Globalization Effects on WorleyParsons Corporation - Case Study Example

Name: Professor: Course: Date of Submission: Globalization: A Case of WorleyParsons Corporation Introduction Globalization has become a key strategy for ensuring sustainability and enhanced profitability for the contemporary corporate realm. Many business organizations have embarked on introduction of their services and products in the global market as a strategy for dealing with market saturation and competition especially at home country markets as well as expansion of market segments. Business globalization involves different strategies including joint ventures, establishment of subsidiaries in a foreign country, and export as well as contracting of foreign countries to manufacture products. The different strategies applied by businesses in their entry into the global market present diverse benefits and challenges that businesses must consider before their venture. Globalization has increased the demands of international competitiveness and strengthened the interrelationship between competitiveness and employment (Porter, Delgado, Kettels & Tern 2009). It has further increased the need for human resource that is capable of engaging in new modes of production, competition, and coexistence. Cultural diversity management has become one of the greatest challenges undermining business globalization efforts in countries such as China and India. Business organization venturing in the global market must consider factors such as political and economic systems, human capital, and culture that differ from one region to another and influence human resource management policies. Strategic human resources management (HRM) has morphed into an important tool of responding to the globalization challenges posed to business organizations venturing into the international market. Multinational enterprises are compelled to streamline human resources management functions such as employees’ recruitment and selection, performance, employees training and development as well reward systems to fit into the policies followed in given business locations. This paper explores strategies applied by Worley Parsons in dealing with the globalization of its business and determination of whether there should be any differences in HRM policies and procedures based on the location. Company Profile WorleyParsons Corporation has a long history dating back to 1971 when the founder and the current CEO of the company established a small engineering consultancy company known as Wholohan Grill and Partners in Australia. The company has since grown to a key player in global market through provision of a wide range of products and services in the global market. The growth of WorleyParsons Corporation to its current status in the global market has involved application of different global market entry strategies including acquisition, contracts, and initiation of joint ventures (WorleyParsons 2011). Its first significant expansion involved the acquisition of interests in an American- based firm known as Worley, a specialist in offshore gas and oil in both Australia and Asia. This move saw the company change its name to Worley followed by a significant growth marked by acquisition of long-term contracts in Asia as well as entry into local joint ventures with some existing up to date. The company’s expansion strategy has seen a great deal of product diversification from its specialization in hydrocarbons into other fields such power generation, infrastructure, minerals, and environmental conservation. In the turn of the 21st century, the company has expanded significantly into the global market through acquisition of companies in different countries including China, Oman, and Canada. In its continued expansion strategies, the company acquired yet another organization known as Parsons E&C, a well-established corporation in the global market and reputable for quality services in petrochemical, power, oil and gas. In order to reap from the reputation and the long existence of Parsons E&C in the global market, the management decided to merge operations of the two companies to form the current company recognized as WorleyParsons (WorleyParson 2011). The acquisition strategy has enabled the company to not only broaden its scope of products and services but also strengthen of its capabilities. In line with its expansion strategy through acquisitions, WorleyPersons made several acquisitions including reputable consultants in water and environmental services in 2007 thus continuing to diversify its services in the global market. One of its most current acquisitions involved the acquisition of SEA Engineering and INTEC made in the period between 2007 and 2008(WorleyParson 2011). WorleyPersons has made its impact in United States’ market where its operations include provision of unmatched engineering services in sulphur technology, refinery, subsea systems, nuclear power, arctic development, renewable energy, and deepwater facilities. Other than specializing in megaprojects, the company also emphasizes on small projects and formation of partnerships in order to ensure provision of high quality services. The company has so far made great impact in global market for renewable energy especially through the concentration of thermal solar energy, geothermal and generation of biomass energy. WarleyParsons has made its presence in 43 countries, especially in regions such as Australia, Africa, Canada, China, Europe, Latin America, Middle East, South-East Asia, and United States. With the company’s extensive global presence, its human resource management faces significant challenges in streamlining its policies and procedures to fit in the different regions where it has established operations. WarleyParsons has a complicated management system marked by establishment of several committees, each with different responsibilities in the company operations. For example the Remuneration Committee of the company plays an important role in advising the board of directors on matters surrounding remuneration of board as well as assessment of the CEO’s performance. The Company’s Globalization Strategy The company’s business globalization is attributed to several factors including the continued search for cheaper materials such as natural resources, human capital, and taking advantage of emerging markets such as the Chinese and the Indian market. With the company having one of its sectors as mining of minerals, some of its efforts in expanding into the global market can be attributed to the search for areas with reliable sources of natural resources such as minerals, land, as well as water. Expansion to the Asian countries like China may be driven by the continued deregulation of the region’s capital and finance markets as well as the rapid growth of the Chinese economy. The large Chinese population also serves as a driving force towards globalization for many businesses especially due to availability of cheap labour and extensive market for products. Despite the increased competition associated with globalization, proactive and enterprising companies such as WorleyParsons have been able to convert such challenges into great opportunities. Like many other multinational enterprises, WorleyParsons has applied different global market entry strategies that have been crucial in asserting its global presence even in country’s that pose great challenges such as China. The company has greatly relied on acquisition of well established companies in different countries through increasing its share count to more than fifty percent (WorleyParsons 2010). The company management has also been keen in forming joint ventures with reputable overseas companies as well as formation of mergers with foreign partners. WorleyParsons has particularly exploited the strategy of forming alliances and joint ventures that have presented the company with increased revenues for expanding its operations to several countries. Formation of the alliances has enabled the company to exploit special expertise present in companies located in other countries. These strategies have played a critical role in the establishment of strong working relations with global organizations thereby enabling the company to share both risks and returns with such organizations. In addition, such strategies have contributed to the success of the company’s global expansion strategy through minimization of challenges such as resistance and cultural differences presented by the event of globalization. The joint ventures strategy has further enabled the company to exploit both the local and the international expertise in its global operations thereby boosting innovativeness and the quality of services. Strategic partnerships have been important in countering the enormous capital required for establishment of fully-owned subsidiaries in foreign countries as well as reduction in asset risks associated with this strategy. Acquisition of other businesses with aim of diversifying its operations, increasing profitability and the assertion of global presence has been an important technique. The company has made its global presence in some countries through purchase of reputable businesses dealing with operations related to its scope of services (WorleyParsons 2011). The acquisitions strategy has seen the company shift from dealing with hydrocarbons to becoming a recognized service provider in infrastructure, minerals, metals, and environmental conservation sector. Management of the Company’s Global Operations Management of WorleyPersons global operations comprises of an executive committee as the senior leadership team that consists of the chief executive officer (CEO) and five group leaders with overall global responsibilities in all areas of management. The responsibilities given to the group leaders entail the areas of finance, legal, risk management, internal procurement and communications as well as human resource management. The executive committee works in consultation with the CEO to oversee all company operations around the globe. In addition, the committee ensures enhancement of professional service delivery and upholding of customer values in all its locations across the world. The group managing directors delegate duties to different professionals in the different locations and ensure control of all functions that fall in their respective dockets. Management of the company’s global operations involves a global work-share program that allows the company to manage its international projects at the different locations around the globe (WorleyParsons China 2011). Through the company’s workshare program, it ensures quick and efficient management of its client’s work and workers. In its operations, the company does not sent workers from Australia to work in their different locations but make use of the local talent and experts to carry out their operations. In its operations in China, the company has over, 1300 personnel comprising mainly of local professionals that offer assistance in projects being undertaken both in China and other countries. The company also relies on an advanced information communications technology infrastructure which supports its global office network. This communications infrastructure enables the company’s executive committee to coordinate its global operations in order to advance the commitment in providing quality services in the global market. Recruitment and Selection WorleyParsons has a strong corporate culture that focuses on recruitment of competent staff as well as employee training and development. The company forms one the largest graduate trainee employers in Australia with the aim of tapping and nurturing the best talent in its home country. In addition, the company has a well-established graduate development programs seeking to promote the concept of ensuring quality recruitment in its staff employment strategy. The company’s human resource strategy involves job rotation, professional development, and enhancement of skills, on-job training programs as well as mentoring schemes, all aimed at promoting quality service provision and innovativeness (WorleyParsons 2011). Such staff training programs are carried out in all its locations as a way of keeping all its employees abreast with the company expectations and changes in the global market. As one of strategic cooperate responsibilities, the company offers localized employment programs and focuses on nationalization programs in lower-income countries where it has established its operations. Through these strategies, the company plays a critical role in reducing unemployment rates in such countries while at the same time tapping from the local knowledge. The company human resource management tries to balance the economic, political, social, and legal constraints in the different countries while ensuring congruency with policies of the company. In this case, the company does not provide complete autonomy to its foreign subsidiaries to respond to local demands and independence of one subsidiary to another through putting all its operations under control of a single committee. This strategy has contributed to the successful integration of the company in the global economy. The company tries to apply the geocentric theory of management in its operations in which it attempts to balance both global integration and local responsiveness. Similar to most multinational corporations, WarleyParsons allows the management at its different localities to recruit junior staff based on specific qualifications. Unlike some multinational enterprises that sent expatriates to manage subsidiaries in foreign countries, the company prefers filling key positions using experts in the host countries with overall regional managers recruited by the parent company. Recruitment of staff from the host country confers international businesses with increased benefits as such workers are conversant with the country’s culture, values, language, law, and resources. Application of the geocentric international human resource management practices enables the company to recruit and fill its staff positions with the best talent regardless of individual nationality. The company ensures unification of its corporate culture in all its subsidiaries without necessarily being dictated upon by the parent company. Socialization of the company values plays an important role in ensuring flexibility in its human resource policies to accommodate the policies among the foreign countries (Kelly 2001). Training and Development of Employees Upon realization of the importance of training and employee development in advancing the quality of service provided to its clients, WorleyParsons has established several programs aimed at nurturing talents in almost every subsidiary regardless of their geographical location. For example, WorleyParsons China has established a training program aimed at recruiting the best talent for the company dubbed the ‘international duty’ (WorleyParsons China 2011). As a member of the global WorleyParson group, WorleyParson China has established this training program in line with the role of each subsidiary in providing technical support to the rest of the group. Such training programs are dedicated towards expanding the company human resource pool. The International Assignment Program though being one of the latest training programs, involves selection of local engineers with special talents as well as assigning them to various WorleyParsons overseas projects to receive training and experience. This strategy enables selected candidates to receive special training under the company’s corporate culture in different WorleyParsons’ subsidiaries across the globe. The company also provides training opportunities for its employees through application of training programs such as job-rotation among its different subsidiaries and projects to widen their scope of skills. The company’s human resource management also fosters development of its employees through ensuring that all its human resources’ skills are boosted by ongoing training programs. The ongoing training program in the company ensures that its staffs stay abreast with changes in the global market including technological advancement and customer demands. The training process in different subsidiary locations emphasize on the corporate culture as a way of ensuring that all its employees are well acquainted with company’s culture regardless of their area of operation. The company further promotes employee development through professional and skills accreditation among other programs such the mentoring program that seeks to nurture young recruits in the company. In the mentoring programs, new recruits in the company are assigned to different senior employees who guide them throughout their incorporation into the company operations. Performance Management Performance management involves evaluation of the company operations against its goals and objectives. Evaluation of multinational corporations particularly presents significant difficulties due to issues that are unique to foreign operations. A well-organized performance evaluation system is embedded at the level of each individual subsidiary and serves the management of the multinational corporation as an integrative and coordinative mechanism for the organization of the corporation (Varma & Budhwar 2008). Such systems evaluate the market performance of a foreign operation within its given environment and its performance within the corporation as a whole. WorleyParsons applies such systems in management of its performance allowing the executive committee to compare subsidiaries by means of selected measures to provide a basis for optimizing allocation of resources throughout the corporation. Reward and Remuneration The board at the company reviews its remuneration structure regularly to streamline with the market practices as well as making it relevant in job prevailing work environment. The company remuneration strategies strive to retain its highly qualified and dedicated workforce as well as aligning its reward system with the interests of the global shareholders. In order to ensure competitiveness and the ability to attract the best talent and skills in the company’s top management, the company ensures that its remuneration remains highly competitive in the global scale. In line with this object, the company engaged PwC as an external remuneration consultant amid the financial crisis to assist in benchmarking the company’s executive committee’s as well as the CEO’s remuneration (WorleyParsons 2011). This strategy was aimed at streamlining their remunerations structure against that of individuals working at the same level in the international market. Findings by the external consultant revealed that the company had one of the best remuneration structures around the globe for the top executives with total reward surpassing what other company’s of same status offer. The company’s remuneration structures are now largely based on variable pay with reward system relying on the delivery of business growth especially the top executives. In the turn of 2011 annual year, the company decided to introduce an additional component known as variable at-risk pay aimed at boosting the company’s competitiveness in its remuneration structure (WorleyParsons 2011). The organization ensures that its remuneration structure is streamlined in all its subsidiaries as a way of ensuring that its workforce attracts and retains the best talent in order to provide the best service to its clients. It further takes into account the Australian and international peer pay levels in its remuneration and reward system in order to remain relevant as a global enterprise. The company sets a fixed pay at the middle levels of its remuneration structure and a variable pay at the top in order to deal with challenging economic times. This organization increases its fixed pay level for its employees around the globe especially the senior management team depending on promotion and responsibilities. It has a short-term incentive plan comprising of cash rewards and a discretionary STI opportunity. The short-term cash incentive (STI) is given to senior managers who achieve their individual key performance indicators in the company operations. Such individual key performance indicators include financial performance, health, safety, and environment conservation targets; client based performance as well as human resource. In the company‘s STI plans, senior executives only receive cash bonus when the company’s group net profit after taxes has exceeded 90 percent of the year’s budget (WorleyParsons 2008). The bonus system indicates a strong link between its reward system and the company performance. However, the company has revised its reward system for executives with regional responsibilities to ensure that their incentives are valued based on measures within their area of influence rather than the entire company’s performance. WorleyParsons also rewards non-executive directors with share ownership incentives as a way of ensuring that they remain committed to the company and motivated to accomplish the company’s global task. Changes Human Resources Policies and Procedures Human resources management policies may change depending on the cultural, legal, political and economic differences characteristic of a given location. However, some global businesses desire to maintain the HRM policies and procedures across borders especially in companies applying the ethnocentric theory of management (Caligiuri & Stroh 1995). Maintenance of the parent company’s culture in different foreign subsidiaries is seen as a strategy for sustaining control in the business operations. Nevertheless, such desires have been challenged in some countries such as China where the people’s culture has significant influence on the country’s HRM policies and practices. On the other hand, multinational companies operating under the geocentric theory of management allow significant flexibility in its policies and procedures in order to accommodate demands and cultural differences in foreign countries (Paul 2006). Many of the most successful global businesses have been able to maintain their corporate culture while at the same time allowing changes in their policies depending on the location of the subsidiary. In this case, subsidiary companies are allowed to operate within the demands of their area of location in order to ensure adequate local responsiveness. Through this strategy, companies like WorleyParsons have been able to circumvent legal, political, economic and cultural constrains in its increased geographical presence thereby fostering a successful global economy economic venture. Therefore, differences in HRM policies and procedures have remained almost inevitable in the era of business globalization as most international companies have opted not transfer their policies but instead adopt the best practices in the areas of their operations. Conclusion WorleyParsons Corporation came into existence in 1971 when the founder and the current CEO of the company started a small engineering consultancy company known as Wholohan Grill and Partners. Since then the company has experienced a tremendous growth to become a leading engineering company around the global market. The growth of WorleyParsons Corporation to its current recognition in the global market has involved application of different global market entry strategies including acquisition of shares, contracts as well as entry into joint ventures. One of the landmark expansions involved the acquisition of Parsons E&C, a well-established company in the global market and reputable for quality services in petrochemical, power, oil and gas leading to adoption of its current company name. Management of WorleyPersons global operations comprise of and an executive committee as the senior leadership team that consists of the CEO and five group leaders with overall global responsibilities in all areas of management. In its recruitment, the company prefers filling key positions using experts in the host countries with overall regional managers recruited by the parent company. Recruitment of staff from the host country confers international businesses with increased benefits as such workers are conversant with the country’s cultures, values, language, laws and resources. This company also provides training for its employees through application of training programs such as job-rotation among its different subsidiaries and project to widen in employees scope of skills. The company applies both fixed pay and variable pay systems in remuneration structure with the pay of the senior executives varying with performance. Finally, differences in HRM policies and procedures exist in its operations in order to accommodate cultural, political and legal differences in its foreign subsidiaries. References Caligiuri, P & Stroh, L 1995, ‘Multinational corporation management strategies and international human resources practices: bringing IHRM to the bottom line’, The International Journal of Human Resource Management, vol.6, no. 3, pp. 494-507. 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E, Delgado, M, Ketels, C & Stern, S 2009, ‘Moving to a new global competitiveness index’, New Global Competitiveness Index, viewed 15 October 2011, from: < https://members.weforum.org/pdf/GCR08/Chapter%201.2.pdf> Read More