Performance Evaluation of Foreign Subsidiaries Term Paper

Excerpt from Term Paper :

Human resource is a function in companies that are designed to maximize the performance of employees in line with strategies that are stipulated by the employers. It is focused on how employees are managed within the companies focusing on systems and policies (Collings & Wood, 2009). The human resource units and departments are responsible for activities such as employee development, recruitment and training, rewarding and performance appraisal. This essay endeavors to talk about human resource management and assess the impact of labor markets, cultures, and nature of globalization on human resource.

Compare and contrast the differences between international and domestic HRM.

First, domestic human resource management is concerned with managing personnel in one nation while international human resource management is concerned with managing employees from different countries. They may include those from the host country, company's home country, and employees from the other countries. Secondly, domestic human resource management is less complicated compared to international human resource management since it has less influence from external sources. IHRM is heavily affected by external factors, including institutional factors and cultural distance (Warner, 2005).

Factors that drive standardization of HRM practices

The first one is strategic issues. Multinational corporations mainly operate in the context of universal conditions that impact on both the MNE goals and the IHRM practices and strategies. This automatically drives a company towards the adoption of standardized practices. The second one is the organizational context. This includes the organizational structures such as sales and export subsidiary and other complex issues such as matrix and how they affect the human resource management. It is not advantageous for an MNE to adopt a worldwide corporate culture for each of its subsidiaries. This arises from the challenge of creating systems expected to operate effectively in multiple states by exploiting the interdependencies and local differences whilst sustaining a global consistency (Mathis & Jackson, 2003).

Examine the role of the subsidiary

Global innovators

Multinational corporations must leverage their competencies in innovation across the dispersed subsidiaries all over the globe since it adds to the competitive advantage of the firm. For a long time, many people have considered subsidiary teamwork and self-determination as intrinsic motivators: they have important effects on knowledge output. A firm's input like hiring and sourcing and outputs like product development and marketing are positive determinants of knowledge. Therefore, managers should put in more effort on motivating the universally dispersed knowledge workers to conduct research and development of products and services that will generate more knowledge and boost the firm's performance. The multinational corporations distribute their activities of innovation across subsidiaries located in different countries. Through this, they gain access to local and highly specialized knowledge besides exploiting the technological sophistication of the parent country (Collings & Wood, 2009).

Integrated player

Companies must establish new covenants and agreements with clients, create new forms of engagements with workers, and manage disruptive technologies. For this reason, the firm needs players that contribute to the growth of the company, add value and engage in the implementation of different policies of the company.


Implementers usually generate the necessary funds for the multinational corporations and allow corporations to realize the economies of scale. However, the implementers have low levels of competencies. Companies usually position them in strategically unimportant markets. Individuals cannot expect them to contribute to the strategy formation in the companies (Schmind & Kretscchmer, 2011).

Local innovators

These are local individuals helping customers in finding and retaining the best talents in the company. They also generate solutions to issues that arise in the company. They offer specialized services that are designed to meet the needs of the companies.

Factors that drive the localization of HRM practices

The factors that drive the localization of HRM practices include the cultural environment and the firm size and maturity. Globalization through cultural localization is all about effectively selling and marketing a brand, products, or services in other cultures while at the same time maintaining quality and core values. Firms should be ready and willing to change their products, packaging, and the mode of advertising as required by the local markets in which they are located. Failure of companies to adapt to cultural localization may lead to subtle outcomes such as abandoned markets, lost revenue and damaged brands. Therefore, it is advisable that companies must first research and understand the culture of local consumers before venturing into new markets (Warner, 2005).

Localization presents diverse advantages to a firm. First, it shows respect for local traditions and culture. This fosters the cohesion and understanding of employees in the multinational corporation. Secondly, the companies need to adapt to the local institutional requirements such as government policies and legislations so as not to clash with the rules and regulations of the local government.

The impact of the institutional context and culture (environment)

Recruitment and selection

A firm takes in new members into the company through these processes. Recruitment process involves the attraction of a pool of applicants that are qualified for the positions that are available. The employers need to choose the candidates who have qualifications that closely match the requirements of a given job. In multinational corporations, the staffing and managing approach affect the preferred employee in any organization strongly (Mondy, Noe, & Gowan, 2005).

For example, in an organization with an ethnocentric approach, nationals from a parent country, usually staff the most important positions at the subsidiaries and the headquarters. However, nationals from the host country often work at the foreign subsidiaries in a polycentric approach. However, in a company that has a geocentric approach usually choose the person that is most suitable for the position regardless of the situation or type.

During the selection and recruitment process, companies usually consider the cultural values and practices that are prevalent in the countries where the subsidiaries are located. The local culture always influences the process, and the local laws may require a different approach in other countries. For instance, in some countries the companies must get a permit from the Labor company before it hires an expatriate.

Different cultures often emphasize on attributes that are different in the selection process depending on the criteria they use whether it is the ascribable or achievement criteria. For example, when an individual makes a hiring decision in a country that is achievement oriented he or she considers the knowledge, skills, and the talents (Mathis & Jackson, 2003).

Training and development

Development of employees enables a company to have trained personnel capable of fulfilling their goals and positively contributing to the growth and performance in their work. Development and training of employees is a special human resource management field that includes education, individual learning, career development and training and the organizational development (Mondy, Noe, & Gowan, 2005).

In multinational organizations, the professionals from the human resource are responsible for training and developing employees in subsidiaries and offering specialized training to prepare expatriates for different assignments abroad. When using a decentralized approach, local people, mainly develop their own training techniques and materials for use in their local community (Rowley, 2008). A company must consider the cultural factors when training their employees. It is important for managers to work on cross-national projects and teams. Learning the new languages and cultures of others enables have a global mind and global perspective. A company should also make sure that he includes citizens of the host country, parent country and third countries.


Compensation of employees refers to the total remuneration in kind or cash paid by an enterprise in return for work done during a given accounting period. The compensation of workers plays a vital role in the acquisition of new workers, which is important to the workers and to the employees. Benefits mainly cover for better health care or possibilities of one spending holidays in the firm's facilities while pay is the rudimentary resource of living for the workers. The decisions that managers make concerning the compensation of employees affects the company's expenses and the ability of a firm to sell its products or services at competitive prices.

The decisions that the firms make may also enhance its ability to compete for workers in the labor market. The rewards that employees receive may make them want to keep or quit their jobs. When developing a system of compensating and rewarding the employees, a firm usually has two chief concerns. The first concern is comparability. A good system usually assigns salaries to the workers that are internally competitive and comparable within the market place. The salaries of the seniors are often high compared to the juniors' salaries, and every position in the organization receives an amount that is within the range of the local market. The company must also consider the salaries of the individuals that may transfer to other locations (Warner, 2005).

The second main concern is cost. Firms usually strive to reduce their expenses and payroll is the largest of the expenses. Compensation and remuneration are closely tied to the conditions of the local labor market even when the…

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