Standardization of Human Resource Management Practices - Literature review Example

Name Course Lecturer Introduction The internalization of organizations has picked pace in the last two centuries, many organizations now operate in multiple countries, while the labor force has become increasingly mobile. Companies that operate across national boundaries are confronted by a number of legal, cultural, economic and political challenges in their foreign operations. Companies that operate in foreign markets and even local companies can be said to be operating in a multicultural environment. The challenge of management in such an environment means managers have to gain skills in multicultural management. Management challenges are experienced at the human resource and operations level of any truly global organization. Briscoe and Schuler argue that organizations that make use of multicultural teams are likely to increase operational efficiency (68). However, they note that a multicultural workforce has a longer learning curve than a cultural homogenous team. Challenges According to Tarique and Schuler one of the major challenges faced by managers in a multicultural environment is attracting and retaining talented employees (123). This comes about because of a number of factors present in multinational operation. The first problem is a shortage of talent Talent shortage Talent shortage or rather talent mismatch continues to be a major problem in the global labor market. According to Hartmann, Feisel, and Schober, more than a third of employers were unable to find talent needed in their operations (170). Ironically, talent shortage is problematic for both local and global companies come against the backdrop of high employment rates in most economies. Proctor and Gamble are concerned about the availability of talent in its Chinese operations. According to Hartmann, Feisel, and Schober, the skill shortage problems are likely to get worse (175). They argue that the rapid globalization of markets and rapid development in technology places greater emphasis on availability of the right skills. In the future the success of businesses will depend on the talent they recruit. As Proctor and Gamble has experienced in China, the most talented job candidates are choosy in evaluating which employer to work for. In the view of Wu, companies are being forced to rethink their recruitment and retention strategies due to the talent scarcity (169). Furthermore, companies may also need to adopt strategies that consider improving the skills of their employees once they are hired. Managers in multinational environment have been faced with a shortage of young people who are upward, progressing, professional and efficient (Beechler and Woodward, 275). In China, millions graduate every year but they do little to quench the talent thirst in the country. According to Wu, most of the Chinese graduates lack the skills needed by a multinational organization (169). The country has more art graduates than science while most multinational companies need employees who have practical skills. China is one of the new economies where global corporation is operating meaning the shortage in qualified and competent workers will affect their operations. Expatriate failure With the scarcity of local managerial talent, most multinational companies are forced to hire expatriates to start their foreign operations. Expatriates are an obvious choice for foreign companies as they are familiar with their operations. However, most expatriate workers perform poorly in local environments and on most occasions are forced to return home earlier than planned. The failure rates for US expatriates in foreign business environments are around 10 to 40 per cent (Wu, 169). According to Briscoe and Schuler, culture shock in host countries is the largest factor that explains expatriate failure (175). Different cultural norms and values leave expatriates confused, lost and frustrated with their work. In the views of Wu, most expatriates are ill equipped for the culture clash they experience in foreign countries (169). Compensation and benefits According to Haile, employee compensation is one of the major issues facing managers in cross-cultural management environments (13). According to Leininger, most talented Chinese workers leave their present employers in search of better pay (17). With rapid economic growth, Chinese workers expect very attractive pay checks. According to Leininger, Chinese wages have been increasing by 8 per cent since 2005 (28). On the contrary, Multinational organizations like Proctor and Gamble tie their compensation rates to employee performance, this mean a Chinese employee at Proctor and Gamble is unlikely to get a raise if his performance hasn’t improved. This situation may leave any Chinese managerial employee who is employed by Proctor and Gamble highly dissatisfied with his employer compensation practices. According to Leininger (2007) only 23 per cent of Chinese workers are satisfied with the compensation and benefits they receive from foreign companies. On the other hand, Local Chinese companies offer a range of benefits to their Chinese workers. The State as the main competitor for top talent also offers very attractive rates to its employees (Mudambi and Venzin, 1512). In response, to the competition for talent by Multinational employers, the state reformed its compensation and pay system. Chinese workers now receive welfare and social insurance benefits besides basic pay (Wu, 169). According to Wu, Chinese workers receive Media insurance, work-related insurance, bearing insurance, endowment insurance among a host of other benefits (169). Apart from these benefits, Chinese workers are allowed to stay from work on the numerous Chinese traditional festivals the country observes. These include the Mid-autumn day, double Ninth Day and the Tomb sweeping day Wu, 169). For Proctor and Gamble and other Global corporations operating in China they have to offer equally generous employee benefits to win the war for Chinese talent. Proctors and Gamble is also faces compensation challenges in regard to its expatriate workers. According to Morschett, Schramm-Klein, and Zentes expatriate compensation is 3-4 times higher than the home country rate (400). Global companies have to cater for additional benefits when compensating their managers. These benefits include differentials, incentives, company assistance and spouse allowance. According to Griffin, Pustay and Liu, for a US MNE like GM or McDonalds to effectively compensate its expatriate employee it must provide an additional range of benefits (151). First, the company must offer incentives for the expatriate to leave the United States. Secondly, the MNE must ensure that its employee maintains their home standard of living. Thirdly, the GM and McDonalds may be forced to provide a high quality education for the Children of their US expatriates in foreign nations. Furthermore, the company is responsible for ensuring relationship between its expatriate employee and their spouses, friends, family and business associates are maintained. Social differences Multicultural managers are most likely to experience different social systems in host countries. For example, McDonald’s and Proctor and Gamble’s are confronted with the situation in China where managerial jobs are considered lifetime jobs (Paik and Sohn, 64). In contrast, Human resources management in Western organization is based on performance, where a manager gets fired if his performance is not satisfactory. This coupled with the compensation and benefit challenge make performance management particularly hard for Proctor and Gamble in China. Secondly, the iron position means that job security as an incentive for better managerial performance is removed. According to Wu, the iron position leads to Chinese workers not observing working time and showing low levels of engagement in their work (169). Ultimately, such social practices make it harder for human resources managers in multicultural environments to obtain skilled talent. Employee Motivation in multicultural environments Uniform employee motivation is likely to fail in a multicultural environment. Briscoe and Schuler stress that culturally relevant messages have to be communicated for motivation to occur in a multicultural environment (23). Tarique and Schuler note that most motivation theories are based on western psychological foundations, and are unlikely to work on Chinese workers. However, some of the western motivation theories are still applicable in multicultural environments (138). According to Briscoe and Schuler, harmonization, interpersonal relationships, trustworthiness and face behaviors still have a significant influence on the motivation of Chinese workers (48). Respect and regard for the culture of other employees from diverse background is also a commonly ignored factor in employee motivation in multicultural environments. According to Hartmann, Feisel and Schober, retention tools in multicultural environments are significantly different to those of homogenous organizations (172). Each of the motivation theories linked to better performance among western employees needs to be identified differently in other diverse cultures. For example need theories have a different applicability in Europe and the United States? For example Russian workers identify increased responsibility as the most important motivational factors, while US workers show a higher need for generous work holidays. Therefore, Multinational Corporation like Proctor and Gamble need to identify which needs are given priority in each culture they operate in. Communication Challenge Communication is one of the major challenges for managers in a multicultural environment. The way we communicate is heavily influenced by the culture we grow up in. Factors such as how loud to address others, the directness of our communication, the emotions we express, non-verbal cues, posture during communication, maintenance of eye contact, proximity, physical contact, tone of voice, giving the others an opportunity to speak are all a product of our culture (Dowling, Fasting and Engle, 120). It is important for a manager to recognize these factors while communicating with his multicultural workforce. Although, English is established as the Lingua Franca of business, there are still very many cultures who do not use the language (Paik and Sohn, 66). Furthermore, due to cultural differences those who learn English as a second language have a problem comprehending some words especially if they are spoken very first. According to Solomon et al, it is easy for misinterpretation to occur when two people from different cultures are communicating (306). Misinterpretation may occur even if both parties understand the language of communication. According to Hartmann, Feisel, and Schober, there is a profound difference between Eastern and Western culture communication style, due to differences in culture (172). Western prefer to talk more directly with little hidden in meaning, on the other hand people from Asia and Africa are less direct while communication (Dowling, Festing, Engle, 67). These differences in communication are very important while communicating with employees and consumers from diverse cultural backgrounds. Conclusion Human resource management issues are more profound in a multicultural environment. Multinational companies have a critical need for qualified staff, meaning that they need an effective international human resource management strategy. Most multinational companies prefer standardization of human resource management practices as it leads to operational effectiveness and efficiency elsewhere. However, a one size fits all approach is problematic for application in multicultural environments be used by companies that have internationalized. The differences in culture between different societies require companies to adopt different strategies for each country they operate in. Strategy conflict is inevitable where the standardization strategy is used in cross-cultural management. Face by these challenges MNE’s need to increasingly localize their human resource functions in the host countries. Recommendations Staff training The talent shortage facing managers in multicultural management can be solved by adopting new staff training strategies. Proctor and Gamble response to the talent war is to recruit directly from college; Proctor recruits fresh graduates as interns and provides them with the career growth training needed to fit into positions at Proctor and Gamble (Vance and Vaiman, 12). A similar approach by other organization faced by talent shortage may help them avoid the ongoing war for talent. Other Global co-operation operating in Nations with a serious skill mismatch like China can also use the same strategy to overcome the skill shortage problem. Expatriate Cross-cultural Training Expatriate managers and employees should be engaged in an extensive program to help them understand the culture of their host. This training program should take place prior to the posting of the managers and during their stay in the host country (Qin and Baruch, 300). Through this training the managers gain intra-cultural competence therefore enhancing his effectiveness as a multicultural manager. Cross-cultural training should also include the family of the employee as their coping ability is an indicator of whether an expatriate manager will fail. Compensation and Benefits Managers in multicultural environment must abandon the standardized way of approaching compensation issues in a multicultural environment. To win and retain the best talent, MNEs must put in place compensation and benefit systems that are more attractive to employees than those offered by other employers including the state. While such a move may be costly, it is an advantage of economies that offer employees with lower levels of benefits. Communication Schein identifies these strategies as frequent face-to-face contact, brief and simple policy manuals, Sensitivity to recipients of messages, and regular written explanation of HR policy (37). Works Cited Beechler, Schon, and Ian C. Woodward. "The global “war for talent”." Journal of International Management 15.3 (2009): 273-285. Briscoe, Dennis R., and Randall S. Schuler. International Human Resource Management: Policies and Practices for the Global Enterprise. Vol. 5. Psychology Press, 2004. Dowling, Peter J., Marion Festing, and Allen D. Engle Sr. International human resource management: Managing people in a multinational context. CengageBrain. Com, 2008. Griffin, Ricky W., Michael W. Pustay, and Chunsheng Liu. International business. Prentice Hall, 2010. Haile, Selassie. “Challenges in International Benefits and Compensation Systems of Multinational Corporation. Afr. Econ. & Bus. Rev., 3 (2002): 13 Hartmann, Evi, Edda Feisel, and Holger Schober. "Talent management of western MNCs in China: balancing global integration and local responsiveness." Journal of World Business 45.2 (2010): 169-178. Leininger, Jim. "China Data: The Labor Market: Recent compensation and benefit trends." China Business Review 34.4 (2007): 28. Leininger, Jim. "The Key to Retention: Committed Employees China's cash-focused managers are demanding more from their employers." China Business Review 31.1 (2004): 16-17. Mudambi, Ram, and Markus Venzin. "The strategic nexus of offshoring and outsourcing decisions." Journal of Management Studies 47.8 (2010): 1510-1533. Paik, Yongsun, and Junghoon Derick Sohn. "Expatriate managers and MNC’s ability to control international subsidiaries: the case of Japanese MNCs." Journal of World Business 39.1 (2004): 61-71. Qin, Chenyi, and Yehuda Baruch. "The impact of cross-cultural training for expatriates in a Chinese firm." Career Development International 15.3 (2010): 296-318. Schein, Edgar H. "Three cultures of management: the key to organizational learning." Glocal working. Living and working across the world with cultural intelligence 37 (2010). Solomon, Oluyinka, et al. "Employee Motivation and Organizational Performance in Multinational Companies: A Study of Cadbury Nigeria PLC." International Journal of Research in Management & Technology (2012): 303-312. Tarique, Ibraiz, and Randall S. Schuler. "Global talent management: Literature review, integrative framework, and suggestions for further research." Journal of world business 45.2 (2010): 122-133. Tarique, Ibraiz, and Randall S. Schuler. "Global talent management: Literature review, integrative framework, and suggestions for further research." Journal of world business 45.2 (2010): 122-133. Vance, Charles M., and Vlad Vaiman. "Smart talent management: on the powerful amalgamation of talent management and knowledge management." Smart talent management: Building knowledge assets for competitive advantage (2008): 1-15. Vance, Charles M., and Vlad Vaiman. "Smart talent management: on the powerful amalgamation of talent management and knowledge management." Smart talent management: Building knowledge assets for competitive advantage (2008): 1-15. Wu, Jianlian. "An analysis of business challenges faced by foreign multinationals operating in the Chinese market." International Journal of Business and Management 3.12 (2008): P169. Read More