Managing People In A Multinational Context - Research Paper Example

Managing People In A Multinational Context Synopsis The purpose of the case study is to analyze the efficacy of expatriate programs by companies and explores ways to combat the negative effects of repatriation with the example of Contact Company. Contact Company has followed the practice of expatriating managerial talent to the operations in Portugal over the last 12 years. Expatriation is a necessary route for an organization’s geographical diversification. The process of expatriation involves priming candidates for the opportunity by appropriate training, adjustment on the part of the individual and family, suitability of compensation and acceptance of the person by the host country. In the course of the expatriation there are issues regarding keeping the person updated with company information, keeping a track of the individual’s adjustment, celebrating successes of the host country and ensuring that knowledge earned in the course of the expatriation is shared across. At the end of the stint, repatriation difficulties arise with the new position of the individual being poorly chalked out, compensation issues and a sense of alienation due to numerous changes effected in the interim. Human Resource Management theories with respect to the design of expatriation/repatriation programs are applied in this case study. Literature with respect to expatriation policy, knowledge management, compensation strategy, cross-cultural learning and repatriation mechanisms are considered. It is assumed that the company has provided training without gathering inputs on training efficacy and that the organization utilizes current communication technology. Findings Contact Company has set up an expatriation policy with the intention of providing managerial expertise above certain levels. The prime concerns are related to early repatriation and turnover within a short period after repatriation. Of 47 who were sent on expatriation, 18 returned before completion of term and 43% of the repatriates leave within three years of return from the company. The feedback provided in the survey point to specific issues faced by individuals who undergo expatriation. The issues fall in the categories of training, knowledge transfer and communication, compensation and repatriation. Training The feedback provided comments on the quality and efficacy of training provided to Portuguese counterparts while another statement questions effectiveness of performance appraisals in the Portuguese context and the absence of confidence ‘to make things happen’ which dilutes appraisal and objective setting. Connerley and Pedersen (2005, p.7) make the case for increasing multicultural awareness as a means to increasing the ‘person’s power, energy and freedom of intentional choice in a multicultural and diverse world.’ It acts as a means to improve decision making ability by widening perspectives beyond one’s own and allows for understanding the different cultural nuances to solutions and approaches to doing things. Abrecht (2001, p.119) highlights the examples of companies that undertake ‘diversity awareness’ training sessions to mutually attune different cultures represented in the company. Trompenaars & Hampden-Turner (1997, p. 3) empathise with the situation of the international manager since they Must operate on a number of different premises… arise from their culture of origin, the culture in which they are working and the culture of the organization that employs them. Harris et al (2003, p. 151) underscore the importance of cross-cultural training as a means to ensuring expatriate success. Harzing and Ruysseveldt (2004, p. 294) indicate the need for cross-cultural training to be evaluated for effectiveness on the basis of utility to the audience. Hogan (2007, p.11) emphasizes the need for ‘facilitating’ cultural sensitivity. Some concepts may be inherent in certain cultures though ‘inappropriate or even dangerous in certain cultural contexts’. The attitude must be one of aiding mutual understanding rather than the assumption of cultural superiority. Warner and Joynt (2002, p. 81) point out that cultural differences towards ‘authority’, ‘interpersonal interaction’ and ‘innovativeness’ affect the implementation of key processes. Jackson (2002, p. 44) highlights the fact that the type of operation, international strategy and ownership that has been set up abroad determines the extent of control and involvement exerted by the home country. The feedback regarding the appraisal process highlights the presence of cultural nuances over-riding the corporate need for internal process adherence. Connerly and Pedersen (2005, p.117) stress on the need to aid understanding and adaptation to different cultures through processes of ‘experiential learning’. Training interventions are required for communicating the relevance and importance of internal processes to create a common method of doing business and managing people. The feedback with respect to the quality of training points to the absence on a post-training check regarding its relevance and efficacy as also to sensitivity regarding cultural perspectives and attitudes. The feedback with respect to the difference in the working of the appraisal systems in Portugal points to this difference. The culture of the home country may encourage honest and objective feedback in an appraisal whereas the host country may tend to be roundabout and meander rather than be direct. Social relationships that have been developed at the workplace may take precedence over the working relationships. This can convert an important appraisal process into a paper exercise and make it difficult for the expatriate to manage teams. Knowledge transfer The feedback displays a feeling of annoyance about the absence of interest about the experiential learning in the business habits of a different culture. Dickman et al (2008, p. 75) stress that the knowledge transfer mechanism may be ‘bureaucratic’ at its base but must allow for ‘social mechanisms’. These mechanisms must be supplemented by ‘personal mechanisms’ to allow for clear knowledge transfers. Sparrow et al (2004, p. 100) comment on the use of ‘team rooms’ on the internet to share knowledge and insights on ‘cross cultural issues’. The absence of a mechanism to ensure that knowledge garnered from experiences during expatriation provides little ‘knowledge leverage’ to the organization. This is de-motivating for the employee who has gone through an expatriation and assures the company of an expensive re-learning process by subsequent expatriates. Compensation The feedback received by Contact Company refers to the annoyance felt about pay parity between expatriates and between a local employee and an expatriate with similar jobs. Another issue that has arisen is the sudden drop in income after return. Dowling et al (2008, p. 161) maintain that the international compensation structure must be drawn up in line with the strategic objective of the geographic diversification. Berger (2000, p. 617) advocates a compensation structure that considers all costs of the transfer and care of the family. Difficult locations call for extra ‘rest and recreation expenses’ and holiday. Employees are concerned about their social security, leave, medical and insurance expenses when they are undergoing the transfer. These should be factored into the structure. The company may divide the salary between home and host currency or choose any one, the decision wavers between favorable and otherwise on the basis of the exchange rate fluctuations. The Contact Company expatriation program has not defined necessary pay parity processes and the conditions when expatriation should be chosen. The presence of employees doing the same work in the host country where an expatriate is being sent pleads the question as to why expatriation has occurred. Pay parity of an expatriate must be considered along with comparable expatriates to be encouraging and on return, a parallel check is required to ensure that savings potential is not affected and appropriate parity is maintained. Repatriation The feedback by a returning employee of having ‘lost touch’ with the company and feeling ‘lost and like a stranger’ refers to the absence of a mechanism to carry the individual through the repatriation process. Another employee complains of a lack of clarity about the new role after returning from the assignment. Dickman et al (2008, p. 177) summarize the thoughts of repatriates: Hope for a holistic process that gives them an early indication of their next position and an adequate prospect of further career advancement… re-establish old contacts…hope to be mentored…job position after repatriation… opportunities to utilize skills learned while abroad…supervisors and colleagues interested in their international experiences and support them through their repatriation process. The authors find that the failure to have these expectations fulfilled lead to poor performance after return and subsequent attrition. The company faces the problem of unintended attrition and the possibility of losing valued experience and knowledge to a competitor. Ongoing communication with the expatriate is an area of concern. At the time of repatriation, the individual faces a shock of finding that the organization has undergone tremendous change during the absence. Dowling et al (2008, p. 207) recommend a mentor at a senior level who can aid the repatriation process by providing necessary information and support to the repatriate. Key issues that are emanating in the Contact Company refer to the absence of a holistic expatriation program that forces attention to the process of return. The most important point is the absence of ongoing communication with the expatriate regarding changes in the home country and a route to discuss personal aspirations and possibilities on return. It is imperative to tone down compensation expectations in line with reality. Management of expectations by highlighting the advantages of the home salary and an assurance of support can alleviate the issues relating to repatriate compensation. Discussion The major issues that have arisen in the expatriate program of Contact Company lie in the areas of training efficacy, knowledge transfer, compensation and repatriation. This indicates the absence of a comprehensive expatriation policy. The area of training efficacy demands that the company focus on the learning that is relevant for business. The feedback indicates a cultural difference in the way certain processes are viewed and implemented – whether this requires rectification in the process is an area for attention. Objective setting can be a challenge where indirect or no feedback is provided and requires direction being provided to the local workforce rather than expecting them to take the lead. The advantage of this method is that there is greater centralized control of operations though it can lead to excess detailing about individual responsibilities and thereby reduce local capability and learning. Knowledge transfer is absent and has not been given importance as a part of the expatriation program. Expatriation calls attention to the need for home country learning about work styles of relevant cultures. This knowledge is available with returning expatriates and the absence of mechanisms to share this learning leads to continuous re-learning by subsequent transfers. This makes for low efficiency and high cost. As a route to come out of this cycle, knowledge may be shared by setting up forums manned by expatriate groups who can mentor and advice employees. The advantage of this method is that a new expatriate will take less time to be at ease in the host country and existing expatriates feel valued by their company. There is a possibility that negative experiences are also shared and reduce future willingness towards expatriation. Compensation design must look to parity and savings potential. It is necessary to continue certain home benefits relating to medical expenses, insurance and social security while assuring the individual and family of an appropriate lifestyle in the host location. The same view should be applied at the time of return. The advantage of this manner of compensation is that it makes the expatriation/ repatriation process more acceptable. The disadvantage of this manner of compensation is that it makes each transfer a high cost decision. Each expatriation needs to be weighed against the alternatives available to the company through local or foreign low-cost recruitment or managing with short stints at the host country. Repatriation in the normal course is the point at which the employee feels alone due to the absence of appropriate care by the company. Unplanned repatriation leads to poor role definition, incorrect salary structure and an overall sense of alienation from the company. A mentor at a senior level should be assigned to taking care of the needs – personal and professional – of the returning employee. The mentor takes care of the interests of the individual by working out an appropriate placement in job and compensation, ensures that there is adequate information shared about the company and allays the insecurities of the repatriate. Early repatriation must also be defined by the company and appropriate measures taken to identify the worth of the individual to the company. Inability to adapt or personal problems may be viewed negatively whereas change in business focus or dilution of role after expatriation and issues that are not in the control of the expatriate may prevent a negative record. The advantage of this definition is the clarity provided to transferees about the view of the company regarding early expatriation. The disadvantage lies in the latent threat of a negative record and appropriate measures to manage the employee. Conclusion It may be said that an expatriation policy must define the purpose and the expected learning and cost benefits that should accrue to the company. It should also be designed considering the gamut of employee experiences from the point of departure till the point of return and clearly state the necessary actions to ensure fairness in salary, training and treatment of expatriates. Expatriation programs may be designed with different aims, one to aid business expansion needs or to cater to immediate business need. An expatriate program that is designed to garner larger organizational benefit must be attractively designed to suit business requirements and cater to the expectations of the employee during the stint abroad. It must ensure communication strategies to keep the overseas person keyed in to home country happenings and plan a suitable return assignment after repatriation. An expatriation program that is designed to meet an immediate need faces a dearth of requisite corporate attention and results in unfavorable expatriate experiences and poor retention of repatriates. Recommendations A well defined expatriation policy is the need of the hour at Contact Company. The existing policy must be reviewed in terms of the phase of learning of the Portugal setup when the policy was introduced. As the foreign setup has become more stable, there should be a change in the need for talent to be sent on expatriate assignments. The policy must consider the purpose of expatriation from a business need perspective and define the career route for an expatriate. The policy must consider the following: Define need for expatriation Cost – benefit of expatriation Alternatives to expatriation Decisions by top management group with respect to expectations of company and future career of expatriate and individuals chosen for maintaining contact with the expatriate Actions to be initiated once decision is taken (compensation checks, employee awareness of expectations towards full term stay, cross-cultural training and feedback, setting in motion communication and knowledge transfer mechanisms and repatriation planning and commitment to employee, planning for return of employee). The purpose of expatriation is brought out by Moran (2007, p. 193) who quotes Prahlad’s observation with respect to the need for companies to retain their competitive edge by seeking workers on the basis of ‘core competence’…‘create a work community in which high performers can freely exchange information and knowledge.’ Dickman et al (2008, p. 195) believe that ‘organization application and expatriate learning are both strategic purposes of expatriation… development of skills in an intercultural context...’ Expatriation serves the purpose of enhancing individual and organizational learning provided the design assures mechanisms to channelize the learning. Contact Company runs the risk of de-selling the attractiveness of the expatriation program in the absence of a well-founded rationale for having the program in the first place. The cost-benefit analysis forces the management of the company to consider the wisdom of transfer and forces an exploration of other modes of sourcing. Alternatives must be discussed so that there is conviction and commitment towards the program and individuals should be identified as responsible for communication with and feedback from the expatriate during the interim. A well-rounded program that forces an intelligent approach to the issue of expatriation ensures that the company takes care of business need as well as employee needs and aspirations to reduce the incidence of failed repatriation. Dickman et al (2008, p. 177) quote Brewster and Scullion when they highlight the consequences of failed repatriations. The high cost associated with the loss of talent and unique experiences and knowledge is increased with the unwillingness of existing employees to view expatriations as an indication of career advancement. Expatriation furthers the corporate need for cross-cultural sensitivity and improves the learning capability of the managers. Schuler et al (2003, p. 30-33) point to the importance of learning as: increased collaboration and trust, boost mutual knowledge levels with respect to proprietary information, enhanced managerial flexibility and willingness to take risks. The introduction of a monthly reporting system and the use of communication forums like online meetings and conference calls can keep the home and host country mutually informed. Ongoing communication becomes the norm. The approach mentioned above also provides due attention to repatriation. Scullion et al (2006, p. 196) agree that it is omitted from the expatriation program design. ‘Instead of being seen as the final link in an integrated process’, it is ignored until the point of return of the individual and often leads to unplanned positioning in the hierarchy. Implementation The literature suggests that the HR function should take responsibility for the knowledge and communication mechanisms and the overall experience of the expatriate. The overall philosophy may be defined by the top management with limits regarding admissible cost-benefit ratio. However, the drafting of such an important document must be done by a group consisting of business heads at senior levels of management who have gone through an expatriation experience. Different departmental views must be taken to ensure due process and aiding mechanisms designed and implemented. The knowledge transfer and communication mechanism must be the responsibility of the Information Technology department while Finance and HR must agree to compensation decision processes. Mentoring should be done by a management representative who can pull appropriate strings to help the employee. Training requirements will be drawn up by the training team in conjunction with people who have the experience and knowledge to add value to the exercise. Bibliography 1. Albrecht MH (Ed) (2001), International HRM: managing diversity in the workplace, Oxford: Blackwell 2. Berger, Lance A. (2000). The Compensation Handbook. McGraw Hill Professional. 3. Connerley ML and Pedersen PB (2005) Leadership in a diverse and multicultural Environment, London:Sage 4. Dowling PJ, Festing M and Engle AD (2008), International Human Resource Management: Managing People in a Multinational Context, London: South Western 5. Dickman M, Brewster C, Sparrow P (2008) International Human Resource Management: A European Perspective, London:Routledge 6. Harris H et al (2003), International Human Resource Management, London:CIPD 7. Harzing A-W and Ruysseveldt JV (2004), International Human Resource Management, London:Sage 8. Hogan C (2007) Facilitating Multicultural Groups, London: Kogan Page 9. Jackson T (2002), International HRM: a cross cultural approach, London: Sage 10. Moran RT et al (2007) Managing Cultural Differences, London:BH 11. Schuler R. and Jackson S. (2003) Managing Human Resources in Cross-Border Alliances London: Routledge 12. Scullion H. and Collings DG (2006) Global Staffing London: Routledge 13. Sparrow P. et al (2004) Globalizing Human Resource Management London: Routledge 14. Trompenaars F and Hampden-Turner C (1997), Riding the Waves of Culture London: Nicholas Brealey 15. Warner M and Joynt P (2002) Managing Across Cultures. London: Thomson Read More