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Discuss factors which might influence whether multinational companies (MNCs) are more likely to attempt to follow uniform HR policies across different national subsidiaries, or to follow different policies in different places.
The idea of internationalization and globalization of companies now occupy a significant position in the root of nearly each and every company by helping in defining their business processes, approaches and strategies. Globalization is an extremely wide domain which holds the potential of causing disturbing effects to organizations as it paralyzes them to follow and respond to quickly changing business surrounding (Marquardt and Berger, 2003). Therefore, all this does not only requires improved contribution and effectiveness but also regular alteration of the objectives as well as roles occupied by different departments existing within an organization, which includes Human Resource (HR) functional area too (Braton and Gold, 2007). The main aim of this essay is to examine factors which might influence whether multinational companies (MNCs) are more likely to attempt to follow uniform HR policies across different national subsidiaries, or to follow different policies in different places.
Concept of HRM
According to Schuler (2000) HRM can be defined as the backbone or the most important part of any organizations in almost all working sectors which involve dealing with several employees as well as involving extra ordinary capabilities and talent of the HR professionals in order to manage people. It not only includes managing people but also deals in development of rules, business strategies and policies that revolve around the employees. Human resources play a fundamental role in the long term working and success of any business or organization and therefore, almost all the management related decisions and steps that form a link between the company and the workers should be taken very carefully (Blyton et al., 2001). HRM is a domain that recognizes the meaning of word ‘employees’, the manner their requirements can be handled and what all can be done to enhance the growth of both the firm and its employees.
Moving further, the notion of HRM in a true sense has raised from ‘personnel management’, which involves controlling, escalating and encouraging the efficiency of several young recruits (Schuler, 2000). However, after the year 1970, a very strong focus is being laid on health, safety and long term aims of the firm as well. Since that time only conversion of personnel management into HRM started taking place. Further, with amplified competition, constant changes in business environment as well as globalizations, Strategic International HRM has also gained significant momentum. According to Schuler (2000), growth of SHRM has lead to significant changes in HRM like HR professionals paying more attention to firm’s strategic goals, growth, competitiveness, flexibility, profit margins etc.
Factors Affecting HR Policies of Multinational Companies
In this extremely competitive era with constantly changing economic surroundings it has become highly essential for firms all across the globe to be as efficient and productive as possible. According to Aycan et. al. (2000), especially for firms with global operations, it is important to understand and well comprehend the cultural context in which they operate, mainly the impact on international human resource practices. Gone are those days, when global operations and business used to be merely confined to attaining business profitability (Triandis, 2004). Research scholars have now started to pay more attention to understand various aspects of the organisational success (Aycan et. al., 2000). Today, winning strategy is to understand the international culture and the way it can impact working of the organisations. K’Obonyo and Dimba (2007) also add to it that out of the several factors that actually drive workplace practices and global operations, culture plays a critical role as it directly relates to attitude and behaviour of the individuals. Moreover, according to Hofstede (1980), culture is actually mental encoding of the human mind that helps differentiate one set of individuals from another. Further, all these distinct shared cultural aspects are usually more prominent to foreigners in comparison to the existing individuals of the nation.
Firms today are extremely competitive due to which the level of risk and competition, economic instability as well as market changes also enhances. Further, Barlett and Ghoshal (1998) mention that behind each and every product or service, which is performed or exchanged across borders, depends upon the individuals who present, examine and actually, implement it. In reality, along with the data and technology, these managers and leadership actually work around human interactions that are governed by a wide array of social factors and variables.
If the interaction takes place between two or more individuals who belong to the same culture, then it is quite easy to recognise the interactions and all the communications through a range of behaviours and project assumptions with which both the parties are familiar. However, when the interaction occurs amongst two or more individuals who are not from same cultures, there are highly likely chances of encountering unfamiliar and strange behaviours (Barlett and Ghoshal, 1998). This is mainly due to differences in thinking, beliefs, values and backgrounds of the individuals, which results in misunderstandings and unwanted complexities. This along with other factors is essential for organisations with global operations to consider and address. Strong understanding of cultural context and surroundings helps MNEs focus upon analysing the factors as well as risks that could impact or in any form restrict performing across border
Success and winning criteria in the global market now mainly depends upon understanding the culture of the nation where business is carried out. George and Jones (1996) mention that this is key reason behind many studies around the theory of culture and work. Culture includes everything ranging from social, political as well as economical values, which differentiate the way people live and work in any nation (George and Jones, 1996).
Geocentric Approach of Management
This approach lays emphasis on a more globe-directed strategy to multinational management. It does not exhibit any partiality towards either home or host nation preferences but instead spotlights the importance of carrying out whatever it requires for better serving the company (Barlett and Ghoshal, 1998). This is obvious in the manner that upper management doesn’t appoint or hand over accountability to a person since they best demonstrate the home or host nations’ views. Rather, management chooses the individual most suitable for fostering the corporations’ objectives and solving issues globally. The chief aim of this is building a company wherein the subsidiary isn’t just a sound candidate of host country but is a prevalent exporter from this country within the global community and makes distinct contributions like new skills and efficiency.
The chief objective of geocentric approach is globally uniting both headquarters as well as divisions. The company’s divisions are therefore neither independent city states nor satellites, but fractions of the complete whose emphasis is made on global aims and local goals, individual fraction making its exceptional involvement with its exceptional ability (Schuler, 2000). Further, geocentric approach goes down to product differentiation, diversifying operations in the manner, which diverse marketplaces need dissimilar conduct and finally, geographic locations. Of several aspects of an organization there are two which are chiefly geocentric i.e. RandD (research and development) as well as marketing (Barlett and Ghoshal, 1998). This is due to the reason that different marketplaces, areas and nations call for different means for approaching them. For instance, what is acceptable means of treating staff members within the UK, the home nation, might not be an acceptable standard in China, the host nation (Barlett and Ghoshal, 1998).
It is the chief objective of geocentric approach to develop a collaborative link amid headquarters and divisions; this link should include several universal policies, which could thus be adopted like a guideline at the time when forming chief business judgments (Schuler, 2000). These judgements take in the start-up and management of fresh plant, perspectives for marketing a product to some new customer base, as well as product modifications (Brewster et. al., 2007). The highly efficient means of enforcing geocentric approach is by way of formal reward system, which motivates both headquarters and subsidiary managers to operate for worldwide objectives instead of simply defending home nation standards. This perception is a good example of the way how present day’s companies must administer both local and global matters for being successful.
A number of past studies and research studies have been conducted till data that focus on human society and overall population (Kogut and Zander, 1993). But it is still challenging to master each and every organizational environment and its related facts prevalent across the world. However, it is important and critically, especially for MNEs to understand what the actual cultural context is and what are the key differences from nation to nation. For an employee to possess something, presence of some material object is necessary. Further, when individuals think, values, ideas, beliefs and attitudes exist and that also, in a certain socially prescribed manner (Brewster et. al., 2007). Thus, it can be concluded that organizational work environment comprises of objects, ideas, values, attitude and a specific pattern of behaviours, which is essential for MNEs to understand in order to succeed and attain a long term competitive edge. It is important for MNEs to understand that work environment is not a short term concept but an inbuilt and inherent way of living (Brewster et. al., 2007). MNEs should realise that culture gets transmitted from one person to another through a constant process of interaction and learning instead of a genetic technique.
With rapid advancement in technology as well as intense spread of globalisation, companies have now started to operate across borders. The strategic benefit advantage behind the same is to leverage from the expertise skill set along with cost effective labour (Kogut and Zander, 1993). For example, several organisations with headquarters in developing nations such as the UK and the USA, outsource part of their operational units to other countries like India, China etc. They benefit from the availability of advanced skills and knowledge but the challenge lies in being well aligned with the cultural and gaining a deep knowledge of the cultural issues (Barlett and Ghoshal, 1998).
Organizational work environment is a complex process that gets linked to various collectives and in between each collective there exist many types of individuals) (Kogut and Zander, 1993). Based upon the current literature, organizational work environment broadly is linked to different ethnic tribes and groups in accordance with organisational structure (management and society), nation (politics, management and sociology) as well as anthropology. For any organization, work environment is viewed from 3 main angles. These include fragmentation, integration and differentiation. Understanding work environment and organizational perspectives prevalent in a particular country can aid global firms attain competitive edge in untapped and neglected region (Brewster et. al., 2007). The chief advantage is that deep understanding and knowledge of all this helps better penetration of business activities and processes into any nation. Understanding work environment and organizational perspectives prevalent in a particular country plays an extremely powerful role in global environment.
Notion of the Cultural Context
A number of past studies and research studies have been conducted till data that focus on human society and overall population. But it is still challenging to master each and every culture and its related facts prevalent across the world. However, it is important and critically, especially for MNEs to understand what the actual cultural context is and what are the key differences from nation to nation. This section of the paper specifically focuses upon the meaning of the term culture and its significance for the businesses operating in the global marketplace. According to Triandis (2004), being updated with such cultural concepts facilitates changes and helps overcome unfamiliar and complex cultural barriers.
Today, there exist several definitions of the term culture, in fact more than 160 definitions. But the one defined by Edward Tylor during the nineteenth century holds most value. According to Edward Tylor, culture can be defined as a complex term, which includes belief, knowledge, morals, art, custom, laws as well as other specific abilities and habits present in any society (Triandis, 2004). It can also be comprehended as historical techniques of living and spending lives. Culture can also be described a man made concept that guides both the societies and businesses into a specific set of people and surroundings. Basically, it is a way of life of individuals in any region or nation. In simple sentence, it can be explained as each and every single thing, which individuals possess, think as well as perform as part of a society. The three key verbs in the above explanation of the term culture i.e. have, do and think enables easy identification of the 3 main structural variables of the concept of culture (Triandis, 2004).
This states that for an individual to possess something, presence of some material object is necessary. Further, when individuals think, values, ideas, beliefs and attitudes exist and that also, in a certain socially prescribed manner. Thus, it can be concluded that culture comprises of objects, ideas, values, attitude and a specific pattern of behaviours, which is essential for MNEs to understand in order to succeed and attain a long term competitive edge. It is important for MNEs to understand that culture is not a short term concept but an inbuilt and inherent way of living. MNEs should realise that culture gets transmitted from one person to another through a constant process of interaction and learning instead of a genetic technique. Culture in a real sense is database of knowledge present in any society, which needs to be well maintained and protected. The following section will now focus and illustrate why it is essential for MNEs to cultural context in which they operate.
Importance of Considering Cultural Context
With rapid advancement in technology as well as intense spread of globalisation, companies have now started to operate across borders (Hofstede and Bond, 1988). The strategic benefit advantage behind the same is to leverage from the expertise skill set alongwith cost effective labour. For example, several organisations with headquarters in developing nations such as the UK and the US outsource part of their operational units to other countries like India, China etc. They benefit from the availability of advanced skills and knowledge but the challenge lies in being well aligned with the cultural and gaining a deep knowledge of the cultural issues (Hofstede and Bond, 1988).
Culture is a complex process that gets linked to various collectives and in between each collective there exist many types of individuals (Hofstede, 2001). Based upon the current literature, culture broadly is linked to different ethnic tribes and groups in accordance with organisational structure (management and society), nation (politics, management and sociology) as well as anthropology (Hofstede, 2001). Hofstede (1984) also mention that for any organisation, culture is viewed from 3 main angles. These include fragmentation, integration and differentiation. Understanding culture can aid global firms attain competitive edge in untapped and neglected region (Hofstede and Bond, 1988). The chief advantage is that deep understanding and knowledge of culture helps better penetration of business activities and processes into any nation.
Under earlier circumstances of comparative ecological sureness as well as constancy, human resource management laid high emphasis on the short period and was influenced mainly by line administration matters (Brewster et. al., 2007). Moreover, incrementing environmental unsteadiness, demographic changes, alterations in expertise, and increased worldwide competition are modifying the requirement and the character of human resource management in leading companies (Schuler, 2000). Planning and appropriate approaches are increasingly being recognized as the product of the interaction between line management and global work environment. Additionally, companies are recognizing that to sufficiently deal with human resource issues, they need to build up both short term and long term solutions (Brewster et. al., 2007). Moving ahead, as human resource management now involves extra plans in order to satisfy the wants of the company and also impact the course of the business they encounter new and augmented accountabilities as well as challenges (Kogut and Zander, 1993). Companies expending their operations overseas must make sure that their practices are well in line with the work environment of a particular nation. Also, MNEs need to be careful about changing global environment and what could turn out to be beneficial and what as advantageous.
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