Strategic HRM in a Multinational Firm Qualitative Research

Introduction

Globalisation, technological innovation, expansion of multinational firms, demographic shift in labour market, capital, and increased global competition among firms are phenomena that have transformed HRM practices and policies.

These factors become complex to multinational firms as they consider other factors related to local and country context. Thus, the focus shifts to cultural variables, labour market factors, regulatory factors, the structure of the industry, human resource skills, experiences, and willingness to work as expatriates.

These factors may hinder or facilitate effective roles of HRM department in implementing strategic direction for the multinational firm. Thus, the firm must be:

• Globally competitive
• Responsive to local needs
• Efficient in operation
• Flexible and adaptable
• Encourage learning and knowledge transfer between the parent company and the local subsidiary

Therefore, the HRM department must facilitate flexible work practices and encourage employees’ commitment to the organisation in order to enhance effective adaptation of the local subsidiary with the parent company.

Multinational organisations face several challenges that influence HRM in the global perspective (Marchington and Grugulis, 2000, p. 1104). This implies that there is a need for integration of various practices and policies in order to ensure effective adaptation and management of human resources in the new subsidiary.

HRM remains crucial for success of multinational organisations. Past studies in multinational organisations have raised significant issues, which multinational companies must address.

First, there is an increasing need to find suitable models and frameworks, which can address various issues affecting the global management of human resources.

Second, there is also a need to develop a systematic model that recognises existing variations in international human resource practices and policies.

Third, the global HRM should rely on theoretical viewpoints for predicting and explaining various characteristics of employees across the globe.

In this research, a focus is on how the HRM department can change its policies and practices in order to accommodate a new subsidiary in a different location.

The focus on a multinational organisation also highlights international human resource management (IHRM) and strategic human resource management (SHRM) (Scullion and Starkey, 2000, p. 1061). This broad focus provides opportunities of making recommendations and suggestions for further studies.

Research Methodology

Purpose of the Study

Theories have emerged in the past few decades as attempts to provide theoretical foundations for HRM practices and policies across global borders. The main purpose of this paper is to identity HRM strategies that a multinational firm can apply in Britain after a takeover of a local insurance firm in London.

Thus, we pay close attention to differences and uniqueness of the local subsidiary. The essay also explores how the multinational firm can apply its influence from the head office to the local firm. In this context, we highlight how such actions can influence strategies, implementation, and performance of the multinational firm in the local context.

Methods

This research makes use of existing literature in the field of HRM across national borders. In this context, the research focuses on best practices in the field of HRM, which multinational firms have applied for effective incorporation of strategic HRM functions in the multinational firm.

The research reviews both theoretical and empirical studies, which account for various factors affecting HRM in multinational, such as costs, skills, recruitment, labour mobility, retention, rewards and compensation, and transfer among other factors (Vaiman, Scullion and Collings, 2012, p. 925).

Given this approach, we can understand why HRM strategies and practices in the local firms differ significantly with practices and strategies in multinational firms. The research makes use of existing studies from various parts of the world in order to show that every local firm may require a different approach to global HRM strategies rather than the standard approach of the parent company.

Thus, it is imperative for the HRM department of the multinational organisation to consider the best local practices and align them with the best HRM practices form the parent company.

Literature Review

HRM Model for a Multinational Firm

There are different views regarding HRM models for multinational firms. Therefore, the research focuses on the Schuler and other authors’ model in order to provide a clear perspective of what a multinational firm is. This definition states that:

“Any enterprise that carries out transactions in or between two sovereign entities, operating under a system of decision-making that permits influence over resources and capabilities, where the transactions are subject to influence by factors exogenous to the home country environment of the enterprise” (Schuler, Dowling and De Cieri, 1993, p. 717).

It provides a basis to show that a global HRM involves many aspects of HRM than a domestic HRM (Dowling, Welch and Schuler, 1999, p. 89). Thus, HRM departments must develop policies and practices, and administer those policies and practices across many countries. The HRM department must recognise that every country has its own legal, cultural, social, economic, historical, and political attributes.

After the takeover of Brit Insurance with Apollo Global Management, the HR policies and practices have to change in order to reflect the multinational status of the company. Thus, Brit Insurance policies and practices should reflect various aspects of HRM planning such as staffing, repatriation, performance appraisal, training and development, and compensation.

The HRM policies and practices have been the focus on many studies. However, some studies have limited research to domestic spheres. However, globalisation and the emergence of multinational firms have changed HRM practices and introduced the concept of international human resource management (IHRM).

Human Resource Planning

The HR department at Brit Insurance must address human resource planning in order to reflect multinational features of Apollo Global Management. This is a wide practice that covers staffing, appraisal, and compensation practices in the company.

Thus, IHRM must provide a comprehensive way of addressing the HRM in response to the multinational status of the company, the stage of the company growth, competitive strategies, the global structure, and the stage of organisational growth globally (Bartlett and Ghoshal, 1998, p. 204).

Some of the practices the HRM should consider are identification of crucial factors, which are significant for merger, planning career growth, creating and maintaining career development systems. In addition, the HRM department must also play a strategic role in the formulation of organisational strategic objectives (Mathis and Jackson, 2011, p. 524).

The HRM department must also manage organisational dynamic, which result from decentralisation in business units as the organisation strives to reflect both global and regional characteristics (Stone, 2010, p. 344). The HRM department must also ensure that employees have meaningful duties when appropriate in order to ensure maximum utilisation of human resources both internationally and locally.

Wong also focused on ten areas in which the HRM department should address in multinational organisations (Wong, 2000, pp. 72-74). These include the following:

• Selection of candidates
• Assignment and cost planning
• Preparation of terms and conditions of employees’ contracts
• Processing of employees’ relocation and management of vendor
• Cultural and language orientation or training
• Tax administration
• Compensation management and payroll processing
• Career guidance and planning
• Handling spouse and dependants’ issues
• Immigration affairs

Integrating and promoting these issues to reflect global characteristics have challenged many HRM departments (Evans, 1986, p. 105). This research shall focus on four issues the HRM department at Brits Insurance must address after the takeover.

Human Resources Management Approaches

Staffing remains a significant activity that the HRM department of a multinational organisation must consider carefully for success of the firm. Harvey and fellow authors noted that the HRM department must coordinate and control all their human resources across the globe (Harvey, Novicevic and Speirer, 2000, p. 381).

In the past, organisations used to send senior executives from the head office to ensure that the local company implemented all HR policies and maintained procedures as provided in the organisational HR policies (Brewster and Scullion, 1997, p. 72).

Scholars have concurred that the HRM department must separate various HRM practices in various subsidiaries across the globe. However, as costs of running such practices increase, it is fundamental for the organisation to use staff in the host country to fulfil these needs (Black et al, 1999, p. 178).

Apollo Global Management has its head office in the US. According to Schuler, Budhwar, and Florkowski, the US multinational companies use their employees as expatriates in global subsidiaries to take management positions for several reasons (Schuler, Budhwar, and Florkowski, 2002, p. 41).

• Protect the interest of organisation
• Enhance global perspectives
• Offer functional perspectives
• Enhance global knowledge
• Develop local talent through expatriates’ training
• Aid career planning
• Manage new ventures

However, Apollo Global Management also has concerns regarding the best approach for selecting expatriates for foreign assignment.

Glinow and Milliman noted that many multinational corporations of the US had trouble in overseas operation. They attributed these difficulties partially to ineffective application of IHRM principles. They applied a product life cycle (PLC) approach and proposed “a two-step contingency model of the strategic and operational levels of MNCs” (Glinow and Milliman, 2009, p. 4).

These researchers discussed effective IHRM practices based on certain characteristics and needs of multinational organisations in a given environment.

Glinow and Milliman approached IHRM by using the PLC and contingency model in order to develop effective IHRM practices, which the US firms could apply overseas in order to create effective cross-cultural managerial system applicable at every stage of production (Smith, 1992, p. 39).

This shall finally create a global system that will be necessary for a competitive and dynamic global business environment.

The US multinational organisations operate in a highly dynamic and competitive global market. Therefore, there is a need for adaptation in several aspects of the organisation, especially HRM practices.

The two-step contingency model highlights how the US firms can “adapt every stage of operation through effective HRM practices” (Glinow and Milliman, 2009, p. 21). The two-step contingency model looks at strategic phase where international PLC has effects on both environmental and organisational factors of the firm.

As a result, these factors affect their strategies. Therefore, the management team and HR department have to transform organisational business plan to strategic HRM objectives. They identified both short-term and long-term strategic IHRM objectives as “planning, cost versus development and the need for integration and differentiation” (Glinow and Milliman, 2009, p. 23).

On the other hand, the model’s operational phase focused on “converting strategic HRM objectives into specific decisions” (Glinow and Milliman, 2009, p. 24).

They relied on the study of Tung when developing operational phase criteria that involved “nature of job or task, how different the host country’s culture is, the ability of the expatriate to adapt, spouse and family considerations, consideration of the host country nationals and the need for longer term developments of expatriates” (Glinow and Milliman, 2009, p. 31).

On this note, Schuler, Budhwar, and Florkowski also observe that it is necessary to consider the following factors among multinational firms.

• Acceptance of foreign assignment
• Foreign language
• Spouse and family support
• Ability to adjust overseas lifestyle
• Technical and cultural competence
• Team spirit

Glinow and Milliman noted that it was necessary for a global firm to conduct “continuous assessment of different IHRM practices and change them based on prevailing conditions” (Glinow and Milliman, 2009, p. 35).

Glinow and Milliman show that adopting this model may be difficult. However, it is necessary for reducing problems that senior management and executives of global firms experience when they start overseas operation.

They argue that it is best if only highly qualified employees go overseas in order to create interest in the company. This strategy shall result into “international thinking and organisational culture that values international assignments” (Glinow and Milliman, 2009, p. 35).

Caligiuri and Stroh looked at the connection between the global management practices of multinational firms and the result of IHRM practices from 46 companies. They examined four global strategies, which included ethnocentric, regiocentric, polycentric and geocentric (Caligiuri and Stroh, 1995, p. 1).

They concluded that HR practices, such as recruitment, selection, and socialization or cultural, were different due to global strategies of a firm. Specifically, they found significant differences between ethnocentric and geocentric companies.

They also observed that these two factors influenced the success of multinational firms based on profit margins, returns on capital, sales volumes, and returns on equity.

They concluded that multinational firms operating under ethnocentric strategies had low-levels of success than other firms deploying other three approaches. Therefore, they noted that it was necessary for multinational organisations to incorporate local responses into their global strategies.

Firms tended to align their global strategies with practices, which showed consistency with the overall organisational strategies in order to maintain competitive advantage (Wright and McMahan, 1992, p. 7; Daft, 2010, p. 298; Miner, 2005, p. 126).

Caligiuri and Stroh asked HR executives to explain to what extent their firms preferred to maintain their headquarters’ cultures in their global subsidiaries. They noted that ethnocentric multinational firms had significant differences from regiocentric, polycentric, and geocentric firms.

Ethnocentric firms believed that promoting the culture of the head office was a form of strategic control. Conversely, the other three types of firms did not have much difference among themselves as they favoured local integration.

According to Caligiuri and Stroh, controls from the head offices reduce the extent of multinational firms’ involvement in local activities.

Caligiuri and Stroh noted that multinational firms should conduct global recruitment in order to attract the best talents, promote global adaptation and orientation of the firm. They also observed that regiocentric, polycentric, and geocentric firms had flexible processes.

They observed that cultural diversity and foreign laws had significant control over selection processes. They also proposed further studies with large sample to analyse the influence of foreign countries’ legal, political, and cultural constraints on selection processes among multinational firms.

These authors argue that multinational companies, which promote ethnocentric ideologies in foreign countries, should re-examine their approaches and replace them with local strategies because “the parent company may not always be right” (Caligiuri and Stroh, 1995, p. 13).

Caligiuri and Stroh conclude that such re-examination can help an organisation recognize that there are other culturally diverse and right ways of running a business.

Mahmood investigated effects of “corporate strategies, structures, and international policy orientations on subsidiaries HRM practices” (Mahmood, 2009, p. 1). He specifically focused on recruitment and selection practices of global firms in their subsidiaries.

He used four European organisations conducting business in Bangladesh and discovered that multinational firms’ HRM practices relied on “the changing nature of strategies, structures and HQ’s policy orientation towards the subsidiaries” (Mahmood, 2009, p. 1).

Mahmood concluded that standardization processes in subsidiaries do not always depend on decisions of the parent companies, but rather on capabilities and importance of the subsidiary influences on the parent company’s decisions on standardization of HRM practices.

Mahmood notes that multinational firms have significant influences on subsidiaries. Attitude of the parent company on the subsidiary influences HRM practices and employees mobility across various subsidiaries. He notes that employee mobility among subsidiaries helps subsidiaries to acquire various skills from training of highly qualified employees.

Some international firms considered employee mobility during selection and recruitment processes of managerial teams as it had significant effects on employees’ placement and assignment both on the long-term and short-term basis (Mello, 2010, p. 238).

This study also noted that multinational firms had challenges in Bangladesh where HRM practices were chaotic and disorganised. As a result, most multinational firms had to apply their parent companies’ HRM practices in their local subsidiaries due to lack of HRM practices in their local contexts.

However, the relationship between the subsidiary and the head office, operational issues, and host country societal activities influenced HRM practices at the local level.

Mahmood concluded that activities of the parent company and globalisation of the subsidiary influenced the HRM practices and development of standardized practices at the local level. Mahmood noted that globalisation (internationalisation) processes of the subsidiary followed a sequential pattern with stages.

Therefore, it is necessary for multinational organisations to have various HRM practices for different subsidiaries across the globe. Therefore, it is important for multinational firms to align their corporate structures, strategies, IHRM practices, and policies.

This study presented two observations. First, subsidiaries have capabilities of earning reputations from their head offices based on their performances. Second, in some cases, the head office may trust some elements of responsibilities to subsidiaries due restructuring of the firm.

Plessis and Huntley examined IHRM within the context of South Africa and noted that employees had diverse backgrounds and experiences (Plessis and Huntley, 2009, p. 413). They concentrated on challenges, which emerged in firms due to diverse composition of employees from different parts of the globe.

These researchers argued that HR activities in multinational corporations were complex than in domestic firms as HR departments had to deal with cultural issues, pay issues, laws of the host country, working conditions of the workforce, and aligning HR practices throughout the global subsidiaries of the company.

Plessis and Huntley developed a model applicable in the context of South Africa MNCs during “the transitional stage, from domestic local to international global” (Plessis and Huntley, 2009, p. 413).

This model can act as a guideline for HR departments for “coordination and integration of leadership skills, procedures, policies, training, policies, and structures within the domestic and international firms of South Africa” (Plessis and Huntley, 2009, p. 420).

The model consists of “HR manager, production manager, service centre and business managers” (Plessis and Huntley, 2009, p. 420). However, they also pointed out that the model was flexible and not restricted to these four areas as firms could adjust it to fit their needs as required.

This model puts emphasis on the importance of HRM’s functions in developing policies, strategies, and procedures necessary for participation in the global economy. They note the importance of “aligning HR’s strategies to those of the organisation” (Plessis and Huntley, 2009, p. 413).

This model also posits that multinational firms should standardize various aspects of human resources management in order to achieve fairness within organisations. Graham and Trevor observed that such strategies are good, but organisations must use them within the context of a specific multinational firm (Graham and Trevor, 2000, p. 136).

The authors challenge HR managers of South African multinational organisations to understand “their employees’ cultural norms, pay and working conditions expectations before designing any program and set up conditions” (Plessis and Huntley, 2009, p. 423).

Domestic and international HRM practices differ. The latter is more complex than domestic HRM. Therefore, it is necessary for HRM departments to consider various aspects HRM practices so that they can develop the best relationships with employees from diverse backgrounds and cultural orientations.

Therefore, they explored the suitability of a ‘global integration strategy’ of Milkovich and Bloom 1998. They focused on how HRM department could apply it in today’s global firms (Milkovich and Bloom, 1998, p. 15).

Retention Plan

Both the parent company and the subsidiary must create a retention plan in order to address cases of potential turnover and ensure that the multinational firm sustains its workforce. The aim of the plan is to retain industrious and engaged employees.

The HRM department must provide exit surveys or interviews in order to determine causes of turnover, what employees like, what they do not like, and what they wish to change about the firm.

The HR department must coordinate with line managers in order to develop the plan. This is because managers allocate roles, targets, and responsibilities that challenge workforce. The manager must be responsible for retention because of job challenges they assign employees. The HRM department must hold managers accountable and provide incentives for high retention of desired employees.

The firm must have retention measures to prevent turnover of desired employees, which include intangible and intangible strategies as follow:

• Professional mentoring, training, and development
• On-the-job training
• Bonus payment and perks
• Telecommuting
• Flexible work schedule
• Reimbursement or education assistance

The company must put these strategies into action. However, it is necessary for the HRM department to protect the company through a retention agreement. This ensures that the employee serves the firm for a specific period before leaving.

Conclusion

The HRM department must extend to strategic needs of the organisation in order to achieve both goals of the organisation and those of employees. This study demonstrates that there are differences, which exist between domestic HRM and global HRM practices and policies.

Staffing of a multinational firm remains a source of major concerns for the HRM department. This requires employees with various skills, experiences, and other attributes (Gratton, Hope-Hailey, Stiles and Truss, 1999, p. 17).

The HRM department must coordinate and control these practices to reflect global characteristics of the company. Compensation and rewards also differ between expatriates and local employees. However, some scholars call for a fair compensation system across the multinational firm (Giammalvo, 2005, p. 18).

Compensation and rewards must also take into performance of employees. Dowling, Welch, and Schuler insist that the HRM department must appraise performance of all employees including expatriates in order to promote fairness in the organisation.

Another area entails the creation of synergy and teamwork among workers of diverse cultural backgrounds. However, scholars note that multinational firms should avoid ethnocentric tendencies in order to identify ability and benefits of cultural synergies in the organisation.

Repatriation of employees also presents significant challenges to HRM department (Mendenhall and Stahl, 2000, p. 251). Studies have focused on activities and qualities of the repatriation as key factors in defining careers. Some scholars have expressed concerns with the turnover of expatriates after returning home from overseas duties (Cappelli, 2008, p. 56).

Finally, training and development of employees in multinational organisations should serve as a tool of developing employees and promoting coordination of diverse aspects of a multinational firm (Li and Scullion, 2010, p. 190).

A lack of proper training has led to failure of many expatriates abroad. Thus, training and development initiatives are fundamental practices for strategic goals of the organisation and employees.

The HRM department must also account for labour relations in the US and the UK. For instance, the HRM department must focus on employees’ deployment especially in managerial roles. This also focuses on areas of legal, political, and historical characteristics of the country.

The HRM must align legal requirements with the labour laws and employees’ rights, particularly with attention to compensation, holidays, benefits, legally established insurance standards, and bargains or individual benefits.

Given these challenges, adhocracy in HRM practices and policies may be a suitable starting point for a multinational firm in a foreign land. However, it is difficult to predict the outcome of such an approach.

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