IHRM standardization and globalization PDF

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International Human Resource Management In Multinational Corporations 1 INTERNATIONAL HUMAN RESOURCE MANAGEMENT IN MULTINATIONAL CORPORATIONS By Student’s Name

Course Name Professors Name School City, State Date

International Human Resource Management In Multinational Corporations 2

Contents LIST OF FIGURES...................................................................................................................................3 LIST ABBREVIATIONS..........................................................................................................................4 Introduction............................................................................................................................................... 5 PESTEL ANALYSYIS...............................................................................................................................5 POLITICAL/LEGAL................................................................................................................................5 ECONOMICAL.........................................................................................................................................6 Social.......................................................................................................................................................... 7 Technological.............................................................................................................................................8 Analysis of the functions that can either be localized or standardized..................................................8 Analysis of HRM Function.......................................................................................................................9 Recruitment and selection.....................................................................................................................9 Training and Development....................................................................................................................9 Reward management...........................................................................................................................10 Performance management..................................................................................................................11 Rational for reasoning and the advantages for localizing the above functions...................................11 Advantages of localizing HR functions..............................................................................................12 Conclusion................................................................................................................................................ 12 References.................................................................................................................................................12

International Human Resource Management In Multinational Corporations 3

LIST OF FIGURES Figure 1: Malaysian unemployment rate………………………....................... 6

International Human Resource Management In Multinational Corporations 4

LIST ABBREVIATIONS HR – Human resource HRM- Human resource management MNC-Multinational corporation

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Introduction This is a detailed report that will aim at helping the British MNC of the key implication in human resource management that the company should put into account before it decides to set up a subsidiary in a new country. This report will also seek to help the British MNC to identify key and important factors that they will have to put into account before setting up their HR function in Malaysia. This report will also guide the company on solving the major problem of deciding which HR functions should they retain in their headquarters and what functions should be delegated to the subsidiary. Furthermore, it will try to explain how the organization can be able sustain it operations in their subsidiaries. PESTEL ANALYSYIS This is basically an analysis of the macro environment factors that will affect the British MNC if it decides to open a subsidiary in Malaysia and localize some of its functions to the subsidiary firm. POLITICAL/LEGAL  Malaysia is a country that uses the parliamentary system of government where the power of the monarch is dictated by the constitution[ CITATION Tal14 \l 1033 ]. 

the law has set a minimum wage for all people who are working at

RM1100[ CITATION Tal14 \l 1033 ]. 

the organization is supposed to set up employment practice that are clearly in line

with Malaysian Employment Act 1995 of Malaysia and it guides host country nationals[ CITATION Tal14 \l 1033 ]. 

The law exempts foreign nationals from being covered by the EPF Act 1991 and

SOCSO 1969[ CITATION Tal14 \l 1033 ]

International Human Resource Management In Multinational Corporations 6



employees are entitled to receive an overtime pay, paid leaves and income

tax[ CITATION Tal14 \l 1033 ] 

employment relationships that will exceed one month will require the employee

and employer to enter into a contract that are also subject to other policies. Oral contracts are also acceptable but they have their own limitations[ CITATION Tal14 \l 1033 ]. 

Most employees are protected by the law that guides several groups[ CITATION

Tal14 \l 1033 ] ECONOMICAL  Malaysia is classified as a third world country. It is in the developing face and according to the (world bank, 2019a) it’s a country with so much potential and their economy mainly depend on exportation of electric appliance, and electronics[ CITATION Tal14 \l 1033 ] 

The countries GDP has been on the rise but it has a few pitfalls in the past years

dropping from $338 in 2014 to 314 in 2017[ CITATION Tal14 \l 1033 ] 

The rate of unemployment in this country currently stands in 3.4% meaning that

cheaper labor is available for new companies that need to set up their operation in that country[ CITATION Tal14 \l 1033 ] 

The inflation rate in Malaysia has is constant at 2% hence it helps attract a lot of

foreign investors in the country[ CITATION Tal14 \l 1033 ] 

The bank interest rate stands at 3.25%[ CITATION Tal14 \l 1033 ]

International Human Resource Management In Multinational Corporations 7

Figure 1: Malaysian unemployment rate Social This shows the characteristics of the Malaysia demography 

The demography consists of people with different culture, religion and

race[ CITATION Tal14 \l 1033 ]. 

There is a higher rate of alcohol consumption so firm should be careful not to hire

wrong people[ CITATION Tal14 \l 1033 ]. 

The illiteracy level is high as only 22% of the adult population hold a higher

education qualification[ CITATION Tal14 \l 1033 ]. 

Statistics show that most men are working more than woman this is because this

society is rigid and view[ CITATION Tal14 \l 1033 ]. 

The population is also made of youthful labor force [ CITATION Tal14 \l 1033 ].

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Technological 

The government of Malaysia has form a council called the national information

technology council to help improve the level of technological infrastructure in the country[ CITATION Tal14 \l 1033 ]. 

Malaysian population has embraced the use of technology as people who are

using the internet continue to rise day in day out. With most people embracing the use of social media as a way to share information or access it[ CITATION Tal14 \l 1033 ]. Analysis of the functions that can either be localized or standardized Most are usually faced by the dilemma of choosing whether to manage their employee based on the laws and principle of the country which their subsidiary is located or manage them differently using the laws and principle of that are being used in the headquarters[ CITATION Gep14 \l 1033 ]. Therefore, the organization needs to choose a method that will prove to be efficient and effective to them. HRM is usually hard to imitate hence gives it a competitive age. Also it has some special and unique characteristics that make it hard to imitate[ CITATION Har10 \l 1033 ]. International human resource management is important as it helps us understand how HRM mainly depends on culture and that it poses some characteristics based on the region. HRM has also plays a critical role in ensuring that internationalization of any organization becomes a success so in order for the British MNC subsidiary to success it must critically analyses how it is supposed to distribute and delegate the HR functions[ CITATION Gep14 \l 1033 ]. The HR functions are usually carried out differently from the other practices between the subsidiary and the parent organization. Different MNC usually have a different level of HRM practice standardization and localization. With some of this practices being in line with the socio cultural context while others are culture free[ CITATION Har10 \l 1033 ]. HRM practice are usually different from each other and mostly this factors will either be influenced by both

International Human Resource Management In Multinational Corporations 9 organizational and national factors. While considering which HRM practice to either standardize then the management needs to analyze this practices separately[ CITATION Har10 \l 1033 ]. Analysis of HRM Function Recruitment and selection Staffing is always a major problem for all the organization as finding the right candidate who will fit your organization need is a major challenge. This problem becomes more complex for an international organization as the laws of the parent companies may differ from those of the host company[ CITATION Hol10 \l 1033 ]. Also determining how many local employees to hire as compared to the expats becomes a bigger problem. Recruitment and selection should be fair and free from any discrimination and should be done within the laws of the host nation[ CITATION Hol10 \l 1033 ]. The cost of hiring and retaining an expat employee is usually so high and any mistake done by the parent organization in hiring an expat maybe very expensive. It’s also important that the organization also consider expat with the higher degree of culture sensitivity. By considering this the British MNC should consider either using an outsourcing firm in Malaysia to outsource for their subsidiary[ CITATION Tal14 \l 1033 ]. This is an effective method of localizing some of the HRM as the outsourcing firm is well familiar with different local laws and cultures that may affect the staffing of employees and this also may reduce the chances of the subsidiary getting employees who don’t meet their needs[ CITATION Hol10 \l 1033 ]. Training and Development Training and development plays a key role in ensuring that the employees that have been select fit well and are comfortable with the position. Training and development should be a function that should be retained by both the parent company and delegated to the

International Human Resource Management In Multinational Corporations 10 subsidiary[ CITATION Ile14 \l 1033 ]. The headquarters will have to train expat on the culture of the host nations and this done two ways; 1.

Pre-arrival training:

a)

Cultural briefing- the expat are given the information about the host country

traditions, customs, health requirement, housing and living conditions b)

Assignment briefing- explaining to the employee all about the job in terms of the

length of the contract, salary, statutory deduction c)

Cross cultural training- explaining to the expat the difference in culture, language

and the laws of the host nation so as to help them to start familiarizing with what might be there new norm. 2.

Post-arrival training- the expat will also require assistance to help them in

settling in as fast as possible in their new country. The organization may allocate a local to help the employee the employee to adopt to their new life. Also the subsidiaries will also require to undertake the training of the local employees they will hire so as to familiarize the employee with the organization culture, goals and overall strategic objective[ CITATION Ile14 \l 1033 ]. Employee career development is important function that the subsidiary organization undertakes so that it can be able to develop their employees so as to help the improve their performance and this will essentially lead to the improvement of the overall organization productivity[ CITATION Ile14 \l 1033 ]. Reward management In order the employee to become satisfied and empowered then the organization needs to offer them a pay that is equivalent to their work. This function will have to be localized and also

International Human Resource Management In Multinational Corporations 11 standardized. Expatriates will have to be paid base on the wage structure of the host nation while those local employees need to be paid according to the local payroll structure[ CITATION Gep14 \l 1033 ]. The problem comes in because of the difference in economy between the Britain and Malaysia as one is a developed country and the other is a developing country respectively. The management should device ways that will help Maintain a balance in pay so as to reduce scenarios where the local employees will feel that their pay is unfair as this might led industrial dispute[ CITATION Har10 \l 1033 ]. Also Malaysian organizations have been found to be favoring males more than females when it comes to payment. The subsidiary should also aim that it promotes equal pay to every employee regardless of the gender. Performance management Managing employee performance is important for both expatriates and local employees. It is important for organization to be able to understand different ways they can be able to measure the performance of employees. This function can be effectively be delegated to be undertaken by managers within the host nation because they are the one who are always on the ground with employees and it’s easy for them to measure weather the employees meet the expectation that have been laid down for them. Performance management is important as it decide what type of training the employee will be exposed to[ CITATION Ile14 \l 1033 ]. Rational for reasoning and the advantages for localizing the above functions Standardization and localization is an important concept that multinational companies are using to ensure that they effectively manage both local and expatriate’s employees. Most MNC organization have been making efforts to effectively and efficiently make use of the aspect of standardization. But not all HR functions can be standardizing as its only effective when applied

International Human Resource Management In Multinational Corporations 12 on manager. The HR employees within the organization HR function should be localized to the subsidiary especially when dealing with the other employees in an organization. Advantages of localizing HR functions 1. Helps the organization to set up and develop new network in the host country. This is usually achieved by replacing expatriate manager by local qualified managers. The local managers are well informed with the laws and regulation of the host country making them to be in a better position to move the organization forward. 2.

Localization create a good image for the local employees as these employees

often feel comfortable when their fellow local employee is at the top rather than an expatriate managing them. Employees will also be motivated to perform more as they will feel that they can rise and hold managerial positions. 3.

Localizing some functions makes the organization reduce the cost that they may

incur in case it standardizes e.g. the cost incurred when relocating an expatriate. Conclusion Base on the above report its evident that international human resource management is a broad discipline and it includes a variety of practices. An organization that need to take its operational globally they need to decide which HR that need to be standardized and the function that also need to be localized and if this decision is not analyzed critically then it might have some effects on their operations. This report will effectively help the British MNC to effectively set up its operations in Malaysia and help it to fully benefit from the advantages of localization and standardization. References Anne-Wil, H. & Pinnington, A., 2010. International human resource management. s.l.:sage.

International Human Resource Management In Multinational Corporations 13 Graham, H. & Mike, G., 2014. Multinationals. social agency and institutional change; variation by sector, pp. 195-199. Hollinshead, G., 2010. International and comparative human resource management. McGraw-Hill: s.n. paul, I. & Rowlands, K., 2014. MANAGING IN A GLOBAL CONTEXT." Strategic Human Resource Management. An International Perspective , p. 440. Talib, H., 2014. Halal logistics PEST analysis: the Malaysia perspectives. Asian Social Science, 10(14), pp. 119-131....