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„Why international companies continue to use expatriate managers even though it is a very expensive option”

Attila Németh11.06.2014.

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Contents• Globalization• Importance of HRM at Coca-Cola• Results of the HRM activities• Company profile and strategic key points• Global HRM at Coca-Cola• Expatriates at Coca-Cola• Staff selection • Workforce diversity• Trainings• Compensation• Expats failure• Performance appraisal• Summary

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Globalization The risk to use expatriates is still remarkable. International companies have many advantages to use expatriates, and beside these they should rethink the nature of their foreign assignments, due to globalization. MNCs need to take this issue more seriously. Most of all they should pay much more attention to the processes as planning, selection, training, measurement, repatriation or carrier planning of expatriates, to protect their one of the main long-term human capital investment.

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Importance of HRM at Coca-Cola• HR practices are internationally one of the most important competitive

strength of The Coca-Cola Company.• Coca-Cola, very successful multinational, who has adopted HR practices that

suits the particular region in where the company operates. • Coca-Cola prefers regional specific HR practices by using practices at home

and adapting them to host regions.• Coca Cola’s HR policies and practices are mainly formed in compliance with

local labour laws and culture. The company operates within the domination of local laws and cultural practices.• Cultural diversity is a major consideration in Coca-Cola international

operations.

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Human capital and Corporate culture„Imagine as life is a game and you are juggling with some five balls in the air. They are work, family, health, friend and spirit and you are keeping all of these in the air. You will soon understand work is a rubber ball. If you will drop, it will bounce back. But the other four balls are made of glass. If you drop one of these, they will be irrevocably scuffed, marked, nicked, damaged or even shattered. They will never be the same. You must understand it and strive for it.Work efficiently during office hours and leave on time. Give the required time to your family, friends and have proper rest.Value has a value only if its values is valued.„

30 second speech by Bryan Dison former CEO of Coca-Cola Company

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HR activities are very effective worldwide. This map shows the results.

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Business profile of The Coca-Cola Company

• In May 1886, Coca-Cola was invented by Doctor John Pemberton a pharmacist from Atlanta, Georgia. • After 19 years of the invention date, the Coca-Cola Company started

operating internationally and it became the world’s largest bottle of liquid, non-alcoholic refreshment.• Coca-Cola Enterprises is the world’s largest Coca-Cola bottler, selling

approximately 1,9 billion bottles and cans each days. The company markets, distributes and produces beverage products of Coca-Cola Company and its subsidiaries. The more than 500 brands include Coca-Cola Classic, caffeine free Coca-Cola classic, diet Coke, Sprite, Cherry Coke, and Fanta.

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Business profile of The Coca-Cola Company

• Today the company operates in almost 200 countries around the world with a population of 398 million people. • The company employs more than 130, 000 people. • Nearly 80 percent of its operating income derived from businesses

outside the United States. • Coca-Cola manages its global operations through 25 operating

divisions that are organized under six regional groups: North America, the European Union, the Pacific Region, the east Europe/Middle East Group, Africa, and Latin America.

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Strategic key points of Coca-Cola Coca-Cola follows Play to Win Strategic Framework is based on their core values and four strategic key points:

• community trust, • consumer relevance, • customer preference, • cost leadership.

„We Play to Win with The Coca-Cola Company, our partners in growth. Unparalleled talent and high performance mind-set are key enablers of our efforts to achieve our aspirational targets.” (www.coca-colahellenic.com/aboutus/ourstrategicframew)

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Objectives what Coca-Cola’s H.R. department is considered

• The accelerating pace of globalization makes the strategic role of global human resource management increasingly important for global companies, like Coca-Cola.• Global firms need talented leadership to operate successfully on a

global scale.• The food and beverage industry is generally recognized as a low-tech

industry in which the share of R&D expenditure is among the lowest in the manufacturing sector. • Knowledge is developed, carried, and exchanged through the

human capital of the companies.

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Global HRM at Coca-Cola HRM tries to establish a common mind-set that all its employees share. The HRM providing connection to the various divisions and groups into the Coca-Cola family:

• by propagating a common human resources philosophy within the company, • by developing a group of internationally minded mid-level executives for future senior

management responsibility.

The corporate HRM group is developing and providing the company mission highlighting the philosophy around which local businesses can develop their own human resource practices. Twice a year the corporate HRM group also conducts a two-week HRM orientation session for the human resource staff from each of its 25 operating divisions. These sessions give an overview of the company's HRM philosophy and talk about how local businesses can translate that philosophy into human resource policies.

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Global HRM at Coca-ColaHRM provides associates with the opportunities to develop knowledge and skills that lead to more effective job performance. • determining development needs, • agreeing on the development methods,• and implementation.

Methods of development include:• on-the-job experiences, • specific training programs,• coaching, • performance appraisal process.

Coca-Cola’s total compensation programs are structured to drive value creation in more than 200 countries by HRM, to provide cost-effective rewards that are meaningful to associates, and to encourage continuous learning, making the company as successful as it can be.

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Vital role of HRM in the implementation of the strategic goalCoca-Cola copes with differences between countries by articulating a common HRM philosophy, but by letting each national operation translate this philosophy into HRM specific policies that are best suited to their operating environment. Coca-Cola also tries to build a cadre of internationally minded executives through its international service program, which involves the HRM function of identifying and managing the career development of a key group of executives from which future senior management will be selected. Most importantly, Coca-Cola sees the HRM function as a vital link in the implementation of its strategic goal of thinking globally and acting locally.

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„Think Globally, Act Locally” • 80% of income derived from businesses outside the US • 25 operating divisions, under 6 regional groups • "Multi-local" & "local face" Cultural diversity in Coca Cola Match the diversity • Separate Data bank department and investigate the background of the applicant• Common salary philosophy • Pay-for-performance model (discrimination in pay) • Fair remuneration policy :

• Discrimination, • Immigration Attract, • Retain & Develop diverse talent

• Provide support systems: • Global Service Program - 500 high-level managers

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Expatriates at Coca-ColaCoca-Cola tries to staff their operations with local personnel on operation level, because of better performance in home locations. Senior managers should have international exposure at strategic level. Expatriates are needed in the system for two main reasons: • to fill a need for a specific set of skills that not exist at a particular location,• to improve the employee's own skill base.

Expatriates are paid according to US benchmarks Prevent the premature return of expatriates. (Cost Of Living Allowances approach)Coca-Cola’s expatriates move from one international assignment to the next but maintain strong connections to their mentors at the Atlanta headquarters.

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Internal, external recruitmentCoca Cola does not prefer external recruitment. They only do external hiring in case of sudden recruitments. Their basic focus is on internal recruitment: • They forecast their future needs and collect the data of applicants in advance. • They collect resumes at their every territory. • They maintain a talent bank for meeting internal hiring needs. • They visit universities and colleges to fulfil their talent bank. • Their major focus is on quality and their standards of recruitment are high. • Their selection standard was 85 % marks in masters. • Their major recruitment source is E-Recruiting. • They have standard type of adds for the job description and specification. • Their recruitment adds are published by their Media department. • Adds and vacancies banners are being offered by every territory as demanded.

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Staffing policy

Coca-Cola’s staffing policy for managerial position is combination of Ethnocentric and Geocentric, but the second one is dominant.  • Ethnocentric staffing: primarily the company hire expatriates to

staff higher-level foreign positions.

• Geocentric staffing: Coca-Cola uses worldwide integrated business strategy, so the company favours the appointment of managers with the best qualifications, regardless of nationality or ethnic background.

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Staff selection and background investigation

Coca-Cola conducts various types of tests for different needs:• aptitude test to check academic knowledge, • work sample test for technical seats, • behavioural test.

For final candidates: The company follows the 5 tests for one recruitment policy.Tests are conducted on both region and head quarter level.Background investigation on:• differences across countries, cultures, customs, laws and procedures for

staff selection.

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Standards for international assignment

The company relies on selection standards on which management can focus when recruiting and hiring. This standard is demonstrated in the board of directors where out of 21 members only 4 persons are American. Aimed to identify candidates inside colleges, Coca-Cola has another standard which is called recruiting program. The company uses a standard which is the internship program. It provides a year of training for the foreign or US students either in the US or at home. This is followed by an evaluation of each intern on which the management relies to choose a future potential employee with the company. By using these standards, the firm is finding talented candidates on a global basis.

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HRM functions of international assignment

Centralizing: planning international assignments and performance management globally, identifying high-potential staff.  Decentralizing: influencing operating units to support international assignments, supporting decentralized HRM. Transition: persuading divisional managers to release key staff using informal and suitable strategic staffing.

The strategic role of the HRM functions at Coca-Cola is smooth transition.

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Workforce diversityCoca-Cola operates across multitude of cultures and geographies, with more than 100 languages.

The company emphasis on diversity:• diversity of race, • gender, • sexual orientation, • ideas, • ways of living, • cultures,• business practices.

The future success will depend on the ability to develop a worldwide team. The company has benefited from the various cultural insights and perspectives of the societies in which they do business. Coca-Cola determined to have a diverse culture, from top to bottom, that benefit from the perspectives of each individual. The diversity training for employees provides an overview of diversity management strategy and the implementation with an inclusive approach. The company offer supplier diversity training by creating a pool of suppliers that include minority- and women-owned businesses.

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Expatriate Preparation and Development Program

Prior to departure: Orientation Training• Language • Culture • History • Local Customs • Living Conditions

During assignment: Continual Development Training • Expanding Skills • Career Planning • Home-Country Development

Near completion: Repatriation Orientation Training:• Lifestyle • Workplace • Employees

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TrainingsCoca-Cola Company provides different type of training to its interns. Functional intern program: which includes undergraduate and graduate level talent that work across various company functions including marketing and finance.Mentoring program: that provides an opportunity for employees to broaden their professional network of resources, enhance their overall employment competitiveness and benefit from learning about multiple areas of the company:

• one on one mentoring, • group mentoring, • self study mentoring.

Inroads program: it enhances educational opportunities for undergraduate students of colours.The company encourages also coaching, feedback, exchange of ideas, diverse thinking and cross-functional learning.

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International Service ProgramCoca-Cola's global service program and management development programs are creating international managers with experience in various nations, to establish an informal management network. The corporate HRM group has about 500 high-level managers involved in its „international service program." The program can build corporate culture, that supports strategic goals. This managers have critical role to implement strategy. This group is the knowledge of Coca-Cola in particular fields, and who give two things in an international location:

• add value by the expertise, • enhance their contribution to the company by having international experience.

200 of the 500 participants in the program, move each year. These managers are paid according to US benchmarks, as opposed to the benchmark prevailing in the country in which they are located.An ultimate goal of this program is to build a special trained group of internationally minded high-level managers from which Coca-Cola will appoint the future senior managers.

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Trends & Innovations: Global E-learning Globalization has also created special need for e-learning. For now global companies can offer courses in several languages to any locations. Coca-Cola worldwide approach to training is called Coca-Cola University. This is a virtual global university representing a one-stop shop for all learning and capability building activities across The Coca-Cola Company. This tool is specifically related to expatriate assignments:

• stewarding global talent, • helping to assess readiness for an assignment in another country and facilitating

moves,• provide cultural and language training for people moving to other countries.

The talent planning approach of Coca-Cola includes people development forums for all locations and functions.

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Expatriate Compensation

Those individuals who are assigned for over-seas operations have different compensation and benefit program than the regular workers at their local country.

Coca-Cola offers a package for that employee containing some of the following benefits:

• more salary (Purchasing Power Models based on the US banchmark rates)• housing, transportation, telephone (cost-of-living allowances) • insurance and security package• yearly ticket to home country• transfer the family• assist the spouse in finding job in any companies 

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Performance Appraisal

Internal and external factors influence the design of the performance appraisal method.

external factors are include:• the legislation• labour union

The legislation requires the appraisal systems to be non-discriminatory (Coca-Cola encourages diversity)Labour union may oppose the use of management-designed appraisal system.

Internal factors are include:• the corporate culture• non-structuring culture

The corporate culture plays a significant role in designing a performance appraisal at Coca-Cola. The shared values, beliefs and habits within an organization should interact with the formal structure to produce behavioural norms. A non-structuring culture does not encourage labours to achieve a high performance either individually or in a team, and this will result in a negative appraisal result.

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Expatriate failureDespite the Coca-Cola has well-organized global staffing approaches, the business still faces a risk of expatriate failure.According to the H.R. Department of Coca-Cola the most striking challenges occurred due to problems of:• technical competence, • adaptability, • lack of local acceptance.

In order to eliminate or rather reduce such issues, a higher emphasis on cultural awareness, and intercultural communication training should be placed. To overcome other possible challenges, a part of the Coca-Cola's Global Human Resource Management is the so called “International Service Program”.

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Repatriation

Coca-Cola does not repatriate managers until they have had a chance to show that they have made an impact. The minimum time is three to five years, depending on the country and the assignments. This kind of performance monitoring serves as a great motivator, but to be inspired, managers require something more.

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SummaryDue to the rapid changing world, Coca-Cola has a great chance to increase their market power, such as open up new markets on a global scale. Coca-Cola is using global staffing approaches which is support the company strategic goals. However there is always room for improvement, the “International Service Program” tries to cope with difficulties to be more effective in global market. Even, the company suffer with expatriate failure, which is still a challenge. Of course no enterprise can guarantee a 100 percent success, but the aim to improvement are realised by Coca-Cola. While expatriate programs are a huge investment of the company, they must reduce failure rates in order to increase profits and ensure global competitiveness. As we see Coca-Cola could concentrate on expatriate selection as well as offering special training programs, but also they need to focus on psychological and social capital. Coca-Cola has many alternative solutions to overcome e.g. culture shocks, ensuring to the expat an appropriate host family. Of course all these tools are highly expensive, but still very reasonable compared to the costs, which could occur due to a new market failure.

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Thank you for your attention!