Multinational HRM

8/4/2019 Multinational HRM

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Introduction:In Bangladesh, with a population of 164 million, we have a lot of organizations doing business

successfully, not only in the domestic but also in the Multinational environment. Lek,

one of our pharmaceutical companies; Square, which produces medicine from variouskinds of chemical; ERA, the road construction company and KT, which produces mens

and womens clothes, are some examples of our most prominent firms.

In those, as well as in similar organizations that function in the global environment, they can

use different approaches to managing employees. How they find employees, pay, train,

and promote them varies with culture. They usually attempt to treat their employees

equitably, yet in a culturally appropriate manner.

When the organization sends its employees to some other country, it takes over the

responsibilities besides the basic functions of human resource management. Forexample, the functions of staffing, training and development are especially emphasized

in this organization. They do not deal merely with the selection of the best employees

for work in foreign countries but also have to be aware of the needs of the whole family

that will accompany the employee to the new cultural environment. A lot of individuals

taking on Multinational assignments are unsuccessful since their spouces or families can

not adjust to their new surroundings. Hence, it is necessary to organize training in the

foreign language for the employee and his family some months before departure.

Everything necessary for the journey, including visas, have to be provided for on time.

It is also necessary to prepare their residence in the new surroundings, as well as to

assure health services and enrolment into schools for the children of the employees.

1.1 What is human resource management?

Multinational Human Resource Management | P a g e 1


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The human resources management (HRM) function includes a variety of activities, and key

among them is deciding what staffing needs you have and whether to use independent

contractors or hire employees to fill these needs, recruiting and training the best

employees, ensuring they are high performers, dealing with performance issues, and

ensuring your personnel and management practices conform to various regulations.Activities also include managing your approach to employee benefits and

compensation, employee records and personnel policies. Usually small businesses (for-

profit or nonprofit) have to carry out these activities themselves because they can't yet

afford part- or full-time help. However, they should always ensure that employees have

-- and are aware of -- personnel policies which conform to current regulations. These

policies are often in the form of employee manuals, which all employees have.

Note that some people distinguish a difference between HRM (a major management activity)

and HRD (human resource development, a profession). Those people might include

HRM in HRD, explaining that HRD includes the broader range of activities to develop

personnel inside of organizations, e.g., career development, training, organization

development, etc.

There is a long-standing argument about where HR-related functions should be organized into

large organizations, eg, "should hr be in the organization development department or the

other way around?"

The HRM function and HRD profession have undergone tremendous change over the past 20-30 years. Many years ago, large organizations looked to the "personnel department,"

mostly to manage the paperwork around hiring and paying people. More recently,

organizations consider the "hr department" as playing a major role in staffing, training

and helping to manage people so that people and the organization are performing at

maximum capability in a highly fulfilling manner.

Recently, the phrase "talent management" is being used to refer the activities to attract,

develop and retain employees. Some people and organizations use the phrase to refer

especially to talented and/or high-potential employees. The phrase often is used

interchangeably with the field of human resource management -- although as the field of

talent management matures, it's very likely there will be an increasing number of people

who will strongly disagree about the interchange of these fields. For now, this library

uses the phrases interchangeably.



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1.2 What is Multinational Human Resource Management:



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Multinational human resource management is an important function in multinational

organisations

Human resources managers are a business organisations people managers, responsible for

managing a wide range of employee responsibilities. The human resource manager in a

multi-national company with divisions or subsidiaries in foreign countries has all thenormal hr responsibilities plus a brace of additional tasks that are specific to offshore

operations of his department. He is literally responsible for Multinational human

resource management.

Multinational human resource management functions cover many different activities related to

a business organizations employees and contractors. The first and most important is the

staffing needs of the company whether staff members are company employees or

outside contractors. Other functions include recruiting and training employees, ensuring

that they are performing at expected levels or better, handling performance issues and

making certain that personnel and management policies conform to laws andregulations. MHR management is also involved in how the company manages employee

compensation and benefits, employee records and personnel policies and practices. (hr-

guide.com, 2007).

The primary difference between domestic human resource management and Multinational

human resource management is the added knowledge and responsibilities required due

to foreign operations. These typically include language (in non-english speaking

offshore organisations), the local and national regulations and laws governing business

operations within a foreign country; currency exchange rates, career outlooks, company

benefits and incentives and, perhaps most important. The ethics and etiquetteexpectations of foreign business contacts. MHR management people must understand

these differences clearly and stand ready to keep other company people informed of

them to prevent embarrassing situations and unintentional affronts from occurring

Basic human resources are a management activity while human resources development is

considered a profession. The latter is targeted more specifically to developing personnel

inside organisations through career development, organizational development and

training activities. Both functions have undergone very-significant evolutions during the

past several decades so that they now play major roles in staffing, managing and

training people so that the will perform in an optimum manner for the organisation.

Today, Multinational human resource management is the fastest-growing subset of hr

due to the growing trend for global business operations.

Still other Multinational human resource management activities include ensuring workplace

safety through dealing with drugs and drug problems, employee assistance, ergonomics,

spirituality and diversity. In these efforts multiple sets of regulations must be used as

guidelines; those of the company and those arising from being in a foreign nation with

different laws, regulations and etiquettes. (managementhelp.org, 2007).



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The multi-national responsibilities of Multinational human resource management require

schooling in psychology as well as the culture and customs of business in offshore

nations. Mba programs at more than seventy universities currently offer Multinational

mba programs carefully tailored to match the needs of students who plan on careers

with multi-national business organisations. Courses are also offered in Multinationalhuman resource management and development for the same purpose. It is clear that

mhrm is a growing field in multi-national business operations that will continue to offer

excellent employment opportunities for people well versed in its Multinational

operations.



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Managing Human Resource

in a Foreign Subsidiary:Approaches To Managing And Staffing Subsidiaries:

Companies can apply one of the three different approaches to managing and staffing their

subsidiaries (Francesco, Gold, 1998):

Ethnocentric. The home country practice prevails with this approach. Headquarters from the

home country makes key decisions, employees from the home country hold important

jobs, and the subsidiaries follow the home country resource management practice.

Polycentric. Each subsidiary manages on a local basis. A local employee heads a subsidiary

because headquarters managers are not considered to have adequate local knowledge.

Subsidiaries usually develop human resource management practices locally.

Geocentric or global. The company that applies the global integrated business strategy

manages and staffs employees on a global basis. For example, Electrolux (the vacuum

cleaner company) has for many years attempted to recruit and develop a group of

Multinational managers from diverse countries. These people constitute a mobile base

of managers who are used in a variety of facilities as the need arises.

In the ethnocentric approach, the cultural values and business practices of the home country

are predominant. Headquarters develops a managing and staffing approach and

consistently applies it throughout the world. Companies following the ethnocentric

approach assume the home country approach is best and that employees from otherparts of the world can and should follow it. Managers from headquarters develop

practices and hold key positions in the subsidiaries to ensure consistency.



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Advantages Disadvantages

Lower labor costs

Demonstrates trust in local

citizenry

Increases acceptance of thecompany by the local

community

Maximizes the number of options

available in the local

environment

Leads to recognition of the

company as a legitimate

participant in the local

economy

Effectively represents localconsiderations and

constraints in the decision-

making process

Makes it difficult to balance local demands and

global priorities

Leads to postponement of difficult local decisions

until they are unavoidable, when they aremore difficult, costly, and painful than they

would have been if implemented earlier

May make it difficult to recruit qualified personnel

May reduce the amount of control exercised by

headquarters

Figure 1. Advantages and disadvantages of using local employees to staff Multinational

subsidiaries (Gomez-Mejia, Balkin, Cardy, 1995)



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Advantages Disadvantages



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Cultural similarity with parent

company ensures transfer of

business/management

practices

Permits closer control andcoordination of Multinational

subsidiaries

Gives employees a multinational

orientation through

experience at parent

company

Establishes a pool of

Multinationally experienced

executives

Creates problems of adaptability to foreign

environment and culture

Increases the foreigness of the subsidiary

May involve high transfer and salary costs

May result in personal and family problemsLeads to high failure rate

Has disincentive effect on local-management

morale and motivation

May be subject to local government restrictions



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Figure 2. Advantages and disadvantages of using expatriate employees to staff Multinational

subsidiaries (Gomez-Mejia, Balkin, Cardy, 1995)

The polycentric approach is in direct opposition. In the company that applies this approach,

the assumption is that each country is different from all the others and that thesubsidiaries in each country should develop locally appropriate practices under the

supervision of local managers. With the geocentric approach, organizations try to

combine the best from headquarters and the subsidiaries to develop consistent world-

wide practices. Manager selection is based on competency rather than nationality.

As Figures 1 and 2 show, there are both advantages and disadvantages to using local nationals

and expatriates in foreign subsidiaries.

Most companies use expatriates only for such key positions as senior managers, high-level

professionals, and technical specialists. Since expatriates tend to be very costly, itmakes little financial sense to hire expatriates for positions that can be competently

filled by foreign nationals. In addition, many countries require that a certain percentage

of the work force be local citizens, with exceptions usually made for upper

management.

2.2 Major Functions Of Multinational Human Resource Management:

Multinational human resource management involves five functional areas we will discuss in

detail in this section: 1. recruitment and selection, 2. development and training, 3.

performance evaluation, 4. remuneration and 5. labor relations. Since expatriate

employees are often treated differently than other employees, the problems arising withit will be presented in the next section.

2.2.1. Recruitment and selection

Recruitment and selection are the processes through which an organization takes in new

members. Recruitment involves attracting a pool of qualified applicants for the

positions available. Selection requires choosing from this pool the candidate whose

qualifications most closely match the job requirements.

In companies that function in a global environment we have to distinguish different types of

employees. Traditionally, they are classified as one of the three types:

Parent country national. The employees nationality is the same as the organizations. For

example, a Slovenian citizen working for a Slovenian company in Macedonia.

Host country national. The employees nationality is the same as the location of the subsidiary.

For example, a Macedonian citizen working for a Slovenian company in Macedonia.

Third country national. The employees nationality is neither that of the organization nor that

of the location of the subsidiary. For example, an Albanian citizen working for a

Slovenian company in Macedonia.



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Since staffing as the function of Multinational human resource management becomes

increasingly more complex, these classifications do not cover all employees (Briscoe,

1995). For example, within the European Union, citizens of member countries can work

in other member countries without a work permit. Hence, how to classify a German

citizen working for a French company in France is not clear.

Briefly, classification of employees might seem to us unimportant. However, such mode of

thinking is not adequate since in many organizations an employees classification is tied

to remuneration, as well as benefits and opportunities for promotion.

In an Multinational organization, the managing and staffing approach strongly affects the type

of employee the company prefers. In a company with an ethnocentric approach, parent

country nationals usually staff important positions at headquarters and subsidiaries.

With a polycentric approach, host country nationals generally work in foreign

subsidiaries while parent country nationals manage headquarters positions. An

organization with a geocentric approach chooses the most suitable person for a position,

regardless of type.

In its approach to recruitment and selection, an organization considers both headquarters

practices and those prevalent in the countries of its subsidiaries. Local culture always

influences recruitment and selection practices, and in some countries, local laws require

a specific approach. For example, in Multinational manufacturing and processing

facilities in Mexico, companies recruit with a sign announcing job openings outside the

facility or by employees introducing family members who are looking for jobs. Another

example is Hungary, where government attempts to combat unemployment have led to

the requirement that an organization must get permission from the Ministry of Labor

before hiring an expatriate.

In choosing the right candidate, a balance between internal corporate consistency and

sensitivity to local labor practices is a goal. Different cultures emphasize different

attributes in the selection process depending on whether they use achievement or

ascribable criteria. When making a hiring decision, people in an achievement-oriented

country consider skills, knowledge, and talents. Although connections can help,

companies generally only hire those with the required qualifications. In an ascribable

culture, age, gender, and family background are important. An organization selects

someone whose personal characteristics fit the job.

2.2.2. Development and training

The overall aim of the development function is to provide that adequately trained personnel in

a company are capable to fulfil their goals, as well as to contribute to better

performance and growth with their work (Armstrong, 1996). The development of

employees can be treated as a special field of human resource management that includes

planned individual learning, education, organization development, career development

and training.



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At the Multinational level, human resource development professionals are responsible for: 1.

training and development of employees located in subsidiaries around the world, 2.

specialized training to prepare expatriates for assignments abroad, and 3. development

of a special group of globally minded managers.

Creation and transfer of Multinational human resource development programs may be carried

out in two ways:

centralized and decentralized.

With a centralized approach, training originates at the headquarters and corporate trainers

travel to subsidiaries, often adapting to local situations. This fits the ethnocentric model.

A geocentric approach is also centralized, but the training develops through input from

both headquarters and subsidiaries staff. Trainers could be sent from various positions

in either the headquarters or subsidiaries to any other location in the company.

In a decentralized approach, training is on a local basis, following a polycentric model. When

training is decentralized, the cultural backgrounds of the trainers and trainees are

usually similar. Local people develop training materials and techniques for use in their

own area.

To maximize training effectiveness, it is important to consider how trainees learn most

effectively. Cultural factors have a strong impact on training practices in different parts

of the world. For example, in North America, where power distance is small, the

relationship between the trainer and trainees tends toward equality. The trainer and

trainees use first names, and the trainees feel free to challenge or question what the

trainer says. In Malaysia, where power distance is large, a trainer receives greater

respect. Students use his surname and title, and he is an expert that students rarely

challenge.

As global competition increases, it is increasingly important for successful companies to have

a group of managers with a global perspective. Companies must identify managers with

global potential and provide them with various training and development opportunities.

For example, having one or more Multinational assignment(s), working on cross-

national teams and projects, and learning other languages and cultures contribute to

making a manager more globally minded. In addition, an organization should include

not only parent country nationals, but also host country nationals and third country

nationals in this group (Treven, 2001).

2.2.3. Performance evaluation



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In companies, the performance evaluation is most frequently carried out for administration or

development intentions (Cleveland and others, 1989). For administration purposes,

performance evaluation is called for when the decisions on work conditions of

employees, promotions, rewards and/or layoffs are in question. Development intention

of performance evaluation is oriented to the improvement of the work performance ofemployees, as well as to the enhancement of their abilities on the ground of the

adequate training program and advising employees regarding behavior in the work

environment.

In Western multinational companies, performance appraisals are usually done yearly and use a

standarized evaluation form. Sometimes, the organization also requires supervisions to

discuss the results of the appraisals with each employee.

Performance evaluation is challenging for any organization. At the Multinational level, the

complexity is greater because the organization must evaluate employees from different

countries working in different subsidiaries. The need for consistency across subsidiaries

for performance comparisons conflicts with the need to consider the cultural

background of employees to make the evaluation meaningful. For example, in Mexico,

an individuals public image is important, and public criticism of an employee might be

justification for leaving a company. Consequently, the delivery of a balanced

performance review, including both strengths and weaknesses, requires tact and

delicacy.

As with other functions, the approach to performance evaluation depends on the organizations

overall human resource management strategy. A company with an ethnocentric

approach is likely to use the same performance evaluation process used at the

headquarters for its subsidiaries. Some companies translate evaluation forms into local

languages, whereas others use the original language everywhere. A company with a

polycentric approach develops local procedures within each country. Finally, a

company with a geocentric approach uses the same performance evaluation system

worldwide, but it has universal applicability. Developing a global system is the most

challenging.

2.2.4. Remuneration and benefits

Remuneration of employees has a key role in acquiring new employees and is important for

employees as well as for the employers. Pay is the basic resource of living of the

employees, while benefits cover better health care, the possibility of spending holidays

in the companys holiday facilities at a favourable price and also other advantages. The

decisions the employers make concerning remuneration are a factor that has an impact

on the expenses of their company as well as on the ability of selling the products at a

competitive price in the market (Treven, 1998). The decisions about remuneration may

also enhance the ability of the employer to compete for employees on the labor market.

The rewards he warrants make the standing personnel either want to keep their jobs or

quit.



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In developing an Multinational system of compensation and benefits, an organization has two

primary concerns. The first is comparability (Briscoe, 1995). A good compensation

system assigns salaries to employees that are internally comparable and competitive

within the marketplace. For example, the salary of a senior manager is usually higher

than that of a supervisor, and each position should receive an amount within the localmarket range. The Multinational organization must also consider the salaries of people

who may transfer from other locations. The second major concern is cost. Organizations

strive to minimize all expenses, and payroll is one of the largest.

Renumeration and benefits are closely tied to local labor market conditions, even when an

organization takes an ethnocentric or geocentric approach. The availability of qualified

local people to fill positions, prevailing wage rates, the use of expatriates, and local laws

interact to influence the level of renumeration and benefits. For example, if there are

few applicants available for positions, the renumeration for those positions generally

increases. To reduce expenses, the Multinational human resources manager might then

consider bringing in an expatriate.

A company usually develops a policy, which could apply globally, to offer salaries and

benefits representing a specific market level. For example, a large successful

multinational company that emphasizes the quality of its products and employees could

have a global policy to pay the highest wages everywhere it operates. Another company

could offer top salaries in the country where it does research and development, yet pay

average wages in the country where it manufactures.

2.2.5. Labor relations

The labor relations function identifies and defines the roles of management and workers in the

workplace. The concept of labor relations varies greatly in different parts of the world.

In the United States, for example, labor relations are often a formal relationship,

sometimes antagonistic, between labor and management defined by a union contract. In

Japan, the relationship between management and unions is cooperative, and

management often appoints union leaders (Hodgetts, Luthans, 1994).

In many countries, the government regulates labor relations practices. Consequently, in this

function, more than other human resources management functions, an organization may

have to be polycentric. However, even though labor relations are local level issues, it is

good corporate strategy to coordinate a labor relations policy across subsidiaries.



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Expatriate Managers:A very strong differentiating factor between domestic and Multinational HRM is the existence

and role of the so-called expatriates, who move from country to country, and there,

having an employment for a shorter or longer time period, become the residents of thereceiving country. The concept of the traditional expatriate has been extended in

several countries, and in many companies they are started to be called as "Multinational

assigners". Another new concept also appeared relating to the assignment of locals from

the receiving country to the

parent country, and recently they are called inpatriates (Dowling-Welch, 2004).

One of the most challenging tasks for any company operating Multinationally is to manage its

expatriates. The statistics showing their efficiency on that matter are not encouraging.

For example, the failure of U.S. expatriates (the percentage who return prematurely,

without completing their assignment) is to be in the 20 40% range. In Japan, thefailure rate is less than 5% for their expatriates.One of the reasons for the difference is

that Japanese expatriates receive far more orientation and language instruction than U.S.

expatriates do.

3.1. The reasons for expatriate failure

In Multinational companies, it is important to understand the reasons behind expatriates high

failure rates so that preventive measures can be taken. Six factors account for most

failures, although their relative importance varies by firm (Gomez-Mejia, Balkin, 1987).

These are: career blockage, culture shock, lack of cross-cultural training, an

overemphasis on technical qualifications, a tendency to use Multinational assignments

as a way to get rid of problem employees, and family problems.

3.2. Cross-cultural adjustment

Expatriates and their families need time to become familiar with their new environment and to

become comfortable living there. When they arrive, the newness of the experience is

exciting. A few months later, when they have had more experience with the culture,

expatriates might begin to feel frustrated or confused as they try to make sense of their

new living situation. This feeling is culture shock. As expatriates get comfortable and

understand more about the culture, usually three to six months after arrival, the culture

shock will wear off, and they will experience a more normal feeling (Adler, 1997).

3.3. Expatriate reentry

After the expatriate completes his assignment and returns home, he must adjust in the same

way as when going abroad. The work, people, and general environment are no longer

familiar. The expatriate and his company are usually unprepared to deal with this

situation. The disorientation experienced by a returning expatriate is known as reverse

culture shock.



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The expatriate gains valuable information and experience from an Multinational assignment,

but for many organizations this is lost because of the failure to manage expatriate

reentry successfully. By one estimate, about 25 % of returning expatriates leave the

company within a year after returning (Black, Gregersen, and Mendenhall, 1992).



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3.4. Selection of expatriates

The choice of employee for an Multinational assignment is a critical decision. Since most

expatriates work under minimal supervision in a distant location, mistakes in selection

are likely to go unnoticed until it is too late. To choose the best employee for the job,

management should: emphasize cultural sensivity as a selection criterion establish aselection board of expatriates required previous Multinational experience explore the

possibility of hiring foreign-born employees who can serve as expatriates at a future

date screen candidates spouses and families.

A successful expatriate must be able to both do the job and handle a new cultural environment.

Hence, the expatriate must do his job competently, learn to live comfortably in a new

culture, and ensure that his family adapts as well.

3.5. Expatriate training

As mentioned earlier, expatriates are more successful when their organizations train them to

prepare for their life and work abroad. Lack of training is a major cause of expatriate

failure.

The most important aspect of expatriate training is cross-cultural training (CCT). Such training

prepares an expatriate to live and work in a different culture because coping with a new

environment is much more challenging than dealing with a new job. A variety of

training methodologies is available for CCT. In Table 1, we outline some of the popular

ones and give a brief description of each.

Table 1. Cross-cultural training methods (Francesco, Gold, 1998)



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Cultural BriefingsExplain the major aspects of the host country culture, including customs,

traditions, everyday behaviors.

Area BriefingsExplain the history, geography, economy, politics and other general

information about the host country and region.

Cases Portray a real life situation in business or personal life to illustrate someaspect of living or working in the host culture.

Role PlayingAllows the trainee to act out a situation that he or she might face in living

or working in the host country.

Culture AssimilatorProvides a written set of situations that the trainee might encounter in

living or working in the host country.



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Field Experiences

Provide an opportunity for the trainee to go to the host country or another

unfamiliar culture to experience living and working there for a

short time.



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3.6. Expatriate evaluation and remuneration

The performance evaluation of expatriate managers is particularly difficult. The job a person

does abroad can include much more than what he does at home. A manager often stepsinto the role of counselor, trainer, troubleshooter, or diplomat, in addition to his

assigned job responsibilities. With the need for adapting to a new culture, a different

way of doing business, and often a new language, many factors influence expatriate

performance.

An organizations general policy influences expatriate remuneration. Three common

approaches are: a home-based policy, a host-based policy and a region-based policy

(Dowling, Schuler, Welch, 1994). With a home-based policy, emloyees remuneration

follows the scale of their home countries. The host-based policy sets salaries at the level

of the host country, with benefits usually tied to the home country. Finally, region

determines the third approach. Remuneration for employees working outside their home

countries reflects whether their relocation is within their home region or in another

region. With this approach, an assignment closer to home (with the region) receives

remuneration at a lower rate than one further away (outside the region).



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Training Expatriate

4.1 Cross Cultural Training & Expatriate Relocation

Managing the relocation of staff to foreign destinations is one of the most challenging areasfacing management and HR personnel today. Huge investments are made by companies

to relocate staff abroad. Such investments are not only necessary to cover the logistics

of expatriate relocation but also in remuneration packages, healthcare, spouse support

and training.

One area of growing importance for expatriate relocation is cross cultural training. The recent

publication of the GMAC, National Foreign Trade Council and SHRM Global Forum

2003/2004 'Global Relocation Trends Survey Report' highlights some interesting facts

with relation to cross cultural training and expatriate relocation. Many of the findings

point to the importance of cross cultural training in maximising the potential of

expatriates successfully adapting and performing abroad.Of the companies surveyed, 60% provided cross cultural training of some sort to expatriates

and/or families. 26% of these had it as a mandatory part of the relocation procedure,

pointing to the growing feeling within such global companies that cross cultural

awareness is having an impact on the success or failure of expatriate placements.

Of the expatriates surveyed, 73% of respondents indicated that cross cultural training was of

high value to their relocation, while 21% indicated it as having a medium value. In line

with the findings stated above, this highlights the positive impact cross cultural training

is having on expatriates.

The survey also indicated that there are certain countries that are 'emerging destinations',

meaning more and more expatriates are and will be assigned to positions there. The top

five emerging countries were China, the UK, Japan, India and Russia. When reviewing

the comments of respondents in terms of the major challenges to expatriates in these

locations, all of them cited language and culture as having an impact.

With relation to cross cultural training and expatriate relocation, the survey conclusively

illustrates the importance of such training in ensuring the relocation process is

successful. Of the companies surveyed, 89% cited that expatriate assignment failure was

due to the inability to adapt to the host country and 90% now view cross cultural

understanding as one of the major challenges to relocation success.

The message the survey gives to management and HR personnel is clear; cross cultural

training is no longer a low priority luxury but a critical part of successful expatriate

relocation.



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4.2 Appraising the Performance of expatriates

Organizations develop performance management systems for a number of reasons, but

primarily for evaluation and development. These purposes are the same for domestic

and Multinational operations. The major difference is that the implementation of thesegoals is much more difficult in the global arena.

Evaluation goals fro performance appraisals in the Multinational environment include:

To provide feedback to managers so they will know where they stand.

To develop valid data for pay, promotion, and job assignment decisions, and to provide a

means of communicating these decisions

To help management in making discharge and retention decisions, and to provide a means of

warning employees about unsatisfactory performance

Development goals for performance appraisals in the Multinational environment include:

To help managers improve their performance and develop future potential

To develop commitment to the company through discussion of career opportunities and career

planning with the manager

To motivate managers via recognition of their efforts

To diagnose individual and organizational problems

To identify individual training and development needs

Of course, the nature of the overseas job, the degree of support from and interaction with the

parent company, the nature of the overseas environment in which the performance

occurs, and the degree of expatriate and family adjustment all impact the ability of any

global organization to achieve these objectives (2004).

In evaluating employee performance in Multinational environments, cultural difference is an

important factor. Culture helps determine what aspects of performance should be

appraised and how that appraisal should be conducted. A firms performance appraisal

system can greatly impact the performance of its workers. Appraising performance and

conducting effective performance appraisals is more challenging in the Multinational

HR arena. For one thing, the types of skills developed and used in an overseas job are

different from those developed and used in the domestic environment.

Standard appraisal criteria cannot be used overseas because it will give invalid results. he

organization needs to construct a criterion according to each subsidiarys unique

situation, use appropriate evaluation form, and conduct performance appraisals

individually or based upon group performance, depending on the culture of each

subsidiary. Successful performance appraisal in Multinational assignments means that

the organization uses multiple raters and makes sure that some of those raters have lived

and worked in the country in which the expatriate is working ( 2002).

4.3 Raising Morale

Raising employee morale is beneficial to everyone involve in an organization. Increased

employee morale will make employees to have more pride in their work, decreaseabsenteeism and increase productivity. Employee morale affects the efficiency and

productivity of an organization.



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Study after study has shown that high morale gives people buoyancy that makes them feel

free, think unconventionally and out-of-the-box, and makes them engage in acts that

contribute positively to human knowledge and well-being. It gives them a sense of

efficacy that translates into creativity-innovation and high productivity. High moraleand a high work contribution are positively correlated because morale is the state of a

relationship between an employee and his or her organization (2000 ;2002). According

to (2002), high morale implies the functioning of employee-organization relationship at

a high level and, consequently, a higher effort strengthens this relationship.

Responsibility for Safety

The management is responsible for formulating a safety policy. This policy must be

thoroughly implemented and sustained. A major objective of any safety program is to

get the employees to think safety to keep safety and accident prevention on their

minds. These programs may include training, safety meetings, posting of safety

statistics, awards for safe performance, contests, and safety and health committees

( 2002).

The organization and the managers are not the only ones responsible for maintaining a healthy

and safe working environment. The employees must also be involved and well educated

about the health and safety programs that the company employs. In order for a safety

policy to be successful employee participation is a must. The responsibility of the

employees are to follow the health and safety rules and regulations set by the

management and to help in reporting, determining and finding solutions to health and

safety hazards inside the company.

One way to encourage employee safety according to (2002) is to involve employees at various

times in safety training sessions and committee meetings and to have these meetings

frequently. In addition to safety training, continuous communication to develop safety

consciousness is necessary. Merely sending safety memos is not enough. Posting safety

policies and rules is part of this effort. Contests, incentives, and posters are all ways to

heighten safety awareness. Changing safety posters, continually updating bulletin

boards, and posting safety information in visible areas are also recommended. Safety

films and videotapes are additional ways to communicate safety ideas.

Many approaches are used to make employees more safety conscious. However, the following

elements are present in most successful safety programs. All employees are trained in

safety procedures and understand relevant company rules. Management is willing to

spend money and budget for safety. Safety programs have the support of top and middle

management. Managers and supervisors follow safety rules and conform to regulations.

Responsibility for safety is an integral part of managers jobs. Positive attitude toward

safety is maintained throughout the organization. Safety efforts are monitored and

evaluated regularly. Differentiating Benefits Traditionally, compensation and benefit

plans may focus on three distinct goals: attracting and retaining qualified employees,

motivating employees, and controlling costs (1996). Planning Pay in Small Companies



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It has been consistently argued that the rewards offered in small businesses doffer markedly

from those in larger businesses. It has been argued that pay determination is usually

individualistic affair in small businesses and rarely pursued in a systematic manner.

Further, pay is not usually regularly reviewed, pay increases are normally a product of

individual bargains and most small companies have no recognized structure( 1998;2004).

Planning pay and management requires organizations to consider four key issues: determining

the value of jobs; establishing a pay structure; building link with performance; and

communication and administration. Employees need some acknowledgement of their

accomplishments and validation of task accomplishments is a strong predictor of

employee satisfaction (2004). Therefore, performance appraisal also has an important

link to rewards particularly where performance-related pay and promotion are offered

within an organization. Without a valid and accepted performance appraisal system,

diminished motivation and lowered performance may result. It should be noted that the

performance appraisal system should also take account of the value of non-monetary or

intrinsic rewards such as prestige, job recognition and job enrichment and variety.

Building a link between pay and performance needs to involve the development of

outcomes to be sought and may entail performance-based pay systems, merit pay plans,

individual incentive plans, and managerial incentive plans that focus on the workgroup

rather than specific individuals (2004).

Small companies often use non-traditional benefits to give employees a feeling of greater

control over the density of their work lives. Benefits may include more responsibility

and autonomy, latitude in direction of product marketing, flexibility in handling

personal matters, leave and leisure-time activities. Other rewards offered can include

liberal dress codes, personnel counseling, assistance with tax preparation, subsidized

childcare and welfare programs ( 2004).

4.4 Interviewing Mistakes

The most widely used selection method in most organizations is the employment interview.

Interviews are face-to-face conversations between prospective job applicants and

representatives of the organization.

Effective interviews happen if the interviewer is properly trained in: Developing and using an

interviewer guide Previewing the interview process for the candidate Probing to gather

complete behavioral data Reinforcing the impressions he or she wants to create

Managing the interviewing environment (2001).

The main goal of the interview is to make accurate decisions about people. The organization

wants to make its best guess about who will be a successful employee. In this way, the

organization can avoid hiring the wrong person for a job. In other words, the main

objective of the interview is to determine which candidate is fitted for the job. It is about

decisions. If these decisions are going to be correct, the techniques used for making

them must yield reliable information. For an interviewing method to be useful, it is not

sufficient for it to be repeatable. Both legally and organizationally, the measures that ityields must also be valid (2002).

Job Analysis



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Collection of information on the characteristics of a job that differentiate it from other jobs is

an important part of job analysis. The categories of information obtained in job analysis

include the following: work activities, interaction with others, performance standards,

financial and budgeting impact, machines and equipment used, working conditions,supervision given and received, and knowledge, skills, and abilities needed. It is

through effective HRM planning that adjustment and refinements are made,

transforming an organizations workforce to meet the projected future needs of the

organization. Job analysis is one of the building blocks of the HRM planning process

and is fundamental source of information for the process.

4.5 Can Job Analysis inform HR process?

Job Analysis informs different HR processes:

1. HRM planning job analysis provides fundamental input to the HRM planning process by

helping planners understand exactly what kinds of work must be performed.

2. Recruitment job analysis specifies the staffing required to complete the job duties. Job

analysis can help the HRM specialist generate a higher-quality pool of job applicants by

making it easy to describe a job in classified ads in a way that more precisely targets

qualified job applicants.

3. Selection human resources selection deals with identifying the most qualified applicants

for employment. To identify which applicants are more qualified, it is first necessary to

determine the tasks that will be performed by the individual hired and the knowledge,

skills, and abilities the individual must have to perform the job effectively.

4. Performance Appraisal through job analysis, the organization can identify the behaviors

and results that distinguish effective performance from ineffective performance (1991).

Information obtained from a job analysis can also be used to develop performance

appraisal forms, which list the jobs tasks or behaviors and specify the expected

performance.

5. Compensation job analysis is essential when determining compensation. As part of

identifying appropriate compensation, job analysis information is used to determine job

content for internal comparisons of responsibilities with the compensation paid by

competing employers.

6. Training and Development organizations use job analysis to asses training needs and to

develop and evaluate training programs.

7. Career Planning career planning entails matching an individuals skills and aspirations

with opportunities that are or may be available in the organization. This matching

process requires that those in charge of career planning know the skill requirements of

the various jobs.

8. Work Redesign To redesign work, detailed information about the existing jobs must be

available.

Can HR be scored?

The HR scorecard reinforces sophisticated approaches to performance management, which

helps align outcomes with strategic objectives (2004).

4.6 Can Careers be managed? By whom?



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According to (1998), career management as well as career planning is a part of a system that is

called career development. Career development is an organized, planned effort

comprised of structured activities or processes that result in a mutual career plotting

between employees and the company. The organization is the one who manages the

employees career while the employee is responsible for career planning.

In career development, the employee is responsible for career planning and the organization,

more specifically the HRD practitioner, is responsible for career management. These

two separate but related processes combine to make up the organizational career

development process. Career planning is a process of setting up employee career

objectives and activities that will be achieved by them. Career management refers to

specific human resource activities, such as job placement, performance appraisal,

counseling, training, and education (1998).

Can any Pay System be fair? Pay is a major consideration in HRM because it provides

employees with tangible reward for their services as well as a source of recognition and

livelihood. A pay system will only be considered fair if it gained the employees

approval and at the same time follow the rules and guidelines provided by the

government while aligning with the organizations objectives. A pay system can be

considered fair if it: Signals to employees the major objectives of the organization.

Complies with the regulations of the government. Attracts and retains the talent that the

organization needs. Remains competitive in the labor market. Rewards employees past

performance. Encourages employees to develop the knowledge, skills and abilities they

need. Controls the compensation budget. Reduces unnecessary turnover

Maintains salary equity among employees. Supports the type of culture the organization seeks

to engender ( 2002).

It can be argued that a pay system must be fair not only for the employees but for the

organization as well.

4.7 Promoting Commitment

Employee commitment is an individuals affirmative psychological connection to his or her

work organization, which is apparent in a sense of personal investment, loyalty, and

identification with the organization. Employee commitment is based on mutual

relationships between employees and their work organizations. Organizations and

mangers must demonstrate commitment to their employees in order to get commitment

from their employees.

Employee commitment is possible if the employer or the organization is equally committed to

their employees. Employee commitment according to () is a reciprocal relationship

between employer and employee. Individuals need to experience commitment from

employers in order to develop and sustain a sense of commitment to their employers. He

also argued that Employee commitment can be elicited through:



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Socialization Experiences that communicate and inculcate corporate values: The socialization

process is important because employees must know what the values of the organization

are before they can be expected to share those values. Once these values are clear, the

potential for employee commitment is present.

Organization culture that encourages commitment: Under optimal circumstances an

organizations culture would not only allow commitment to develop but would

encourage employees to feel committed to the organization. An agency's organizational

culture must communicate to employees, through its artifacts, values, basic decision-

making assumptions, and behaviors, that employees are valued by the organization.

Meeting the expectations of employees: Employers must devote attention to the question of

whether the employees expectations about work are met. Each individual develops a

unique relationship with the organization where he or she works based on unvoiced

expectations about the work experience.

Paying Expatriates5.1 Multinational Compensation

The whole area of Multinational compensation management presents some tricky problems.

On the one hand, there is a certain logic in maintaining companywide pay scales and

policies so that, for instance, divisional marketing directors throughout the world are all

paid within the same narrow range. This reduces the risk of perceived inequities and

dramatically simplifies the job of keeping track of disparate country-by-country wage

rates.



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Yet, the practice of not adapting pay scales to local markets can present an HR manager with

more problems than it solves. The fact is that it can be enormously more expensive to

live in some countries (like Japan) than others (like Greece); if these cost-of-living

differences are not considered, it may be almost impossible to get managers to take

high-cost assignments. However, the answer is usually not just to pay, say, marketingdirectors more in one country than in another. For one thing, the firm could thereby

elicit resistance when telling a marketing director in Tokyo who is earning $3000 per

week to move to a division in Spain, where his or her pay for the same job (cost of

living notwithstanding) will drop by half. One way to handle the problem is to pay a

similar base salary company-wide and then add on various allowances according to

individual market conditions.50 Determining equitable wage rates in many countries is

no simple matter, as compensation survey data is hard to come by overseas. Some

multinational companies deal with this problem for local managers by conducting their

own annual compensation surveys. For example, Kraft conducts an annual study of total

compensation in Belgium, Germany, Italy, Spain, and the United Kingdom The Balance

Sheet Approach The most common approach to formulating expatriate pay is to

equalize purchasing power across countries, a technique known as the balance sheet

approach.51 The basic idea is that each expatriate should enjoy the same standard of

living that he or she would have had at home. With the balance sheet approach, four

main home-country groups of expensesincome taxes, housing, goods and services,

and reserveare the focus of attention. The employer estimates what each of these four

expenses is for the expatriates home country, and also what each is expected to be in

the expatriates host country. Any differences such as additional income taxes or

housing expensesare then paid by the employer. In practice, this usually boils down

to building the expatriates total compensation around five or six separate components.

For example, base salary will normally be in the same range as the managers home-

country salary. In addition, however, there might be an overseas or foreign service

premium. This is paid as a percentage of the executives base salary, in part to

compensate the manager for the cultural and physical adjustments that he or she will

have to make.52 There may also be several allowances, including a housing allowance

and an education allowance for the expatriates children. Income taxes represent another

area of concern. In many cases, a Canadian manager posted abroad may have to pay not

only Canadian taxes, but also income taxes to the country to which he or she is posted

as well.

5.2 Incentives



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One Multinational compensation trend is the use of long-term incentive pay for overseas

managers. Multinationals are formulating new long-term incentives specifically for

overseas executives, using performance-based long-term incentive plans that are tied

more closely to performance at the subsidiary level. These can help to build a sense of

ownership among key local managers while providing the financial incentives needed toattract and keep the people required for overseas operations. A recent study by

consulting firm William M. Mercer Ltd. found that in order to discourage employees

from leaving while on foreign assignment, mobility premiums are increasingly being

used. These premiums average about 15 percent of base salary, but can go up to 30 or

40 percent for difficult locations like Algeria, China, and Columbia. The survey also

found that 20 percent of companies now pay part of the mobility premium at the

beginning of an

assignment, with the remainder paid on return to the home country at the completion of the

assignment.53



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ConclusionsInternational human resource management focuses on the management of human resources on

a global basis. An organizations strategy on globalization strongly affects the approach

it takes to international human resource management. The approach to international

human resource management in turn influences the implementation of the major

international human resource management functions of recruitment and selection,

development and training, performance evaluation, remuneration and benefits, and labor

relations. Companies taking an ethnocentric approach attempt to impose their home

country methods on their subsidiaries. The polycentric approach follows local practices.

Finally, a geocentric or global approach develops practices for world-wide use.After completing this topic, we are able to analyse the use of Multinational Human Resource

Management principles in our own organization, and perhaps introduce them; in addition we

will be able to:

Identify and discuss the main tasks associated with MHRM

Assess the main perspectives on management and explain their relationship to MHRM

Explain the importance of the cultural context for MHRM

Discuss the challenges that multi-national corporations face in managing HR in some

major economies

Evaluate the importance of parentsubsidiary relationships in relation to HRM

Assess the extent to which multi-national corporations have the freedom to impose

common approaches to HRM in their international operations

Embed organizational learning and knowledge within the strategic IHRM function

Discuss the challenges of managing culture within an international joint venture

Examine expatriation from the perspectives of both the parent company and the

overseas subsidiary/partner

Summarise IHRM and its implications for HR practice



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References:



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