The Strategy of ‘Localizing’ HR Practices From the Perspective of Multinational Corporation

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Localization of International Human Resources Management

Contemporary international human resources management strategies are focusing on how they can be able to localize human resources policies and practices for the betterment of their organizations; when localizing human resources policies, it takes the forms of international coordination, global leadership development and management, cultural intelligence, and diversity management.

When managing a diverse global human capital, multinationals (MNCs) have the mandate of facilitating production of work of difference cultural beliefs, social settings, with diverse views, thinking styles, personalities, and emotional intellectualism. Despite the differences, they offer a rich ground for diverse views and decisions that when effectively managed they can be of high benefit to the multinationals (Kaplan and Norton, 2001).

In international human resources management (IHRM), there are three main approaches, they include, the MNC may send people from the country of incorporation to represent the company abroad (expatriates approach), hire host countries employees, or hire a third countries employees.

With globalization and improved education across binderies, the countries are able to produce people with the knowledge and the expertise to operate and run multinationals; this has come as a blessing to the multinationals that are nowadays relying on local people to manage and run international businesses, the approach is called localization of IHRM (Maznevski and DiStefano, 2000).

This paper evaluates the emerging strategy, localization; it will evaluate how the concept came into operation, how MNCs manage/adopt it as well its advantages and disadvantages.

The emergence of localization

The idea to use local people for the management and running of multinational came from the challenges that use of experts had on MNCs; the main issue that expatriates had is the costs that are associate with their deployments. In most cases the costs of deploying expatriates is high and calls for increased operational costs to the MNs.

Other than the general operational costs, in most cases, the company is responsible other human needs like housing, security and the welfare of the expatriate. Expatriates have higher remuneration than local employees who have the same post, qualification as well as responsibilities; the high remuneration does not necessarily mean that they can perform better but the notion that they are foreigners and experts creates the urge for high pays.

According to Warner 2003, the cost of an American expatriate in China is about six times higher than that of a Chinese expatriate; with this kind of a difference, then when dealing with the expatriates, then the firm violates the noble objective of efficiency, cost management and profit improvements.

Other than remuneration, there are other costs that come along with an expatriate, they include, cost of families, including relocation expenses, special allowances like education, mileage, accommodations, recruitment and training costs; it is also a challenging task to get a person who is qualified and willing to work in a foreign country (Takeuchi, Chen, and Lam, 2009)

When a manager is operating in an industry, it is by default required that he understands the cultures, environment, and the general conditions that he is working under; when they are understood, then the firm will be able to make such responsive decisions. The issues of using expatriates come into play here; they are people with different backgrounds, culture and belief thus they may not be able to connect with the situation on the ground (both market and the work force they are managing).

With this the MNCs is not bound to be competitive and chances of loss of business to the local venders is high. Other than the personal bias, the expatriates may not have the drive and motivation to follow the market situation as well as the day-to-day occurrences of the market. This may be aggravated more by their temporary job assignments in the foreign country.

When it comes to the issue of local employees, they are able to connect to the market and have deeper analysis of the situation on the ground; this facilitates making of market effective decisions and the use of the local information and experience to make sound decisions.

Cultural differences, language barriers, and perception of the locals is another issue that faces expatriates; they are people with differences with the locals and thus they need incur further costs in their efforts to seek acceptance and understanding of the locals behavior and their character traits. In the case of a local executive, he has grown in the country and developed such special skills and culture intelligence that he can understand and make more business responsive questions to the good of the organization (Triandis, 2006).

The concept of localization

In simple terms localization means MNCs relying on local people for the provision of technical and otherwise jobs in their country; after an establishment, the MNC decides instead of having other people to manage and operate an international business, the choice made is local people. When using this model, the normal process of human resource that starts with planning, recruiting and selection is done to ensure that, the local person to secure the position has been vetted for experience, qualification and capability.

After choosing the local person, sometimes there is need to orient, train, and inform the person o matters of the company that may be special to the company’s management or otherwise. This may be done through seminars, or in some cases, the employee may travel to the parent company for such training and assist in making the final plans.

When the employee starts working, it will be assumed that he performs his duties with diligence and for the best interest of the employer; he will need to be appraised, motivated and appropriate measures to keep him going put in place.

Recruitment and selection

After knowing the country of venture as well as the human resources method to adopt, the MNC must on the ground and start the recruitment method; the method is slightly special and takes different forms where the company can hire a recruiting firm in the local country to make the recruitments. Alternatively, the MNC can get on the ground and undertake the task; the earlier is more preferred.

The recruitment and selection of appropriate staff is the foundation of any quality-conscious firm; thus, the MNC needs to enact such appropriate measures that ensure they have recruited people of high dignity, experience and who can perform effectively (Hollinshead, 2009).

In the past, professionals were recruited based on technical criteria, experience, and membership of an appropriate professional body; although these criteria are still important, technical skills are only a part of the overall service delivery, which also includes functional criteria such as marketing and business skills and the ability to foster client relationships.

Different countries needs different category of people thus when called upon to recruit for particular company; there are some special traits that may have much weight in a country A than they have in country B. The customer-centered firm should take into account all these criteria and consider recruitment as the first stage of retaining loyal, well- motivated and happy employees.

Technological changes call for competent and skilled employees thus; organizations should ensure that their employees match the current technology. During the interview, the panel should ensure that they identify the strengths and weaknesses of the candidate. This will assist them in making the final decision (Trudel, 2009).

Training and development

With the people deployed, the next major and very important step is t orient, train, and mentor the recruiting; every company has its own organizational culture that makes them what they are; the recruits needs to be well acquainted with the culture as he will be needed to instill such culture to the international branch. To get such mentoring and orienting, the parent company may decide to have him on board in the parent company or can use trainings, seminars and one-on-one training to orient and get the manager on board.

On the other hand, when on the ground, professional employee, need to be continually trained to improve their skills, decision making, and expertise; they have limited set of skills that require continual upgrading to match the changing market demands and technology.

Only by updating these skills using well-developed programs, can professional firms ensure that they equip their staff with the skills needed to respond to future business expectations. The management should ensure that employees are well motivated; highly motivated employees are more productive (Harzing and Van Ruysseveldt, 2004).

To enable employees perform their duties effectively, continuous training system and employee’s appraisal is important. It helps management establish areas that needs improvement. Some organizations have employees training as a continuous process to ensure that employees are up-to-date with the changes in the industry.

Motivational measures should be put in place to ensure that employees are loyal to the organization and they work efficiently. This ranges from attractive salaries or/and benefits, to developing a good working environment. This ensures that employees are retained as assets in the organization (Hampden–Turner and Trompenaars, 2006)

Motivation, appraisal and evaluation

With all policies and strategies set, the parent company management should be keep to appraise, motivate and evaluate the local employees to ensure they live to the expectations of the MNC. When appraising, care needs to be taken to ensure that the situation and condition on the ground has been well understood and advice coming from the locals understood effectively.

The employee must be appraised appropriately to enable the human resources department to establish the areas that need to be improved. It is through effective communication and feedback that these areas of weaknesses can be established; programs to facilitate communication should be put in place. Those who meet expectations of the management should be rewarded accordingly.

With contemporary business environments, there are a number of scientific appraisal models that an employer can use, they include balanced score card appraisal model (Trudel, 2009).

Retaining

It is more cheap, efficient and easy to retain employees within an organization; as the employees meet the organization’s expectations, it is important for the organization to realize that the employees also have their targets that they want met. Many employees think of looking for another job if the current job is not satisfactory this stage.

The human resources department must come up with measures that are aimed at retaining employees. One of the ways is to make the working environment as comfortable as possible. Remuneration and rewards of employees are other ways that can be used. Rewards mean that the efforts of the employee are recognized (Fernandez-Alles and Ramos-Rodríguez, 2009)

Advantages of localization

Numerous advantage have come with the new MNCs human resources management style. From a wider angle, when a company employ’s locals, they eliminate the risks and business challenges associated with deployment of expatriates.

When an MNC employs the local people, they are developing opportunity benefits of developing local managerial skills that promote talents and develop talents to the local people; when this happens, the locals feel they are working with a company of their own that they can depend on and respect as their own.

With such moves, an improved business-customer relationship can lead to customer loyalty and growth in business. People are more willing to trade with local companies that seem to be promoting their own culture, and wellbeing’s; they will be able to develop good business relations with the customer, suppliers and other stakeholders like the government and shareholders if any.

The costs of personal culture contexts/tensions and cross-culture misunderstandings will be saved as the locals understand what the nation or the country they are operating in wants. One of the most important attribute of a well-managed company is the motivation of its local staffs; when an MNC is, manage by a foreigner, the local workforce feels less motivated than when a local person is the business leader.

When accompany has high employees motivation, then it is bound to perform better than when the motivation is minimal and wanting (DiStefano and Maznevski, 2000). When locals are given the task of managing MNCs, other than using their experience and qualification, they use the general understanding and learnt social aspects about the country to make such decisions that are responsive to the needs of the country of operation.

For example, they may be able to know the cultures or tribes they should deploy in certain areas, as they have been known to have some special attributes that can favor the MNC. The net effect is an improved business.

Through inpatriation, local managers are able to combine any international experience with the local experience for the good of the company; when they successful do this, then the company stands to benefit. For example, they may combine root-marketing methods to international marketing approaches and come-up with a strategy that fits the county of operation. Despite the above advantages, a number of challenges MNCs face when they take the option of using local people.

Disadvantages of localization

When the MNC rely on localization method of recruitment, then the control and the influence that the parent management has will be diluted and the locals may highjack the management. When this happens the running of the organization as a single unit moving to single noble destination is lost.

In the case that the concept has been adopted by all MNCs they risk the career development of international managers and expatriates; in some companies, the method of expatriates had been used for rewarding and motivating employees in the organization; when the chances has been lost, then the MNC is likely to suffer demonization.

When deploying the local people, there is needed to have training, mentoring, and coaching of the local people to align them with the needs of the organization; this task may become expensive and challenging task to the organization. Sometimes, the trainings may be done but the expected outcome fails to come outs leading to cost losses. It is also very challenging to get a person who can be molded to the needs of an MNC since there is much influence from experiences and exposure.

Another challenge that comes with employing local people is lack of new ideas, creativity and sometimes innovativeness in a foreign company; this is caused by the similar ideas and decisions or way of thinking as may be expected from the local employee. The lack of exposure can lead to decisions that do not favor the business (Bullen and Eyler, 2010)

Conclusion

MNCs need to have an effective and efficient human resources team; there are three main options available to the company they are deploying expatriates, deploying local people or using people from a third country. When using the localization method, using country is of operation employees, the MNC stands to benefit reduced human resources costs, cultural intelligence, and builds customer confidence.

The main challenge with localization is loss of parent’s company management controlling power as well as scarcity of creativity in the companies as the local people experience is confined in their country. International human resources management team has the role of ensuring the MNC’s human capital is highly motivated for favorable working environment.

References

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Fernandez-Alles, M. and Ramos-Rodríguez, A. ,2009. Intellectual structure of human resources management research: A bibliometric analysis of the journal Human Resource Management, 1985–2005. Journal of the American Society for Information Science & Technology, 60(1), pp. 161-175.

Hampden–Turner, C. and Trompenaars, F.,2006.Cultural Intelligence: Is Such a Capacity Credible? Group & Organization Management, 31(1), pp.56-63.

Harzing, A.W. and Van Ruysseveldt, J. ,2004. International Human Resource Management. London: Sage.

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Maznevski, M. L. and DiStefano, J. J.,2000. Global Leaders Are Team Players: Developing Global Leaders Through Membership On Global Teams . Human Resource Management, 39(2/3), p.185.

Takeuchi, N., Chen, Z. and Lam, W. ,2009. Coping with an emerging market competition through strategy-human resource alignment: case study evidence from five leading Japanese manufacturers in the People’s Republic of China. International Journal of Human Resource Management, 20(12), pp. 2454-2470.

Triandis, H.C.,2006. Cultural Intelligence in Organizations. Group and Organization Management, 31(1),pp. 20-26.

Trudel, J. M. ,2009. International human resources management: a new challenge. Portuguese Journal of Management Studies, 14(2), pp.149-161.

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