JKL International plc. International Human Resource Essay
JKL International plc. International Human Resource
With the trend of globalisation, the number of multinational companies is constantly increasing as well as expatriates (Business Recorder, 2011). Expatriate management now is an essential issue of human resource department because it takes a large amount of budget from the corporation. It is inevitable for expatriates to face culture barriers in subsidiaries because of unique national cultures in all countries over the world.
National culture is ”cultural experiences, beliefs, learned behaviour patterns, and values shared by citizens of the same nation” (Neale _et al_, 2006, p.26). A national culture will significantly affect any employee working in firms and furthermore, national culture will influence the management framework in a company as well accompanied with organisational culture so that cross culture management is helpful not only for the supervisors’ decisions but also for employees especially for expatriates (Chen, 2006, p. 2). In the case study of JKL, it showed a range of problems in their expatriates which related national cultures and JKL will implement a British managerial system into its Russian subsidiary.
This essay will first examine the problems and issues in managing expatriates in JKL and then evaluate the proposal from Jim Flinn, the CEO of Zagorski who will apply an entire British managerial system into a Russian subsidiary.
ORGANISATIONAL CONTEXT (CASE STUDY)
JKL is a British pharmaceutical company which was founded in 1925 and it has expanded its business by acquiring other pharmaceutical companies in Malaysia, India, Greece and USA. Recently, JKL has made the largest acquisition of Zagorski, a pharmaceutical company in Russia.
At the headquarter of UK, JKL applies a decentralised organisational structure. All managers are required to give their own opinions to avoid some drawbacks of group decision making which is conformity pressure in groups (Robbins and Judge, 2009, p.336). Employees are allowed to propose valuable ideas to manufacture and administrative systems as well. Supervisors will award monetary incentives (one of the physical needs) as motivation to employees and managers (Carrell, Elbert and Hatfield, 2000, p.129) if their initiatives are judged as potential innovations.
On the other hand, in subsidiaries, JKL applied localised human resource practices in order to fit local cultural values and legal systems (Dowling, Festing and Engle, 2008, p.217) by keeping local managers with existing organisational and managerial systems. In past years, those subsidiaries in Malaysia, India and Greece were continually making profits to JKL and JKL also regularly sent managers and specialists to those subsidiaries for expatriation in a period of time.
After the acquisition of Zagorski, Dr. Jim Flinn will be the CEO who had spent last three years in the subsidiary of USA.
EXPATRIATES MANAGEMENT AND CROSS CULTURE MANAGEMENT IN MULTINATIONAL CORPORATIONS
Culture is a popular topic in literature research and it could be described as a ”software of the mind” (Hofstede, 1991, p. 2) .With the trend of globalisation, managing cultural differences has become an important issue in human resource management of multinational corporations. Misunderstanding may be occurred if culture differences are not well-managed even these colleagues are working in the same organisation (Hall, 1995, p.6). In the case study, seven expatriates of JKL have their own problems and for JKL, there is a high expatriate leaving rate after repatriation (Appendix F).
This essay will identify the problem of seven expatriates working in JKL and its subsidiaries and after that, rational proposals of changes will be given to them on the basis of improvements of JKL’s human resource department.
EXPATRIATES AND ORGANISATION PROBLEMS AND PROPOSALS FOR CHANGES
In the case study it lists seven expatriates with their problems and in the following essay they will be numbered from A to G.
A (RETURNED FROM PENNSYLVANIA, USA)
According to the case study, expatriate A was the first expatriate to Pennsylvania because of an attractive salary. The reason of returning is that expatiate A was annoyed about following managers received better compensation packages than him although they were almost doing the same works.
The main problems of the human resource department of JKL are rewarding system and lack of correct performance appraisal system. ”Every employee believes, and most experts believe, that pay and rewards are an important part of an organisation’s human resource management” (Harris, Brewster and Sparrow, 2003, p.91). In fact, the first expatriate to a subsidiary will face loads of difficulties in practical and then try to solve them as a pioneer (Business Wire, 1998). As a result, the first expatriate is deserved to have a better compensation package than followers. As the perspective of organisation, the first expatriate may important to human resource managers because this person can be regarded as a training model of human resource management (Arusha Times, 2009, p.16).
On the other hand, because of lacking effective performance appraisal, expatriate A had a lower compensation package compared with following managers and that may be the reason of the compensation package of expatriate A was retain unvarying for a long time as well. Expatriates sometimes will feel unfair if performance evaluate system is not effective enough because insufficient performance appraisal system may make expatriates uncertain of their performance especially for those hard working expats (Gordon, 2010, p.56).
The possible solution of dealing this problem is establishing an effective reward system by performance appraisal (Performance -related reward system). Performance-related pay (PRP) can change the payment from a rigid structure to a flexible way depended on performance (Harris, Brewster and Sparrow, 2003, p.94). By applying this system, the productivity of employees will be significantly increased and for expatriates, they will be motivated and more willing to finish their assignments as well (Gielen, Kerkhofs and Van, 2010, p.299). Furthermore, accurate evaluation is also a factor which company need to take account because there is an essential link between motivation and performance appraisal (Carrell, Elbert and Hatfield, 2000, p.315).
B (RETURNED FROM INDIA)
The reason of expatriate B returning to UK is that his spouse and child had enough of India living and schooling as seemed to be suffering (Case Study).
The main problem of the human resource department of JKL is expatriate selection especially in cross-cultural suitability and family. Cross-cultural suitability and family are two of the most crucial criteria of expatriate selection (Dowling, Festing and Engle, 2008, p.120). In culture aspect, Hofstede’s national culture model demonstrated the main various between UK and India in power distance and individualism (Appendix A). According to appendix A, the power distance column in India is much higher than it in UK as well as individualism so that there maybe the reason of his spouse had enough of India.
In addition, unlike Western Europe civilisation, there is a caste system in India which cause the high power distance and many females in India basically are not regarded as equal to males (Robert _et al_., 2000, pp.654-656). Moreover, individualism in India is much less important than UK so that residents in India intend to work, study and live collectively (South Asian Studies, 2011) that is totally different to UK. As a result, the wife and child keened on back to UK because of the cultural adjustment problem while her husband was still working only with British colleagues (Case Study).
The solutions will be provided here are selecting an appropriate candidate as an expatriate and putting more emphasis on cross-cultural suitability and family requirement. Cotemporary, the family element is having more important weight in expatriate selection because of non-working factors and potential influence to working expatriates (Andreason and Aaron, 2008, pp. 386-387).
C (RETURNED AFTER A-FIVE-YEAR-ASSIGNMENT AND WOULD BE SENT OUT IMMEDIATELY)
The problem of JKL here is about repatriate management and in detail; it will be related to re-entry management. In general, after completing an international assignment, an expatriate will go back to the home country as called re-entry or repatriation (Harzing and Ruysseveldt, 2004, p.337). However, most repatriates will cope with culture shock after they back to the home country. Using an example of India and UK here, although many British work in India as expats for its booming economic and after their finishing assignments, back to UK, they therefore only find they cannot work under a UK context (The International Herald Tribune, 2009). That may be the reason that JKL sent employee C abroad again without hesitation in order to avoid coping with culture shocks (Case Study).
It is obviously that JKL need to improve their repatriate management and there are many models here from other multinational companies. JKL could ‘Offer repatriation training, pre-departure training, and re-entry orientation to employees and their families’ (Liu, 2005, p.129) and expats can increase the awareness of repatriation and decrease the uncertainty after back to the home country . Moreover, JKL could prepare a job vacancy in expatriate management division of human resource management because expatriates have various working experiences in other countries (Berman and Ursula, 2009, pp.80-81).
D (NOW WORKING IN GREECE AS AN EXPATRIATE)
The major issue of expatriate D in Greece now is adapting the local customs and culture in Greece although JKL had a prepared pre-departure training programme (Case Study). In Hofstede’s national culture demonstration of UK and Greece (Appendix B), the uncertainty avoidance is extremely high and no long-term orientation in Greece. In the case of expatriate D, a problem of communication is occurred as well. In theoretical aspect, there four problems in cross-cultural oral communication: ”semantics, word connotations, tone differences and differences among perceptions” (Robbins and Judge, 2009, pp.407-408) and English and Greek are classified to two different language system. As a result, it will take a longer training programme to completely learn and understand a foreign language. Likewise the body language and gestures in England are slightly different to the world, for example, a ”V” gesture means victory or peace in many countries but in England, ”if the palm and fingers face inward, it means ‘up yours’ especially if executed with an upward jerk of the fingers” (New York Times, 1996, p.E7).
Consequently, post-departure training is a rational option for expatriate D to continually make adjustments into Greek culture. The reason is that post-departure training is suit for expatriates living in a country which has an entirely different culture and it can accelerate accustoming another culture (Managing Training and Development, 2005).
E AND F (CONFUSED AFTER REPATRIATE)
Expatriate E and F have similar problems after finishing their international assignments because JKL currently have no response about their repatriate (Case Study). The problem of JKL must be repatriate management.
The possible solution will be provided here is putting emphasis on repatriate management. In fact, in last ten years, there is an increasing number of multinational corporations focus on repatriate management while in 1990s, only few companies would hold a re-entry discussion. According to a survey in 1997, only 27% firms supposed to hold a discussion about re-entry and it had been improved in 2000s. In 2004, there are 86% companies intended to discuss the re-entry issue (Dowling, Festing and Engle, 2008, p.199). JKL could offer repatriate supports to repatriates such as give interaction to human resource management to increase the sense of loyalty so that the company can avoid losing these experienced employees (Harzing and Ruysseveldt, 2004, pp. 343-344).
G (THOUGHT GREEK DISCRIMINATE AGAINST FEMALE)
From expatriate G’s case, it seems Greek dislike the idea of female even she is well qualified or experienced (Case Study). Thus, for JKL, it shall investigate the culture and even the working environment in Greece.
From Hofstede’s national culture model, UK and Greece possess almost the same figure in masculinity and Greece actually has a lower masculinity figure than UK (Appendix B). However, the power distance in Greece is much higher than it in UK which means whatever a male or female, their ideas are hardly applied to supervisors as an employee.
In Greek working condition, it is surprisingly to find much evidence of discrimination against female. According to an official report written by Greek Helsinki Monitor (GHM) and the World Organisation against Torture (OMCT) (2002, pp.13-21), there are approximately 4500 rapes in working communities every year and only 6% are reported to police. Furthermore, Sexual harassment in communities is common in Greece due to no specific legislation of sexual harassment. Those factors may be the reasons of Greek male employees discriminate against female in the working place.
In JKL’s view, it is a challenge to solve this problem as well, one of the effective ways is sending a male expatriate instead of female employee in Greece to prevent any hidden risks in Greece and make further investigation in Greek subsidiaries.
From the case study, JKL have a high expatriate failure rate (Exceed 46%) in subsidiaries except USA (Appendix F). JKL has paid a low attention on cross culture management because it applies a localised managerial system and most managers in the subsidiaries are from the host countries. In fact, many multicultural corporations which apply localised managerial system have the same issue in manage culture difference (National Centre for Vocational Education Research, 2006, p.1).
According to Brunstein (1995, pp. 275-280), a localised managerial system will positively fit the local context and it is easier to bring profit like autonomy units in a shorter of time than centralised management system. However, the drawbacks are employees especially the expatriates from the parent company will probably face a huge culture shock in the subsidiary if their cultures are totally different. As a result, JKL must release many improvements in human resource department especially in expatriate management field.
If JKL continually applies a localised managerial system in acquired firms, it may only have problems on expatriates’ management. However, once the supervisors intended to transplant the whole management system into a country with entirely different national culture like flag-planting, it definitely will bring a serious impact to the target subsidiary and the worst consequence may like the failure of Japanisation entering UK in 1990s.
The main problem that JKL has is on its international human resource management as a part of managerial system. In the case study, seven expatriate had a range of typical expatriate problems comprising training, expatriate selection and repatriate management. Moreover, 43 per cent of expatriate left JKL after their repatriation and at least 46 per cent of expatriate cannot complete their tour in subsidiaries except USA. In short, those fundamental factors of expatriates’ problems are totally based on various national cultures that JKL need to take account in its cross culture management.
APPRAISE THE DECENTRALISED MANAGERIAL SYSTEMS OF JKL APPLIED IN RUSSIAN AFFILIATE
Like national cultures, many companies have developed their own organisational culture as well as managerial structure. Organisational structure is important to multinational corporations because it will definitely interact with different national cultures in host countries (Francesco and Gold, 2005, p.236). In the case study, JKL applies a polycentric control system in Malaysia, India and Greece and decision making authority is awarded to subsidiaries in order to avoid drawbacks on the motivation and political problems in these countries (Stonehouse _et al_, 2004, pp.382-383). As a result, those subsidiaries make profit very shortly (Case Study).
This essay will evaluate Jim Flinn’s proposal who intends to transplant a whole managerial system from JKL headquarter to its Russian affiliate.
STRENGTHS AND WEAKNESS OF JKL’S AND ZAGORSKI’S STRUCTURES AND MANAGERIAL SYSTEMS
At the headquarter in UK and its affiliate in USA, JKL uses a decentralised management structure and employees will be empowered to make decisions on their own works (Case Study). Currently, many European multinational companies applied decentralised managerial structure and developed an organisational culture called ‘old boys network’ with high autonomy (Bartlett, Ghoshal and Birkinshaw 2003 pp.342-343). Decentralised structure is one of the most successful management systems in transnational corporations which has experienced a long time modification and has generated many derivative systems. Under this system, diverse standards are made to fit specific manufacturing cases and it will enhance developing new and innovative products (Johnson _et al_, 2008, p. 166). For JKL, it is a brilliant choice because innovation is actually a crucial factor to a pharmaceutical company.
Yet, the weak point of this system is hard to implement global business strategies because those subsidiaries are working as autonomies while Zagorski used to apply a centralised structure which renowned for the efficiency of implements business strategies. Furthermore, JKL developed a monitoring system with performance appraisal in headquarter and USA which can significantly motivate employees in working place (Decenzo and Robbins, 1999, pp. 292-294). However, there are a few weaknesses of performance appraisal system. For example, a report from General Electric (GE) which applied performance appraisal system and it found that those employees who received a honest but negative feedback from supervisors would actually not motivated them but decrease the motivation in their work (Oberg, 2000, p. 64). On the contrast, a centralised structure has a formal bureaucracy system with a tall hierarchy and fixed official duties (Francesco and Gold 2005, pp.240-241).
This structure is therefore suit for small or middle-sized companies at the beginning stage for effective control power in strategy implementation (Jeong, 2001, p. 446). One the other hand, the Economist (2004, p.33) found that with the increasing size of firms, a centralised structure will constantly lose the efficiency of decision making process through the complicated bureaucracy system and the employees will get used to receive orders from supervisors instead of expressing their own idea. In addition, there is no performance related rewards in Zagorski because a tall hierarchy management system proposed to make a uniform management system by formalised, vertical and fair control so that regulations are designed to fit every employee as a same unit (Czinkota, Ronkainen and Moffett, 1999, p.712).
NATIONAL CULTURE DIFFERENCES
JKL used to transplant their management system to its subsidiary in USA and it successful worked. This is the main reason that Jim Flinn, the former manager in US affiliate wants to transplant the system to Russia again.
Before making the final decision, it is necessary to analyse the reasons of this success in USA. As main economics in Europe and North America, there are many similarities in the national culture of UK and USA. According to Harris, Moran and Moran (2004, pp.297-298, pp. 437-440), free enterprise, culture affinity, English speaking, private, good manners, aggressive and self-realisation are the common key words of American and British. Moreover, in Hofstede’s national culture model (Appendix C), the national culture of USA and UK are almost the same and in uncertainty avoidance column, USA is slightly higher than UK.
However, Russia is totally a different country in East Europe. First, employees in Russia are regarded as a kind of cost rather than a resource (Organizational Dynamics, 1999, p.75). Second, beside the language usage, all management decisions are made by supervisors in business context. Furthermore, Russian basically have a slow time sense and they intend to work collectively (Harris, Moran and Moran, 2004, pp.497-500). In Hofstede’s national culture demonstration (Appendix D), Russia has a higher power distances, lower individualism, higher uncertainty avoidance and no long term orientation compared to UK and USA. From a report, Russian firms used to apply a reactor business strategy in order to meet immediate need instead of long term benefits but most of those companies are finally failed (Milles and Snow, 1978, p. 353).
After culture analysis, it is showed that there is a huge difference in national culture between Russia and UK. Hence, it is not sure that Jim Flinn will still succeed again in his transplanting programme.
Look back at history, in 1990s, Japanisation once became a popular word in UK and Toyota established its manufacturing plant in Derby in 1992 because there was an existing skilled engineering workforce there (The Independent, 1992, p.23). During the early 1990’s only about 55000 people were employed by Japanese companies in the UK (The Journal, 1999). Japanisation is a Japanese managerial system with Cost-centred Just in Time System, long term contracts, vertical integration to supplier and low labour turnover rate (Hasegawa, 2001, pp.165-166).
However, once Japanese manager attempted to entirely implement this system into British subsidiaries, it was not worked effectively with British employees and many Japanese companies like Nissan finally failed in UK market because Japanese manufacturing method did not fit British economic and culture conditions with collective working method (Procter and Ackroyd, 1998, p. 241, pp.244-245). In Hofstede’s national culture model (Appendix E), Japan is a collective, success oriented and long term oriented country with high uncertainty avoidance which is almost an opposite of UK.
It is recommended to apply a centralised managerial structure in Russia because many most Russian companies applied a ”traditional production-oriented culture with strong factory patriotism” just like a typical Soviet traditions (Clarke, 2004, p. 418). In 2003, IKEA opened its first store in Russia and many Swedish worked in IKEA Russia as expatriates. After repatriation, their feedbacks are high power distance in the working place accompanied with rigid centralised management structures (Jonsson, 2008, p.34).
Despite the nation culture of Russia possess a high power distance, there are some autonomous states in Russia which has rich unexplored natural resources such as Komi and Sakhalin actually have a more decentralised culture and many Dutch petroleum and pharmaceutical companies had established their affiliates with decentralised management structures in those regions (Condon, and Dauman, 1993, p.31).
According to the case study, Jim Flinn intends to use a ‘top-down’ change approach to transplant the managerial structure which may be imposed in a coercive manner (Balogun and Hailey, 2004, p.27). Once Jim Flinn has completely applied the management system that used in the headquarter and USA, the employees in Russian subsidiaries have to cope with a huge culture difference from West Europe. Jim Flinn may draw attention on the success of Dutch pharmaceutical companies in Russia as mentioned before. Thus, in a short term, transition will be a main issue in Russian subsidiary and it probably will take a long time in this process. However, in a long term perspective, the management structure of JKL’s headquarter may bring a range of benefits because a decentralised management system is exactly helpful in research and development department although the Russian employees are used to reluctant in changes (Case Study).
The main problem of JKL’s Russian affiliate is culture adjustment if Jim Flinn transplants the whole management structure from JKL to Zagorski. In fact, national culture will strongly influence the organisational culture as well as managerial framework of a company. Changing management system in a subsidiary is not a flag-planting work because of various national cultures involved. In the first part of essay, some expatriates actually have problems on their international assignments in India and Greece. Hence, it can be estimated that, after the transplantation, many local employees working in Russia subsidiaries may have the same problems. Furthermore, many previous cases above are provided which could be used as a reference to Jim Flinn as well.
CONCLUSION AND RECOMMENDATIONS
This essay examined the problems in managing expatriates in JKL and evaluated the proposal from Jim Flinn who will transplant a British managerial system to a Russian subsidiary. Through these analyses, it is concluded that national culture will influence both expatriates and organisational cultures. It is essential for multinational corporations to have a good command of human resource management because of the large proportion budget of expatriates and efficiency of implementing business strategies. Managerial structure, on the other hand, it cannot be easily changed and sometime it will bring a series negative consequences in real business context because national cultures are involved as well.
JKL have to improve its human resource department especially repatriate division and training programme to offer better supports to expatriates and eventually, there is a suggestion to Jim Flinn which is making further investigations on previous cases and local subsidiaries
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