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.
Regiocentric and Polycentric would be second ideal as they satisfy local responsiveness at the expense of global integration. On the other hand, ethnocentric is neither globally integrated nor locally responsive because it focuses on headquarter control. Strategic advantage is essential to enhance market competitiveness for the company. Implementation of geocentric approach will make the company to achieve market forces.
4. Would your suggestions achieve any strategic advantage for the company, and if so, how would this be demonstrated?
Future of global of the company competitive market advantages depends on the ability to adapt and change its resources strategically. Business strategies within an organization should be developed in conjunction with an organizational human resources department. For organization to achieve strategic advantageous, firm needs to develop organizational strategic plan with human resources department to facilitate success. An organization needs to develop strategic plan to maximize employee effectiveness to achieve organization mission, goals and objectives. To achieve a strategy advantage, the company should adopt geocentric approach to achieve economic success. Strategically, an organization should adopt geocentric human resources perspective to select the best talent worldwide. By adopting geocentric approach, the company will have a large pool of talent to fill the key position. The geocentric approach is more strategically and will make the company to achieve competitive edge on a global basis. However, the company will need to implement an effective human resources plan that will be consistence with the legal, political, and cultural constraints which are the features of geocentric approach.
The study collects data through primary and secondary sources. The primary data include academic research papers. The secondary sources include journal articles, and reports. The study collects primary and secondary data to review the literatures and answer research questions. The paper collects data by searching several electronic databases such as Emerald publishing, Science Direct, Springer Link and Social Science Resources Network. The study also searches for journal articles to answer research questions.
Achievement of company competitive advantages depends on the strategy that a company has employed to manage HR resources on a global basis. The standardized skill set and competence is a human resources practice to develop the worker technical skill. While there are many benefits that a company could enjoy by implementing standardization on a global basis, the challenges such as cultural, economic and political differences among countries may serve as barriers for a global company to manage its subsidiaries on a global basis. To address this shortcoming, the study suggests geocentric approach for a company to…