Human Resource Management in the context of a global company

INTRODUCTION

People are the best form of resource any organization can have and boast of. Many theories have been propounded about how to maximize gains from this resource. People are mostly unpredictable and must therefore be studied and properly managed in order to benefit from their vast pool of skills and abilities. This is the underlying principle of human resource management (HRM or HR). Armstrong (2007) describes HRM as a unique approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce using an integrated collection of cultural, structural and personnel techniques. This definition is succinct especially as several companies in different cultures have embraced the concept of managing their workforce in a manner that will impact performance and leave the worker happy and fulfilled.

This essay, in the context of a company with production and distribution outlets throughout the world, discusses which HR practices to be standardized, and how to ensure that global policies are implemented by each of the company’s subsidiaries. It further delves into the question of whether suggestions made in here would achieve any strategic advantage for the company.

EVOLUTION OF HUMAN RESOURCE MANAGEMENT

The world has come a long way from the days of stiff and autocratic leadership styles and profit-mindedness in the management of businesses to a more human-centred approach which seeks to derive the best from employees through their development and training and allows greater involvement of line managers. One of the remnants of the first industrial revolution in the United Kingdom was the concept of ‘People management.’ This was the model used in managing people who worked in the factories. These workers faced the wrath of unbridled capitalism. The exploitative nature of the revolution forced the promulgation of the Factory Acts of the mid-nineteenth century, which required of bosses to mind the well-being of their workforce. This produced a system where some factory owners appointed ‘welfare officers’ to ensure that the well-being of the factory worker was somewhat ensured (Henderson 2011). The dusk of the nineteenth century introduced an improvement to the exploitative people management model; called the ‘scientific management.’ This concept was postulated by Frederick Taylor who worked at a steel factory in the early 1880s. He observed that differences existed in the productivity levels of workers which he thought were due to differences in talent, intelligence and even motivation. This birthed the concept of scientific management (Aitken 1985). Taylor’s model was reliant on high level of supervisory control over employee work practices. Though this approach proved useful for a while, it differed from previous methods because it called for a higher supervisor to worker or labourer ratio. This amounted to micromanaging the worker which created its own problems and tensions between the labourer and the overseer (Beissinger 1988). Taylorism led to managers taking skills training of their workers a bit more seriously (Henderson 2011). By the 1970s, issues of proper management of personnel began taking considerable shape as evidence was accruing that good management of employees affected performance. This became known as personnel management. It was generally seen as specialist people management and was concerned mainly with procedures such as recruitment and selection, pay and conditions of service, training and development, employee welfare and employee exit. It however, had traces of the Taylorist style, and dealt with day-to-day issues of the organization. Line managers had little role to play in employee relations (Henderson 2011).

In the early 1980s the success of the Japanese manufacturers in penetrating the US market called for a rethink of the traditional personnel management model they (USA) used (mainly Taylorist). This paradigm shift completed the evolution of personnel management to human resource management (Henderson 2011). David Ulrich’s (1998) intervention in settling the initial skepticism that wrapped the concept of HRM largely ‘set the agenda for people management in the 21st century as being essentially about its contribution to organizational performance’ (Henderson 2011). With the growing needs of industry and competition at the heels of businesses the need has arisen for strategic human resource management. This concerns itself with HR strategies to employ in ensuring that the organization achieves its long term objectives. The strategies will determine which HR practices must be followed in reaching those goals.

INTER-COUNTRY DIFFERENCES AND HRM

HR practices dominant in Europe have greater orientation towards people than those from the United States (Organ 1998). Practices in Japan form a profit-centred, organizational focus on long range growth as a strong commitment from employees is expected to the company. HR practices in the United States are more of a short-range profit standard calculated periodically while performance of employees is centred on immediate production. In sub-saharan Africa, the continent’s communal nature is usually transported even to business (Shutte 1993). In India, before the 1990s, several recruitments done were along family lines. So once an individual was recruited, he worked for life, with the aim of helping to build the business. People here were rarely fired, because of the blood ties (Falkenberg et al 2003).

HR arrangements in China are also different from those in other economic power houses of the world. Whilst the Western opinion of HR systems and practices emphasize empowerment, the Chinese see control as a major constituent of what makes up a high- performance HR system (www.digitalcommons.ilr.cornell.edu).

Despite the cultural differences, some HR practices can be standardized for all. HR directors in global companies must be conversant with and appreciate the living philosophies (cultural, business, political) and backgrounds of people they seek to do business with (Falkenberg et al 2003).

LINE MANAGERS AND STRATEGIC HR

Line managers in strategic HR wield influence in a chain of command (vertical line). This authority may be over a certain product line or department. The manager is tasked with meeting corporate objectives in a particular functional field. In contemporary management, quite a number of HR functions have been passed on to line managers. The recognition of line managers is important because they usually hold the workforce and are in better positions to pronounce on the performance of each employee they supervise.

HR PRACTICES IN SUBSIDIARIES OF A GLOBAL COMPANY

Standardizing HR practices on the global level for a business is a key human resource issue as it is a major strategic management one too. The direction or bundle of HR practices a company adopts is determined by its organizational strategy and it is necessary the HR policy is aligned with this grand corporate strategy (Leopold et al 2005).

Michael Porter’s work on competitive strategy which identifies three generic competitive strategies can be useful in determining which practices will be appropriate for a given company. The three strategies he named as reproduced by Leopold et al (2005) are;

- Innovation
- Cost reduction
- Quality enhancement

Always, a company’s determination to travel one of these three strategic directions should dictate which HR approach it adopts, since the HR strategy must align itself with the bigger organizational direction. For instance, if a global manufacturing firm wants to adopt a cost reduction business strategy, it may not be useful expending so much on employee training and development, compared to a company seeking to be a market leader by using innovation and differentiation of its products as strategy (Armstrong 2006).

Best-Practice: Often referred to as universalist or one-best-way-for-all, it is based on the thinking that there is a set of best HR practices and employing them will lead to superior organizational performance (Shields 2007). Best-practice does not take organizational context, strategy or structure in to consideration. Pfeffer (1994) came up with a set of seven HR practices; employment security, high pay dependent on company performance, extensive training, teamwork, breakdown of status differentials and information sharing.

Best-fit: Also known as contingency thinking argues that different types of HR practices match different organizational circumstances (Shields 2007).

It is therefore thorny with the insight given by Porter to say rigidly that either best-practice or the so-called best-fit model should be the sole way to go, regardless of the organization, its context and internal factors. A third school posits that managers can make choices and these ‘may be influenced by contingent factors (best-fit) and prior decisions (best- practice), but are not determined by either’ (Henderson 2011). This is the perspective implied in the Harvard HR model.

It can be simply said that the fundamental choice to be made about HR practices can best be understood as one between a low commitment and a high commitment set of policies and practices (Leopold et al 2005). A low commitment approach to HR strategy will be appropriate in a circumstance where employees are not a major cause of strategic uncertainty for the firm. This situation arises if the firm has a comparatively uncomplicated business environment and employs simple technology and recruits easily replaceable employees. However, companies operating in very tricky industries may require a highly- educated and skilled workforce to man complex technology. Such employees will not be easily obtainable and replaceable; therefore ‘best-practice’ HR approaches will be required to attract, motivate and retain them. It is thus becoming clear that various circumstances determine which set of HR practices must be used.

Let’s consider global automobile manufacturer, Toyota Motor Corporation and examine which practices are best suited for its kind of operation.

HR PRACTICES AND THE TOYOTA EXAMPLE

Toyota Motor Corporation is an automobile company headquartered in Japan with dozens of production, design bases and distribution centres worldwide. This is a very technologically sophisticated business and with Toyota aiming over the years to be an innovative leader in the automobile industry, and a global vision to “lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people. Through our commitment to quality, constant innovation and respect for the planet, we aim to exceed expectations and be rewarded…” (www.toyota- global.com/company), a clear path for its choice of HR practices has been constructed. With thousands of employees of first-rate engineering, IT backgrounds, Shields(2007) suggests that a set of HR practices which sits well with high-commitment, high-involvement work system is required in such a company. Pfeffer’s (1994) set of seven HR practices which largely define high-commitment model suits the company. An elaborate contextualization of these practices, which have been bundled variously into four, is below;