Human Resource management inmultinational corporations:Challenges of MNCs outsourcing activitiesin emerging economiesAhmed R ShakiPhD Candidate in HRM, UUM, MalaysiaVisiting PhD Student, EBS and TTU
International, Multinational and GlobalOrganizations• International company – transports its businessoutside home country; each of its operations is areplication of the companys domestic experience;structured geographically; and involves subsidiarygeneral managers.• MNC- is any business that owns and controlsproduction or service facilities in two or morecountries. Examples include Ford, Wal-Mart, Cemex,Nokia, Sony, etc.• Global organizations – treat the entire world as thoughit were one large country; may be the entire companyor one or more of its product lines; may operate with amixture of two or more organizational structuresimultaneously.
Questions for the Class?• Why Do Companies Go Abroad?• Do we have a strategy for becoming aninternational firm?• What type of managers will we need to besuccessful?• What will be the impact of cultural norms on ourHR policies.• How will we choose whether to sendexpatriates or use local employees.• How do we move people to different locations
Just an Example:• Expats in India• Market leaders like Nokia, LG, Suzuki, IBM andSamsung have seen the number of expats in theirIndian subsidiaries swell.• Nokia has nearly 100 Finns at key positions inIndia.• Samsung has 25 Koreans• LG has 30 Koreans• Maruti has 15 Japanese• Huawie has approx.125 Chineseworking at their offices in India.
IMPACTONGlobalists AntiglobalistsConsumers Free trade promotes lowercosts, etc.Benefits the wealth at the expenseof the poorEmployees Faster economic growthHigher wagesImproved working conditionsPlaces profits above peopleEnvironment Creates resources needed toaddress environmental issuesExploits and destroys ecosystemsMore pollutionDevelopingNationsPromotes national economicdevelopment, higher standard ofliving, better working conditions,cleaner environments.World financial institutions conspireto keep poor nations in debtHuman Rights Creates cultures that support lawand free expression.Spreads economic / politicalfreedom to far cornersCorporations pursing profits ignorehuman rights violations, abuse ofworkers, free speech, etc.Pros and Cons of GlobalizationSource: Center for the Study of American Business, 2010.
Parent-country NationalsAdvantages Control and co-ordinationby HQ is maintained. Promising managers getinternational experience. PCNs may be the bestpeople for the job. Assurance that thesubsidiary will complywith company objectivespolicies etc.Disadvantages HCNs promotionopportunities arelimited. Adaptation to hostcountry may take along time. PCNs may impose aninappropriate HQstyle. Compensationdifferences betweenPCNs and HCNs maycause problems.
Host-country NationalsAdvantages• No problems with languageand culture.• Reduced hiring costs.• No work permits required.• Continuity of managementimproves since HCNs staylonger in positions.• Govt. policy may force hiringof HCNs.• Promotional opportunities notlimited - so higher moraleamong HCNs.Disadvantages• HQ may have less controlover operations.• HCNs may still havelimited careeropportunities outside thesubsidiary.• Hiring HCNs limitsopportunities for PCNs togain overseasexperience.
MNC-Host Country Challenges• Differing philosophies between MNCs and hostcountries• Cultural differences• Business / government differences• Management and control of global operations Organizational structure Human resource management• Exploration of global markets Modify or redesign products appropriate forthe intended market Be sensitive to the impacts of products Be sensitive to politically-vulnerable products
Ethical Issues in Global Business• Ethical issues tend to be worse in lessdeveloped countries (LDCs)Legal/ethical structure less developedTemptation to apply lower standards
Sweatshops• Wide-spread criticism of unfair/unsafe laborpractices Focus on textiles (e.g., Nike, Wal-Mart, Gap,Reebok) Nike case• More than 530,000 people employed in factoriesthat make Nike products• In 1996, Michael Jordon under $20 Mendorsement contract• Questions on Nike case Why should Nike be held responsible for whathappens in factories that it does not own? Does Nike have a responsibility to ensure workersreceive a “living wage”? Are contracts with MJ (and others such as TigerWoods) unethical?
Plant Safety• Bhopal Tragedy (1984) Poisonous gas leak at Union Carbide plant killedat least 2,000 people and injured about 200,000 Up to 150,000 people still suffering mental/physical problems Main issue: low standards in host country andUnion Carbide did not enforce appropriatestandards• $460 M settlement, but payments slow due tocorruption Note: this led to “Responsible Care” program inthe chemical industry
Social Accountability Standard1. Child Labor (min age 14 or 15)2. Forced Labor3. Health and Safety4. Freedom of Association and Right to CollectiveBargaining5. Discrimination6. Discipline (no physical/mental abuse)7. Working Hours (48 hr/wk, min one day off)8. Compensation9. Management Systems
Bribery and Corruption• Corruption: Involves behavior on the part of officials, in thepublic and private sectors, in which theyimproperly and unlawfully enrich themselvesand/or those close to them.• Bribery: Offering something (usually $) in exchange forgaining an illicit advantage Example: Lockheed Martin bribe to Japanesefirm led to resignation of Japanese Prime-Minister.
Company-Situation Analysis:SWOT• Strengths: distinctive capability, resourceor skill• Weaknesses: competitive disadvantagecompared to competitors• Opportunities: favorable conditions in theenvironment• Threats: unfavorable conditions in theenvironment
Key Success Factors- Experience of firm in business- Cost position for raw materials- Cost position for production- R&D quality- Financial assets- Product quality- Quality of human resources