Management of Multinational Corporations

Human Resource Management in MNCs : Chapter 10

HRM is a strategic function concerned with recruitment, training and development, performance appraisal, communication and labor relations. HR policies guide the various functions of HRM. The need for a particular type of HRM is determined by the need for standardization or adaptation. Managing human resources in an international context is more complex than in a domestic set up because of the many differences between headquarters and the subsidiaries. The HR policies of certain companies seem to discriminate on the basis of religion, race, caste, sex or nationality. Companies like Ford and Volvo, however, strive to maintain equality in work and pay.

Companies can identify and develop local talent through in-house Management Development Programs (MDP). These programs will help improve the coordination between employees with diverse cultural, religious and educational backgrounds. Performance appraisal is another activity where there can be differences of opinion between headquarters and subsidiaries.

Subsidiary managers must be involved in setting of unambiguous targets and the establishment of criteria for measuring performance. Performance Management attempts to link performance appraisal to employee training and development, and possibly to compensation. There are three theories concerning the autonomy of subsidiaries in decision-making.

They are: limited autonomy, variable autonomy and negotiated autonomy. According to the theory of limited autonomy, the degree of autonomy will depend on the MNC's approach to globalization. The theory of variable autonomy states that the degree of autonomy varies with the degree of internationalization of the company.

Companies that adopt an export strategy can afford to have centralized decision-making, whereas strategic business units (SBUs) will require decentralized decision-making. According to the theory of negotiated autonomy, the degree of autonomy of a subsidiary will depend on its ability to negotiate with headquarters.

HRM plays an important role in maintaining harmonious industrial relations. Companies are often intimidated by the strength of the union and the political support it enjoys. Certain companies like Volvo ensure cordial relations with the labor union by actively participating in their development. But certain other companies, like Bata have had frequent labor relations problems in India.

Chapter 10 : Overview