Management of Multinational Corporations ( MNCS )

Chapter 10 : Human Resource Management in MNCs

HR Policies in MNCs

Equality in Recruitment and Pay

Types of Staffing Policy

Ethnocentric approach
Polycentric Approach
Geocentric Approach

Employing Expatriates in MNCs
Developing Local Talent

Training and Development in MNCs

Training of Expatriates
Repatriation of Expatriates

Compensation in MNCs

National Differences in Compensation
Expatriate Pay

Performance Appraisal in Subsidiaries
Domestic HR strategies Pursued in Subsidiaries

Subsidiaries'Autonomy in decision making

Limited Autonomy
Variable Autonomy
Negotiated Autonomy

Labour relations in MNCs

Concerns for Organized Labour
The Strategy of Organized Labour
Approaches to Labour Relations

Developing a Culturally Synergistic Approach to HRM.

Chapter Summary

HRM is a strategic function concerned with recruitment, training and development, performance appraisal, communication and labor relations. HR policies guide the various functions of HRM. The need for a particular type of HRM is determined by the need for standardization or adaptation.

Managing human resources in an international context is more complex than in a domestic set up because of the many differences between headquarters and the subsidiaries. The HR policies of certain companies seem to discriminate on the basis of religion, race, caste, sex or nationality. Companies like Ford and Volvo, however, strive to maintain equality in work and pay.

Staffing is an important aspect of HRM. The staffing policies of MNCs are determined by their approach to globalization. MNCs with an ethnocentric approach fill all top management positions with home country nationals to ensure that home country practices are replicated in subsidiaries. Companies that adopt a polycentric approach to globalization, fill all senior management positions with local nationals to ensure maximum adaptation to local conditions.

Companies that adopt a geocentric approach to globalization, identify managers irrespective of their nationality for various international assignments to ensure that best practices are identified and replicated in all the units of the organization. Managers belonging to a particular country and working in another country are called expatriates.

The selection, training, period of stay abroad, compensation and repatriation of expatriates are delicate issues that have to be managed by the HR department. On their repatriation, they must be provided suitable challenging assignments that give them the autonomy they have become accustomed to. Since maintaining expatriate managers is expensive, a company must develop local talent.

Companies can identify and develop local talent through in-house Management Development Programs (MDP). These programs will help improve the coordination between employees with diverse cultural, religious and educational backgrounds. Performance appraisal is another activity where there can be differences of opinion between headquarters and subsidiaries.

Subsidiary managers must be involved in setting of unambiguous targets and the establishment of criteria for measuring performance. Performance Management attempts to link performance appraisal to employee training and development, and possibly to compensation. There are three theories concerning the autonomy of subsidiaries in decision-making.

They are: limited autonomy, variable autonomy and negotiated autonomy. According to the theory of limited autonomy, the degree of autonomy will depend on the MNC's approach to globalization. The theory of variable autonomy states that the degree of autonomy varies with the degree of internationalization of the company.

Companies that adopt an export strategy can afford to have centralized decision-making, whereas strategic business units (SBUs) will require decentralized decision-making. According to the theory of negotiated autonomy, the degree of autonomy of a subsidiary will depend on its ability to negotiate with headquarters.

HRM plays an important role in maintaining harmonious industrial relations. Companies are often intimidated by the strength of the union and the political support it enjoys. Certain companies like Volvo ensure cordial relations with the labor union by actively participating in their development. But certain other companies, like Bata have had frequent labor relations problems in India.

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