Analyse the human resource issue relevant to an organization intending to expand into the global market - Essay Example

?Executive Summary The analysis of human resource management (HRM) processes in Australia and the United Kingdom has been carried out in the point ofview of political, economic, legal, and socio-cultural systems and the evolving business situations. The organization of the sections has assisted in emphasizing the impact of fundamental aspects on HRM practices and policies in each nation, and the context-focused character of HRM. For instance, the economy considerably affects HRM in both nations, but its effect differs. For example, in Australia the recessionary situations of the earlier years are weakening employment traditions and encouraging reforms in the system. The United Kingdom has seen an explosion in foreign direct investment (FDI). Nevertheless, the entrance of foreign companies in the British labor market is encouraging local companies to downsize their HRM processes. Hence, the sections portray a combination of aspects including political, legal, economic, and sociocultural which dynamically determine the behavior if national HRM structure. By using UK’s Organon Laboratories Ltd. as a multinational company planning to expand to Australia, each section reveals several HRM challenges in Australia, as well as in the parent country, the United Kingdom. Table of Contents Section Title Page Number Introduction 3 Description of Organon Laboratories Ltd. 3 Rationale for Expansion 4 Country Factor Analysis 5 Differences in National Culture Australia and the United Kingdom 7 HR Functions 9 Recruitment and Selection 9 Performance Management 11 Compensation 12 Recommendations 13 Conclusions 15 References 15 Introduction Taking into account the infancy phase of human resource management in several Asia-Pacific nations, such as Australia, and the assumption that HRM in a cross-cultural and cross-national perspective could be best examined by exploring the effect of dimensions of natural culture, as proposed by Geek Hofstede, this paper tries to analyze the effect of the major national aspects on international HRM by using the planned expansion of UK’s Organon Laboraties Ltd. to Australia. Description of Organon Laboratories Ltd. Organon is a pharmaceutical business branch of a Dutch multinational firm, Akzo Nobel, based in Arnhem, eastern Netherlands. The main offices of Organon are located in Oss, southern Netherlands, and it has 55 subordinate units across the globe, with two in the United Kingdom: (1) management, marketing, etc. in Cambridge, England, and (2) processing, research and development in Motherwell, Scotland (Tayeb 2005, 210). Organon hires 10,000 people all over the world. It was founded in 1948 and its primary goods are human prescription medication and its market is prescription pharmacies. It is one of the major providers of oral contraceptives and infertility drugs (Tayeb 2005, 210). Astra Zeneca and GlaxoSmithKline are its main competitors. Organon’s mission statement is provided by Akzo Nobel. Nevertheless, being the main actor in the pharmaceutical unit, the company aspires to sustain its independence. Hence mention of Akzo Nobel are silenced, for instance the manner personnel answer callers is ‘Organon Laboratories’ (Tayeb 2005, 211). In other branches their image is more strongly identified with Akzo. Each of the two sub-divisions in the UK has a human resource (HR) manager. However, there is only one Managing Director in the UK. The employee guidelines of Scotland are slightly controlled by the main office. The HR manager has acquired the practices and guidelines which have progressed since 1948 (BioPortfolio 2011). Employees have been permitted to develop work hours, payment rules and employment agreements that would meet the needs of the firm in the UK. There has been a productive relationship with the directors who have been major guardians of company guidelines in the UK, such as Cambridge’s Managing Director and Motherwell’s Process Director and Research Director (Tayeb 2005). They were somewhat like-minded with regard to employment issues, the parent organization would grant permission for senior compensations. They would talk about the main office frequently by phone, and make a decision about the reforms needed (Tayeb 2005). From there on, according to BioPortfolio (2011), each director would be in charge of compensations in their branch. Rationale for Expansion The current pattern of globalization and the growth of information and communications technologies have integrated countries all over the world. From the point of view of business, the globe is a single marketplace. Organon has served a groundbreaking function in the growth of the pharmaceutical industry through prompt, thorough, and bulk production and valuable research of pharmaceutical products (Tayeb 2005). Even though the European pharmaceutical industry is benefitting from the leadership status, it cannot be satisfied anymore with its American and Asian markets. Australia is becoming one of the best prospects for pharmaceutical firms, such as Organon. In Australia, according to Rowley and Benson (2004), industry competitiveness and economic goals influence social policy, efficacy regulations, and product quality and safety. Country Factor Analysis Country Factors Benefits Costs Risks Business Strategies International HRM Strategies Political Business-friendly regulatory environment Government solidarity and consistency has disintegrated Australian patient and consumer advocacy groups have more power now than before (Budhwar 2004) International, Global, Transnational HCN, PCN, TCN Economics Economy is influenced by the interaction between Australian and multinational companies Substantial portion of pharmaceutical supplies in Australia is manufactured abroad (Budhwar 2004); intense competition overseas Instability in financial markets and irregular tempo of global recovery Combined standardization and localization Recruitment and Selection, Performance Management, and Compensation Legal National government has been building a strong cooperative rule toward its Asian-Pacific neighbors Distribution of power is vastly unbalanced Blurring of boundaries between public and private sectors; legal issues, like the function of generics and reference pricing and pharmaceutical patenting policies, are creating tension Merger/acquisition, contracting and licensing Labor Relations, Pay and Benefits Socio-Cultural Social and cultural structures are primary determinant of Australian health and wellbeing; culturally diverse Australian labor force is composed of individuals from different cultural backgrounds Aboriginal Australian populations do not value health and wellbeing Diversity management Australia is usually regarded to be a highly industrialized nation providing its people a comparatively high living standards and a comfortable lifestyle. Australian industry was sheltered against the progress of global trade until 1973 through high tariffs but nearly all tariffs had been decreased by 1996 making the economy more at risk to competition from overseas (Schuler, Jackson, & Luo 2003). According to Budhwar (2004), the Australian government, since 2000, has been developing a concrete cooperative rule toward its Asian-Pacific neighbors. This has overlapped with Australian business expansions and a growing participation and interest of multinational companies in the domestic economy. As shown in the country factor analysis, Australia is an excellent prospect for Organon in terms of political, economics, legal, and socio-cultural. Basically, the Australian government and economy are now more accepting of the entrance of foreign direct investments (FDI) and foreign companies. The table above summarizes the benefits, costs, and risks of expanding to Australia for Organon. However, there are various business and international HRM strategies that Organon could use to maximize the benefits and minimize the costs and risks. Since Australia is culturally diverse and highly vulnerable to foreign competition then it is quite reasonable to adopt standardized and localized business strategies and employ HCNs, PCNs and TCNs. In particular, merger/acquisition and contracting and licensing are suitable strategies since power distribution in the private and public sector is disproportionate and the economy is highly influenced by the interaction between Australian and multinational companies. In a merger, Organon merges with an Australian firm and builds a new unit. Within an acquisition, Organon seizes an Australian company. The Australian firm could still operate under its own name with management and ownership held by Organon. Organon could also decide to expand to Australia by contracting the production of its goods in the host country. Organon’s products can be modified to the particular demands and conditions of the domestic market. Or, since there is a productive relationship between Australian and multinational companies, Organon could enter the market through licensing. Differences in National Culture of Australia and the United Kingdom Geert Hofstede’s ‘dimensions of national culture’ is used here to identify the differences between the national culture of Australia, the host country, and the United Kingdom, the parent country, and to assess potential implication of these differences for human resource management. Australia and the UK both scored high in Individualism, 90 and 89 respectively (Johnson & Turner 2003). This implies that both countries highly value individuality. This individuality is expressed in the everyday lives of Australians and should be taken into account when expanding to their country. Similarly, the British society greatly values privacy and independence. In the context of business, an individual may be more worried for or interested in themselves rather than the group. In terms of power distance, both countries rank low. This suggests that inequalities, standing, and rank between individuals are quite low (Johnson & Turner 2003). On a micro level this is manifested in the workplace where the superior-subordinate relationship is fairly relaxed and integrates modest official procedures. On a macro level this is expressed in several ways, like government policies safeguarding the rights of ethnic minorities. In terms of Uncertainty Avoidance, both countries rank low. This implies that both cultures are somewhat open to risk taking and coping with change (Cooke 2003). On a micro level, disparity or conflict in the workplace is perceived to be constructive. On a macro level this is manifested in the continuous adjustment of government systems and laws. In terms of Masculinity, both countries are positioned in the middle. According to Cooke (2003), this perhaps reveals the fact that both cultures aspire for gender equality, but a particular level of gender discrimination remains. So, how do these differences in national culture influence human resource management? As argued by Hofstede, the two national culture dimensions that could influence HR management, especially diversity management, are individualism and power distance (Johnson & Turner 2003). Countries with low power distance, like Australia and the UK, would witness greater impacts of involvement on views of workplace diversity than countries with high power distance, since there would be fewer hurdles in the workplace that would hinder the integration of diverse workers. Countries with low individualism, like Thailand, South Korea, Ecuador, Chile, and Brazil (Johnson & Turner 2003), may witness greater impacts of involvement on views of diversity than individualistic nations like Australia and the UK because of the stress on inclusion and group work. Since, basically, the national culture of Australia and the UK are fairly similar, Organon will not have much of a problem coping with the Australian culture. However, the major challenge for Organon’s HRM is diversity management since Australia is highly individualistic. At this point, one of the challenges to Organon’s HRM is the breaking down of barriers and the formulation of methods to make sure that all workers in Australian companies or organizations can enhance the scope of their knowledge and capabilities, whether informal or formal. In Australia, it is argued that there are still issues of gender inequalities in the workplace (Schuler et al. 2003). If this is true, then Organon’s HR managers confront the task of building a secure and protected environment for female employees. Organon should keep in mind that in order for it to be able to employ, empower and retain female staff, HR managers have to face the problems concerning the gender discrimination in the labor force. On the other hand, the superior-subordinate relationship rests on power distance (Jones 2005). In Australia, which has a low power distance, managers and subordinates are viewed as equals and as a result the best HRM approach is a democratic one. HR Functions Three HR functions are discussed here, namely, recruitment and selection, performance management, and compensation. Recruitment and Selection The aging labor force is one of the critical employment problems of Australia. The labor force has been typified by a chain of streamlining and frequent downsizing attempts leading to the prevalence of early retirement and a considerable increase in the dependent labor force in outsourcing (Rowley & Benson 2004). Diversity is also increasing. Because Australian immigration guidelines support immigrants with high educational attainment, the volume of non-English-speaking adult migrants who have a postgraduate diploma is 55% of all employees as of the year 2000 (Rowley & Benson 2004, 241). Culturally the labor force manifests mainly Anglo-Celtic ideals with English virtually the only language of organizations (Rowley & Benson 2004, 241), even though there are indications this is slowly becoming more inclusive as workplaces start to accept and give importance to the input of people from other cultures. In a comparative investigation of recruitment procedures, Huo and colleagues (2002) stated that, in comparison to standards in the Asia-Pacific, large numbers of Australian managers think that an excellent match between ways of doing things and organizational principles should have greater consideration in their selection procedures. Even though other qualifications, like an individual’s capacity to carry out the technical tasks of the work and an individual’s capacity to relate and work well with others, are regarded as valuable, in reality these had not been viewed and treated as valuable (Huo et al. 2002). Australia appears to be situated among nations that confirm slight significant relationship between practices of recruitment and selection and consequent organizational success. Nevertheless, the aging work force of Australia will not be much of a problem for Organon since its recruitment and selection practices are global, or, consider HCNs, PCNs, and TCNs. The HR department is essentially a servant to the company. It consolidates the attempts to present qualified applicants to line management. It is the main task of the line management to classify and select applicants for interview. The globe is Organon’s recruitment ground particularly at the level of senior management (Tayeb 2005). However, there are differences between Organon’s and Australian companies’ recruitment and selection processes. In Organon the recruitment processes are composed of planned interview, reporting of the interview results, presentation, and assessment of the presentation. The processes are more inflexible and stricter compared to Australia. In relation to employment contracts, Australian companies have different work hours and compensation requirements in comparison to Organon. A great deal of the terms and conditions of employment in Australian companies are controlled by unions. Organon, on the other hand, is not influenced or controlled by collective labor agreement (Schuler et al. 2003). Organon attempts to retain freedom and autonomy of decision and thought and act in response to the existing local circumstances. Performance Management Procedures like the use of balanced scorecard and benchmarking are turning out to be more common in Australia (Rowley & Benson 2004). In a comparative study on the performance management traditions, the finding from the study of Lowe and colleagues (2002) is that organizations should give more importance to documenting evaluation outcomes. Relationship between pay and performance evaluation are less regarded in Australia where the primary goal is more probably to be developmental instead of reward related (Sparrow, Brewster, & Harris 2004). On the other hand, Organon’s performance evaluation system is intended to draw out people’s potentials, and is designed to be visible in its objectives in relation to career growth and compensations (Tayeb 2005) in order to attain the objective to be a center of excellence. As reported by the OECD, the efforts toward public management reform in Australia have tried to develop fiscal guidelines that would minimize inflation and reduce local demand (Rowley & Benson 2004). As a component of this strategy, the federal government gave encouragements to budget-subsidized entities to recognize and reward excellent performance. Departments differed enormously in their model of performance management criteria (Rowley & Benson 2004). Only some held people responsible for results; the cream of the crop is inclined to emphasize outputs. On the contrary, Organon’s site managers have had to carry out a thorough analysis of the evaluation system. For several years the organization has had an evaluation system of different types. The company has provided evaluation training to evaluators (Tayeb 2005). The important different measure Australian companies and Organon are performing here is the bonus prospect for attainment of goals. This will be appealing for Organon because Australia has a reward process. Organon will also be interested in how the company will evaluate employees and whether it can adjust its established system. Compensation Although a great deal of the salary increase in Australia has been ascribed to the effect of the United States on the relationship between performance and compensation, matters of governance are still a challenge (Jones 2005). Even though there is some sort of rank or seniority in compensation procedures, managers are not eager to witness the grade improved. Instead they thought that the connection between performance and compensation, as well as group performance, should be higher than at the moment (Briscoe & Schuler 2004). There are also a number of findings of a more temporary perception of pay, according to Schuler and colleagues (2003), even though with some anticipation that compensation should be linked to more permanent future outcomes. Hence, for motivational sake, companies in Australia should try to lessen the disparity between the existing compensation level and the expectations of employees. On the contrary, Organon’s directors have been the guardians of major connections to compensation systems. Compensation and benefits are resolved by the pay bill of the previous year (Tayeb 2005). There are a total of eight compensation levels, according to Tayeb (2005), each of which has a common job account which identifies its duties in terms of research outcome and innovation, and teamwork. Recommendations A major challenge in Organon’s HRM in Australia is the impacts of the transition to individualism. At this point, alongside the responses of managers to culturally diverse employees is the requirement for Organon’s HR managers to build a new culture in which compensation, promotion, and other organizational gains will be derived from individual inputs instead of group attributes. In relation to this, it seems that competitive demands and globalization are driving companies in the Asia-Pacific region towards the Australian process of recognition of worker benefits. How to realize an efficient and effective transition to individualistic HRM procedures is a major challenge to Organon’s HR managers. In order to make the most of personnel’s ability in the company, recruitment and selection practices should include (adapted from Dowling, Festing, & Welch 2008): (1) thorough selection processes for personnel at all levels; (2) transfer of employees from the parent country who are competent ones with needed sets of abilities (against incompetent employees that the parent country tries to relocate); (3) assignment of adequate numbers of employees to Organon to capitalize on the advantages of constant development through significant employee participation; (4) employing managers to the merger with particular abilities (e.g. having political and cultural knowledge) outside those of conventional managers; and (5) the creation of HR strategy that safeguards the interests or goals of the merger but simultaneously facilitates flexibility. Of all HR functions, the performance management (PM) system gets the smallest amount of emphasis and is the most incoherent. Nevertheless, Organon may succeed in their expansion to Australia by carrying out the following (adapted from Adler 2008): (1) to realize strategic company goals, the PM system should be planned to strengthen primary standards and operation conditions; (2) for PM to be carried out soundly, it should gain support from employees, supervisors, mid-level managers, and top or senior managers; (3) in Organon, where culturally diverse employees are there, PM systems are best if they are straightforward and concise, and rooted in the contributions of members of each culture; and (4) training helps to make sure that the PM system is understood by employees accountable for accomplishing the reviews, and assists to give reliability in the review procedure. Conclusions This paper has emphasized several international HRM trends in Australia, like the better complexity in the nature of recruitment and selection, performance evaluation, and compensation. Globalization has motivated a growing realization that cross-cultural concerns require human resource management strategies that express this developing relationship and there are several proofs of this occurring. In spite of its improvements, international HRM in Australia is still traditional. Why this is the case is hard to clarify, but in terms of its legacy of antipathetic employment processes. It is the contention of this paper that standardizing HRM worldwide and the growing presence of multinational companies and mergers may speed up further progress. References n.a. (2011) “Organon Laboratories Ltd.” BioPortfolio, http://www.bioportfolio.com/corporate/company/28953/Organon-Laboratories-Ltd.html Adler, N.J. (2008) International Dimensions of Organizational Behavior (5th Edition). Australia: Thompson-South Western Publishing. Briscoe, D.R. & Schuler, R.S. (2004) International Human Resource Management: Policy and Practice for the Global Enterprise. London: Routledge. 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