1986). Once key staff have been recruited, HRM are faced with the challenge of retaining such employees in the company. Staff often respond well to incentives and remuneration schemes with which they gauge their relative importance in the organization. Hence MNC constantly have to stay updated with the various trends in the local markets of the various local countries in which they operate to ensure that they offer attractive and competitive remuneration packages for their staff. This is done to prevent staff attrition to other organizations which offer better pay (Doz, 1986). However, remuneration poses significant challenges to HRM because of its obvious implication on overall revenue that the organization accrues. Incentives must also be provided cautiously to ensure they do not devalue the work output such that staff only work towards quantity of output while compromising on quality. HRM is thus faced with maintaining a careful balance in their rewards scheme (Cooke, 2003). Different approaches may be used including a development of the compensation scheme from its internal operations across its outlets regardless of national location. Compensation schemes may as well be pegged on whether an employee will be considered as an international employee or whether they will be regarded local employees. The question of whether to use global remuneration systems of international assignment compensation is a common challenge for HRM because each approach will have its own implications (Beardwell & Holden, 2005). Performance Management HRM is also extensively engaged in performance management within the organization. This activity has often been considered as ever ongoing within the organization owing to the significant redundancies that occur in operation systems in the organization. Every company seeks to perform well in order to increase its output (Kramer & Syed, 2012). Hence performance management seeks to ensure that the company has the best members of staff, well qualified to operate in various areas in the organization. They also seek stability in their performance through systems that ensure staff retention within the organization in order to reduce costs of recruitment and training of new members of staff. Performance appraisals and reviews also have to be conducted constantly in MNC to ensure that objectives are being achieved within the company. These appraisals may often be viewed by many employees are invasive and may not be entirely accepted. Common misconceptions of such appraisals and reviews are that the information obtained from them will be used as a basis of termination of employment. HRM faces the challenge of ensuring that such appraisals are performed in an efficient manner to elicit the right type of information and receive appropriate responses for change (Briscoe, Schuler & Claus, 2008) Managing Staff Expatriation There are cases whereby staff members are sent out to operate in offices outside their parent country. These are considered as international assignments that may take several years or even forever depending on their nature. There are those who are sent on a one-off assignment while other are sent to manage international offices. As a result, staff members have to relocate their homes and families to such locations in order to continue with their social lives. Several staff members on international assignment have been known to turn down such assignments and even resign from their workplaces. Others have experienced significant psychological difficulties at the point when they leave their home countries for other places (Silverthorne, 2005). On arrival, numerous more have had trouble adjusting to foreign culture, climatic conditions and political environments of the new place. This poses a significant challenge to HRM because employee productivity in such cases is very low. Employees who are not psychologically comfortable with their working conditions are likely to have low levels of self-motivation (Silverthorne, 2005). The result is poor work input lacking ideas and energy that eventually results in diminished output and revenue. Hence HRM managers while faced with the crisis of sending qualified expatriates to work in their international offices, they have an even greater challenge of ensuring that such employees, on arrival, are able to adjust. This is because, failure to monitor their employees mood and motivation, may lead to wastage of resources when these employees resign for other jobs back at home (Silverthorne, 2005). Managing Adult Learning The learning process among staff members is an intricate process that is clouded by various other factors (Kramer & Syed, 2012). Adult learning is not as simple as imparting life lessons on children because of the age and experience accumulated by this group. HRM managers from time to time have to impart lessons to the organizations staff members to ensure best practices are implemented. But even with the clear understanding that adult learning is not as simple as child learning, HRM still face significant challenges when it comes to introducing new concepts to members of staff. Adults learn best through meaningful experiences with behavior skills improved through observation and practice with feedback from other areas. Observed learning is faced with a lot of challenges especially when wrong behavior is essentially being practiced. Correcting such errors in behavior may thus be a precarious process because staff may not take it positively. There are cases where disciplinary action is initiated against employees because they have failed to respect working hours within the organization. HRM may face a significant challenge if such an action is being taken against a senior member of staff. Feedback also has to be done appropriately because every type of communication is subject to a lot of interpretation (Silverthorne, 2005). In order to effectively communicate with adults, a proper mode of communication has to be chosen that does not make them feel humiliated. HRM therefore have the task of developing informal methods of learning within the organization that ensure that adults are able to learn and emulate best business practices. There should be a variety of international management development programmes that are also suitable for the different types and levels of people that are present in the international community. The international community consists of people of different cultures who may not share many common aspects of learning with the parent country. As such, HRM for MNC should tailor their learning programmes to meet the broad needs of these cultures. Examples for learning should be derived in context of these international countries requiring HRM managers to be constantly up to date with events occurring in such countries. Partnering with officials in these host countries is also essential for such functions to be established especially when language barrier becomes a major challenge to communication (Scullion & Collings, 2006). Managing Staffing Strategy A staffing strategy also needs to be put in place to ensure that staff attrition does not take place resulting in waste of human resource (Scullion & Collings, 2006). In cases where international offices are located in areas that have got harsh climatic conditions or culture issues then it is fundamental that a staffing strategy be developed. HRM managers face challenges when determining whether members of staff should be recruited from the local population or brought in from the parent country. In cases whereby there are harsh climatic conditions, HRM may opt to utilize people from the local population because they are better adapted to the climatic conditions present in the area (Brewster, Sparrow & Vernon, 2007). In addition, placing people from international communities in such environments may lead to health problems and issues with cultural adaptation that may lead to reduced productivity. There have been cases whereby culture differences require a person of a certain gender or selected interpersonal skill to work. Countries that have got cultural bias towards women would not respond positively to if a woman manager is sent to manage local staff in the host country (Silverthorne, 2005). However, a person who does not understand the cultural biases in the host country may not be suitable because they may lead to cultural conflicts at the work place. Hence HRM managers are faced with the challenge of selecting the best person for the job in question after they have understood the cultural dynamism of a particular country. Implementing a poor staffing strategy will work against operations. Managing Corporate Social Responsibility Corporate social responsibility (CSR) is an activity commonly undertaken by various companies so that they can provide some form of development in the communities with which they operate (Kramer & Syed, 2012). MNC are often perceived as merely seeking economic gain from countries and have in the past been accused of exploiting the resources of the host country. It is thus fundamental that a MNC implement a CSR project in their activities to ensure that they provide some other benefit to the local community as a show of appreciation. CSR may involve implementation of projects that seek to preserve the environment for use by future generations. In addition, they may support activities that ensure free trade within the host country thus also providing support for its competitors. The use of organic produce for those MNC that are involved in food produce is a strategy that commonly received worldwide acclamation owing to its focus on proper health of the community they serve. Charities must however be the most common and simplest form of CSR that an organization can implement because it provides direct benefits to the less fortunate members of society. CSR is a component that is implemented by HRM because essentially it is implemented by the members of staff within the organization. It must be understood that not all CSR activities are suitable for all organizations hence each MNC has got to develop its own CSR activity that best reflects its vision. CSR selection presents a significant challenge to HRM because of the international dimension that it takes. Most activities they engage in are viewed in light of the international world because of their involvement with the international markets. CSR activities can have a great impact on the overall image of the organization thus if not implemented way may impart a negative image on the organization. Hence CSR can contribute to an organizations overall positive outlook and compensate for any negative publicity that is may already be receiving. This was realized in the case of a company that sought to provide drinking chocolate and tea as a substitute for alcohol. Much as the company was producing a beneficial product for society, it came under attack for its use of cocoa beans that had been produced by slaves. Through the use of CSR, such a company can comfortably improve its public image by contributing back to the society (Brewster, Sparrow & Vernon, 2007). Hence HRM have the task of identifying an activity that can mitigate the negative publicity that it is likely to receive in the host country while still operating within a defined budget. CSR activities may a times require heavy funding thus a careful balance has to be created between the input and output of CSR activities. HRM have the challenge of defining an activity that will utilize minimal funding while maximizing the MNC presence in the host country. Value systems in Society This refers to the value system in society that distinguishes members of one group in society from those of another group (Hofstede, 2001). These value systems depict values that are held in positive light by society against others that are shunned upon and even discouraged in society (commonly referred to as norms). These values have evolved in society and have been learned through a carefully designed historical process. These values have also been passed down from one generation to another to present attitudes and meanings that are applied to daily life (Hofstede, 2001). These values have been known to affect the material and non-material way of life thus HRM of MNC in a host country must understand these value systems because they will impact their operations in the country. These value systems and norms present significant challenges to HRM because of the nature with which they affect interactions between people in society. Host countries may have groups of people that have been considered as superior to others. They are probably not allowed to socialize with other people of a lower level as realized with the caste system in India (Hofstede, 2001). Thus people of a lower caste are not allowed to be in the presence of those of a higher caste because of their belief systems. HRM may thus face challenges when a qualified person of a lower caste system cannot be allowed to manage people of a higher caste. HRM may thus have to settle for a less qualified person of a higher caste who may significantly affect operations or alternatively outsource from other countries. It is fundamental to understand these systems because of the significant methods with which they affect human relationships and consequently human resource operations. Issue of power distance are also experienced in some host countries whereby perceptions that people may have about whether power has been distributed equally are expected. These pose challenges to HRM because they have to be incorporated in staffing. Ultimately, motivation levels for the different members of a population also need to be identified (Hofstede, 2001). HRM have to create a balance between masculinity (staff members who work because they want to be the best at what they are) and femininity (staff members who work because they like what they do). Belief systems in different societies emphasize different aspects for motivation and thus understanding these allows HRM to operate efficiently. Conclusion There are significant challenges that are presented to HRM of MCN making it seemingly inappropriate to seek out such a position. However, there are various methods that have been put in place to handle such potential challenges. With the right strategies in place, HRM in MCN can make their work easier and actually enjoy the diversity experienced with such kind of work. References Banfield, P and Kay, R 2012, Introduction to Human Resource Management, Oxford University Press, New York. Beardwell and Holden 2005, Human Resource Management, Harlow, Prentice Hall/FT. 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