Challenges and Human Resource Mechanisms in Multinational Companies

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Table of Contents

Introduction
Conclusion
Reference List

Introduction

Multinational companies have operations in more than one country. Therefore, companies employ people from different countries and culture (Feely 2003). These companies have a culturally diverse work force. Multinational companies have subsidiaries in different countries thus have diverse work forces.

Diversity is characterised by religious and cultural differences among employees (Som 2006). Human resource managers are expected to provide an environment where needs of all employees are adequately addressed.

There are several challenges that face human resource specialists in multinational companies. This relates to various aspects of human resource management practice including recruitment and selection, employee training and development and performance appraisal. Therefore, multinational companies are expected to put in place mechanisms which address challenges ensuring that employees remain motivated.

This contributes to the overall organisational performance and realisation of organisational objectives. The following article explores some of the challenges faced by multinational companies in human resource management practice. Similarly, human resource mechanisms addressing the above challenges shall be explored in the article.

Changing Landscape of HRM and Organisational Behaviour Domain

Human resource practice has evolved greatly. There are several challenges that faced personnel managers in the 1970’s and 1980’s. One of the challenges that faced personnel managers during that particular duration, before incorporation of human resource practice is reduced influence in decision making.

Personnel managers input in critical organisational decisions was minimal (Caldwell 2003). This includes decisions of selection of employees where personnel managers were expected provide a breakdown of tasks associated with different positions.

Also, personnel managers had decreased autonomy in decision making. Therefore, they were not in a position to significantly influence the organisational culture. Similarly, personnel managers were expected to harmonize employee and management interests (Caldwell 2003). Managers were not in a position to be highly innovative in addressing emerging employee needs.

However, researchers were keen on justifying the role of the human resource function in organisations. Some of the early human resource management models developed linked employee output and company strategies (Noe 2008). Under the models, emphasis was on management of employees thus ensuring that the organisation was in a position to realize strategic objectives.

Furthermore, human resource management models introduced the aspects of selection, recruitment and performance appraisal as part of the human resource function. Therefore, the human resource function was entrenched in corporate culture and has become an integral part of modern firm’s organisational culture.

The human resource function has greatly evolved including incorporation of technology in modern practice (Becker & Huselid 2006). Firms for example, are in a position to screen potential employees thus gain insight into their employment record and other things.

Similarly, firms are in a position to receive applications from candidates using modern communication methods such as emails. Also, modern human resource management practices put emphasis on employee training rather than organisational development. Employee training incorporates modern learning methods and equipment.

Multinational companies have also incorporated the human resource function into their organisational culture. However, these companies are faced with a unique problem of having multicultural workforces. There are three approaches developed which can be adopted as part of human resource management practice in multinational companies.

The first approach is ethnocentricity where human resource management practices are aligned in terms of the home country orientation (Born & Peltokopi 2010). Therefore, subsidiaries adopt human resource management practices developed at the parent company. For example, employees might be required to understand the main language in the country where the multinational company is based (Luo & Shenkar 2006).

A good example of the above is the Panasonic Company where Japanese is the company’s first language, (Born & Peltokopi 2010). Senior management members in various subsidiaries including the United States are expected to understand the language thus enhance internal communication.

The second approach is polycentricity. Polycentricity encompasses adoption of a host country’s orientation where human resource management practice is aligned with local needs. Different countries have varied cultures which influence employee interaction. Therefore, human resource managers consider a country’s national culture which provides insight into other aspects including employee training.

The final approach is geocentricity which encompasses an international orientation. Human management practices are, therefore, not based on either home or host country’s cultures. The human resource department is expected to develop policies that are applicable in various countries across the world.

The above approaches guide human resource specialists in developing and implementing human resource management policies in multinational companies. Adoption of either of the above approaches however is dependent on a critical analysis of pros and cons associated with either of the above approaches.

Also, a fusion of the approaches can be done based on the analysis carried out. Similarly, the above approaches guide other human resource management practices including selection, recruitment, employee training and performance appraisal.

Recruitment and Selection in Multinational Companies

A successful recruitment process encompasses several things. Firstly, departments are expected to identify positions that need to be filled where such information is forwarded to human resource department (Noe 2008).

The human resource department is expected to carry out an analysis of tasks associated with the position. Tasks associated with the position are identified which guide the process of outlining the requirements of the position.

The human resource department is expected to advertise the position and outline the different requirements for potential candidates willing to fill the position. A good advert also contains an outline of other things such as remuneration package and other additional benefits (Becker & Gerhart 1996).

This is aimed at attracting quality candidates to fill that particular position. A quality work force increases a company’s competitiveness through innovation and increased productivity (Som 2006)

Selection process encompasses identification of persons with the right knowledge, skills and abilities to fit in a position (Liu et al 2007). Similarly, persons recruited should be easy to assimilate into the company’s organisational culture (Liu et al 2007).

There are several useful tools used in the selection process which establish the candidate’s knowledge, skills and abilities. These include structured interviews, amplitude and ability tests. This are used to categorize candidates where the best candidate is identified.

Challenges in Recruitment and Selection in Multinational Companies

Some of the challenges that multinational companies face include differences in culture, technology, administrative and legal policies. Different countries have national cultures that influence the relationship between employees and employers.

One of the challenges that multinational companies face is increased competition from local firms to secure quality human capital. In Japan for example, firms compete aggressively in order to secure graduates from prestigious universities in the country (Magan 2012).

Also, different countries have varied education systems and thus put emphasis on various aspects in their education system. Education systems influence factors such as completion time of various courses which influences the availability of workers in various fields. For example, the average age of college graduates entering the job market in Germany is twenty eight years.

On the other hand, the average age of college graduates entering the job market in Britain and Japan is twenty years (Magan 2012). Therefore, the above might lead to shortage of skilled workers in various fields thus impact on the recruitment process of multinationals setting up subsidiaries in a country.

Another challenge that faces multinational companies during recruitment and selection is administrative and legal policies that govern various job markets. In the United States for example, any form of discrimination based on gender, race or religion leads to legal action.

Similarly, in China, a multinational company wishing to hire local employees might be required to contact government agencies or local bureaus before it can commence the process. This increases cost of recruiting and selection process for the multinational company.

There are varied work cultures across different countries. For example, in the United States, candidates may hide their doctoral qualification for fear of being overqualified for the position (Magan 2012). Similarly, methods used job seekers in seeking out job opportunities vary across different countries.

For example, forth three percent of job seekers in Italy preferred to hand written resumes as opposed to fourteen percent of job seekers in Germany. Therefore, human resource specialists in multinational companies with subsidiaries in countries across the world are expected to understand work cultures in different countries.

Human Resource Mechanisms in addressing challenges in Recruitment and Selection of Multinational Companies

Multinational companies have to put in place human resource mechanisms to counter some of the challenges outlined above. Human resource specialists are expected to ensure that they have adequate knowledge of the work culture in different countries.

This knowledge ensures appropriate tools are used to reach potential employees. As indicated above, work cultures are differentiated by such things as the behaviour of jobseekers. This guides human resource specialists in identifying relevant media channels to use while advertising vacant positions in subsidiaries.

In countries such as Japan, where there is increased competition for quality human resource, appropriate mechanisms should be put in place. In subsidiaries, graduate programs should be introduced. The management in subsidiaries in countries such as Japan should ensure enter into strategic partnerships with universities. Therefore, graduates from the institutions are easily assimilated into corporate culture of the subsidiary.

Employee learning, training and skill development in Multinational Companies

The learning organisation concept has been integrated in human resource management practice (Cho & Yoon 2010). In human resource practice, a learning organisation encompasses focusing on learning and development at individual, group and organisational level (Cho & Yoon 2010).

At the individual level, learning encompasses increasing self efficacy through increased mastery of new and existing skills. Group level learning entails team learning where cooperation among employees towards realisation of organisational goals is promoted.

Employee training and skill development contributes toward organisational performance (Vijayabanu, C & Amadhu 2012). Training enables employees recognise the expected cognitive and behavioural requirements towards successful completion of a specific task.

Therefore, effective training yields improved work quality characterised by reduced errors which gives the company a strong competitive advantage (Grossman & Salas, 2011). Employee training and skill development in multinational companies entails ensuring that there is consistency in organisational practices and thus quality of either goods or service is not compromised.

Therefore, employees both at the parent company and subsidiaries are expected to be at the same skill level thus ensuring consistency in the product or service quality (Boyacigiller 1990).

Challenges to Employee Training and Development in Multinational Companies

One challenge of that affects transfer of knowledge is difference in culture. The parent’s company’s organisation culture could be based on the home country’s national culture. Therefore, some elements of the organisational culture might not be compatible with national culture of the host country (Peltokopi 2008).

This results in increased work-place conflicts where local employees might resist some elements of the parent company’s organisational culture. Another challenge is language barrier between expatriates and local employees (Andersson, Fosgren & Holm 2001). Expatriates possess in-depth knowledge on company processes and operations. However, the expatriates may not understand the local language in the host country.

The above situation impacts on employee training where expatriates are not in a position disseminate information. Additionally, where an interpreter is introduced, this may result in distortion of information compromising the training programme.

Modern employees training programs have incorporated technology. This includes computer based training programs which depend on availability of high speed internet. Therefore, employees in subsidiaries located in countries that do not have high speed internet are at a disadvantage. Computer based training is cheap and convenient where new ideas are easily disseminated from home company to the subsidiaries.

Human Resource Mechanisms addressing Challenges in Employee Training and Development in Multinational Companies

To address the above problems, a polycentric approach to employee training and skills development can be adopted. This training relates to double loop learning under the organisational learning theory. Double loop learning encompasses change in values and strategies in order to fit the environment (Argyris1977).

Polycentric multinational companies combine services of local managers and expatriates. Increased interaction between local managers and expatriates ensure that local managers are in a position to understand the parent company’s organisational culture.

Local managers are, therefore, expected to come up with strategies that incorporate parent company’s organisational culture with the local culture. Employee training is based on addressing local needs while maintaining a global practice in the multinational company. A successful training programme is characterised by several things including motivators and perceived usefulness (Grossman & Salas 2011).

In multinational companies, employee training can incorporate language training where employees are in a position to understand the main language in the parent company’s home country. This can be done by incorporating language courses in employee training programmes. This enhances interaction between employees from various subsidiaries across the world where they are in a position to exchange ideas.

Increased interaction between employees in multinational companies enhances the companies’ organisational identity (Harzing & Feely 2008). Training programmes in multinational companies also encompass new techniques in production or service delivery.

This could be from either research conducted by parent company or innovation from employees in other subsidiaries. Employees are in a position to analyse the relevance such information to their local environment. This increases employee innovation as they try to incorporate the new knowledge in their environment.

Performance Appraisal in Multinational Companies

Performance appraisal encompasses an assessment of an employee’s job performance. There are several characteristics associated with effective performance management systems. Performance management systems are expected to provide clear links between employee behaviour and organisational objectives (Hendry, Woodward, Bradley & Perkins 2000).

This refers to promoting systemic thinking in organisations. Employees should, therefore, perceive the impact of their behaviour on its overall impact on the business strategy rather than being driven by hygiene factors such salaries and other fringe benefits.

Other characteristics of an effective performance management include clearly defining and aligning objectives. Employees are in a position to understand the impact of their input towards realisation of the organisational objectives (Hendry et al.2000). Therefore, employees are in a position to conduct self evaluations thus identifying areas on which they require improvement.

Also, there is should be a distinction between incentives and rewards (Wieseke, Alavi, & Kessler-Thönes 2011). This is geared towards ensuring that the level of motivation as a result of either reward or incentive can be established.

There are several tools used in performance appraisal. They include the use of structured interviews, scales, peer and supervisor reviews. Results from the tools are used to establish salary increases, bonuses and training needs (Born & Peltokorpi, 2010).

International performance appraisal is a tool used by multinational companies which comprises of an incentive system where employees from subsidiaries are encouraged to promote home company’s interests (Shen 2005).

Challenges in Performance Appraisal in Multinational Companies

One of the challenges that affect performance appraisals is multiplicity of external factors. Some of the factors that may affect performance of employees in various subsidiaries include level of economic development. This includes such factors as the inflation, unemployment and interest rates. Such factors affect employee performance and compromises performance appraisals in multinational companies (Harvey 1997). Also, internal factors such as differences in the level of infrastructural development between the parent company and subsidiaries affects performance appraisal. Employees at the parent company might enjoy more facilities which enhance employees’ performance. Therefore, scales used for evaluation at the parent company and subsidiaries with improved infrastructure cannot be used in subsidiaries which do not have vast resources and facilities (Harvey 1997).

Human Resource Mechanisms addressing challenges in performance appraisal in multinational companies

International performance appraisal should take into account the national culture. This is because national cultures perceptions of rewards vary. Therefore, rewards and incentives should relate to the above perception enhancing motivation to meet objectives as outlined by the company (Shen 2005). Polycentric approach encourages development of localised rewards and incentives.

This is aimed at increasing motivation of employees based in particular subsidiaries in different countries. Moreover, different countries have varied levels of infrastructure. Therefore, while all employees are expected to have the same level of skill and work towards broader company objectives, the above aspect is taken into account.

This helps the company’s senior management set realistic and achievable targets for subsidiaries based on infrastructure available in different countries. This promotes inter-unit cooperation rather than competition which could detrimental in achievement of the home company’s main objectives.

Conclusion

Employee productivity in multinational companies can be increased through ensuring that human resource management practice at the company is constantly reviewed. This ensures specific employee needs in different countries are adequately addressed.

Also, through understanding the work culture in different countries, human resource specialists in multinational companies ensure that companies are able to attract and retain quality staff. Companies intending to expand should therefore address some of the challenges as outlined in the above article and thus ensuring successful integration into the host country’s culture.

Reference List

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