Issues in Managing International Human Resource - Research Proposal Example

Table Of Contents Contents Page Introduction 01 2. Company Background 01 3. Issues in Managing International Human Resource 02 4. Current HRM Issues in MPS Overseas Operations 03 5. Analysis of HRM Issues with a Cultural Perspective 04 6. Recommendations for International HRM Strategy 06 6.1 Staffing policy 06 6.2 Management Development programs 07 6.3 Choosing the Correct Expatriate Personnel 07 6.4 Implementing Profit & Gain Sharing Schemes 08 6.5 Flexible Remuneration Packages 08 6.6 Centralized Labour relations 08 7. Conclusion 09 1. Introduction With the rapid phase of globalisation; increaed amounts of free trade coupled with liberalisation of many of the closed economies, more and more companies are becoming transnational organisations, operating across national boundaries and structuring their business operations across the globe. Today, most of the large business conglomerates do not operate on national scale but on a global platform with globally targeted strategies. When organisations enter oversease markets with greater level of commitment by setting up joint ventures or subsidiaries, managing the international work force becomes a crucial aspect impacting upon the company’s success. Thus, it is not only the marketing, production and process management that has to take a global pespective but also the Human Reosurce Managemnet (HRM) function so that these organisations are able to align their human capital with their global strategies to maximise effectiveness. While it is theoriticaly sound to state that a globally placed organisation needs to develop their HRM strategies with a global pespective, the actual practice is hindered by cultural differences across different countries. Therefore the challenge for an organisation lies in combining the global perspective with the local responsivness in the development of an international HRM strategy. This report aims at analysing the current issues faced by the managemement of Medical Precision Systems (MPS) USA in managing the international workforce of the company and provides recommendations for developing an international HRM strategy with a global outlook coupled with local responsiveness. 2. Company Background Medical Precision Systems, which has been in operation since 1972 is a US owned company producing medical precision tools. With a staff of over 2000 and an annual turnover of $150 million the company has built a high level of reputations for its products and services in the US market. The company operates a highly performance oriented culture reinforced through tightly linked performance and pay strategies. The company’s HRM policies follow best practices and offer profit sharing, pension schemes and stock option plans to reward their employees. The workforce is un- unionized and the company avoids laying off practices as much as possible during slack periods in order to retain staff loyalty. Company has implemented a highly successful TQM program and place high level of importance on staff training and continuous development processes. Performance targets are pursued aggressively and remunerations and rewards are closely linked to performance. MPS has expanded its operations in to overseas since 1990s and have set up plants in various locations in Europe including UK, France, Germany and Sweden. As the company has been supplying to these markets since early 1980s the setting up of production facilities in these geographic locations were strategic moves in the company’s global expansion process. With approximately 250 staff in each location, the MPS, international operations added a sizable international workforce to the company’s operations. While some of the expansions were Greenfield projects as was the case in Sweden, others were acquired operations. With such rapid expansions in its global operations, MPS has decided to revamp its strategy in line with its global developments and commitments. While the performance of the overseas operations have been satisfactory, need for setting up an International HRM strategy has been identified, in the face of numerous difficulties experienced and reported by the overseas management pertaining to HRM operations. The need for creating an HRM strategy that would compliment the new globally placed company strategy while being equipped to resolve the problems in the overseas subsidiaries was recognised by MPS management. 3. Issues in Managing International Human Resource One of the key success factors of international business lies in the effective management of the Human Resource. Human Resource Management refers to “the activities an organisation carries out to use its human resources effectively” (Dowling & Schuler 1990). The strategic importance of Human Resource is uncontested in today’s business and is highly complex even in domestic setting. When international scenarios such as IJVs and subsidiaries are concerned the challenges surrounding the human resource increase with issues pertaining to deployment of expatriates, managing career development, applying standardized performance appraisal systems and implementing other HRM policies shared on an international platform. The differences in cultural, legal, social and economic systems in host countries are the key factors posing challenges in implementing an international HRM strategy (Killing 1982). The most significant challenge is managing an International Workforce is in creating a cohesive an integrated team including representation from parent company and overseas operations. Here, the issues related to cultural gaps, cultural shocks and cultural insensitivity could crop up, hindering the process of forming effective work teams (Curry 2005). It is a common scenario where there is “camping” attitude with polarization of management of the host country managers and the expatriate staff. With such conflicts within the organisation, the resulting disruption in communication, decision-making and the operations leads to inefficiencies and venture failures in worst-case situations. Comprehending different work related ethics and work practices is needed and surmounting communicational barriers becomes a necessity in managing an international workforce. 4. Current HRM Issues in MPS Overseas Operations In the case of MPS, UK operations, some of the key HRM issues included the highly unionized labour, differences in managing industrial relations where the management had to deal with a multiple number of trade unions, and the cultural differences and attitudes pertaining to performance management. The French operations had a different set of issues where the American management style did not seem to be compatible with the French workforce. In implementing the Performance Management System, the French workforce “preferred to have a line manager with an authoritative air, technically proficient and capable of directing the workforce towards work tasks, rather than getting involved in feed back mechanisms” (Case Information). Attitude towards extra work than normal working hours was a common problem for both UK and French plants. Excessive holidays in France were another issues in the eyes of the American expatriates managing the French operations. The Swedish operation too shared the UK’s issue of having highly unionized labour. As in France and the UK, the Swedish workforce also resisted the targets sets under the performance management scheme. None of the work forces were impressed by the attempts by American management to inculcate the MPS’s corporate culture through culture training and attitudinal orientation sessions. A works council was set up in accordance with European law, but in the eyes of most of the international workforce, they did not operate very effectively due to the lack of commitment from expatriate representatives. 5. Analysis of HRM Issues with a Cultural Perspective Having identified the above HRM issues which the American expatriates are facing in managing the MPS’s European operations, its is important to understand why such differences in work related practicies and attitudes are present. It is also important to idemtify possible conflicting views on managemnet styles, performance and labour relations in different cultures. Fons Trompenaar & Charles Hampden-Turner’s model of seven dimensions of culture which assess different national cultures on a continum of universalism vs. particularism; individualism vs. community; neutrality vs. affectivism; specific vs. diffused; achieved status vs. ascribed status; time orientation: past / present / future ; sequential time vs. synchronal time and internal vs. external orientation will be useful in understanding contrasting perceptions on performance, unionized labour as well as extra work (Trompenaar & Hampden-Turner 1998). When a national culture is ascribed rather than achieved, the importance is placed on status, seniority, family background etc while in achieved cultures, a great importance is placed upon performance. USA which has one of the highly achievement oriented cultures, will therefore promote stringent performance management systems which will not be upheld with same level of enthusiasm in cultures which are less achievement oriented. In a similar case of introducing performance related remuneration systems, Lincoln Electric – USA found out that contrary to its US workforce, the European workers valued extra leisure time greater than extra income (O Connell 1998). Internal Vs. External orientation dimension can be used in assessing the issue where the overseas workforce is seeing the American management being overly controlling. American culture is a highly internal culture, which is exemplified in their foreign policies, personal attitudes towards concurring nature etc. In the Indices of Work Related Values (Appendix I) by Geert Hofstede, power distance dimension may be useful in understanding the issues of management styles in French operations. France is one of the comparatively high power distance countries in Europe under the Hofstede’s indices and this will explain why the French did not feel comfortable with the American management style guided by its low power distance culture (Weiss 2001). Communication Barriers also result mainly due to cultural differences. Lack of cultural insight and sensitivity can lead to disputes and misunderstandings. The theory of Silent Languages of Culture identifies five dimensions across which cultures differ as language of time, space, material goods, friendship and agreement (Hall 1963). It is common to encounter cross-cultural communication problems in communicating targets, deadlines and other aspects of an assignment to an international workforce, even if they are conversant with a common language of speech as English in the case of MPS. Implementing performance Management systems and driving high productivity targets is hampered across different countries by not only the national culture, but also through legislature and trade unions (Hill 2003). Some countries such as Germany performance linked pay systems as piece rate remunerations are not legal. In other countries such as Britain, the strong trade unions would resist implementation of high productivity systems. While some companies such as Ford managed to get UK trade union’s agreement to implement performance management systems through their threat to relocate production facilities in other countries, most companies are hindered by highly unionized work forces in their attempts to increase productivity (Hill 2003). 6. Recommendations for International HRM Strategy Having analyzed the MPS’s current situation and also evaluating the issues with a cultural perspective, in order to couple the local responsiveness necessary to be built in to the new international HRM strategy, the following recommendations are made for consideration of the MPS board members. 6.1 Staffing policy Currently, MPS ‘s staffing policy is ethnocentric, with most of the key management positions of overseas operations being filled by parent country nationals (Hill 2003). While this mode of staffing was popular in the past, many companies are now resorting to either poly centric or geocentric approaches. In the case of polycentric staffing, subsidiaries are managed by local management while key positions at head quarters level are occupied by parent country nationals. While this strategy is useful in keeping costs down and also benefit the subsidiaries from the local knowledge of the local management, technology and know-how transfer from parent company cannot be implemented effectively. Therefore, what MPS with its global expansions would need to adopt a geocentric approach where best staff throughout the organisation can be used in fulfilling key management positions, regardless of nationality (Kobrin 1994). Such a policy has the advantage of facilitating the development of a strong and unified corporate culture without national bias. Molex Corporation, a US based manufacture of electronic components operating in the global market has adopted a highly effective geocentric approach though costly has fueled the organisational success (Laabs, 1999). 6.2 Management Development programs While MPS currently place significant emphasis on training programs within its US operations, what is needed to achieve a truly global carder of management team is to implement management development programs targeted at prospective staff across all operations including subsidiaries. These training programs should include management exposure at different subsidiaries. Such training programs also facilitate the informal network forming between representatives from different subsidiaries, increasing cross-cultural adaptability and sensitivity. These management programs should be linked to career development of the global team of managers regardless of their nationality, thus taking away the perception of cultural bias and notion of parent country domination. 6.3 Choosing the Correct Expatriate Personnel Selecting personnel who have better ability to adapt to the new cultures, who are able to cope with challenges and capable of integrating with the host nation personnel will minimize expatriate failure rates which are currently at significantly high level (Solomon 1995). In selecting personnel, four dimensions have been proposed in Mendenhall & Oddou’s research of the issue of expatriate selection. These four dimensions include self-orientation, others orientation, perceptual ability and Cultural toughness (Mandenhall & Odddou 1985). 6.4 Implementing Profit Sharing & Gain Sharing Schemes Implementing the already established Profit sharing and stock option schemes across all international operations will strengthen the moral of the international workforce of the MPS. In addition to these schemes, with local responsiveness to some of the productivity issues faced by international subsidiaries, a Gain Sharing scheme, aiming to increase productivity levels to desired levels could be initiated (Cascio 1998). A Gain sharing plans or Scanlon plans which emphasis the win-win philosophy and motivates employees to work together to improve the organizational performance, imperative of their functions and the resulting profits through productivity improvements, cost reductions and other organizational improvements are shared between the employees and the employer (Bratten & Gold 1999). The proposed ratio of sharing is 40%: 60% where 40% of the gains will be shared among the employees on an equal dollar amount. 6.5 Flexible Remuneration Packages. In order to bring in local responsiveness in to the HRM strategy, a high level of flexibility should be incorporated to the remuneration system. This will facilitate in motivating the European staff that place lesser value on monetary remuneration. By offering a “cafeteria style” remuneration option for workers to choose from, which may include family medical covers, fully paid annual holiday trips, schooling subsidies for children etc, so that employees can choose according to their needs (Lawler 2000). 6.6 Centralized Labour relations Although most firms expanding overseas adopted decentralized labour relations policy in order to bring in local responsiveness, recent trends show that centralized labour relations function has been effective in negotiating with the local trade unions with a greater level of power. As in the case of Nissan Motors which adopts such centralized labour relations approach, prior to initial entry in to a country the global labour relations unit of the company will negotiate and set terms on which the trade unions should agree to operate with the company. This covers areas of pay, productivity management systems and other HRM policies, which the firm plans to implement in the new subsidiary (Hill 2003). Such a global unit can be briefed on how to pay greater attention to the needs of each country such as the requirements of Works Council in European countries. Although the existing expatriates in these host country operations may not realize the importance of a Works Council in improving labour relations, a global team of HRM experts with a global outlook will see it as a vital tool in managing the international work force. 7 Conclusion In conclusion, it can be noted that while MPS has been successful in initiating and operating several international operations in Europe, some of its home country HRM practices has failed in being effectively integrated in to the foreign country operations. These difficulties can be attributed to a host of cross-cultural differences in work related values and practices. In minimising such HRM issues, MPS will adopt a locally responsive international HRM strategy which will implement new staffing policies with a geocentric approach; look in to management development programs open to the total staff including international cadre and also implement Gain Sharing Plans to improve productivity in new ventures. Further, the firm will also offer flexible remuneration packages to suit different value systems of the international workforce and look in to the need of setting up a centralized labour relations unit which will deal with trade unions and works councils. It is hoped that with the implementation of these HRM strategies, MPS will be able to create a truly global workforce geared to perform within its global market place. Bibliography Bratten, J. and Gold, J. (1999) Human Resource Management: Theory & Practice. 2nd ed, New York: McGraw-Hill Publishing Company Ltd. Curry, S.R.(2005) “The Rise of the "Returnees” [online].Workforce Management, February 59-62. Available from: [15.03.2006]. Cascio, W. F. (1998) Managing Human Resources: Productivity, Quality of Work Life, Profits. 5th ed. New York: McGraw-Hill Companies. Dowling, P.J and Schuler, R.S. (1990) International Dimensions of Human Resource Management. Boston: PSW-Kent. Hill, C.W.L. (2003) International Business: Competing in the Global Market Place. 4th ed. New York: McGraw-Hill Publishing Company Ltd. Harvey, M. & Fung, H. (2000) “Impatriate Managers: Need for Realistic Relocation Reviews.” International Journal of Management, 17. pp 151-159 Kobrin, S.J. (1994) “Geocentric Mindset and Multinational Strategy,” Journal of International Business Studies. 25. pp 493-511. Killing, J. P.(1982) "How to Make a Global Joint Venture Work". Harvard Business Review. vol. 60 (May/June), pp 120-­27. Laabs, J. (1999) “Molex Makes Global HR look Easy.” Workforce. March. pp 42-46 Lawler, E.E. (2000) Rewarding Excellence: Pay Strategies for the New Economy, San Francisco: Jossey-Bass Publishers. Mandenhall, M. & Odddou, G. (1985) “The Dimensions of Expatriate Acculturation: A Review.” Academy of Management Review. 10. pp. 39-47. O’Connell, J. (1998) “Lincoln Electrics: Venturing Abroad.” [online] Harvard Business School Case, # 9-398-095. Available at: [12.03.2006] Solomon, C.M. (1995) “Navigating Your Search For Global Talent” [online] Personnel Journal, May Vol. 74, No. 5, pp. 94-101. Available from : http://www.workforce.com/archive/article/22/03/08.php [10.03.2006] Tung, R. L. (1981) “Selecting & Training Personnel for Overseas Assignments,” Colombia Journal of World Business, 16, pp 68-78. Weiss, J.W. (2001) Organizational Behavior & Change. 2nd ed. Ohio: South-Western Collage Publishing. Appendix I Table 1 – Work Related Values for 20 Selected Countries Country Power Distance Uncertainty Avoidance Individualism Masculinity Argentina 49 86 46 56 Australia 36 51 90 61 Brazil 69 76 38 49 Canada 39 48 80 52 Denmark 18 23 74 16 France 68 86 71 43 Germany 35 65 67 66 Great Britain 35 35 89 66 Indonesia 78 48 14 46 India 77 40 48 56 Israel 13 81 54 47 Japan 54 92 46 95 Mexico 81 82 30 69 Netherlands 38 53 80 14 Panama 95 86 41 44 Spain 57 86 51 42 Sweden 31 29 71 5 Thailand 64 64 20 34 Turkey 66 85 37 45 United States 40 46 91 62 Source: Weiss, J.W. (2001) Organisational Behavior & Change, 2nd ed. Ohio: South-Western Collage Publishing. p16. INTERNATIONAL HUMAN RESOURCE STRATEGY PROPOSAL Medical Precision Systems Limited Prepared By Student Name : Course Module Details : Tutors Name : College Name Read More