The Human Resource Management Issues at Alpha Services IT Company - Coursework Example

Implementing HRM in Alpha Services - an Indian IT Company Student’s name: Course: Tutor’s name: Date: Table of contents Introduction Alpha Services (hereunder Alpha) is among the top performing services companies in India’s Information Technology (IT) sector according to information provided by Thite, Wilkinson and Shah (n.d.). The service company was selected for this report owing to its multinational corporation status, which is derived from its operation in more than 44 countries. Notably, the company had a US$2.5 billion turnover in 2008 and employs approximately 445,000 professionals in its three business segments. The three business segments are Business Process Outsourcing (BPO), IT services, and software product development. Through the three segments, Alpha has been able to penetrate different business sectors, which include banking and finance, manufacturing, insurance, infrastructure, telecommunication, retail and transportation, and healthcare among others. The company’s vision is to become one of the leading IT service providers in the world in the next 5-10 years. The human resource management practices in Alpha are worth mentioning because in line with the character of multinational firms that originate from India, the management staff members are predominantly Indian. This means that although the organisation has an international character, the managers posted in the different countries where alpha has established operations are drawn from India. As indicated by Thite et al. (n.d., 20), this is largely done for purposes of ensuring that operational and strategic policy making retains an Indian component. Notably, in countries such as China where language barrier and other cultural factors necessitate staffing locally, Alpha records as high as 98% Chinese workforce, with the remaining 2 percent accounting for the management posts which are filled by Indian expatriates. In countries such as Australia where language is not perceived as a barrier, the use of local Australians in the employment sector is less that 50% (Thite et al., n.d., 21). The human resource management issues at Alpha Like most multinational corporations (MNCs), Alpha is apparently having a hard time in staffing its different offices using local people or expatriates. Notably, and as noted by Thite et al. (2011, 20), the foreign subsidiaries of the company do not have autonomy, since they are closely guarded by the Indian-based headquarters through Indian managers. Such management mindsets correspond with Perlmutter’s (1969, cited by Harris, n.d., 2) argument that an ethnocentric mindset (home-country oriented) by an MNC ensures that key positions in the foreign operations are held by personnel appointed directly from the company’s headquarters. Additionally, key decisions regarding the foreign offices are made at the headquarters with little or no involvement from the foreign office managers. This approach, though advantageous in that it allows the head office to retain autonomous decision-making and hence the ability to steer the company to a preferred direction, has some weak points which may negate any possibilities of successful business operations in the foreign office. To start with, it is worth noting that the cultural differences between Indian managers and the locally sourced human resources may bring about conflict especially if the Indian managers do not fully understand the culture of the locals. In China for example, the 98% local employees in Alpha may not fully agree to the directions or management approach offered by the 2% Indian expatriates occupying the managerial positions. Additionally, the management, owing to their different culture, may not fully understand how best to handle or manage the predominantly Chinese workforce. Moreover, the lack of Chinese representation at the managerial level may arouse some kind of resentment from the Chinese stakeholders who may dislike Alpha’s decision to import management talent instead of sourcing the same from the pool of qualified Chinese managers. To correct this, it is suggested that the CEO should consider adopting a polycentric mindset (host-country oriented) whereby, local nationals would be recruited to manage foreign operations in their home countries. When appointed, the local managers should be given some decision-making autonomy for purposes of giving them room to create a distinct national entity. By so doing, the local managers would be able to customise Alpha’s position to prevailing local environments in order to fully use the economic, political, legal, social and technological cultural aspects of the foreign operations positively and for the advantage of the organisation. In countries like Australia where Thite et al. (2011, 20) observes that employment of locals is less than 50%, Alpha should seek to change this in order not only to attract goodwill from Australians, but also to reduce costs associated with using expatriates to work in foreign offices. Notably, it has been established in literature (Farndale and Paauwe, 2005, 9) that using expatriates to work in foreign firms is always comparatively expensive when compared to hiring qualified locals at prevailing industry salary offers. Notably, Alpha should seek to adopt human resource management practices that are strategic, proactive and long-term since such constitutes an integrated approach of managing its employees, which goes above the traditional personnel management as noted by Stahl and Björkman (2006, 3). Specifically, there is a need to ensure that whatever HRM approach that the organisation chooses addresses the tension between the “needs of global coordination (integration) and local responsiveness (differentiation)” as has been noted by Stahl and Björkman (2006,16). If Alpha is to attain its vision of becoming one among the leading IT-service providers on a global scale, there is need for it to integrate its HRM practices with its business strategy. Notably, there is need for corporate control in the foreign businesses as noted by Pudelko and Harzing (2007, 553), but this does not necessarily mean that Alpha needs to position Indian managers in all its foreign offices. As Schuler, Budhwar and Florkowski (2002,1) argue, the interplay of cultural, organisational and institutional differences that exist in different countries means that the strategies that succeed in one country may very well fail in another. This then means that the ethnocentric bias has to be replaced with a more-befitting HRM mindset especially if MNCs like Alpha are to appropriately determine the employees to hire, and at what pay. Additionally, different cultures employ different employee performance evaluation techniques and this means that a host-country oriented mindset would be more befitting for a company that seeks to enhance its service delivery to customers by motivating its employees as a source or a facilitator of the same customer value. B According to Madan (2006, 28), economic value can either be monetary or non-monetary, and represents the present worth of the services that the human resource capital in a firm is “expected to render in future”. Recruitment as a source of economic value for Alpha The resource-based theory implies that an organisation is a “collection of heterogeneous productive resources/capabilities, and that the characteristics of these resources/capabilities influence how the firm behaves and performs” (Tan and Mahoney, 2003, 183). Following this thought, and observing that recruitment is the management function responsible for bringing in new talent and skills to an organisation, it is apparent that it can create economic value to a company through revenue, cost and risk-associated factors. For example, recruiting highly competitive employees, with invaluable skills that cannot be duplicated elsewhere in the industry would give Alpha a competitive advantage hence upping its revenue generation capacity compared to other firms in the industry. In the same manner, the cost of hiring such talent will also affect the economic value of the firm especially in relation to the revenue generated by the firm. Additionally, there are risks associated with recruitment which include hiring people whose performance does not measure up to the expected standards, or those who can shirk their work-related responsibilities, disclose company trade secrets, or those who resign as soon as they get the experience needed to work elsewhere. To minimise the costs of recruitment and the associated risks, Tan and Mahoney (2003, 186) suggest that MNCs such as Alpha should utilise recruitment avenues such as contracting in order to enhance their economic value by articulating their performance expectations in regard to newly recruited employees, and offering the rules and regulations that guide employees’ handling of company-related information and contract periods among other things. Overall, the economic value that Alpha can derive from the recruitment process is contained in the intellectual capital that new hires bring into the company including the creativity, innovation capacity, flexibility, motivation, teamwork capacity, formal training, loyalty, learning capacity and skills. Ideally, the recruitment process should target identifying, selecting and hiring employees whose productivity, transferability, and promotability are high in order to offer the organisation maximum possible value (Madan, 2006, 28). Training and development as a source of economic value Training and development is an intervening variable that affects the economic value that an organisation is able to derive from its human resource capital (Madan, 2006, 32). While sending expatriates abroad for example, Alpha invests time and resources in training the employees regarding the host cultures in the hope that they will use the acquired skills to enhance their job performances abroad. Oftentimes, this occurs although not without risks. For example, a trained expatriate may be lured by a more lucrative job offer while abroad; hence leaving the same firm that had trained him. The same case is applicable to local hires that may leave their current jobs for more lucrative job offers elsewhere. In order to avert such situations, Leaser (2008) recommends that MNCs such Alpha should invest in good HRM practices in order to enhance employee retention, hence improving the firm’s chances of realising economic value from the people it enrols in training and development programmes. Such an opinion is supported in a white paper authored by Leaser (2008, 3) for IBM stating that in the IT industry (which is Alpha’s operation forte), the economic value of training and development is manifest in “revenue generation, productivity/performance improvement, and cost reduction”. Overall, Leaser (2008, 6) notes that in addition to enhancing the skills and knowledge that employees to a certain firm have in relation to their jobs, training and development also enhance employee morale, job satisfaction and loyalty, and these attributes translate to better performance and productivity at work. Consequently, customers are satisfied by the quality of service provision hence purchasing more hence generating increased revenues for the company. Compensation as a source of economic value Generally, an employee’s compensation is perceived as being equivalent to their value contribution to his/her employer. As Jackson, Schuler and Werner (2011, 361) note, the compensation in HRM include the salaries and other non-monetary benefits that an employee receives in recognition of the roles played and contributions made to the employer. The economic value of compensation is related to the fact that it helps the firm in employee recruitment and retention (since compensation attracts applicants, and determines their willingness to stay in a job once hired). Additionally, it relates to training and development since employees who need to undertake courses in order to enhance their skills may not receive as much compensation as those who have comprehensive skills set (Jackson et al., 2011, 362). Moreover, an organisation like Alpha may need to use the skills of individual employees in order to set up skill-based payment plans. Additionally, the economic value of compensation must be responsive to external factors such as prevailing labour market conditions, laws and regulations, and labour unions (Jackson et al., 2011, 363-4). Without proper compensation, HRM would fail to attract, motivate and retain competent workforce, and by so doing, would compromise the competitive position of the firm. As Jackson et al. (2011, 362) note, HRM should strive to reinforce “the needs and characteristics of the organisation with the motivation and behaviours of employees” in a manner that addresses concerns by both parties. Put in context, the suggestion by Jackson et al. (2011) means that Alpha should strive to balance the business objectives of the firm against the employees’ perceptions regarding contribution to work and equitable pay. Conclusion MNCs such as Alpha are increasingly facing challenges associated with the environments they find in their host-countries combined with some of the management approaches they seek to export to their businesses abroad. At Alpha, this report has identified that the company is using Indian expatriate managers in foreign operations. As such, the report recommends the adoption of a host-country oriented mindset where the company can rely more on local management talent owing to the belief that such managers would have a better understanding of the local environment than expatriate managers would. Additionally, the report also recommends a higher absorption of local employees especially in countries like Australia where it has been observed that local people constitute less than half of the entire workforce. By so doing, this report argues that Alpha would have a high chance of being accepted by locals, hence improving its chances of profit-making. This report has also identified recruitment, training and development, and compensation as some of the HRM functions that Alpha can use in order to add economic value to the organisation. As indicated, recruitment is among the ideal ways of getting the right skills to work in the organisation. Additionally, training and development will enable the organisation to equip its employees with specific skills that they may lack in order to enhance its competitive advantage. Finally, compensation has been identified as a way of attracting, motivating, and retaining the right talent. Combined, the identified factors if implemented, can improve Alpha’s chances of realising its potential of becoming one of the leading providers of IT services in the world. References Farndale, E., and J. Paauwe. 2005. The role of corporate HR functions in multinational corporations: the Interplay between corporate, regional/national and plant level. CAHRS Working Paper Series. Ithaca, NY: Cornell University, School of Industrial and Labour Relations, Centre for Advanced Human Resource Studies. http://digitalcommons.ilr.cornell.edu/cahrswp/477 (accessed June 13, 2012). Harris, H. n.d. The role of international human resource management- part one- global excellence. 1-7. http://www.global-excellence.com/getfile.php?g=49/ (accessed June 13, 2012). Jackson, S.E., R.S. Schuler, and S. Werner. 2011. Managing human resources. London: Cengage Learning. Leaser, D. 2008. The value of training. IBM Training- White Paper. Pp. 1-12. https://www-304.ibm.com/jct03001c/services/learning/za/pdfs/ibm_white_paper-value_of_training.pdf/ (accessed June 13, 2012). Madan, P. 2006. Human resource accounting. Unit 18. http://www.egyankosh.ac.in/bitstream/123456789/35602/1/unit-18.pdf/ (accessed June 13, 2012). Pudelko, M., and A. Harzing. 2007. Country-of-origin, localization, or dominance effect? An empirical investigation of HRM practices in foreign subsidiaries. Human Resource Management 46(4): 535-559 Schuler, R. S., P. Budhwar, and G.W. Florkowski. 2002. International Human Resource Management, Review and Critique. The International Journal of Management Review 4(1): 41-70. Stahl, G. K., and I. Björkman. 2006. Handbook of research in international human resource management. Northampton, MA: Edward Elgar Publishing. Tan, D., and J.T. Mahoney. 2003. Explaining the utilization of managerial expatriates from the perspectives of resource-based, agency, and transactions- costs theories. Advances in International Management, 15: 179-205. Thite, M., A. Wilkinson, and D. Shah. n.d. Internationalisation & HRM strategies across subsidiaries in multinational corporations from emerging economies- a conceptual framework. 1-31. http://www.shrm.org/about/foundation/research/documents/thite%20final%20report%204-11.doc (accessed June 13, 2012). Read More