This report was written to examine the procedure of internationalization of 1 Japanese production company in Singapore. Influences from financial crisis in time 2008 forced the group companies to exercise cost-cutting actions in their global procedures, and localization is the only path to save costs and also to maximize the use of local expertise and responsiveness to meet global competition.
The review focuses on several front-end areas of international HRM activities during the process of internationalization. Books review on the subject areas of strategic IHRM, staffing systems, social distinctions and expatriate choices were studied and weighed against the current company structure and its HR management solutions and practices. Issues and problems comes from expatriate assignments were evaluated for future development. Extensive evaluation activities and regions of improvement were advised for the business to revolution.
1. Strategic Human Resources Management in International Context
Strategy Human Resources Management (SHRM) is an activity that allowed a company to bring its central resources alongside one another for tactical planning, for example core competency, core techniques, cultural, structure and human source to align with the company strategy to achieve its goal and aims, see number 1.
In the context of international field where in fact the firm operation includes in a variety of countries and using different national types of workforces, the SHRM can look into broader perspective, for example in the area of six recognized human learning resource activities in home framework internationalization [Dowling P. J 2008]. Some of the additional international HRM's activities implemented by the HR office when Mastec progressed into internationalization receive in Stand 1. The terminology of employee category are such as, i) PCN:- employees given birth to and stay in parent or guardian (home) country (headquarter), ii) HCD:- employees delivered and brought up in the sponsor country (where in fact the subsidiary operate, and iii) TCN:- employees delivered in a country apart from the web host and parent or guardian country, were unveiled in to the company human reference system.
The execution of the tactical IHRM depends upon the stage of the business at during the process of internationalization. Adler and Ghadar's model (1990) based on Vernon's life-cycle theory distinguishes three phases in the international product life-cycle [H. Scullion, 2005]. The first period ("high-tech") focuses on products, research and development that emphasizing on technical competency and role of efficient area. The next period ("growth and internationalization") specializes in business growth and market penetration in local and overseas country. The 3rd stage ("maturity") put pressure on the cheap and cost-control actions anticipated to global competition. In the present day technology world, product life-cycle has been shortened to 3~5 years, which allowed Adler and Ghader to suggest a fourth stage. The fourth phase emphasis that a firm must pursue differentiation and global integration to be able to attain cost-control measures. That is the main reason behind headquarter in Japan to reorganize the business composition in Southeast Asia. The parent company has seen the maturity of the marketplace in Southeast which brought on their decision to put into action cost-control steps. However, fine detail examines at each of the subsidiary shown that there are mixture of phases which the subsidiaries are experiencing. For example, Vietnam and India are in the first period which targets products and growing technical competency.
Human Reference Activities
International Human Tool Activities
Human source of information planning
administrative activities in overseas subsidiary, cross-border dangers management, political risk, terrorism and welfare
Staffing
Staffing procedure in subsidiaries in Vietnam, India, Thailand and Malaysia. Recruitment of HCNs for host-country operation, etc.
Training and Development
Cross-cultural training, dialect translation, pre-departure training
Performance management
Evaluation of expatriate performance, international assignment ROI analysis and staffs evaluation for overseas subsidiary
Compensation and Benefits
Tax equalization, international housing and publishing allowances, come back air ticket benefits, health-care, etc.
Industrial Relationship
different taxation regulation, compliances with web host government plan, and compliances with standard acceptable practice of doing business.
Table: 1
The other approach to strategic IHRM implementation was added by both reasoning of Evans and Lorange which suggested 'product-market reasoning' and 'social-culture reasoning' [Evans & Lorange, 1989]. Both increase a question what sort of firm performs in another type of product markets and diverse social-culture environment, which effectively set up human resource procedures. Product-market logic implied that various phases of produce life-cycle need different focuses of director which dictates the HR activities to focus on core competency, entrepreneurial skills and technological know-how. Social-culture reasoning suggested that for a company to operate in various counties, hiring people from difference social-culture backgrounds affects HR activities into providing training and education of ethnical difference. Focusing on encouraging open up communication, an "open-minded" tuning in, discouraging "silo" and facilitating activities that required less syntax will get around terms and social different obstacles [H. Buknall, 2005]. The argument stressed the important of willingness to listen, enabling the other party to clarify any question without making self assumption to achieve effective communication.
Since Mastec experienced gained the position of local headquarter in yr 2009, the HR activities experienced started to look into above requirement, but the implementation process is still at a learning periods. This is the reason why only expatriate from Singapore was assigned to subsidiary procedure in Vietnam, whereas Thailand and India still managed immediately from Japan. The potency of current organization composition to manage the subsidiary and exactly how effective it is capable of doing its role as local headquarter and retaining the similar degree of corporate government as before have to be evaluated.
2. Staffing Methodology and Human Tool Orientation
As a firm progressing toward internationalization, management and control are more complex credited to procedure in geographical dispersion and multiculturalism. In leveraging those factors, the multinational firm can adopts centralized or decentralized approach which ever meets the complexity of its surroundings. Majority of Taiwanese's MNC desires Foxconn and Acer Computer rehearsing centralized control system. Prahalad and Doz send centralized procedure as 'global integration' with strict control and decisions making from headquarter. Decentralized methodology is more towards 'local responsive' that gives some decision making autonomy to its subsidiary to be able to 'best' improve it product and services to meet local market requirements [Prahalad, 1987]. Typical decentralized control company is a joint venture alliances. One of a reference company which manages very effectively under decentralized system is Johnson & Johnson.
The IHRM books used four approaches to managing and staffing its subsidiary, called ethnocentric, polycentric, geocentric and regiocentric [Perlmutter, 1979]. Through these four types of management orientations, companies can clearly differ from one orientation to another, with respect to the needs of the company [Mujtaba, 2006]. This assertion was proven by the decision of headquarter to change management system in Southeast from clean ethnocentric to regiocentric. Detail explanations of each kind of the staffing contacted are given as follows:
2. 1) Ethnocentric.
Is a staffing approach where subsidiaries are managed by staffs from PCN. In ethnocentric methodology, PCNs are dispatched to complete key position of your subsidiary in host-country. Your brain group of management is 'what home based, will continue to work here' [Guergana K. S. & Mujtaba, 2009]. A number of the reasons to go after ethnocentric management system are lack of competent personal, competency or special technological knowledge in HCNs. The necessity for centralized control, risk management, needs for parent-subsidiary to keep up good communication and coordination are another reasons to practice ethnocentric management. However, there are several restrictions associated with ethnocentric system where HCNs has limited opportunity for career advertising and causes high turnover. Version of expatriates to host country takes much longer time and often contributes to poor decision and cross-cultural issue might occur [Zeira, 1976]. High functioning cost to preserve expatriates expenses being considered unjustified by HCNs. Typical exemplory case of ethnocentric way company are Japanese firms such as Panasonic, Sony and Hitachi. In Mastec corporation, the staffing procedure for subsidiaries in Thailand, Vietnam and India adopted ethnocentric system scheduled to insufficient competency of HCNs and the needs for commercial communication. Most of the customers in India and Thailand are Japanese manufacturers, therefore an expatriate with Japanese vocabulary ability to talk to customer's parent company in Japan continues to be vital.
2. 2) Polycentric
In polycentric staffing approach, multinational firms rely on the HCN to perform the business operation and rarely PCN are transferred to foreign subsidiary. Each subsidiary is treated as an unbiased business entity with decision making autonomy. In some cases, PCN notion that foreign market segments are too difficult to comprehend and therefore a join business alliance was produced. The benefits associated with polycentric are local subsidiary has more leverage to perform business procedure and achieve fastest local response to advertise demand. Polycentric system allows continuity of management by HCNs in foreign subsidiary. Language barrier, cross-cultural version problems and high relocation cost to maintain expatriate expenditures were taken away. The disadvantage of polycentric is bridging difference between HCNs and PCNs at headquarter credited to language barrier, conflicting of countrywide loyalties and compliance to headquarter HRM guidelines. You will find potential hazards of subsidiary become federation, isolated from headquarter and not pursuing corporate and business business goals [Dowling P. J 2008]. In Mastec's corporation, the establishment of subsidiaries in Indonesia and Malaysia was under joint venture alliance and operate under polycentric system. In order to maintain an acceptable level of control and also to provide managerial and executive support, virtual tasks system was integrated with consistent business trips to go to the subsidiary company by the individual manager.
2. 3) Geocentric
The management style in geocentric staffing system targets global operation to get best talents and resources. Each subsidiary and headquarter are interdependent of each other to make unique contribution based on their comparative advantages. An example of the corporation is Mercedes Benz, where the company sources raw materials about the world from the lowest-cost perspective and assembles their cars in Germany where in fact the best technology is located. The strengths of geocentric approach are multinational companies able to create a pool of global executive for deployment throughout the global business. It encourages profession development and campaign of high-potential professional no matter nationality. However, in the process of collecting wisdoms and deploying skills globally, host government may intervenes recruitment using immigration control to encourage job of HCNs. In depth international socializing between PCN, HCN and TCN to support geocentric staffing system needs centralized control which reduced independency of subsidiaries and the staffing decision is time consuming. High cost associated with cross-cultural training, relocation expenses and the necessity to have compensation bundle with international standard offers large financial burden to the businesses.
2. 4) Regiocentric
Regiocentric staffing approach focuses at a specific geographic boundary, but used a pool of managers from the subsidiaries within the region. Several regional headquarter can be developed such as with Asia, European countries and Middle East that will are accountable to headquarter in parent country. The local headquarter gains decision making autonomy to operate their business. HCH can connect to PCN published in the local headquarter. Parent company can maintain reasonable compliances to headquarter HR policy and manage dangers control with PCN staffed in regional office [Dowling P. J 2008]. However, there is a potential of federation at local rather than a country basis. Career prospect also limited by local level and insufficient opportunity for HCN or TCN to explore headquarter working experience.
One should understand that the four management orientations are not mutually exclusive. Therefore, they may take place constantly within same organization for its departments or products [Guergana K. S. & Mujtaba, 2009]. The existing organization structure of Mastec plainly demonstrating the application of various management styles in a organization.
3. Managing Cultural Differences
Culture can be explained as shared of beliefs, values of a group of person, means of thinking and living [L. Laroche, 2007]. It includes everything we are taught to think and response to any given situation by the society in which we are increased. In multinational business context that operating internationally, one must be very sensitive and understand the social ways of performing. A good example is, in Japanese culture, some of the decision making process is executed through informal move forward discussion to attain a consensus called 'nemawashi' [Jon Miller 2007]. Greert Hofstede has identified culture as:
" Culture is more often a way to obtain issue than of synergy. Ethnic dissimilarities are a nuisance at best and often a disaster. "[Geert Hofstede Cultural Sizes, 2009]
The affirmation implied that if we have an understanding view of different people behaves in different cultures, we will have a tendency to interact with the individuals in other countries more effectively to make successful business results. The Hofstede's five ethnical dimensions of research can be applied to possess broader views of nationwide culture.
Power Distance: A lot of the countries in Southeast Asia region displays large vitality distance. In such organization, most of the power centralized in the hands of few key staffs. Subordinates have high dependency on their bosses and are unlikely to deal with and contradict with the bosses straight.
Individualism: Countries in Southeast Asia are a blended of individualism and collectivism. Thailand, Indonesia and Vietnam tend to be more collectivism because of the people from birth onwards are built-into cohesive organizations, high esteem for royal family and family focused. In Japanese culture, 'individual thoughts' almost do not are present and employees will act based on the interest of the group ~ the group come before specific. American and Australia countries show high individualism where people tend to be self-oriented.
Masculinity: Refer to the societies where gender roles are clearly different. In masculinity culture male are supposed to be assertive, difficult and materials success oriented. Feminine are said to be more modest, tender, submissive and concerned with quality. In Asian contemporary society, especially Korean and Japanese company, the masculinity culture is much better, where female staffs are expected to provide tea whenever there can be an important visitor.
Uncertainty Avoidance: This is defined as people tolerance toward doubt or ambiguity. It signify to what increase the cultural intricate a person to exhibit the feeling of uneasy and stressed in unstructured situations. Country of USA and UK display low level of doubt avoidance whereas Japan and Singapore display higher level of doubt avoidance. An example, Japan tends to have strict laws and methods to which their people adhered directly.
Long-Term Orientation: Long-term orientation versus short-term orientation. This fifth culture is said to package with 'Virtue no matter Truth'. Worth associated with long-term orientation are thrift and perseverance and values associated with short-term orientation are value for tradition, gratifying social responsibilities, and safeguarding one's 'face'. Both the positively and the negatively scored values of this dimension are located in the teachings of Confucius, the most important Chinese philosopher who lived around 500 B. C. This aspect also pertains to countries without a Confucian heritage such as Brazil. [Hofstede, 1994, Geert Hofstede Cultural Proportions, 2009]
Beyond the monetary and political-legal issues, a country's ethnical environment (communications, religion, ideals and ideologies, education, and cultural structure) also has an important implications when it comes to a company's decision about when and the way to conduct business there [Bohlander/Snell 2007]. Asian world comprised of various civilizations and traditional traditions inherited from different countries. It really is vital for a global supervisor or expatriate to totally alert to the respected culture before departing for international task. Some supervisor can take up culturally appropriate habits, but that will not apply constantly in all social setting up [Dowling P. J, 2008]. Therefore, it is vital for HR to arrange and facilitates ethnical training to equip expatriates with necessary skills to handle the new environment in overseas country.
4. Expatriates Selection
Hiring and deployment people to effectively perform international task is a crucial decision because inability in expatriate project may cause huge financial reduction, damaging a company, and distance a relations between subsidiary and parent or guardian company. You can concluded that an expatriate inability represents a selection error, compounded in some instances by poor expatriate management [Eugene & Nic, 2002]. Recruitment and selection is a process of looking potential job prospects and gathering information for the purpose of analyzing and deciding best people for a particular vacancy. The factors involved with expatriate selection can be evaluated from individual and situation aspects. Specific factors are i) technological ability, ii) cross-culture suitability, and iii) family need, whereas situation factors are classified when i) culture or country need, ii) terminology, iii) MNE necessity.
Technical capability of a worker to perform the mandatory tasks is the main consideration, given almost all of the reason for international assignment is to 'complete up position'. Which means, special skills and competency or important functions will be assigned to the expatriate. In almost all of the expanding country such as Vietnam and India, insufficient HCN's staffs capacity required mother or father company to dispatch know-how to do the careers as well as knowledge copy. Giving that reason, an effective skill of expatriate is also important to convert technological or managerial skills to HCN.
Cross-culture suitability or ability to adjust to foreign environment is essential for an expatriate to use independently in foreign environment. The attractive characteristics shall include ethnic empathy, adaptability, diplomacy, words ability, good attitude, emotionally steadiness and maturity [Caligiuri, 2000]. A worker with high 'coping skill' allowed him to survive and mix into local culture. Aside from culture capacity, individual's personality, communication skills and attitude to foreigner are also important factors for expatriate to build up personal network in foreign country, hence donate to successful of international project.
Family requirement can determine the ability of members of the family to adjust to the new overseas environment, particularly spouse. The duty of spouse to setup new home, in addition to the down side psychological feeling of abandoning a career, friends and communal support network could cause burden to a expatriate and afflicted the work performance. The significant reasons of expatriate failure are family adjustment causing premature departure, poor performances, lifestyle issues, work adjustment, business climate and repatriation issues, and other opportunities come up. By far, the biggest factor tends to be a spouse's incapability to adapt to his / her new area [Riki Takeuchi, 2002]. Disruption to children education, the need to look after aging parents and custody of children for an individual parent may cause the selected applicant to reject the international task. In order to avoid burden of trailing partner, the manager given to India is without accompanying by his partner and children.
Country or ethnic requirement may impose restriction to employ PCN or TCN. Multinational solid need to demonstrate that HCN is not available, or providing an exercise program to copy knowledge to HCN before the host administration will concern working permit. An example is UK, working permit for Japanese terminology translation is not hard to obtain likened engineering jobs. In a few country, working permits only issued to expatriate where trailing partner is not permitted to work, which may create adjustment problems. Or work allow only issues to male expatriate (eg. no work permit for female expatriate in Midsection East country).
MNE staffing insurance policy is another important decision to meet company aim, for example knowledge copy, management development or business development. The motivational of HCN, HCN's job progression and keeping the lowest cost of business operation also need to be considered. However, for the reason of corporate and business control and the need for special skills, staffing of PCN cannot be prevented. Other situational factors are mode of operation, length and kind of task and amount of knowledge transfers will affect the staffing plan.
The potential to speak local dialect from the capability to learn local culture. Distinctions in terms are named major barrier to effective cross-cultural communication. Despite the fact that, many multinational companies places language at less important standards and they view vocabulary as a mechanical which is controllable by individual. Expatriates who can speak local vocabulary will be regarded as area of the local society which will make business communication easier and friendlier. The other essential requirement of vocabulary is the capability to understand corporate language. Some multinational company from non-English speaking countries may take up corporate communication using the language of parent country (eg. Japanese or Korean) as a standard way of confirming. Prospective applicant may be eradicated from the potential pool credited to a lack of competency in the common language [R. Marschanp, 1999]. Therefore, terms potential may limit the multinational organization ability to select the most appropriate candidate. The requirement of Japanese terminology to talk to Japanese customers has located limitation of expatriate selection in India & Thailand.
5. Lessons Learned
The decision of headquarter in Japan to change management system in Southeast Asia region has put great stresses on Mastec's HR management to looks beyond local context. Throughout the procedure for implementing IHRM activities, numerous valuable activities have been discovered for future improvement although there is absolutely no major problems arise. Those experiences advised that IHRM does not only facilitate and supporting business units but takes on a strategic jobs to initiate the look process and monitoring the execution throughout the business. The close coordination between HR division and individual business units in the execution process is vital to realize the business objections. Several encounters gained are reviewed below for learning process:
5. 1) Mis-match of expectation: Lack of cultural understanding: It isn't surprise that the ethnic training was disregarded because HR division has overlooked that Singapore is a multicultural country. The expectation administrator from the HNC in term of responsiveness and local staffs management have causes conflict under obvious management system. This had resulted the supervisor to fly more regularly to the destination to resolve the problems.
5. 2) Lack of cultural understanding: In India, positioning hands between male-and-male indicate good marriage and trust of each other. However, this practice has given a culture shock to japan expatriate whenever a local customer tried out to carry his hand during the walks for lunch time after a significant business conversation.
5. 3) Insufficient expatriate preparations: The last minutes decision of selecting a applicant for job assignments in Vietnam has given surprises to the spouses. To keep his job performance, the expatriate decided on the assignment and leave behind his sick parent to be taken attention by his spouse by itself. Frequently, the expatriate must go back to home at his own expenses for traveling cost.
5. 4) Insufficient communication route: All these expatriate does not has communication channel to relay his personal problem to the company. Approaching directly to his manager could be misinterpreted into requiring for extra benefits. The issue may be resolved if HR could tackle 'open-minded' dialogue or using mentoring way.
5. 5) Dialect barrier: Due to the unique communication requirement with Japanese expatriate of customers and potential local candidate for jobs assignment in Thailand and India was eliminated. This has slowed up company objective to reduce functioning cost toward regiocentric management system.
5. 6) Insufficient broader perspective: Due to different compensation package for overseas assignment between Japanese and Singapore expatriate, a potential local candidate who have Japanese language capability declined the offers for job task in India. The difference of payment especially in hardship country has seen as unjustified and less attractive by local personnel.
5. 7) Insufficient cultural understanding: A newly expatriate Japanese director exercises his authority to force several worker to work during the cultural national visit to Thailand (Buddhist happening party). The director has guaranteed to his customer to dispatch his employees to support production and will pay triple salary for the over-time working time. Without understanding the ethnic practice of religious celebration in Thailand, he applied clean ethnocentric management style that proved helpful well in Japan into Thailand population. That incident induced cultural turmoil between that group or employee and the expatriate.
6. Conclusions
The internationalization procedure for Mastec is still at an early on stage where you may still find many activities had a need to put in place to strengthen its operation. Mastec need to look beyond its coverage of IHRM studies in the region of training and development, performance management of expatriate, management of repatriates, succession plan, industrial relation, and human resources management in host-country. The issues and issues that arise could be avoided if the correct pre-departure trainings were conducted before expatriate assignment. 'People before Products' is a viewpoint of the creator of Panasonic Group company, Konosuke Matsushita (1984-1989), focus on on cultivating the actual potential and development of personnel before business [Konosuke Matsushita, 2007]. For example, Samsung Consumer electronics used inner developed 'Local Expert' program to teach employees to better understand the international business environment [Tony Michell, 2010].
We can also forecast that in long haul there is opportunity for parent company decision to move toward to polycentric system in Southeast Asia region put through successful of current design. Therefore, it is very important for Mastec to use more IHRM activities to be able to show its independency and capacity to manage the local business. At the same time, it is essential to gain esteem and trust from headquarter by implementing strong commercial governance, co-operation and compliances to headquarter HR plans in Japan.
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