A Multinational Corporation Is Planning to Implement a Common Set of Performance Management - Essay Example

IMPLEMENTING A COMMON SET OF PERFORMANCE MANAGEMENT PRACTICES IN A MULTINATIONAL IN AUSTRALIA AND SPAIN Introduction Performance management is not a new phenomenon in the human resource management sector Human resource practitioners and managers are in constant efforts of improving the overall performance of their staff. According to Armstrong (2000), performance management is the idea of a systematic way of maintaining good performance while still improving the same. It is not only the performance that concerns the human resource managers but also the outcomes, roles and satisfaction of individuals and teams forming an organization (Marilyn, 2005). There are various challenges that come in the way of developing such a system but in the long run it should be to the benefit of the organization if at all every aspects of the program were taken into consideration in the development and implementation stage. Human resource management is not the same when comparing it between different levels. While it might be simple to implement a performance management program in an organization based in one single location. It poses a great challenge implementing a common set of performance management in different subsidiaries of a multinational present in different countries or regions (Dowling, Welch & Schuler, 1999). Judging from this different set of complexities involved and the fact that the different countries and regions have their own unique way of doing things then it is important that enough feasibility study is done in order for the developers and implementers of the performance management practice in a multinational are completely aware of the issues that lay in front of them in the process of having a common set of performance management for the company concerned. Harris, Brewster and Sparrow (2003) argue that it is impossible and almost irrational to embark on implementing a set of performance management in one region in exactly the same way as it was done in a different location most likely in the mother country. According to Harris et al (2003) employees do not have the same perspective and expectations in the organization like the management team. Brewster (2006) on the other hand believes that emphasizing too much on culture and national differences puts in a danger of becoming a purely statistic analysis on the side of the company putting it in a situation where it might not be able to cope with the changes as they come in due to the inflexibility. International human resource management is changing rapidly. Brewster, Sparrow and Harris (2005) suggest that currently there are five drivers of international human resource; efficiency orientation, service provision on a global level, information exchange, core business processes and localization of decision making. In light of all this understanding it is important that a multinational with its mother company and headquarters in Australia critically evaluates the feasibility of implementing a common set of performance management in Australia and Spain considering the fact that the two countries have unique operating environment as will be discussed in this paper. In addition to discussing the different set of circumstances that a company is likely to face in these countries, this paper will also evaluate the pitfalls and benefits that a business is set to achieve by implementing the performance management practice. Different Political and economic states of Australia and Spain Spain The economy of Spain is the second largest in the world. Until the year 2008, the economy had been performing very well with new jobs been created in the country. This was almost half of all the jobs created in the EU. However the economy took a nose dive as a result of increased debts in the middle income from the real estate boom. By the year 2009 the unemployment rate was predicted to be up to 16%. By the end of 2011 the credit deficit in Spain stood at 8.5%, however it is expected to lower towards the end of 2012 (Jaumottte, 2011). In an effort to reduce the deficit the government is implementing a set austerity measures to try and control the spending of major government arms. In order to reduce the public debt the Spain government is tending to be more pro neo-corporatism so that all the players in the economy can normalize the situation (Briscoe, & Schuler, 2004). By the year 2009 Spain had four million unemployed people in its population the trend had continued to get worse until in the first quarter of the year 2012 the government introduced new labor laws to govern the labor market. This, the government hoped will increase employment and at the same time make it favorable for the companies operating in Spain (Jaumottte, 2011). Before any common set of performance management can be enacted in the Australia and in Spain it is important that we critically review the political and economic framework of both Australia and Spain. Spain is tending to become more of a neo-corporatism in an effort to deal with the Eurozone crisis that is threatening to bring the economy down to its knees. The neo-corporatism theory calls for the active involvement of the state in moderating the interests of various powerful organizations in the economy, more specifically those representing the labor and those representing the capital. The rock foundation of neo-corporatism is anchored on the belief that if all the forces in the market are allowed to take charge it could lead to a situation that will be disastrous to the public in the long run and possibly a crumble of the whole economy. This is what was threatening to happen in Spain when the real estate boom threatened to put the working class into perennial debts and the government borrowing too much from the public. Eventually Spain had to be rescued by bailouts from EU. Neo-corporatism tendencies in Spain have started emerging as the government tries to solve joblessness and put its foot down regarding implementation of the austerity cuts. Any company wishing to set up in Spain has to abide by the labor laws which the government is keen to ensure they are being followed to the letter. Union affiliation in spin remains to be low, at 9% although the influence of the union cannot be looked down upon. Not in one occasion that the union has succeeded in making their demands met (Edwards, & Rees, 2006). In 2010 the union was involved in a direct confrontation with the government regarding its push to implement it objectives in budget slashing and review of pension program in a move geared towards reduction of public debt. The public were not fully in support of the industrial action as the general agreement was that drastic measures have to be taken to reduce the adversities of a huge public debt (Jaumottte, 2011). In the year 2012 the trade unions in Spain suffer from low affiliation and coverage. The young workers are especially not so much into the idea of joining any trade unions. They feel they are better placed to solve their issues with their employers in an amicable way without having to channel their grievances through the unions. The unions have also failed to taker bold moves in tackling major employee issues like for example their support for insiders within companies who have worked for a very long time on an indefinite contract at the expense of deserving workers with short term contracts. The Spain economy can therefore be classified as a more knowledge based economy with more self employed and enterprising population. There is more task specialization and individualization in the production system. In light of these it will therefore be difficult for the traditional type trade unions to be effective or relevant to say the least however the active involvement of the government to govern the labor market is sure going to affect the way companies set their performance management practices KPMG, (2012). Among the new measures that the Spanish government has approved are: Measures to improve employment conditions which include such aspects as short and long term contract outlines depending on the companies’ size. Measures to promote permanent employment in an effort to support entrepreneurs in job creation Measures to favor internal flexibilities of companies instead of job destruction Measure to favor job market efficiency and reduce unemployment contact inequality Modification of employment tribunals procedure All these key changes have been noted in new laws affecting each an every aspect of the above mentioned measures. For a multinational wishing to implement a set of procedures it is important to familiarize with the new labor laws that tend to promote employment for the whole population as opposed to reducing workforce. In addition to these the government is determined to ensure that the citizens work in ideal environments and have their rights observed. Australia Union membership is not only declining in Spain but the same situation is still affecting the Australian labor market. The collapse of the Australian trade unions can be attributed to four factors; changes to laws governing the trade unions, more product market competition, rising inequality in the economic classes, structural change in the labor market. Conservative governments in five out of six state passed legislation that banned compulsory membership to unions paving the way for individual bargaining as opposed to the collective bargaining method adopted by unions. In addition to this there has been a micro-economic reform like the resumption of the Australian competition and consumer commission that among other things has ensured there is a sustained and strong product competition (Andrew, 2005). When the monopolies tendencies are eliminated it is impossible for companies to make supernormal profits that they can transfer to their employees. In reaction to this the companies have to come up with anti union tactics like having a non uniform salary regime which works to divide the workers Cipd (2009). The logic is that a worker who is earning 40 dollars per hour is unlikely to partner in with a worker earning 20 dollars per hour in bargaining for a pay hike as opposed to having both workers earning 30 dollars. At 30 dollars they are at a position where they can in solidarity bargain for better terms. Australian economy is not badly off as compared to the spin situation. This means that the government has adopted a more neo-liberal approach towards regulating the labor market. Neo-liberalism favors the free movement of labor and capital. As such the state tries as much as possible to reduce its direct influence on the real effectors of change in the market. This is the situation in the Australian market which is amongst the best performing in the world today. Implementing the common set of performance management practices in Spain and Australia Having reviewed the economic and political situations of both Australia and Spain the next step is the real implementation of the common set of performance management practices (Budhwar, 2004). It should be effective, strategic and integrated especially for implementation in different subsidiaries located in entirely different countries faced with a different set of factors like Spain and Australia. A multinational has a choice of following one of the three orientations as identified by Howard Perlmuter. These orientations are held by the senior management of a multinational and have an effect of dictating the strategies and mindset of the company in terms of implementing performance management (Budhwar, 2004). These orientations are; Ethnocentric Orientation- Oriented towards home country In this orientation the dominant assumption is that the way of going about business in the mother country is applicable to any location in the whole world. The management therefore assumes that the national managers are more suited to run the company better than the natives (Scholte, 2005). In view of this then the management results in implementing a common set of performance management based on the success of the same practices in the mother country, In this case, Australia. The practices are imported to the subsidiary without changing any aspect at all. While this orientation is the best in transferring core competencies and best practices to the subsidiary, it is a disadvantageous orientation in the sense that the multinational will not develop more regional base knowledge base which will be vital in appealing to the conditions of the mother country. If the multinational goes with this orientation, the risk is that the organizational culture will only reflect the preferences of the mother company in Australia. This is a big hindrance as the performance management program might not be effective at all considering the fact that human resource management is the most sensitive aspect to local context than any other aspect of the business. Polycentric orientation- oriented towards the host country In this orientation the management assumes that the one size fits all approach is not feasible at all. There the management adopts a strategy where the subsidiaries are managed almost autonomously. This leads to a broader organizational culture, where the top management is not saturated by the people from the host country but instead with members of the host country (Budhwar, 2004). This is not a bad approach as it will lead to a better understanding of the local needs and demands of the work force when it comes to effective implementation of the management practices. However this approach might be incompatible with the intention of the multinational of implementing a common set of management practices and monitor them in Australia and Spain concurrently. Geocentric orientation- oriented towards the whole world In this orientation nationality or competitiveness is not a consideration but rather emphasis is on the getting the best talent from all over the world to run the organization from anywhere in the world for as long as doing business in the location is possible. The key lies in gaining from differentiation and integration of the company at the global level. This is the eventual orientation of most multinationals after they are done with the ethnocentric and polycentric orientations. It is the best approach when implementing a common set of performance management practices in Australia and Spain since the multinational will be globally sensitive and internally integrative as well. Pitfalls Performance management practices are very effective in getting the best out of your employees. It is also a strategic issue regarding the competitiveness of a company at the global level. However care must be taken at the drafting and implementation stage to avoid possible pitfalls that may mark the eventual demise of a multinational or a turbulent situation that may prove difficult to get over (Evans, Pucik & Barsoux, 2002). Some of the possible pitfalls are; Organizational fears- some departments in the organization might be apprehensive on implementing performance management systems due to the uncertainty of its impact on the department and also what will be discovered about the department during the program implementation Performance management being a strenuous process- it might be a complex and expensive process that might at the end of the day consume much of the organizations time and resources. In effect the companies own organization culture and the strategies might not be in favor of the program. Comparing performance management between host country and subsidiary- As has been evidenced in the comparison between Spain and Australia, it is irrational to compare performance in these different countries with strikingly diverse economic and political environments Conclusion Implementing a common set of performance management practices in Australia and Spain might not be the easiest of tasks for any human resource [practitioner in a multinational. However it is very possible. The key is in understanding the different set of factors in both countries that are likely to affect the performance management. One o the key factors is the involvement of the governments and trade unions in both countries (Sparrow, 2007). While the tendency in Spain is more of neo-corporatism in Australia it is more of neo-liberalism. There are also challenges in terms of the internal obstacles and capacity issues that need to be taken care of during implementation. 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Second Edition. New York: Palgrave Macmillan. *Sparrow, P.(2007) Performance Management Systems in the UK. In Varma, A., Budhwar,P.S. and De Nisi, A. (Ed.) Performance Management Systems Around the Globe. London: Routledge Read More