People Management to Strategic Human

People Management to Strategic Human Resource Management

The future of multinational corporations in global competitive market forces depends on the ability of global companies "to change and adapt their resources strategically to the nuances of the broadening global playing field. Business strategies, which organizations adopt to maintain competitiveness, should be developed in conjunction with their human resource departments." (Caligiuri and Stroh 1995 P1). Global enterprises are the companies having extensive oversea operations. Ability of a global company to achieve competitive market advantages depend on the extent the company has been able to strategically manage its global human resources. However, management of human resources (HR) on a global basis involves challenges that a global company must address to achieve global competitiveness. Inter-country differences have been the common challenges that global companies face when implementing the right policies with regard to HR management. Economic factors and labor costs of different countries also determine the type of HR resources practice to adopt. Getting the right skills regardless of the geographical location is very critical and dissemination of knowledge and innovation to enhance competitiveness of a company at overseas operations has been the challenges facing global companies when adopting human resources practice. In addition, global companies face challenges in identifying, developing and managing talents on the global basis. (Dessler, Cole, and Sutherland, 2011). Standardization of human resources has been identified as an effective tool to address challenges facing global companies when attempting to adopt effective human resources practice on a global basis.

The objective of this paper is to analyze and critically evaluate the HR practice to be standardized on a global basis for Toyota Motor Co. Ltd. (Toyota). The paper suggests Human Resources standardized skill set and competence on a global basis.

The rest of the paper is structured as follows:

The study suggests where different approach of standardization of HR would be suitable.

Moreover, the paper discusses the strategy the global policies can be implemented in each of the subsidiaries.

Finally, the study suggests the strategic advantages that the company should adopt.

Literatures Review

The study reviews the literatures to answer the following questions.

1. Which HR practices would you standardise on a global basis?

2. Where would you allow different approaches?

3. How would you ensure that global policies are implemented by each of the subsidiaries?

4. Would your suggestions achieve any strategic advantage for the company, and if so, how would this be demonstrated?

Which HR practices would you standardize on a global basis?

Standardization of human resources is critical for a global company that attempts to adopt HR practice on a global basis. HR practices practice to be standardized on a global basis is a standardized skill set and competence. Standardization of Human Resources (HR) is the process where human resources practice such as selection, incentive practice, training and the whole of HR function is transferred from the headquarter to all the units of a multination enterprises. This set of practice becomes standardized because firms will manage people in the same strategy with the practice being adopted at corporate headquarter. On the other words, standardization of HR is the management initiatives to transfer the HRM policies and practice to the company international operations with the belief that standardization policies will enhance best performances for the headquarters and the subsidiaries. Standardization of HR policies is critical to achieve competitive advantages, and many multinational enterprises implement standardized HR policies to attain competitive advantages. HR practice to be standardize on a global basis is to transfer the HR practice being adopted at the company headquarter to the company subsidiaries. This type of HR practice is referred to Standardization of Human Resources (HR) where the company implements the same HR resources practice being adopted at the headquarter at the company subsidiaries.

Dessler et al. (2011) argue that cultural differences are the major factor affecting selection of managers on the global basis. While it might be easier to select managers for an expatriate assignment, however, screening the manager to adapt to new environment may be challenging. Adaptability to new cultural orientation in a new country is very critical for the success of global operations. Couple with the difference in cultural orientation, labor, law and motivation may also be different from country to country. Formulation of human resources practice on the global basis is very critical to enhance the success of HR.

Chen & Wilson (2003) argue that standardization of human resources is an effective HR strategy on a global basis. Morgan and Liker (2006) reveal that Toyota success lies on the method the company manages team of engineering to enhance people development and growth within the organization. Training on-the- job is the type of HR standardization that Toyota employs on a global basis. The company employs standardized skill set and competence to enhance product development (PD). The standardized of skill set "enable development incredible development speed drives task variation out of the development process." (P 112). Toyota HR culture is to create high performing team and professional trust on a global basis. Typically, Toyota specially trains its line manager to enhance company output, and to achieve corporate objective. The company also uses its line manager to achieve HR advantages. (McGuire, Stoner and Mylona, 2008).

Dickmann (2008) points out fundamental success of Japanese firms are their capability to obtain zero defects, and first rate products. Japanese firms have been able to achieve this success because their HR practices are tailored with the "job flexibility, team work and cooperative relations between management and employee, and intensive on-the-job training" (Dickmann 2008, P 71), and many Japanese firms transfer the HR practice into their subsidiaries in North America. Toyota adopts this type of standardized process to demonstrate a leader in the production of vehicles. Toyota follows the headquarter process when hiring professional candidates for engineering position. After a lengthy selection process, Toyota only hires 1.1% of professional applicants, and once they are hired, engineers follow standard skill acquisition development process. The process focuses on the intensive mentoring for technical skill and competence to enhance technical and skill advancement. As being practice at the company corporate headquarters, engineers are expected to undergo on-the-job training for two years before being allowed to move to the first level engineer. Typically, Toyota incurs three or four-year investment on each engineer before being allowed to become a team contributor. An engineer is expected to spend between five and six years in the company before being considered first rate engineer. Toyota employs training on-the- job on a global basis to ensure that the personnel achieve rapid growth. The action plan to develop human resources consists of experience that enables personnel to develop technical skill set and development of talent within the organization.

The standardized HR practice being implemented by Toyota is to employ flexible capacity strategy whereby the company transfers skilled technician into the company subsidiaries to ramp quickly and become almost productive instantly. Typically, the technicians transferred from the company headquarter to work in the company subsidiaries have already been familiar with relevant standard and specialize by part.

Thus, "they are able to checklist, master cross section, and standard locator to the design space, which is provided by the surface scans from the clay and K4 body structure drawing, to produce final designs that reflect the new styling and performances intent of the new program." (Morgan and Liker, 2006 P. 104).

Standardization of HR practice is critical to firms because it enhances high level of interdependence among various units of Multinational Corporation. High level of standardization occurs when subsidiaries highly depend on the headquarters for the supply of raw materials. To enhance organizational profit maximization, company often implements management practice for the subsidiaries similar to what is being practice at the corporate headquarter. With the significant position held by the corporate headquarter, the HRM approach needs to be tailored to the management decision to achieve strategic competitive advantages.

In addition, the standardization of HR resources is critical to ensure that firm is able to maintain consistence as well as enhancing internal equity in employee management. This is very important when firms intend to coordinate and control different subunits to achieve innovation and expertise among different subunits. McGuire, et al. (2008) argues that line manager contributes to the coordination of different subunits within an organization. A line manager plays a central role in the management of HR personnel, and the greater involvement of line manager in personnel functions is to perform the role of coach, leader or conductor to achieve high performances. Typically, global firms are now using line managers on a global basis to implement international HR functions. Although, the critics argues that involvement of line manager in the HR practice may devalue the importance of HR. (DeJong Leenders and Thijssen 1999).

On the other hand, Chen & Wilson (2003) point out that the main driver for the implementation of standardized HR is management believe that the HR practice in the headquarter is superior and it is critical to extend the same HR practice adopted at the headquarter to other MNC subsidiaries. In addition, transaction costs may be too high to implement HR practice that is different from the HR policies being practice at the headquarter. Thus, to lower costs, it is critical for MNC to adopt HR standardization. (Dickmann,2008).

Despite the argument in support of standardization of HR, there are challenges that a global company may face while implementing standardized HR practice on a global basis.

The challenge in practicing standardization is that MNC needs to develop a HR resources strategy to attract, retain, and motivate talented employee that is well suited to a particular setting. With cultural difference among different countries, integration of HR practice from the headquarter may not be suitable to the company subsidiaries. Typically, it is critical for a global company to assess the strategy that could be employed as well as identifying main mechanisms that the company could use to facilitate integration and knowledge transfer. Cultural norm from country-to-country affects the HR policies and practice. The cultural norm in Japan often affects the relationship of Toyota workers with their employer and the factor often influences worker performances.

Typically, "Japanese workers have often come to expect lifetime employment in return for their loyalty, for instance. As well, incentive plans in Japan tend to focus on the work group, while in the West the more usual prescription is still to focus on individual worker incentives." (Dessler et al. 2011 pp 3-4).

Different in the labor costs is another challenge that may hinder standardization of HR on a global basis. The labor costs that focus on efficiency such pay-per-performances is different from country-to-country. For example, the pay-per-hour for a production worker is $25.56 per hour in Germany while pay-per-hour for the same job is $2.65 per hour in Mexico.

Differences in the countries economic development also serve as challenges in the practice of standardized HR practice. In a free market enterprise, market forces often dictate the HR policies and practice. Motivation of workers may be relative low in countries experiencing high employment compared with countries with low unemployment rates. Based on the challenges in the implementing standardize HR approach, there are cases where it is critical to adopt different approach.

Where would you allow different approaches?

Different approach to standardized HR practice may essential when there is a difference in international compensation. Living condition in one country is different to another country, and it is may be extremely expensive to live in one country than the other. For example, workers experience high cost of living in Japan compared to Greece where cost of living is low. In a country such as Greece or Spain, it is critical for a global company to adopt different approach to standardization based on the economic difference of these countries. For example, an average marketing director is earning $3,000 per week in Tokyo, however, it will become challenging to relocate the same marketing director to a country such as Greece, Spain or Mexico and ask the director to earn half of what he is earning in Tokyo for the same job because the cost of living is low in these countries.

Moreover, different approach to a standardized HR is essential where there is a relatively low level of skilled labor or when it would be very expensive to train an employee to acquire the skills of first-rate worker. For example, the number of skilled labor in Mexico is lower compared to number of skilled labor in U.S., Canada, or Europe. Different approach need to be adopted in countries with relative low skilled manpower. Chen and Wilson (2003) argue that different approach is necessary where local manager believe that local HR management practice is only suitable in the local environment and MNE practice could not work in the local circumstances due to cultural differences. In addition, different approach is essential in a country where the management already have

"ability of local managers to control access to the labor market and product distribution channels, expertise and information may effectively stymie standardization efforts -- either directly or indirectly (strategic driver of resource power)."(Chen and Wilson 2003 P. 400).

However, it is still possible for a global company to implement global policies in each of the subsidiaries. With implementation of different strategy, it is possible to implement global policies in the MNE subsidiaries.

3. How would you ensure that global policies are implemented by each of the subsidiaries?

To implement global policies in each of the subsidiaries, the company will need to implement the same corporate culture of the parent company to each of the subsidiaries. Caligiuri and Stroh (1995) argues that the more mature local subsidiaries become the more they become resources independent with respect to strategic resources such as capital, technology, access to market and management control. When the subsidiaries have become totally independent from the parent company, the parent company may lose the total control of subsidiaries if the headquarter does not implement new global policy on each of the subsidiaries. Integration of headquarter corporate culture is an ideal HR strategy to implement on global policies. By implementing the same corporate culture globally, human resources at the subsidiaries will share the same values with HR department at the headquarter.

Dessler et al. (2011) propose four theoretical approaches to implement in each of the subsidiaries. The authors argue that ethnocentric, regiocentric, polycentric and geocentric theoretical approach are the HR strategies to implement on global policies with respect to the company subsidiaries. "Ethnocentric strategy suggests that companies should maximize their parent company control in order to integrate subsidiaries, at the cost of local responsiveness subsidiaries." (Caligiuri and Stroh 1995 P. 2). Ethnocentric expatriate managers tend to transfer the company corporate culture and belief into the company subsidiaries. However, companies implementing ethnocentric global policies are less successful that the companies adopting the other three theoretical approach for global practice. On the other hand, both regiocentric and polycentric approaches allow for more local responsiveness and less corporate integration. In the HR practice in this category, the MNC manages subsidiaries with the coordination from the headquarter. Geocentric approach is ideal as it attempts to balance both local responsiveness and global integration. Geocentric approach is considered as the best as it incorporates both polycentric and geocentric theoretical approach. Despite the benefits that a company stands to enjoy from the implementation of geocentric approach, there are political, legal and cultural constraints that a company could face while implementing this approach on a global basis.