MNCS and Staffing Policies - Assignment Example

MNCS and Staffing policies Globalization and intertwining of trade relations with different countries has made the business dynamics work within a single sphere with complex human relations. As globalization has seen business enter different arenas without geographical constraints, hurdles also evolve in dealing with different cultures, ethnicity, linguistic and various cognitive dimensions of different nations. The multinational companies (MNCs) can be regarded as a byproduct of globalization imbibed with the notion of optimum profit maximization subjected to cost minimization. When they spread their business globally, recruitment acts as a crucial parameter for effective functioning of business processes. Here the effectiveness of human resource plays a predominant part. The concept of human resource management (HRM) as defined by Boxall and Purcell in 2003 states that “all those activities associated with the management of employment relationships in the firm” (Wilton, 2010, p.5). HRM covers the broad arena of human capital management, design of the organization and development, resourcing which further includes planning of the workforce, recruitment and selection, talent management, performance management, learning and development, employee relations and employee wellbeing (Armstrong, 2011, p.6). The efficiency and productivity of the employee is dependent upon the effective HRM. It helps in accomplishing organizational goals and objectives. Although globalization is a powerful force, various characteristics of the nations exercise major impact on the HR strategies of firms (Boxall & Purcell, 2011, p. 10). Due to globalization, organizations are facing problem to incorporate the same corporate culture round the globe, since the corporate culture differs from country to country. About 90% of the MNCs think leadership to be the critical factor in growth (Rioux, et al, 2000, p.2). At the same time there has to be a unified ways of communication. The concerns of HRM is to highlight the questions of ‘what and why’, for the understanding of different management behaviors. Another concern relates to the process of execution of activities (Bratton & Gold, 2007, p.6). HRM is facing challenges to manage issues related to the employee in businesses operating in global markets. Staffing policies hold an apex position. The key challenges are selection and retention of talented employee, training and developing, encouraging them to be innovative and creative, living and working conditions, cultural barrier, performance appraisal from distance, legal framework (labour law), compensation package and labor relations (Sengupta, 2009, p.281). The issue arises since the policies and legal structure varies from country to country. Due to globalization the companies are not restricted to a single country and these problems require immediate address. Within the companies, the staffing function imparts a significant impact on the domain of strategic management including recruitment and selection. Recruitment occurs from the grass root level to the top hierarchy, who are steered with the motive of taking strategic actions for the company. The linkage between the behavior of the employees and performance of organizations has not been promptly highlighted within the HR policy studies. Empirical evidences also reveal that the top management of the companies attach a greater attention to processes like capital budgeting and has ignored proper mechanisms that could be useful for allocating the human skills to form the core competencies (Prahalad & Hamel, 1990, p.87). Still different aspects of the HR practice should be incorporated within each other so that the business objectives can be rigidly manifested (Searle & Ball, 2003, p.52). This paper will critically evaluate different international orientations of the MNCs that influence recruitment and selection practices within their subsidiaries. For this, the different types of managing and staffing approaches followed in the subsidiary should be observed. There are three different approaches followed by the companies namely Ethnocentric, Polycentric and Geocentric approach. In the ethnocentric approach, the cultural values and the business practices of the home country or the host country predominates (Hill, Tim & McKaig, 2006, p. 525). The organization following this approach believes that their culture and approach is the best and other parts of the world would have to follow it. The managerial and all other decisions related to staffing are taken by the headquarter present in the home country and other parts of the world have to consistently apply those. The employees in the home country do significant jobs and the subsidiaries have to follow the home country’s resource management practice (Warner, 2005).In the polycentric approach, the subsidiaries are managed independently. The companies who follow polycentric approach assumes that each country is different from the other and therefore the subsidiaries in each country should develop their own policies and practices which are to be supervised by the local managers. This approach considers that the managers who are sitting at the headquarters are not having enough local knowledge to take any decision. So they have their own managers who are the local citizens. They also frame their own Human Resource Management practices taking the local scenario into consideration (Warner, 2005). In the geocentric approach, the companies try to combine the best from both the headquarters and the subsidiary. The selection of employees is purely based on their competencies rather than nationality. This approach is applied by those companies who manage their employees on global basis (Francesco, 2008, p.146). Since significant work is done by the employees of the home country, the company incurs lower labor cost. The employees in the subsidiary just consistently follow the culture and norms of the parent company led by the local citizens. Hence the company has to demonstrate trust over the citizens. Thus this leads to the increase in trust over the company by the local community. The company, in this case, is considered to be a participant in the growth of the local country’s economy. While taking decisions, the organizations have to consider the local constraints, which make it difficult to balance between local demands and global priorities. The decisions taken are affected by the local constraints until they are unavoidable. Sometimes due to this, a difficult situation arises. Such situations increases cost to the company. Organization that follows this approach may face difficulties in recruiting qualified personals. Since the subsidiaries are situated in other countries, lesser control can be exercised by the headquarter (Rathore, 1996). Since the subsidiary has its own sets of policies, internal coordination becomes easier. The employees get a feel of multinational orientation by working at the parent company. They get to hire experienced people who are competent enough (Varkkey, 2009, p. 296). But it creates a problem for the company to adapt with the foreign environment and culture since the policies of the parent company are different from that of the subsidiaries. As the employees of the subsidiaries seem foreign to the parent company, transfer and salary costs rise. The employee is an outsider, personal and family problems also arise. The policies of the local government might restrict the operation of the subsidiary. Many countries maintain the policy of recruiting a certain percentage of their employees from the local citizens. Going by this rule, some companies hire expatriates for senior positions such as senior managers, technical supervisors and high level professionals. The expatriates are paid very high salary due to their position; hence cost to the company is high. Recruitment and Selection is the most challenging work in HRM especially in case of Multi National Corporation. Through recruitment the organization identifies the best talent from the pools of applicants and provides the organization with adequately talented people. If we consider both of them separately then we can say Recruitment is the process of finding and attracting a set of qualified individual for the positions available. Whereas Selection stands as a process of choosing the exact qualified candidate who fits into the job profile appropriately and meets the requirement. It is not an easy task to recruit and select talented individuals for an MNC. MNCs need to ensure that the HR departments should be able to perform efficiently. Otherwise an experienced outside would be more fitted to do this work (Employing overseas workers, 2012). They have to be flexible so that they can move from one place to another including international destinations. They need to be trained in international policies. Simultaneously, the individual has to meet the standard in terms of skill and competencies (Kayode, 2012, p. 3). It may be unimportant to classify the type of employee but the remuneration, incentives as well as opportunities for promotion depend on this classification only. In an International organization the type of employee that the company prefers largely depends upon the managing and staffing approach. In a company that follows the ethnocentric approach headquarter and the subsidiary are managed by the employees of the parent company. In a company following the polycentric approach, the employees of headquarter are the parent country’s citizen and the employees of the subsidiary are generally from the host country. An organization following the geocentric approach hires its employee not on the basis of the nationality but on the basis of technical expertise and competency. While recruiting an organization requires to consider the practices followed in both headquarter and its subsidiaries. Understanding the economy is important for the HR. The hiring and selection practices of a company are also affected by the influence of local culture and laws. The number of staff the organizations recruit and the cost associated to it depends mainly on the number of people available and eager to work (Understanding the economy and labor market, 2012). Some countries make it necessary to hire a certain percentage of employees from the host country. For example, in Hungary, in order to combat with unemployment, the government has asked the organizations to get permission from the ministry of labor before hiring any expatriate. The HR manager has to balance between the company policies and objectives and the sensitivity of the local labor practices. Selection of candidates from different cultures emphasizes upon different attributes. If one is recruiting for achievement oriented country, he has to consider talent, knowledge and technical skills. The company hires those who has got technical expertise and required qualification. On the other hand, ascribable culture gives stress upon parameters like gender, age and family background. The organization selects only those who meet the personal characteristics. With the increase in globalization the role of expatriates play significant roles within the MNCs. One of the most challenging tasks that the Human Resource Management faces is with managing the expatriates. Statistics show that the rate of failure that is leaving their projects prematurely, in case of expatriate in US is about 20-40% but that in the case of Japan it was 5% less than that of US. The difference is due to the fact that the expatriates in Japan get more training and orientation regarding the foreign policies rather than that in US (Tungli & Peiperl, 2009, pp. 154-156). In the selection of the choice of employee for any international subsidiary is critical. As the expatriates work at a distant location, supervision of work becomes difficult for the parent company. So the chances of fraud become more prevalent and it’s difficult to recognize unless it takes a huge size (Berwick, 2007, pp. 53-55). In the Multi National companies the problem of expatriate failure is high. So, one has to undertake preventive measures in order to avoid such a situation. Studies show that six factors are responsible for such a failure. These are blockages in career, problem in cultural adjustment, family problems, lack of cross-cultural training, stress on technical education and using international assignment to get rid of employee failure. Moreover 50% of expatriates gave low level performance even if they did not return (Ghafoor et al, 2011, p.337). When the expatriate and their families move to the subsidiary in the host country, they feel excited about the feeling of new place and surrounding. But gradually when they start living and understanding the culture of that place, they get frustrated and confused. This is termed as “culture shock”. They then try to manage living in the new situation. Gradually the expatriate starts to get more comfortable and starts understanding the situation. Within three to six months the “cultural-shock” wears off and the expatriate starts feeling normal (Hofstede, 2001, p.427). At times when an expatriate moves to a new place along with its family cross cultural adjustment is more vital than dealing with the new job assignment. The cultural shock may range from mild uneasiness to psychological problems in extreme cases. An expatriate is more successful only when only when he cop up with this cultural shock. To cope up with this problem training takes a vital role. Before sending the expatriate to abroad the human resource team should provide adequate training. Lack of such training leads to expatriate failure (Gary, 2011, p. 648). Evaluation of an expatriate is really challenging for the human resource team. The job that a person does abroad is much more challenging than that what he does in his home country. The person has to do many works out of his own area of excellence and work like a trainer or a councilor or a troubleshooter. Moreover the expatriate has gone somewhere out of his parent country to a place where he has to make lots of adjustment in terms of job, culture, language. This may be one of the important factors which affect his work too. So the evaluation becomes a problem (Cseh, 2007, pp.22-23). The remuneration of an expatriate is dependent upon the general remuneration policies of the organization. There are generally three approaches: a home-based policy, a host-based policy and lastly a region based policy. The Home-based policy sets the remuneration at a scale which matches the salary of the home country. Whereas the host based policy sets the remuneration at a scale that follows the salary structure of the host country. The third approach looks whether the relocation is within their home region or any other region. If the relocation is nearer to the home country then the remuneration would have been less than what has been paid if the relocation would have been further away. Based on the above parameters the remuneration is decided. Like in case of US apart from salary they also give allowances like relocation allowance, mobility allowance, Medical and Dental plan, Sick pay, Personal property insurance and pension plan. Keeping in mind the cultural shock and the cost incurred often the expatriate shows reluctance towards relocation. This becomes a huge problem to the company. Often they don’t find proper people who are willing to move abroad to do the designated assignment (Gary, 2011, p. 648). Thus the staffing function imparts a huge impact on strategic management which includes recruitment as well as selection of the managers and top level employees which influence directly the performance of the organization. Let us consider two examples. The concentration will be on the retail market. The companies which will be taken into consideration are Tesco Plc in U.K. (United Kingdom) and Walmart in the U.S. Let us first consider the case of the retail giant in U.K. and that is Tesco Plc. The company is the largest retailer in the UK market and it is one of the largest retail firms in the world. The company operates in and around 4000 supermarkets, superstores as well as convenience stores. In the year 2008, the company opened up 508 new stores with around 350 stores outside UK. In the same year in the month of May 2008, the company acquired 36 home stores in South Korea. The company has also launched its branches in India as well. Thus it can be inferred that the multinational Tesco Plc has spread its business around different corners of the world (Plunkett, 2008). Thus having an idea about the company’s business process in the international market it would be interesting to know about the recruitment policies of the company. The company recruits around 380, 000 people on a global basis with around 260000 employees within the UK. The company places the human resource management to a high level and infuses a geocentric policy for the company. With the expansion in the corporation across the world, it became an utmost necessity for the company for retaining a sizeable number of employees. This is because each store of the company required a significant number of employees for the purpose of running the business in a smooth manner. A part of the management technique of the company is always alert in ensuring the fact that the managers possess a significant detail of the specified market. They ensure the fact that the local knowledge of a new market can be implemented within the daily resources of the store. The company has targeted 5 chief areas of business where hiring of the employees is maximum. The areas are “store management, site location analysts, marketing and financial personnel, supporting and sustaining international operations” (Malley & Palmer, 2010, p.20). The company thinks that for continued success across diverse cultural markets these business areas are needed to be strengthened. Another example which can be incorporated into the scenario is of the retail giant WalMart. WalMart Stores, Inc operates in multifarious formats across the globe and dominates the global retail market. The main business segments through which WalMart operates are WalMart U.S., Walmart International and Sam’s Club (Munzer, 2009, p.6). The company employs a mammoth figure of employees in comparison with any other companies in the United States. The founder of the company Sam Walton has promised “a better life for all” (Pringle, 2008, p.188). However the company has faced criticisms that the employees are below poverty line. Yes, it is true that in developing countries where the company has extended its branches are poor and their life standards are not up to the mark but it have tried its best to mitigate the problem. It applies a region-centric approach. The company realizes that the employees are the prime drivers of business success and utmost importance is given to them. In order to incorporate a sense of unity and effectiveness among all the employees the company adapted the policy of terming them with the word ‘associates’. This created a sense of belonging as well as involvement within the activities of the company and steered its success. The company has been also highly committed in the improvement of the career prospects of the employees and it applies a policy of recruiting more than around 70% of the personnel in managerial positions based on performance evaluation (Walmart's Culture - Supporting Success, 2003). In this era of globalization the Multi National Organizations should look towards implementing such human resource techniques that is acceptable to the global market and as well as the organization may benefit from them. This can be done by properly following the trends as well as the company objective. The HRM should recruit the right people for right work, and then only one can optimize return. The examples provided in case of WalMart and Tesco reveal two different scenarios and based on them they have planned their HR processes and recruitment strategies. This has led these companies to reap an immense benefit and robust market goodwill. The HR professionals in the company should be aligned with delivery of optimal strategy in the company for best performance of the corporations. Chief focus will be entailed on the development of unique strategies that will be directed towards changing HR strategies as needed. 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