Employment Relations at Motoco - Case Study Example

Employment Relations at Motoco Student’s Name Institutional Affiliation Course Name Date of Submission Executive Summary Globalization is one of the greatest things that have happened in the recent past. In particular, globalization has opened up business opportunities to large companies that are currently able to explore new business opportunities in the international market to ensure competitiveness and success. Motoco is an example of a big American company that has taken advantage of opportunities offered by globalization by expanding its business into the international markets. Although the company has always imported its management practices to foreign countries and currently considers introducing MPMS system in its South Korean subsidiary, the success of Motoco will depend on how well it fits its production practices to the local arrangement. This requires cooperating with the local labor union and transforming its production practices to fit into the Korean institutional and cultural arrangements. Table of Contents Executive Summary 2 Table of Contents 3 Introduction 4 Potential Benefits of implementing the MPMS system 
 5 Potential Risks of implementing the MPMS system 
 6 Institutional and cultural arrangements that might affect implementation of the MPMS 
 8 Various strategic options available for the implementation of the MPMS 11 Recommendation 12 Conclusion 12 References 14 Employment Relations at Motoco Introduction Globalization is one of the greatest things that have happened in the recent past. In particular, globalization has opened up business opportunities to large companies that are currently able to explore new business opportunities in the international market to ensure competitiveness and success (Wilkinson 1996, p. 421). Motoco is a classical example of American multinational company that has operations in six different countries. The company deals with the manufacture and sale of lighting and signaling components to automakers. It recently acquired a South Korean company based in Soul as part of its growth strategy. However, According to the case, Motoco want to introduce its management policies in South Korea by adopting the Motoco Performance Management System, which it believes has been key to its success in the U.S. and other locations. However, before adopting the MPMS system in South Korea, there are certain benefits and drawbacks, as well as institutional and cultural constraints that might affect effective implementation of the system at its subsidiary. This report will begin by examining the potential benefits and risks of implementing MPMS system in Soul subsidiary and proceed to highlight the institutional and cultural arrangements that might affect effective implementation of MPMS system in South Korean subsidiary. The report will also provide the strategic options available for Motoco in implementing MPMS system and recommend the best option to adopt under the circumstances. Potential Benefits of implementing the MPMS system 
 The first main benefit that Motoco would derive from the implementation of MPMS is the achievement of greater result. The performance of a company depends largely on the contribution of every individual employee in a company. However, not all employees usually put in the efforts that can contribute to the achievement of greater results. It is for this reason that the implementation of MPMS would be of immense benefit to Motoco since MPMS ensures that workers understand the value of their efforts in the achievement of organizational objectives and goals (Jwijati and Bititci 2010, p. 425). Consequently, this results in greater productivity of each employee, thus organizational success. Secondly, the implementation of MPMS will be of immense benefit to Motoco in the sense that it will result in efficient utilization of company resources, thus ensuring cost saving. In order for a company to achieve high profitability, it must ensure that costs are kept as low as possible. Fortunately, MPMS is a good strategy for managing cost since it ensures that employees are remunerated according to their contribution to the organization (Reddy 2011, p. 300). Many companies are said to lose millions of dollars in paying redundant employees and ghost workers that do not contribute to a company. Therefore, the implementation of MPMS in Soul will benefit Motoco because the system evaluates the relative worth of an employee by measuring their performance and remunerating according to the results achieved. Accordingly, this helps in cost-saving as it ensures that employees that do not contribute much to the organization are paid according to their contribution. Thirdly, the adoption of MPMS will be of huge benefit to the American firm in South Korea since the system promotes the culture of hard work and creativity among employees. Any company where employees are allowed to lazy around and do as they wish cannot succeed in the present day business environment. Therefore, the only way for a company to succeed is to promote the culture of hard work and creativity. Therefore, because MPMS rewards employees based on their contribution, this motivates employees to work hard and come up with ideas that can be of help to the company (Groeschl 2003, p. 68). This is because employees understand that the harder they work and achieve great results, the more they are rewarded by the company. In the end, this results in increased productivity, thus ensuring enhanced performance of Motoco in the South Korean market. Fourthly, the adoption of MPMS system will benefit Motoco by ensuring that the activities and processes being carried out at the South Korean subsidiary are aligned with the organizational goals set at the headquarters in Detroit. Because MPMS system has worked well for Motoco at its headquarters and different countries, where the company operates, the adoption of the system will provide immense benefits by ensuing that the goals and objectives at its subsidiaries aligns to Motoco goals and objectives set at its headquarters. Additionally, the implementation of MPMS system will benefit Motoco managers both at the headquarters in Detroit and at its subsidiaries in South Korea by saving time, minimizing conflicts, as well as promoting increased efficiency and consistency in performance (Davis and Albright 2004, p. 137). Potential Risks of implementing the MPMS system 
 Although the successful implementation of MPMS system could produce numerous benefits to Motoco in its bid to conquer the South Korean auto component market, the implementation of the system is likely to encounter many challenges. The first major risk likely to be encountered in the implementation of the system is resistance from the union and employees (Rajendran 2015). As indicated in the case, the union representing the local South Korean automotive assembly industry Korean Auto Workers Union (KAWU) has over the years opposed the introduction of performance-based pay system in other manufacturing firms in the country. As such, it is highly likely that the union will oppose Motoco’s planned implementation of MPMS system in its South Korean. Accordingly, this will make the implementation of the system difficult in Korea. In fact, Joon Choi reports in the case that KAWU has already heard of the rumors that Motoco intends to introduce MPMS in South Korea and is planning to stage industrial action against the company in both South Korea and the U.S., as it is currently monitoring closely the moves that Motoco makes in its subsidiary. Secondly, the implementation of MPMS system might face the risk of lack of commitment from the leadership in South Korea. The commitment of leadership is critical in the implementation of performance management system (Bititci et al. 2011, p. 11). Therefore, in the event that the management fails to shown commitment to the implementation of the program in the subsidiary, this might make it difficult for Motoco to implement the system in its South Korean subsidiary. As such, because the HR manager from the head office would have to work with managers in the subsidiary, failure by the managers in the subsidiary to commit to the implementation of MPMS will result in lack of reinforcement of the system in the subsidiary (De Waal 2003, p. 691). Thirdly, the implementation of MPMS might face integration challenge. For a performance management system to be effective, it must integrate with the organizational culture, structure and other processes of the subsidiary (Bourne 2005, p. 102). Unfortunately, because the business culture of South Korea has not embraced the concept of performance management. As such, Motoco is likely to find it difficult implementing the MPMS system in its subsidiary in South Korea because of integration problem. Additionally, the implementation of MPMS system might be affected by incompetence. To smoothly implement a performance management system such as the MPMS, competence is a necessity. (Bourne et al. 2002, p. 1290). Unfortunately, Motoco’s HR from the headquarters might not get the right workforce in its South Korean subsidiary with the right skills required to ensure smooth implementation of MPMS system. As such, effective implementation of MPMS system in its subsidiary in South Korea might require training staff on how best to implement the system that results in additional cost to the company. Institutional and cultural arrangements that might affect implementation of the MPMS 
 Performance management system (PMS) is a business strategy that companies use to gain competitive advantage. Big multinational companies, in particular are increasingly adopting PMS as a business strategy. As has been demonstrated above, Motoco is one of the multinational companies with operations beyond its home country. Although Motoco has found it easy to implement MPMS in its domestic market, the implementation of the system in the South Korean automotive market is likely to be affected greatly by the South Korean institutional and cultural aspects. According to Hofstede’s model, the operation of a company in a foreign country can be affected by five different cultural dimensions, including power distance, degree of uncertainty avoidance, individualism vs. collectivism, long vs. short-term orientation and masculinity vs. feminism (Yip 1992, p. 44). Therefore, to succeed in doing a business in a different country with a different culture, managers of parent company must ensure that there is a cultural fit. This is because there are quite a number of cultural and institutional constraints that might affect the effective implementation of a performance management system. The first major cultural constraint that might affect effective implementation of MPMS in South Korea is power distance. According to Hofstede’s cultural dimensions, South Korea scores highly in power distance. High power distance implies that South Korea is a high hierarchal society that stresses on the importance of relationships. High power distance in South Korea results promotes the delegation of work to lower level staff, which creates a gap between the management and workers. Accordingly, this result in high degree of inequality as senior management isolates themselves from the rest of the staff. Regarding individualism vs. collectivism, South Korea is more of a collective society. This is seen as South Koreans has a strong sense of belonging and loyalty to groups (Yip 1992, p. 44). In fact, people usually prefer pursuing the interest of the group as opposed to that of an individual. Collectivism is manifested even in companies, where employees prefer working as a team and group achievement as opposed to individual achievement. On uncertainty avoidance dimension, South Korea has a high uncertainty score (Dastmalchian 2000, p. 391). It is noted that South Korean culture is based on tradition, social codes and rules. Accordingly, the South Koreans put high value on security by minimizing risks as much as possible through hard work and punctuality in their work. The high uncertainty score also implies that the country is businesses are regulated by strict rules, laws and policies. Masculinity is another cultural dimension that might affect the implementation of performance management. Masculinity denotes how roles and tasks are distributed between genders. South Korea, however, is a more feminine society as it stresses on the importance of equality, quality work, and working to earn a living. Lastly, as regards long vs. short-term orientation, South Korea is more long-term oriented. This implies that the society makes judgments based on the prevailing situation. They are also highly adaptable to situations and persevere a lot. Because these cultural and institutional dimensions have a huge impact on the performance management, for Motoco to succeed in implementing MPMS, it must ensure that it aligns it business practices to the South Korean institutional and cultural arranged highlighted above. In this respect, because the U.S. and South Korea differ significantly with regards to power distance, uncertainty avoidance, orientation and individualism, the difference might act as a hindrance to the effective implementation of MPMS in South Korea (Yip 1992, p. 48). For instance, whereas the Americans place value on the contribution of individual employees, the South Koreans place value on group performance. Therefore, because MPMS system focuses on contribution of each individual employee to the company, there is likely to be a cultural clash as South Korean managers and employees might find it difficult accepting the strategy. Similarly, it has been demonstrated by the Hofstede cultural dimension that South Koreans score highly in terms of uncertainty avoidance. This is because they are highly risk averse and would do everything possible to minimize exposure to risk. The high risk aversion arrangement of the South Koreans is also demonstrated in the case where it is revealed that the Korean automakers are highly conservative, particularly when it comes to procuring component supplies. This is because of their high uncertainty avoidance that is based or risk avoidance. This cultural arrangement differs with that of the U.S. people who are risk takers. Therefore, to succeed in Korea, the HR manager of Motoco will have to give the South Koreans time to gain trust in the company and its business practices, such as when implementing the MPMS system. Various strategic options available for the implementation of the MPMS As things stand, the union representing workers is strongly opposed to the idea of introducing MPMS system in its South Korean subsidiary. This implies that the implementation of the system will not be an easy task as it would be met with strong opposition and protest from the labor union. Therefore, the first option available to ensure effective implementation of MPMS system is to corporate with the KAWU by sitting with their officials and representatives to explain to them why implementing MPMS system would be a good move to the company and the industry at large. This is because, as demonstrated earlier, the strong resistance is attributed mainly to institutional and cultural arrangements as well as the fear of the unknown (Higgs 1996, p. 32). The labor union, in particular is fearful that performance-based pay system might result in constant dismissal of its workers. However, by explaining to them the importance of adopting the performance management system, the worker’s union might be convinced and allow its implementation without resistance. The other strategic option available is to abandon the implementation of MPMS and adopt a “best fit” approach (Watson 1997, p. 19). This would involve avoiding exporting Motoco’s preferred management practices to its South Korean subsidiary by implementing the South Korean production methods by working cooperatively with KAWU and convincing Motoco Headquarters to modify the aspects of the production system of the company in order to accommodate the South Korean local institutional and cultural arrangements. Adopting production techniques and system used in South Korea will help minimize friction between Motoco and the local union representatives in South Korea, thereby ensuring smooth running of business in the country. Recommendation The success of a multinational company in a foreign country depends largely on how well it fits to the institutional and cultural arrangements of a country. Every country has its laws, regulations and cultural aspects that affect how businesses are operated in the country. The same has been seen in South Korea, which has certain institutional and cultural arrangements that influence how businesses are conducted in the country. Therefore, for Motoco to succeed in Soul, the best strategic option is to adopt the “best-fit” approach to management practices. The first thing that Motoco must understand is that the business practices in South Korea is quite different with that of the United States. As such, it would be wrong for the managers at the headquarters to assume that MPMS system will work well in the subsidiary because it has been effective in ensuring productivity in the U.S. This is because of the existing institutional and cultural differences between the two countries (Lebas 1995, p. 24). Therefore, the best option available for Motoco is to change the firm’s production system in a manner that accommodates the South Korean local arrangement. Doing so will make South Koreans see Motoco as one of their own, build trust in the company, thereby resulting in success. Conclusion South Korea offers great business opportunity for Motoco. However, because South Korea has certain institutional and cultural arrangements that influence how businesses is conducted in the country, the success of Motoco in Soul will depend largely on how well it fits into the institutional and cultural arrangements of the local people. Although MPMS has been beneficial to Motoco in its parent company in the U.S., the system might not succeed in South Korea, as it is already facing strong opposition from the local labor union. Therefore, to succeed, Motoco should corporate with the local labor union and modify its production system to accommodate the South Korean institutional and cultural arrangements. 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