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Discuss The Challenges Facing Multinational Corporation In The Management Of Global Talent.

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“The Jack Welch of the future cannot be like me. I spent my entire life in the United States. The next head of General Electric will be somebody who spent time in Bombay, In Hong Kong in Buenos Aires. We have to send our best and brightest overseas and make sure they have the training that will allow them to be global leaders who will make GE flourish in the future.”
Jack Welch

Discuss the challenges facing Multinational Corporation in the management of global talent.

In a highly competitive global economy where the other factors of production- capital, technology, raw materials and information, are increasingly able to be duplicated “the calibre of the people in an organisation will be the only source of sustainable competitive advantage available to US companies (J.L Laabs 1996). Therefore attention must be paid to and resources must be ploughed into the management of global talent to take the business forward. To do this attention must be paid to several areas, in particular to maximise long-term retention and use of international cadre through career management so that the company can develop a top management team with global experience and to develop effective global management teams (Deresky 2006).

International assignments are becoming increasingly important for the reasons outlined by Jack Welch above; moving forward, top level managers need to have international experience in order for their company to remain competitive. An understanding of the management of expatriates is of growing importance due to the rapid increase in global economic activity and global competition (Young and Hamill, 1992). It is increasingly being recognised that expatriates play a vital role in success or failure of international business (Tung 1984).

However there are various challenges facing Multinational Corporations in the realisation of these goals. These challenges are two fold involving the attitudes of two groups of people, namely the multinational corporation who are instigating the international assignment and the expatriate and their family.

In international assignments there are three phases of transition and adjustment that must be managed for successful integration to a new culture and re-orientation to the old one. These phases are:
1. The exit transition form the home country
2. The entry transition to the host country,
3. The entry transition back to the home country or to a new host country (Asheghian and Ebrahimi 1990)

The first stage requires appropriate selection and recruitment procedures, the second adequate pre-assignment training and mentoring and the final, preparation by the company for the homecoming and procedures put in place to maximise on the increase in expertise.

If these phases are not dealt with effectively by the corporation then there is a high chance that the assignment will fail the costs of failure of international assignments is far greater than those of failure on a domestic level (Forster 1997) The average cost of expatriate failures varies between $65,000 up to $300,000 (Zeira and Banai, 1985) some estimates reaching as high as $1 million or more (Shannonhouse 1996), with an estimate of total losses for American expatriate firms exceeding $2 billion a year (Punnet 1997)

Up to 40% of expatriate managers and their foreign assignments finish early because of poor performance or an inability to adjust to the local environment (Black 1988). About half of those who did remain function at a low level of effectiveness. Indirect costs may be far greater depending on the expats position. Relations with the host country government may be damaged resulting in a loss of market share and a poor reception for future PCN’s.

Research into recruitment and selection has concentrated on the criteria used to asses the suitability of the candidate. (Mendenhall and Oddou 1985) identified that a major problem area was the ingrained practice of using the domestic equal’s overseas performance equation. Technical expertise and domestic track record are by far the most popular selection criteria. Factors such as language skills and international adaptability are often overlooked; however there is some evidence that these are more widely used in European organisations (Brewster 1991). This may mean that it is not the �brightest and best’ or those most suitable for the job which are selected, meaning that the right talent is not harnessed.

It is important to asses whether potential expatriates have the necessary cross-cultural awareness and interpersonal skills, before sending them on international assignments. There are five categories of success for an expatriate manager; job factors, relational dimensions such as cultural empathy and flexibility, motivational state, family situation and language skills.

Jack Welch’s statement above suggest that its the brightest and best employees who are the ones who should be sent on international assignment in order to gain international experience however finding people willing to accept global assignments is one of the greatest HR challenges, according to many managers. One such manager was James McCarthy from Motorola, who said “One of the most difficult aspects of developing global leaders is getting people to move on international assignments. Dealing with dual careers is often one of the greatest challenges.” (Stroh and Caligiuri 1998). Many companies report that while the desire to go on international assignments remains flat, the demand for them is steadily increasing.

Being that the costs of failed international assignments are so high and the failure rate is so high the importance of getting it right is obvious, however in many ways it is the attitudes of the multinational corporations themselves whose money is in jeopardy that largely contribute to these failures. “While 89% of companies formally asses a candidates job skills prior to a foreign posting, less than half go through the same process for cultural suitability” (www.FT.com)

In order to ensure that phase 2 goes smoothly the best preparation is largely believed to be cross-cultural training. This is complex and deals with deep-rooted behaviours. This training should result in the expatriate learning both content and skills that will improve interactions with host country individuals by reducing mis-understandings and inappropriate behaviours. The result is a state of adjustment representing the ability to effectively interact with host nationals.

In a study by Harvey of 332 US expatriates (dual career couples) the respondents stated that their MNC’s had not provided them with sufficient training or social support during the international assignment. (Harvey 1997). Japanese expatriates have a recall rate of only about 5%, possibly because they’re better prepared or maybe because their families usually do not accompany them (Tung). The Japanese are much better at pre-assignment training (Tung). Better selection processes weed out a lot of potential failure before they happen.

The goal of this training is to ease the adjustment to the new environment by reducing culture shock- a state of disorientation and anxiety about not knowing how to behave in unfamiliar circumstances. The symptoms of culture shock range from mild irritation to deep seated psychological panic or crisis. The inability to work effectively, stress within the family and hostility toward host nationals are the common dysfunctional results of culture shock, often leading to the manager giving up and going home.

There are many training techniques available to assist overseas assignees in the adjustment process. These techniques are classified by Tung as:
1. area studies e.g. documentaries about the countries geography, history and economics etc
2. cultural assimilators which expose trainees to the kinds of situations they are likely to encounter that are critical to successful interactions
3. language training
4. sensitivity training; and
5. field experiments, exposure to people form other cultures within trainees own country

These usually happen in home country but it is probably more beneficial to have them in the host country where the culture can be experiences rather than just discussed. John R Garrison manager of recruitment and development at Colgate “That’s the definition of a global manager: one who has seen several environments first hand.

The management of the re-entry phase of the career cycle is as vital as the management of the cross-cultural entry and training. Otherwise the long term benefits of that executives international experience may be negated (Adler 1991).

The effects of reverse culture shock are often ignored. In fact a survey of companies belonging to the American society of Personnel Administration International –(ASPAI) revealed that only 31% had formal repatriation programmes for executives and only 35% of those included spouses (Harvey 1987)

GE sets a model for effective expatriate career management. With its 500 expatriates worldwide, it takes care to select only the best managers for overseas jobs and then commits to placing them in specific positions upon re-entry (Feldman 1981).

The repatriation of expatriates has been identified as a major problem for multinational companies in the UK and North America (Harvey 1989; Scullion 1993) but is still comparatively under-researched (Brewster and Pickard, 1994). The major problem here being that upon return there are no spaces which need filling by the expatriate, for the expatriate therefore there are issues of loss of status, loss of autonomy, loss of career direction and a feeling that their international experience is undervalued by the company. Where a company is seen to be acting unsympathetically towards these re-entry process managers will be more reluctant to accept international assignments (Scullion 1993). Many expatriates leave the company on return (Adler 1986) resulting in loss of expertise and investment.

The long term effects of these poorly managed repatriations programs is that few good managers will be willing to take international assignments having seen what happened to their colleagues. They may have seen that colleagues had had an awful time of it and missed out on promotions as a result therefore having a negative impact on their career, and the only ones willing to go will be the those who are not succeeding at home or those who would see it as some kind of holiday. Research has shown that it is common for employees to see international assignments as a negative career move in multinational US companies (Tung 1988). “Managers returning for expatriate assignments are two to three times more likely to leave the company with a year because attention has not been paid to their careers and the way they fit back into the corporate structure back home” (www.FT.com)

The other side to the challenges faced by multinational firms in global talent management is the attitudes of managers and the perceptions they have as to what an international assignment entails.

In a study of management succession in US companies it was reported that 93% said that they did not consider international assignments to be in their top three criteria for getting promoted to senior management (Tung and Miller 1990). As a consequence managers are often reluctant to accept the offer of an international assignment for fear that it may result in a negative career move (Selmer 1998 j3) Research confirms this with 65% of HR executives thinking international assignments had a positive impact on careers whereas 73% of expatriates believed that they had a negative effect (Black, et al 1999). A substantial percentage of expatriates resign upon return because they feel undervalued by the company,

Recent research on 321 American expatriate spouses around the world shows that the effective cross-cultural adjustment by spouses is more likely
1. when firms seek the spouses opinion about the international assignment and the expected standard of living and
2. when the spouse initiates his or her own pre-departure training (thereby supplementing the minimal training given by most firms) (Pascoe 1992).

The �trailing’ spouse is a big consideration. At Procter & Gamble employees and spouses destined for China are sent to Beijing for two months of language training and cultural familiarisation. Spouses are given a salary by Motorola Corporation, who are then encouraged to use this for professional development, in the hope that the international assignment will benefit them in the long run as well. They found that this better prepared them for repatriation and employment upon their return to America.

Black and Gregersons research of 750 US, European and Japanese companies concluded that these companies that reported a high degree of job satisfaction and strong performance and that experience limited turnover, used the following practices when making international assignments:
• They focus on knowledge creation and global leadership development
• They assign overseas posts to people whose technical skills are matched or exceeded by their cross cultural abilities
• They end expatriate assignments with a deliberated repatriation process (Black and Gregerson 1992)

Another issue was that companies had a shortage of staff within them willing, and with the necessary skills to do an international assignment, larger organisations have combated this by recruiting college/university graduates with the sole intention of one day having them as global managers because they posses the necessary characteristics such as openness flexibility, motivational skills, foreign language skills and express a desire to live and work abroad.

Farsighted policies along with selection criteria based on more than adaptability of the manager and her or his family to the culture than on technical skills apparently account for the low international assignment failure rate, estimated at less than 5% (Hamill 1989)

Coca-cola and other such successful multinationals have recently created a new post called the Chief Learning Officer (CLO) whose sole responsibility is developing the organisations human talent on a world wide scale, and for utilising the current talent within an organisation.

In conclusion providing international exposure to promising mangers is one of the strategic reasons for international assignments as cited by Torbirn 1994.

International companies undertaking training and development programmes face significant problems, two in particular being that not only does the expat have to adjust to a new job but also to a new culture (Mendenhall and Oddou 1985), secondly since the stress associated with foreign assignments falls on all family members (Harvey 1985 j4) the issue of training programme for the spouse and family needs to be addressed.


In addition to these skills managers also gain knowledge and experience of how to do business abroad, about new technology, local marketing and competitive information. If the company cannot retain its good returning managers then their potential shared knowledge is not only lost but also conveyed to another organisation that hires that person, this is therefore detrimental to the company’s competitive stance.

Both company and manager benefit from enhanced skills and experience obtained from international experience; improvement in their managerial skills not technical skills learning how to deal with a wide range of people to adapt to their culture through compromise and not be a dictator; tolerance for ambiguity, making decisions with less information and more uncertainty about the process and the outcome; multiple perspectives, learning to understand situation from the perspectives of local employees and business people; ability to work with and manage others; learning patience and tolerance realising that managers abroad are in the minority among local people, learning to communicate more with others and empathise with them (Adler 2002)


For companies to maximise the long term use of their global cadre, they need to make sure the foreign assignment and the reintegration are positive experiences. This means careful career planning, support while overseas and the use of increased experience and skills of returned managers to benefit the home office.


References

• J.L Laabs, “HR Pioneers Explore the Road Less Travelled” Personnel journal (Feb 1996): 70-72, 74, 77-78
• Deresky. H “International Management, Managing Across Borders and Cultures” Pearson (2006) 5th ed p379
• Young, S. and Hamill, J. 1992. Europe and the Multinationals, Aldershot: Gower. Zeira, Y. and Banai, M. 1984. 'Present and desired methods of selecting expatriate managers for international assignments'. Personnel Review, Vol. 13, no. 3, 29-35.
• Tung, R. L. 1984. ’Strategic management of human resources in the multinational enterprise’. Human Resource Management, Vol. 23, no. 2,129-43.
• Saheghian. P and Ebrahimi B, International Business (NY: HaperCollins, 1990) 470
• Forster, N. 1997. ’The effects of international job moves on employees’ work performance’. Journal of Occupational Psychology.
• Zeira, Y. and Banai, M. 1984. �Present and desired methods of selecting expatriate managers for international assignments�. Personnel Review, Vol. 13, no. 3,29-35.
• Shannonhouse, R. (1996), ��Overseas-assignment failures’’, USA Today/International, November. p 8A.
• Punnett, B. (1997), ��Towards an effective management of expatriate spouses’’, Journal of World Business, Vol. 3, pp. 243-58.
• Black. J.S, “Work Transitions: A study of American Expatriate Managers in Japan” Journal of International Business Studies 5 no.1 (1974): 25-37; Tung 1998
• Mendenhall, M. and Oddou, G. 1985. ’The dimensions of expatriate acculturation: a review’. Academy of Management Review, Vol. 10, no.l,39-47.
• Brewster, C. 1991. The Management of Expatriates, London: Kogan Page.
• Stroh, L.K., & Caliguiri, P.M. ( 1998). Increasing global competitiveness through effective people management. Journal of World Business, 33, 1– 16.
• www.FT.com, March 5, 2001
• Harvey.M, “Dual Career Expatriates: expectations Adjustment and Satisfaction with International Relocation,” Journal of International Business Studies 28, no 3 (1997)
• Tung, “US, European and Japanese Multinationals”
• Tung, “Selection and Training of Personnel for Overseas Assignments.”
• Adler N.J, International Dimensions of Organisational Behaviour, 2nd ed (Boston: PWS- Kent, 1991)
• Harvey M.G, “Repatriation of Corporate Executives: An empirical Study, “Journal of International Business Studies 20 (Spring 1989)
• Feldman D.C, “The Multinational Socialisation of Organisation Members,” Academy of Management Review 6 no.2 (April 1981): 309-318
• Tung R “Career Issues in International Assignments Academy of Management Executive 2, no 3 (1988)
• www.FT.com March 5 2001
• Pascoe R, surviving Overseas: The wife’s Guide to Successful Living Abroad (Singapore; Times Publishing 1992
• Black and Gregerson “The other half of the picture; Ancedents of Spouse Cross-cultural Adjustment,” Journal of International Business Studies (Third Quarter 1992): 461-477
• Torbiorn, I. 1984. ’The structure of managerial roles in cross-cultural settings’. International Studies of Management and Organization, Vol. 15, no. 1,52-74.

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