Issues Relating To the Management of People in Multinational Enterprises - Essay Example

A critical evaluation of the issues relating to the management of people in multinational enterprises Introduction Being a manager in a multinational enterprise is a difficult task. This responsibility is unlike an organisation that is able to understand the needs, values and attitudes of employees in a domestic organisation. Enterprises that only operate in a home country have managers and employees that usually share the same cultural values. This makes the process of developing human resources policies and best practices much easier. This is because they are lined up with the social and business values of employees and managers have a much easier time relating to these employees. In the multinational enterprise, managers are often expatriates that come from a home country to a foreign nation to guide and control the business. When this occurs, there is often a culture clash between foreign workers and the expatriate manager especially when their values and attitudes are very different. Also in the multinational enterprise there are existing organisational cultures that have set norms which are often different from those of foreign management. This makes it hard to align organisational objectives with satisfying employee needs in a way that is productive and effective. This essay gives a critical evaluation of the different issues that face managers in the multinational enterprise. Research has found that cultural differences and diversity, leadership styles, social factors are the main challenges for management in multi-national enterprises. Multinational management: the case of Canada and Germany Wal-Mart is a major multinational firm. It currently operates in the UK, the United States, China and approximately ten other nations. It is common for Wal-Mart managers to be recruited as expatriates when the business acquires other retailers in a foreign country or when foreign direct investment (FDI) is a good market entry strategy. Wal-Mart, in the UK and United States, has built a solid organisational culture where all members operate as a team. It is a type of family structure where employees are rewarded for their efforts and given bonuses for achieving organisational goals. This is known as management-by-objectives which is a transactional leadership style. Antonakis, Avolio and Sivasubramaniam (2003) call this style the process of setting desired performance targets and then giving rewards for employees that meet these goals. When Wal-Mart entered the Canadian market, the organisation tried to build a similar, family-style organisational culture that works rather well in the UK and the United States. However, the firm’s HR leaders realised very quickly that Canadian work culture was very different from these countries. Canadian workers and consumers are very conservative socially (Arnold and Fernie 2000). Wal-Mart’s management and HR leaders did not perform early labour market research to find out the cultural values of Canadian workers. This made the company unprepared for the difficulties that setting up a workable organisational culture would create. It was common for Wal-Mart managers to hold regular shift meetings where employees and managers would cheer and clap for others’ successes in their job roles. When trying to set up the same type of supportive organisational culture built on passion and social mania, it failed terribly with Canadian workers. This same strategy was attempted in Germany as well. German employees were asked by North American leadership to join in physical exercising during shift meetings, often shouting “Walmart! Walmart!” as part of their motivational efforts (Kwintessential 2013, p.2). In the United States, this was known to give employees a sense of motivation and higher morale. In Germany, it was considered very annoying and not at all motivational. Germans are very restrained socially. They are often cynical and pessimistic (Hofstede Centre 2013). Germans that are oriented this way feel that emotional outbursts are inappropriate and work hard to restrain their impulses (Hofstede Centre). German workers are used to cultures that are collective only when they are given professional voices with support of labour unions, work councils and job training (Wever 1994). Therefore German workers saw this activity as being very unprofessional and not appropriate for the business environment which affected productivity and intention to stay with the organisation once employed. To better improve organisational culture development in Canada and Germany, Wal-Mart was forced to come up with better HR and management policies that were closer to the cultural and social values of German and Canadian workers. However, since the company’s entry into Germany in 1998, the company lost hundreds of millions financially and finally decided to pull out of this country since it could not satisfy employees or consumers sharing the same cultural traits (Landler and Barbaro 2006). Expatriate managers and local managers trained in Wal-Mart’s North American organisational culture system could not get employees motivated or productive using HR and management models that were very effective in the home country. Also, the expatriate manager from the United States sent to guide German business operations made sure that all business activities be done in the English language (Kottolli 2006). This angered German employees. Germans have a strong sense of national pride both in identity and in the German language. In nearly all situations, Wal-Mart failed terribly at building organisational cultures in these two countries whilst trying to use American-style human resources policies and actions. Building a positive organisational culture is therefore one of the most important and challenging factors for multinational enterprises. It is necessary to know what is driving cultural and social values before using foreign country labourers to give enterprises needed human capital. Companies such as Wal-Mart that fail to understand these values and traits will have a hard time coming up with policies and management strategies that will make employees loyal and motivated. In Canada, Wal-Mart learned how better to deal with employees by setting up strategic alliances with Canadian suppliers that shared many of the same cultural values and social values as Canadian employees. These alliances gave Wal-Mart managers new awareness of how to build a culture that would be accepted by Canadian labourers and the enterprise finally found market success in this country because of it. Social challenges: the Asian factor Social factors for multinational enterprises from the UK that want to find market success in Asia create many different challenges to the enterprise. As one example, many Asian countries are very collectivist countries. Collectivists want to have reward systems that give bonuses to the group. This is because many Asian workers value group membership and build their identities based on social judgments from important reference groups. This sets the structure of organisational culture and social norms in a professional environment in these nations. However, in the UK and US, workers are more individualistic, meaning that they value rewards for their own performance and have much less need for group membership and team-working. Managers that are assigned expatriate positions in foreign Asian nations often have problems with building loyalty and commitment when trying to use individualism strategies with collectivist workers. It is very important for collectivists to keep a respected reputation (Cheung et al. 2008). When reputation is challenged, many Asian workers pass poor judgments against the person who has failed to stay in good standing and character. This affects building a positive organisational culture and managers in multinational enterprises must therefore pay close attention to employee emotional needs from a group social thought. Why is this? Chinese and Singaporean workers, as just two examples, are hedonistic. This has been built from a very long history of culture founded on Confucius politics. Hedonism is the process of seeking self-gratification and pleasure as the most important life goals (Mees and Schmitt 2008). In fact, some of the most important fantasies of Chinese men is having nice looking skin tone and having fancy dress. It has been said that many Chinese men in today’s Chinese culture want to have face creams crafted from luxury pearls (Wen 2007). Many workers in China and Singapore are very strongly driven by appearance which explains why reputation is so very important. They see social environments as being important reference groups which guides decision making in their job roles. Hedonism also affects their perception of job role importance by comparing it to themselves and their view of self-importance. Collectivist values and hedonism in some Asian markets is very challenging for Western managers. Western values are not nearly as strong when it comes to in-group membership and keeping face with other peers in the work environment. If employees such as those in China and Singapore feel that their social needs are not being addressed, HR leaders and managers will have a difficult time communicating and motivating these workers. Also, many managers that come from Western nations such as the UK and the US use participative leadership strategies. It is about democracy in decision-making. This type of leadership gives employees a chance to share their ideas and problem solutions. In the Western divisions of the multinational enterprise, this leadership style increases employee commitment and gives better business performance through human capital (Carmelli, Sheaffer and Halevi 2009). This is because employees in these countries value autonomy in their work and builds a sense of belonging in the organisation. In such countries, participative leadership strategies build a strong and unified organisational culture. It also motivates employees which gives competitive advantages to the enterprise. In many Asian countries however, employees are used to working in structures where there is much power distance. This is where managers and employees do not socialise and workers are not used to being consulted for their opinions and ideas. In Chinese work environments, as just one example, managers are given higher status and prestige. It is considered inappropriate and dangerous for employees to challenge superiors (House, Hanges, Javidan, Dorfman and Gupta 2004). Many Chinese workers, and those in other Asian work environments, have become used to working under these hierarchy structures. Jing-Zhou, Xiao-Xue and Xia-Qing (2010) show that Chinese organisations give managers praise when they show high levels of authority. Many multinational enterprises used to building organisational cultures that are dedicated to teamwork and participation try to give Asian workers chances to speak their minds and become involved in decision making. However, in cultures such as China loyalty and commitment are built over time and founded on trust that can only be built through many experiences between manager and employee. Western models of management and HR state that high quality leader-member exchanges are necessary to improve organisational commitment (Jing-Zhou et al 2010). However, many Asian workers will reject and resist this type of close relationship with management because they do not have immediate loyalty to the organisation. It takes time for managers to build trust and commitment in Asian work environments. Furthermore, those employees in collectivist countries have very specific beliefs and expectations about how people should function in groups (Cianci and Gambrel 2003). Managers that do not meet these expectations are deemed incompetent and not worthy of Asian worker support and shared social situations. The problem is that many Chinese employees, as one example, have loyalty towards individual managers rather than the organisation itself (Chen, Tsui and Farh 2002). Western managers from countries such as the UK and the United States try to build an immediate organisational commitment so that they can achieve strategic goals and profitability. Therefore, these managers try to set a vision and mission with the organisation in mind as a strategy to build motivation and commitment. In Asian countries, this will not work until Asian employees sense a very strong commitment from managers and HR leaders first and foremost. Many multinational enterprises expect that organisational loyalty be set as a primary strategy for cultural development. Without first building positive and dedicated leader-member exchanges, Asian workers simply will not accept organisational loyalty strategies and will reject the manager/leader in this fashion. A study done by Wang, Chen, Hyde and Hsieh (2010) had a sample group of 260 employees that were working within multinational companies in Shanghai. The industry was the semiconductor industry. The goal was to measure intention to leave the enterprise and what drove these attitudes. Using questionnaires, the study found that pay satisfaction was the most important thing to reduce turnover intention and build organisational commitment (Wang et al. 2010). This is not surprising since hedonism and pleasure are important and it requires higher financial resources to get these important products, services and social reputation. Ming, Zivlak and Ljubicic (2011) provide study results that support pay as an important motivator leading to organisational commitment in companies operating in Asia. This study found that 78 percent of recruited samples believed pay problems were the major factor making employees want to exit the organisation. At the four companies highlighted in the study the turnover rates were between 27 and 36 percent (Ming et al. 2011). This is very high for any multinational or local organisation. Therefore, a major challenge for multinational enterprises is to provide better pay systems and bonus systems to gain commitment. However, not all enterprises have the financial resources to use HR strategies that give opportunities for better pay and bonuses for achievement. The literature though would seem to show that pay and management that is committed to giving opportunities for pay increases would be the best method of building organisational commitment. In many Asian nations where multinationals are using local workers there needs to be HR strategies aimed as the social and cultural values of Asian workers if organisational commitment is to happen. This is not true in Western countries such as the US and UK where autonomy, a sense of belonging, and participation are more important than pay in building commitment and loyalty to the organisation. Conclusion The examples shown that focused on Canada, Germany, Singapore and China show the many challenges that multinational enterprises face. If these enterprises are not aware of social and cultural factors of foreign nation labourers it will be hard to align best practices in HR and management with the needs of these workers. Managers need to be more diverse in policy creation and strategy development to gain organisational commitment. Western models of leadership, HR and management that are productive in home countries are not going to be accepted by all foreign employees. It is difficult to break down cultural and social patterns that have driven many foreign societies for centuries. Managers that try to do this and use home country strategies will create turnover problems, job role dissatisfaction, and reduce organisational commitment. Managers of multinational enterprises must fully understand the impact of using accommodating strategies to set up the needed diversity. This will build a strong organisational culture and give the enterprise competitive advantages with a more committed and dedicated work population. It would seem that main challenge is creating more diverse HR and management policies that take care to be related to cultural values and social beliefs if the multinational hopes to improve motivation and employee loyalty. References Antonakis, J., Avolio, B. and Sivasbramaniam, N. (2003), ‘Context and leadership: an examination of the nine-factor full-range leadership theory using the multifactor leadership questionnaire, The Leadership Quarterly, 14, pp.261-295. Arnold, S.J. and Fernie, J. (2000). 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