End Project Module Human Resource Mannagement In Mnc

Question: Discuss about the End Project Module for Human Resource Mannagement In Mnc? Answer: What is a Multinational Corporation? United Nations defines a Multinational Corporation as follows: An enterprise which owns or controls production or service facilities outside the country in which it is based. Thus, MNCs are those business entities who conduct their operations not only in the country they belong to or headquartered in, but it also has its wings in more than one foreign country or state (host country). An MNC can be a service firm or manufacturer or can be a both. Examples: Toyota Motors, Microsoft, Google Inc., KFC, Pepsi Co., PG are few glaring examples of MNCs. Human Resource Management in MNCs: Like any ordinary human resource manager, the HR manager of multinational firm is also endowed with similar responsibilities of managing people, but with a little more additional duties .i.e., he does not only keep eye on HR issues of parent company, but also administers the same in subsidiaries companies operating outside the home country (Gomez and Sanchez, 2005). In other way around, he is also responsible for international management of human resources besides domestic HR duties. First of all, he has to check for the staffing needs of the corporation and to decide whether the people be hired, should belong to home country, host country or third country. Although every alternative has its own pros and cons. Secondly, he is responsible to make sure that designated HR policies should be compatible or at least does not conflict with the labor laws of receiving country. In short, International Human Resource Management not only comprises keeping e-record of employees, training, compensating, motivating, reinforcing them, resolving their grievances and improving their performances, but it also considers the in-depth knowledge of language, cultural, political, legal, economic, social and possible technological differences that exists across the countries, while formulating and implementing HR policies. For example, currency and forex rates, career aspirations of people, cultural dispositions, economic standards, labor availability, workers skill set and education, legal framework, political situation, labor laws, business etiquettes are some of the areas of major concern which a manager of MNC must never ignore. However, some corporations used to practice a common grand HR strategy for all its subsidiaries. But, as for now, world has become a compact global village and the Internet has entirely change the way once businesses were being conducted, one policy for all rule seems nothing more than an idiocy. In order to pave way for success, a country to country HRM strategy appears more promising today. Issues Faced by MNCs while Managing Human Resources: Following are some of the issues every MNC has to deal with: Cultural Factors: It is of no doubt that every country has its own set of beliefs and values. For Example, the Western culture is altogether different from Japanese Culture. Japanese people value group incentives, team work and equate loyalty with life time employment. While situation is totally opposite when it comes to US. American people are more inclined towards individualism and expect monetary gains in return for loyalty, commitment and performance. Japanese culture is more masculine in nature while this is not the case in Europe or States. Courtesy, manners, ethics, power distance, uncertainty carry different meaning and values in the two countries. Such cultural differences deeply influence the HR policies. For example, promoting the idea of individual incentives in Japan and group incentives in American employees will prove to be total disaster. However, doing vice versa can ensure desired outcomes. Moreover, in cases where the culture of home country is at daggers drawn from host country, its better to hire local people as they can better understand the behavioral dispositions of domestic customers Apart from that, commonality of culture would allow coworkers to empathize and comprehend each others problems in a thoughtful manner. Socio-Economic Factors: Other than culture, economic factors greatly influence HR policies. In a labor intensive economy, workers will be abundantly available. Hence, wages of workers will be low and majority of workforce tend to be low skilled and untrained in technology usage. Whereas on other hand in a capitalist economy, wages and salaries will be comparatively high, and employees would be well equipped with latest knowledge of tools and machineries. Same is the case with socialist verses capitalist economy. In socialist society, effort would be directed to engage more people in workforce while in capitalist HR policies would be aimed at improving efficiency and profits through cost cutting by laying off employees. Apart from that economic growth, interest rate, CPI, and standards of living, etc. highly influence the drafting and designing of compensation and benefit policies. Industrial Relation Factors: IR and labor laws vary dramatically from state to state and, thus significantly influences the HRM activities of an organization. Like, in Germany decision with consultation rule prevails. That is union and employees can raise their voices while HR policies at national and company level, are being formulated. While no such thing exists in Asian and African countries. Legislative Factors: Besides this, each and every country has its own legal framework in form of state constitution, municipal laws, international treaties and conventions to which every MNC is obliged to abide by. And, violation of which can lead to cancellation of her operations in the host country. For example, majority of the countries of the world are parties to international conventions on human rights act, child labor policy, and equal employment opportunity. Moreover, every country require MNCs to hire fixed percentage of its national in the company. Minimum wage and minimum leaves policy, child care policy, maternity leaves, Employee safety regulations all pose a great influence on determining HR strategy for a subsidiary company. Once Nike was found to get its footballs hand-stitched from very young-aged children, and Coca Cola intimidated its daily wage workers for boycotting the factory work and demanding the rise in their wages through trade unions. Both the corporations faced strong backlash for gross violation of human rights and child labor policy(Omondi, n.d.). Which resulted in loss of both business and reputation for the two. Apart from that, sometimes MNCs require employee from home country to be sent or posted in host country for effective management of operations in the subsidiary company. Such instances broaden the scope of human resource management in multinational company. Finding the right person, training him to work in global business ambiance, making necessary arrangements for him and his family for relocation, calculating the cost incurred in the whole process and offering three times higher salary then pre-departure on oversees assignment are some of the HR issues that come under the umbrella of IHRM policy making, particularly in case of Multinational business entities. Challenges and Potential Benefits of MNCs: Following are some of potential benefits of MNCs: Business Expansion expanding the reach to consumer market is one of the essential points of interest that the MNCs enjoy over organizations with operations constrained domestically. Greater availability of products and services in more extensive topographical areas permits the MNCs to have a bigger pool of potential clients and help them in growing, developing at a speedier pace when contrasted with other companies. Easy access to Cheap Labor MNCs help augmenting access to low-paid workforce. A firm having operations spread worldwide can have its generation units set up in nations where labor is inexpensive and abundant. China, India, and Pakistan are three countries where labor is cheap and readily available. Taxes and Tariffs Taxes are one of the aspects where an MNC predict great advantage. Numerous nations offer decreased tariffs on imports with a specific goal .i.e. to develop their trade ties internationally. Such steps bring about high net revenue for MNCs and brighten the business prospects for them. Increase access to resources -- MNCs is a way to gain access to raw resources and materials both financial and natural that are not available locally. Most of the governments sign deals with multinationals for mega projects. However, the government authorities provide them to access to finances and raw resources in exchange of skills and services. Innovation The industry gets most recent innovation from outside nations through MNCs which offer them some assistance in technology and capital machinery. Research and development MNCs strengthens the RD base of the country. Imports and exports MNC operations additionally help in enhancing the Balance of Payments. This can be accomplished by the promoting exports and discouraging the imports. Here are the challenges: Risk of loss as a consequence of war or nationalization: Global environment is highly volatile. Series of events such as rise of militant organizations, terrorist and suicide attacks, civil wars in Middle east, political turmoil create obstacles for many a MNCs to make entry in potential but risky emerging markets. For Example, great many multinationals lost their businesses during Russian invasion in Afghanistan. Sometimes, a wave of government reforms aimed at nationalization can take away major chunk of assets and profits from MNCs too(Hackett, n.d.). Change of Government: When government formed by one party goes, other political party takes its place. Such sort of political changes at times brings many amendments in industrial policies which may not favor the subsidiaries of MNC operating in concerned country. Such situation usually put the MNC in dilemma and create obstacle in smooth completion of business operations. Criticism from local people: Local nationals at times severely criticize MNCs as they deem it exploitation of their home resources and a source of undue competition that curtails their business profits by a great margin, eventually making them loose business. Restricted flow of Income: Sometimes host countries take steps to discourage the flow of profits earned by MNCs to travel to the home country, as the receiving country consider it as the loss of economy. Other disadvantages include red-taps, legal constraints, unstable foreign exchange market of host country, etc. Factors that impact the strategy and structure of MNCS: Geographical location and economic status of the home country, customer needs and demands, organizational objectives, cultural factors, trends and regulations of home and host country pose significant influence on strategy and structure of MNCs (Scullion and Linehan, 2005). Influence of IHRM on transfer and share of knowledge and control: In todays knowledge driven economy, transfer and share of knowledge among the various units of organizations within and across the border is crucial to sustainable business growth. In this regard, HRM is an important tool for transfer and share of knowledge within a MNC. Widespread usage of HRM techniques like performance management, training and career development, merit and performance based compensation and promotions and well defined incentive systems and effective internal communication promote flow of knowledge(Minbaeva, n.d.). Some examples are: Aligning pay with the performance convey organizational vision to employees. Training enables to improving the existing skill-base of employee and increase absorptive capacity Other than share of knowledge, HR tactics facilitate control. For example performance assessment that leads to demotion and negative feedback stops the employee from doing the things that lead to such consequences and provoke to do right things. Similarly, training is also another way to exercise control. It enhances knowledge base and skills of employee and tells the way the direction and way to act in that that could improve individual performance and ensures the attainment of organizational objectives. Google Reward system: According to Fortune magazine and Great Place to Work Institute report of 2014, Google was named the Best Place to Work For. With 50,000 employees it serves millions of people all around the globe. It has following reward systems to motivate its employees to deliver their best performances. Peer Bonus Spot Bonus Massage Credits Annual Review Employee Promotion Stock Grants and Refreshes Holiday Gifts Team Rewards All the bonuses, rewards and gifts are performance based. Employees have to work very hard to get them. References Gomez, C. and Sanchez, J. (2005). Human resource control in MNCs: a study of the factors influencing the use of formal and informal control mechanisms. The International Journal of Human Resource Management, 16(10), pp.1847-1861. Hackett, C. (n.d.). The Challenge of MNCs and Development. SSRN Electronic Journal. Mellahi, K., Frynas, J. and Collings, D. (2015). Performance management practices within emerging market multinational enterprises: the case of Brazilian multinationals. The International Journal of Human Resource Management, pp.1-30. Minbaeva, D. (n.d.). HRM Practices and Knowledge Transfer in MNCs. SSRN Electronic Journal. Omondi, O. (n.d.). Globalization and MNCs: Which Way to Go?. SSRN Electronic Journal. Scullion, H. and Linehan, M. (2005). International human resource management. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. What Are The Different Benefits And Risks Faced By Multinational Enterprises?. (2013). [online] YourArticleLibrary.com: The Next Generation Library. Available at: https://www.yourarticlelibrary.com/management/what-are-the-different-benefits-and-risks-faced-by-multinational-enterprises/3498/ [Accessed 5 Mar. 2016]. What sort of rewards recognitions does Google offer to their employees? How do you earn them? - Quora. (2016). [online] Quora.com. Available at: https://www.quora.com/Googlers-Google-employees/What-sort-of-rewards-recognitions-does-Google-offer-to-their-employees-How-do-you-earn-them [Accessed 5 Mar. 2016].