Diversity of various types in a global company suggests that HRM practices have to be tailor-made to suit the local conditions. Such practices can be seen in the context of different HRM functions.
Recruitment and Selection
A global company has the following alternative approaches to recruitment and selection of employees:
- Ethnocentric-all key positions, in headquarters as well as subsidiaries, are staffed by parent-country nationals.
- Polycentric-key positions in subsidiaries staffed by host-country nationals and those in headquarters staffed by parent-country nationals.
- Regiocentric-key positions staffed by host-country nationals within particular geographical regions (such as continent-wise).
- Geocentric-key positions in headquarters as well as subsidiaries staffed by people based on merit, irrespective of their nationality.
Different MNCs adopt different approaches for recruitment. For example, a survey of recruitment practices adopted by MNCs reveals that 50 per cent MNCs believe in geocentric approach while 35 per cent MNCs believe in ethnocentric approach and key functionaries from parent country national are put on foreign assignments for two-three years. While selecting personnel, MNCs generally place emphasis on technical skills. Not much emphasis is placed on skills for cultural adaptability. With the result, expatriate failure rate is high. In order to overcome this problem, many MNCs have adopted the practice of recruiting fresh graduates from host countries and providing training in parent country.
Performance Management
Performance management, that is, assessment of employee performance, discussing its results with employees, and suggesting and working out way for improvement in performance, is based on the practices adopted by MNCs in this respect for parent-country nationals. However, this has posed a serious limitation in the American MNCs which adopt, generally, management by objectives (MBO). MBO works in an environment which is open and provides platform for discussion between superior and subordinate on equal footing. In countries where people are highly oriented towards authority, any open discussion with superior by subordinate is treated as insubordination, and MBO system does not work. Therefore, the alternatives suggested are recognizing and formally incorporating the difficulty level of operating in different countries, relying the foreign on-site manager to consult the home-site manager before finalizing assessment, and involving the expatriate in deciding on performance criteria and making them more appropriate to the expatriate’s position and circumstances.
Training and Development
MNCs provide pre-departure training to expatriates. However, in many cases, such a training is superficial without really addressing the issues uppermost in the minds of expatriates and their families. The depth and breadth of training can vary from a simple information-giving approach (films/books) to effective approach (culture and language training) and impression approach (field experience) depending on the length of stay and nature of the position. Regarding training and development, it is suggested that MNCs develop a global pool of international managers and rotate them across foreign locations to facilitate transfer of best HRM practices and mentoring of future global managers. Emphasis should be placed on making managers sensitive to cultural differences and adept at managing them.
Compensation Management
There are two commonly used approaches in international compensation systems — going-rate approach in which compensation is tied to host-country norms and the balance-sheet approach in which compensation is tied to home-country norms. In both approaches, additional expenses in the form of housing and additional taxes are reimbursed. Both the approaches have their own merits and limitations.
Industrial Relations
Industrial relations depend on the history, legal framework, power relations, and ideologies of management and trade unions in each country. Therefore, MNCs have to adopt specific industrial relations strategies to suit local conditions. However, MNCs face pressure for standardization in terms of productivity at least within a region if not internationally. Therefore, they have to strike a balance between industrial relations strategies to suit local conditions and standardization. Some MNCs lobby with local governments to have better industrial relations.