Multinational Corporations Strategies and Human Resource Management Practices - Essay Example

Module Number Table of contents Table of contents 2 Introduction 3 Impact of Multinational Corporations strategy and structure 4 Globalisation and Internationalisation of firms 4 Multinational companies’ strategies and structures 4 Multinational Strategy 4 International Strategy 5 Global Strategy 5 Transnational Strategy 6 How strategies could affect Human Resource Management policies and practices 7 Recruitment and Selection 7 Training and development 9 Benefits and limitations of The Global Organisation 11 Benefits of The Global Organisation concept 12 Limitations of The Global Organisation concept 13 Conclusion 14 References 16 Multinational Corporation’s Strategies and Human Resource Management Practices Introduction Human resource management plays a vital role in every successful company, as it brings strategic advantage to the business. As the world embraces globalisation, many aspects of conducting business are changing as companies go beyond borders and activities become more complex. Cultural diversity goes hand in hand with globalisation since different geographical locations have different kinds of people. When companies conduct business in areas with high cultural diversity, appropriate human resource management practices are crucial in enabling healthy human interactions and successful daily operations. Multinational companies have realised that human resource management is important as it provides global strategies that would help in managing the workforce, thus gain success and a significant market share in foreign countries (Shah et al. 2012: 28). This paper will explore globalisation and internationalisation of business firms, the structures and strategies of multinational companies and how they influence human resource management. Globalisation is a concept that has been in existence for many years. Multinational corporations emerged as a result of globalisation. In order to ensure that their businesses run smoothly, multinational corporations have developed different strategies in line with their different structures. These strategies influence human resource management to carry out different activities regarding to the recruitment, selection, training and performance of the workforce. These strategies bring some benefits and limitations to the organisation. This paper will discuss the preceding issues relating to multinational corporations and human resource management (Barber and Alegre, 2010: 11). Impact of Multinational Corporations strategy and structure Globalisation and Internationalisation of firms The term globalisation has different meanings in reference to different contexts, and in this situation it refers to the quick, uninterrupted inter-border flow of technology, services, money, information, goods, ideas, and cultures all over the globe. Through globalisation firms are able to operate in many countries, utilising local and foreign labour, capital and technology, marketing, management skills and therefore, becoming Multinational corporations. Firms internationalise to look for markets, exploit firm-specific advantages and to gain access to various factors of production, labour being a key factor. Multinational corporations utilise local and foreign work forces, therefore, require an effective human resource management that will successfully manage the workforce and ensure productivity. Multinational companies have developed various structures and strategies, which have a significant influence on the human resource management practices (Heidenreich, 2012: 550). Multinational companies’ strategies and structures Over the years, Multinational companies have developed four different strategic approaches that assist in giving them competitive advantage and strategic objectives. Multinational Strategy This strategy is used where the company enjoys autonomy from the main company and focuses on one specific region or country. This strategy ensures that the company utilises the local opportunities by providing employment to the country’s citizens, and the knowledge and innovations developed are usually retained in this subdivision of the Multinational company. The structure used in this strategy is the decentralised model where the subsidiaries enjoy disintegration from the headquarters. This structure emphasises on the use of local management and human resource management personnel. The firm looks at competing in the specified nation only; therefore, recruitment, selection, training and development are carried out according to the local needs and practices. Utilising human resource management personnel from the region ensures that the employees’ needs are met, government rules are met, and the consumers’ preferences are satisfied (Cooke, 2003: 17). International Strategy In this strategy, the multinational company uses the home country’s expertise to lead other subsidiaries of the firm located in other geographical locations. Innovations and knowledge are passed to the other subdivisions of the company, where the managers are supposed to adapt them and employ them in their operations. A centralised structure is used in this strategy. The main decisions are made at the headquarters. Many companies utilising this structure realise that their subsidiaries lag behind because many of the practices are imported; therefore, do not favour many of the local people. This leads to low local motivation and morale in the work places, which result to inefficiency. The human resource management personnel in the subsidiaries execute the instructions from the headquarters, therefore, cannot change them to suit the local needs and opportunities. There is a high level of integration between the headquarters and the subsidiaries (Barber and Alegre, 2010: 20). Global Strategy This strategy is utilised in multinational corporations where they integrate the resources, knowledge and innovations. It is used in multinational companies that need to cut down on various costs. The subsidiaries depend heavily on the central office for every resource and technical know-how that they need. This strategy affects the human resource management in that training and development strategies are derived from the headquarters. In order to provide the company with competitive advantage the human resource management personnel have to utilise strategies received from the headquarters. This limits flexibility and sometimes has negative outcomes on the subsidiaries (Bartlett and Ghoshal, 1992: 125). Transnational Strategy Companies that utilise this strategy aim at achieving all integral objectives at the same time. This strategy ensures that the headquarters and the subsidiaries are well coordinated but allows autonomy for the subsidiaries. The strategy creates an integrated network of units, which have different roles. The structure used in this strategy is the integrated network Model where both managements of the headquarters and the subsidiaries work interdependently to create a flexible integrative process. It is the most suitable strategy for human resource management for it allows a flow of information and knowledge that is important in enhancing the workforce (Cooke, 2003: 23). The human resource practices usually change with the structure and strategy of a multinational company. In transnational and multinational strategies, the human resource practices are implemented according to the culture, and political, economic, social and technological environment of the country, therefore, enabling easy recruitment and retaining of the workforce (Martell, 2009: 456). Using these strategies, the local responsiveness is high and the companies have competitive advantage. The companies that use the international and global strategies may experience difficulties in their human resource practices since they have failed to harmonise their knowledge towards the establishment of a great workforce (Bartlett and Ghoshal, 1992: 125). How strategies could affect Human Resource Management policies and practices Recruitment and Selection Globalisation has played a large part in determining particular human resource policies that should be followed in multinational corporations. A crucial part of human resource management is human resource planning, which involves predicting the organisation’s future workforce’s requirements and supplies. A multinational corporation requires an adequate workforce that is highly skilled and knowledgeable. The right composition of employees can only be realised after a successful recruitment and selection process. Human resource department in every firm is directly responsible for these processes (Ishrat, 2013: 29). Recruitment is the process of seeking and identifying ample and well-qualified applicants for job opportunities in an organization. Selection involves the process of choosing a suitable job candidate by collecting information and using it to evaluate the best candidate from the applicants. The recruitment and selection process, which is carried out by the human resource department, can determine the fate of a multinational company. If the process is carried out incorrectly the business can experience an increase in the cases of absenteeism, customer dissatisfaction, expatriates’ inadequacy and bad business relationships. The process aims at providing a competent workforce that will work effectively towards the organisation’s goals (Cox, 2009:7). Human resource personnel need to consider a number of factors before starting the recruitment process in every multinational corporation. They need to know the government policies in the country, the organisation’s personnel policies, the recruitment techniques that need to be used, the recruitment needs, sources and costs, the competing organizations’ personnel policies and the selection criteria. In order to conduct a recruitment process, the company should have a vacancy. A job analysis is conducted and helps in preparing a job description, which is used to advertisement the vacancy. Reviewing the applicants’ curriculum vitae should be done to screen the applicants and determine those who will be asked to attend an interview (Nche, 2013: 24). Selection aims at comparing the job applicants to the tasks that they will be executing in the organisation, to ascertain that the candidate selected will perform excellently. In multinational corporations, this process is dynamic and checks for many suitable elements. Firstly, it involves screening the candidate’s background to see if the cultural background, work experience and overall performance among other elements, match the job description. The job description may require a candidate who speaks certain language and has experience working in foreign countries (Freeman, 2006: 147). Secondly, the process assesses the characters through an interview to check their skills and competencies. Thirdly, testing is conducted on the candidates to ascertain that they can easily adapt to a new cultural environment. Personal attributes are also considered to see if the candidate will fit in with the rest of the employees. Other tests include the achievements test which proves capability at work and the ability test to demonstrate the applicants’ abilities. Fourthly, the selection process involves checks or verifications that help ascertain the candidate’s qualifications, health, and criminal records. The selection process concludes after an offer is sent or given to the prospective employee (Gomes, 2009: 5). Recruitment and selection is a process carried out by the human resource department and requires financial resources. This process needs to be reviewed regularly to ensure that it is effective and in line with the company’s policies. It should be cost effective in that the results should match the cost and the measure in every stage (Gomes, 2009: 4). Training and development Training And Development you should include consideration of leadership and management development and cultural awareness training Human resources are important in enhancing multinational companies’ global or national development by helping them maintain a competitive advantage in the highly competitive worldwide business environs. The human resources should be well-trained and experienced in order to execute the assigned activities competently (Aguinis, and Kraiger, 2009: 453). Training and development of the workforce is a process that aims at the acquisition and transfers of skills and knowledge, sustaining effective communication between subsidiaries and the headquarters and successfully managing foreign subsidiary companies. In all the strategies used by multinational corporations, training and development is initiated at the headquarters except for the multinational and transnational models where it can start locally. The role of human resource management in training and development is to identify employees that need training and look for appropriate training programmes that will improve their knowledge and competencies (Shah et al. 2012: 36). Training is a term that describes an orderly and planned approach to learning new skills and developing an individual or a team in order to enhance organisational effectiveness. Training and development is essential in increasing adaptability and versatility of employees. Training provides learning opportunities that enable the employees to adapt in a dynamic, complex environment full of uncertainty. More knowledge and skills are required to handle modern issues in the business environment (Vemić, 2007: 209). Development is important in helping a company preserve its place in the market and increase competitive advantage. This is because development involves the ability to create fresh knowledge, which helps in improving the productivity of the firm. Training and development exercise helps in enhancing an individual’s performance and the overall performance of the organisation (Aguinis, and Kraiger, 2009: 457). Multinational corporations insist on various training and development programmes to ensure that their businesses remain successful. Leadership training programmes are crucial in the operations of a multinational corporation. They help in empowering the management and offers important information on how they are supposed to handle their subordinates and improve the firm’s performance. Leadership programmes include leadership modules, blend coaching, bespoke projects and action learning. Focused learning is important for developing a great management. The managers usually practice leadership behaviours, reflect on how to improve their skills, and raise their knowledge base. Trainings for management include talent management programmes, workshops, assessment and development centres, action learning sets and leadership modules (Yawson, 2009: 24). Training and development becomes a complex process when cultural diversity comes into play. The human resource management personnel must come up with a training programme that will facilitate the diverse employees and promote cohesion among them to ensure that they work effectively. Cross-cultural Training is an effective training programme that offers a model with which the employees learn how to cooperate and work together in a diverse workforce. It demonstrates the position and functions of various people in the society, fosters appreciation, respect, and sensitivity for other cultures, and enhances pluralism (Yawson, 2009: 25). Benefits and limitations of The Global Organisation The Global Organisation is a new internal management concept that the international firm called Leisure Choice International wants to implement. The Global Organisation will be implemented in all the subsidiary companies operating in America and other foreign countries. This new concept requires the subsidiary companies to standardise their processes and management practices, an increased focus on the international managers and a more globally Human Resource Management. Many of the operations carried out by Leisure Choice International are heavily influenced by the central office in the United States of America. Although management practices and approaches such as human resource management have been influenced significantly by the host countries, some of the crucial decisions influencing the subsidiaries such as the company’s mission, objectives, strategic management, and structure, are made at the central office. The company’s utilises the international strategy and staffing orientation is a mixture of polycentric and ethnocentric. The new integral management concept, The Global Organisation, will change the firm’s strategy from international to global strategy. The subsidiary companies for example, the company based in Germany, used to enjoy a low degree of autonomy, since some of the management practices were centralized while others were not. This meant that the human resource management of the company’s branch in Germany recruited a handful of local employees who interacted with the expatriates to provide new innovations and knowledge. Integrating The Global Organisation concept will help Leisure Choice International integrate all its productions, therefore, producing standard goods in a cost efficient way. The International strategy was not cost effective (Dunning, 2008: 24). Benefits of The Global Organisation concept This strategy will make Leisure Choice International’s subsidiaries to be highly dependent on the central office in the United States for various resources such as capital, labour, knowledge and skills. Each subsidiary may have a unique function and management personnel, which will be determined by the headquarters. The human resource practices will also be determined by the central office. By introducing specific management practices for different subsidiaries, the central office is able to assess production and notice problems easily. Communication between the subsidiaries will also be more effective with an international manager reporting directly to the central office (Diaconu, 2012: 142). Leisure Choice International will be able to cut costs since the firm will concentrate on giving all the customers the same treatment in all its subsidiaries. This means that the extra costs of marketing and production will decrease. The subsidiary in Germany will show its advertisements in a similar manner to all the other subsidiaries, thus cutting down on different marketing strategies. All the products offered by the firm will be made locations that will suit the low cost production processes. This might make the products cheaper to produce, therefore, translating to bigger profits for the company (Shah et al. 2012: 31). Since the firm will be operating globally and providing similar services and products in all its subsidiaries, it will be easier to gain worldwide recognition than in former times when all the subsidiaries had different products and different customer services. The service will be uniform starting from the central office to the subsidiaries, thus creating a good reputation to the customers. The management of the subsidiary in Germany will ensure that the spas, hotels, gyms and alternative treatments are maintained as the management in the United States office wants, which is also the case for in the other subsidiaries, therefore, providing uniform services to all the customers (Diaconu, 2012: 144). Limitations of The Global Organisation concept The Global Organisation concept has a number of limitations. By adopting this strategy, Leisure Choice International will be taking a big risk by providing all the customers from different subsidiaries located in different parts of the world with the same kinds of services and products. The customers might not like the changes as they may not be in line with their preferences hence look for other alternatives. In the Germany subsidiary, the customers might have been used to a local alternative treatment but after the implementation of the global strategy; the firm might have cancelled its production and brought alternatives that the customers do not like. The subsidiary will lose money as the customers turn to the rivals. During and after the transitional period, the firm will have to hire new employees especially for some subsidiaries where the employees may have been fired for not meeting the new management requirements or the subsidiaries that have added reporting requirements. This will incur additional costs for the firm (Bartlett and Ghoshal, 1992: 125). Too much centralisation of the firm’s activities will affect the employees’ morale, thus lowering the firm’s output. Take the example of the subsidiary in Germany. Many local employees may be rendered unemployed after the implementation of the global strategy, therefore, bring foreign labour from other countries, which will demotivate and demoralise the few local employees that may have stayed (Bartlett and Ghoshal, 1992: 126). The Global Organisation concept may limit the ability of the subsidiary companies’ managers and the employees to learning from their counterparts in different regions. This shows that knowledge and skills are not transferred as effectively as possible. This reduces the competitive advantage of the firm (Hennart, 2008: 28). Conclusion Human resource management is considered as an asset especially in these times when many companies are aiming at attracting new talent for recruitment, and retaining in order to gain competitive advantage. This is because international firms have realised that human resource practices should be adjusted according to the people’s culture and the country’s political, economic, social and technological environment. To ensure profitability, multinational companies have realised that they need skilled human resource personnel that will conduct effective recruitment, selection, training, development, performance and reward processes. (Gomes, 2009: 5). There are four strategies that are employed by multinational corporations. These include the multinational, international, global and transnational strategy. The most effective strategy is the transnational, which allows the human resource management to conduct research and ensure that competent candidates are hired. It promotes local responsiveness since the local communities are considered for the job opportunities. The strategy ensures that knowledge and competencies flow between all the subsidiaries and the headquarters (Hennart, 2008: 22). The Global Organisation concept being implemented by the Leisure Choice International represents the global strategy of multinational corporations. This strategy will not give the Germany subsidiary a level of autonomy over all its practices; therefore, it will affect the human resource management negatively. The human resource management personnel will not be allowed to carry out the necessary recruitment and selection processes that they believe are best suited for the subsidiary. The training and development process will be determined by the central office, which can provide the wrong techniques leading to ineffective trainings. This strategy has more disadvantages than advantages showing that it is not ideal (Thite et al. 2010: 16). 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