Factors That Affect Human Resource Management Strategy in Multinational - Research Paper Example

Thesis Question Analyze and evaluate factors which affect HRM strategy in multinational Corporations This report will be covering the study details about linking strategic human resource with cultural orientation, the motivation of employee, cultural orientation of employee, and the performance of multinational firms. The main objective was get a clear relationship between human practice and performance of firm and to determine the relationship between hr practice and employee motivation that is supposed to be dependent on cultural orientation. That means a clear relationship or understanding of motivation linked with employee performance will be studied. The main part of the study was multinational corporations and the data was collected using questionnaire. Introduction HRM strategy of multinational corporations are Efficiency (Charles Vance, Yongsun Paik,2006); Information exchange or organisational learning (Peter Dowling, Denice E. Welch, Marion Festing,2008); International provisions (Nicholas C. Burkholder, Preston J. Edwards, Libby Sartain,2003); Convergence of key business processes; and Localisation of HRM policies (Baliga,1984) Interpersonal skills of the employees Leadership development has been found to be more important for many organizations and they have been concentrating on improving the soft skills. There has been need for globalizing the soft skills and that includes leadership values. Global team should possess global mindsets and global soft skills to succeed. In this era of Mergers and Acquisitions, lot of companies has been seen as becoming multi cultural and that means there has been increase of the need for soft skills to make sure that the team works together and stays together. There will be a diverse range of professionals working in an organization like finance, marketing, legal and other frame works. Team goals and objectives should be shared equally by all team members to succeed and this is where the application of soft skills matter. It is a case of acceptance of difference and clarification of similarities and this has to be understood in detail. The team should be working in a concept of mutual learning and communication strategy should be in such a way that both internal and external communication will work. Soft skills are skills that can be acquired on spot and this is the skill that cannot be developed by reading books and that means advancement in basic oral and written communication skills, basic computer skills and good workplace attitude should be developed in an employee (Gordon). Individuals tend to have different opinions, attitudes, perceptions and beliefs that have been the main factor in creating a conflict situation. Conflict may be arising due to difference in personalities and it has been identified that conflict has been part of everyday life (Forrester). Studies done by Edwards and Wright have shown that there is link between the human resource practice and the performance of an organization .The performance can be termed as direct and there have been contradictory studies also.Katou and Budhwar has argued that human resource practice will not be leading directly to the business performance of an organization. They argue that it is the employee motivation that will influence the performance and that can be stated as one set of human resource practice that will work best with one set and that may not be applicable to other contexts. Human resource has been also identified as a powerful tool that will be helping the business organizations to make business strategy and enhance the performance. (Lengnick-Hall and Lengnick-Hall, 1988;) Human resource has been found to be increasing the much needed competitive advantage in a market that can be termed as global and it is not easy for replication by competitors. (Barney, 1991). It has been found out that international human resource management has been the main dividing factor between winners and losers in MNC and that has been the case from the 90s. (Schuler et al., 1987;) There has been increasing recognition that international human resource management has been advantage for multinational corporations and little research has been done on that topic in Australian MNC when compared with USA, Japan and Western European countries (Clark et al., 1999; ) The focus has been on the expatriate management rather than on knowing about the hrm issues of subsidiary employees. (Welch, 1994).The organizational effectiveness of the company is dependent on the effective management of subsidiary employees. Background to the case Schuler, Dowling, and De Cieri has defined as "Human resource management issues, functions and policies and practices that result from the strategic activities of multinational corporations and that impact the international concerns and goals of those corporations".((Schuler/Dowling/De Cieri, 1993, p. 422). The study will be undertaken using three theories and that is resource based view of the firm, resource dependence theory and the universalism cultural relativism. The framework will be built on the above said three theoretical perspectives .(De Cieri and Dowling, 1999) Objective The strategy that has been proposed by the MNC will form the basis for competitive advantage and that will determine the way the resources of the firm will be structured and allocated among the subsidiary units.The international corporate strategy of MNC will influence the way the human resource of MNC will be configured and the way that will be managed among the subsidiary units that can be foreign. (Taylor et al., 1996; ). That will form the degree of similarity between the parent company and the foreign subsidiary and the following hypothesis will be tested. The hypothesis one is that: There is level of similarity in HRM systems between the parent company and the subsidiary and will vary according to the international strategies adopted by MNCs. There is no level of similarity in HRM systems between the parent company and the subsidiary and will not vary according to the international strategies adopted by MNCs. Objective The MNC with global strategy will be focusing on the integration of culture between the parents and subsidiary units. The integration degree will determine the level of control and coordination in the world wide operations and that will lead to increased consistency of the subsidiary with the rest of MNC.( (Taylor et al., 1996). The Hypothesis two states that There has been higher degrees of similarity in HRM systems between the parent company and subsidiary will be found in MNCs following a global strategy. The alternative hypothesis will be using the following objective and hypothesis It has been found out that MNC that has been adopting the multi domestic strategy will be viewing subsidiary units as independent units and they will be provided with the authority, responsibility, designing, and implementation of management systems. That includes human resource management systems and the need for controlling subsidiary units by parent companies will be less. (Taylor et al., 1996). That means Multinational corporations adopting multi domestic strategy will be likely to adjust to the individual needs of local environment in which the company operate upon. That means hypothesis can be developed as follows The degrees of similarity that is lower in the HRM systems between the parent company and the subsidiary will be found in MNCs following a multi-domestic strategy. The Objective The orientation of the top management with foreign operation was identified with as the single most important factor in determining an multinational true multinationality ((Bartlett and Ghoshal, 1987;).It has been argued that attitudes of the management at the top will influence the transferability of domestic hrm practice across cultures. It has to be believed that beliefs and attitudes are the best important factor that influences the design of the child or subsidiary human resource system. That will give advantage to the competitors. Hypothesis three The degree of similarity in HRM systems between the parent company and the subsidiary is positively associated with top management SIHRM orientation. Objective The main aim is to understand the employee cultural orientations that moderate the relationship between human resource practices and employee motivation. Hypothesis Motivation will influence the performance of a person in a multinational firm. Motivation will not influence the performance of a person in a multinational firm. Methodology The cross sectional survey report was adopted in the study to under the objectives and hypothesis and this will not include the motivation hypothesis as that objective will be done using questionnaire method. The sample and the respondent selection were collected initially by obtaining the list of Australian MNC that had at least one subsidiary. The MNC had the power of exercising control using majority equity ownership .It has been found that the definition of subsidiary will be different from different subsidiary and the procedure was started by sending request letter to the companies that was in Australian stock exchange.The annual reports of the companies in the year 1998 was chosen and the annual report had controlled entity . The annual reports was collected, and 236 firms were identified as being Australian-owned listed firms that were having foreign subsidiaries .The data was on December 1998.The sample had included only Australian-owned multinational corporations and this was done to control the effect of any potential home-country effect on international human resource management. From this a final sample was done with limitation of firms extended to firms having annual turnover equal more than 10 million turnover and this study can lead to a bias that can be called size bias. The small firms has been growing multinationally.The large multinationals has been found to pose the complex for organizational challenge and 450 multinationals has been found having 80 per cent of total investment. (Bartlett and Ghoshal, 1987) A survey questionnaire was prepared and it was mailed out to the concerned person at the parent company who was most responsible for each MNC’s international human resource management. A time period of four weeks was given after the first mailing and , another copy of the survey questionnaire was mailed to MNCs that had not given back the filled questionnaire. There were companies that were not willing to give filled reply and after , a couple of weeks, other means of communication like e-mails were used. The final sample included in this study is thus limited to relatively large Australian-owned multinational corporations cross-sectionally. There were 236 firms that were included for survey mailing, and thirty-five firms has been identified as not meeting criteria specified for inclusion in this study for various reasons that can be termed as divestment and foreign ownership .That had meant that a total of 201 MNCs were found eligible.The response rate was 17% as 35 firms had responded to the questionnaire. Table 1 Distribution of parent firms by industry and number of employees Industry (Australian SIC) Number of employees Manufacturing 12 (35.3%) Up to 99 1 (2.9%) Mining 6 (17.6%) 100–999 15 (44.1%) Services 4 (11.8%) 1000–4999 8 (23.5%) Transport/communications/utilities 5 (14.7%) 5000–9999 4 (11.8%) Wholesale/retail trade 1 (2.9%) 10000 or more 6 (17.6%) Finance/insurance/real estate 6 (17.6%) Total 34* (100%) Total 34* (100%) As also indicated in Table 1, out of thirty-four parent companies that responded, fifteen firms (44.1 per cent) have between 100 and 999 employees, while approximately 24 per cent of firms have 1000–4999 employees, with only 17.6 per cent employing 10000 or more people . Potential bias towards large-size parent companies would have been present, considering that firms with 500 or more employees was constituting 1 per cent of total workplaces in Australia (Callus et al., 1991). The chance of potential bias can be lessened due to the fact that MNC has been larger in size when compared with domestic firms. Measurement of variables , Hill’s (2000) typology was used to measure the construction of international strategy. They are multi-domestic, international, transnationaland global.There has been criticism of Generic typologies because their exclusive and static nature will not reflect the realities of the current business environment (Ferris et al., 1999). Hill’s (2000) four archetypes were used in this study even though it had limitations and the strategy had also difficulty in measuring corporate international strategy. To reduce the weaknesses associated with study method used , various parameters were used in designing a question on international strategy. Potential respondents were asked to identify the one that most closely resembled their firm’s international strategy. A dummy coding of variable was used for the regression analysis. Multi-item scales were used for measurement .This was done to avoid the distortions and misclassification that will come with it. Results The study had shown that the MNCs from Australia has not been having a high level of transfer of parent HRM to their foreign subsidiaries, with the aggregate index of similarity being 2.7634 out of 5. This meaning was that relatively low degree of similarity was consistent with the findings in the literature review has been traditionally localized to reflect differences in employment regulations between home and international markets or parent and subsidiary markets. The study had also shown that , the greatest similarity was in performance appraisal (3.1244), while the lowest degree of similarity (2.1494) was demonstrated in respect of training. The meaning of the study was that relatively low degree of similarity overall seems to indicate that the subsidiary’s HRM system may not be integrated with that of the parent company, thus lacking in ‘internal consistency’ (Rosenzweig, 1994) or ‘internal fit’ (Milliman et al., 1991). A questionnaire was used to understand the motivation of employee and performance in multinational corporation. The questionnaire was divided into sections. The questionnaire started by asking questions related to demographic characteristics.The final part of the study contained the question of motivation.The study was done on employees from various multinational firms.The total number of employees chosen were 50 and the number of firms used were 50. The response rate was overwhelming 75% of the motivation company and this was better response rate for conducting survey. Regression analysis of factors influencing motivation at work Variable Beta t value α value SHRM practices: Training and Development 0.3 3.5 Read More