Advanced Human Resource Management Paper

Advanced Human Resource Management Paper

1. Introduction

International occupational mobility of employees is becoming more important in a glob-alized world. That is why we decided to put our focus on this topic. This paper is going to analyze the view of the firm and also the view of the employee.
The analysis about the firm’s perspective will mainly concentrate on the Return on In-vestment (ROI) which a company can achieve. So this means for this part we will use the Economic Perspective and the Resource-Based Theory. It seems obvious that it creates a competitive advantage if you know how business works in other countries and their mar-kets you want to get in. You need well-educated and competent employees who are will-ing to go abroad. We want to explain that it is a strategic necessity for a multinational company like PwC to send them abroad. And we want to explain why companies spend an extraordinary amount of money. So in the end we will prove that they do it because a company expects a future return of their foreign employees.

For the perspective of the employee we decided to use the Sociological Perspective of Human Resource Management with special regard to the Social Network Theory. We will show different ways like the cultural benefit you gain and another important thing is that you get in contact to other people who maybe will offer you a job or at least the op-portunity. Also important about this is that there are factors, which prevent employees from going abroad, especially the conflict between personal life and career.

2. Problem Definition

The decision to go abroad is difficult to make, for the employees as well as for the com-panies. A company has to decide whom to send abroad because this decision is responsi-ble for success or failure. And the employee has to decide if he wants to go or not be-cause this is a adjudication which affects the employee’s and his family’s life.

So the purpose of this essay is to answer the following research questions:
(1) Why is it attractive for PwC as an example of a multinational company to spend an extraordinary amount of money on sending their employees abroad?
(2) What are possible advantages for employees to go abroad and which factors can pre-vent them from doing so?

3. Case Description

We chose an article from the Financial Times headlined “the lure of opportunity” pub-lished at the 25th of August 2008. In this article a young woman working as an executive for PricewaterhouseCoopers (PwC) in Beijing is introduced and telling about her motiva-tion and her decision why she goes abroad. Afterwards several HR-directors of different enterprises explain why it is a positive thing and a strategic necessity to send employees abroad.
Nevertheless there also given information about problems, e.g. family reasons and the post-integration of the employees. According to the end of this article you can see that there is a real need for people who are willing to go and that the companies have to be careful if they do not want to lose their best employees.

To remain competitive in today's global environment, companies must overcome a whole new array of concerns - including a multitude of complex, people-related business issues. PricewaterhouseCoopers' Human Resource Advisory practice recognises the important role people play in creating value for businesses and works with companies that strive to make their people a sustainable source of competitive advantage. They work closely with clients to offer practical, multi-disciplinary approaches to create environments in which their people can work most effectively.
PwC employs 5300 human resource practitioners in 114 countries. In China, with offices in Beijing, Shanghai and Hong Kong, PwC is one of the largest professional HR consult-ing firms offering proven HR solutions (www.pwccn.com/home/eng/hra.html).

4. Research Question 1

Resource-based theory states that organizations can be successful if they acquire and maintain competitive advantage over time . Competitive advantage is defined as “a condition which enables a company to operate in a more efficient or otherwise higher-quality manner than the companies it competes with, and which results in benefits accruing to that company” (http://www.investorwords.com/998/competitive_advantage.html). It derives from the definition that the firm implements a strategy that cannot be easily imitated by competitors and for which there are no substitutes. Also, the Resource Based therory focuses on the role that people management systems play in developing those competen-cies which gives the firm a competitive advantage . Moreover, Competencies “refer to organizational processes, engaged in by people, resulting in superior products, and generally these must endure over time as employees flow in, through and out of the firm” (Wright 2001). Knowledge is also a key concept regarding this theory. The transfer, inte-gration and protection of it is essential for gaining a sustainable competitive advantage.

Our research question is: Why is it attractive for PWC, as an example of a multinational company, to spend an extraordinary amount of money on sending their employees abroad?

The main idea to answer this question is that expatriates can be a source to gain competi-tive advantage. Wright proposes that core competences arise from the combination of the firms stock of knowledge (human, social, and organizational capital) and the flow of this knowledge through creation, transfer, and integration in a way that is rare, valuable and inimitable. As a result, we believe that expatriates are a good source especially for the creation and integration of knowledge for multinational companies. Although Organiza-tional Capital is essential for developing integration, we will not focus on it as we assume expatriates are more embedded in the Human and Social capital.

As regards Human Capital , International Human Resource skills can be seen as inimitable and unique for acquiring the necessary knowledge. The creation of practices without a strong supervision enables expatriates to develop new responses to locally problems but always under the corporation culture. Expatriates can also improve the firm´s social capital as others see them as more confident (Szulanski, 1996 & Thai 2002). Therefore, they contribute to making of deeper relationships within the company emphasizing the exchange and integration of knowledge. The sharing and integration of knowledge cannot be possible without strong social connections (Goshalt and Barhlet 1989).

The building of global manager teams provides better decision making due to cultural and environmental enrichment. This reasoning leads us to the development of Dynamic Capabilities in order to adapt to changes, contingencies and emergence of new markets. Hence, expatriates can serve as part of the renewal process firms might take under envi-ronmental changes in order to sustain their core competencies. Their wider expertise in different markets and countries is crucial to face local and international problems. Local managers may lack diversity narrowing consequently potential different perspectives. As Richard (2001) found, “diversity was positively related to productivity, return on equity, and market performance for firms engaged in a growth strategy, but negatively related for firms downsizing”.

Another important issue is that competitive advantage created in a certain time and loca-tion is not necessarily replicated elsewhere. As a result, companies have to deal with the task of being able to establish their competitive advantage worldwide in order to adapt to changing environments and opportunities. Expatriates can act as brokers that manage the tension between local practices in local markets and the global strategy of the firm. In ad-dition, they can carry out supervision tasks that are difficult to be replaced by organiza-tional processes.

Multinational firms are affected by globalization. Consequently, there is a strong aim to acquire a universal culture among all their worldwide locations. Expatriates might be seen as the force that make knowledge flows. Although the various improvements made in information technologies, transport and processes, “face to face” relationships with mates , customers and markets are essential for the exchange of knowledge, especially tacit . It can be said that expatriates act as students, messengers and teachers among the global organization that catalyze knowledge creation and integration through Human and Social Capital.

5. Research Question 2

Focus will now be aimed at the single employee. We will examine which gains the em-ployee can get by accepting an expatriate assignment. The average salary package for an expatriate manager is about 250.000$ (Noe; page 635), but apart from the financial com-pensations, what kind of benefits can the expatriate expect to be able to bring home. What can make an employee move to a foreign country for a number of years? We will also focus on, which factors can prevent the employee from accepting the expatriate as-signment. It will also be in our interest to see what personal qualities the employee should posses to be suited for an experience abroad. Which personal characteristics are requisite in order to make the expatriate assignment successful?

The social network theory can be used to analyze the value of the relationship between different actors. The relationships are of high importance because they define the actor’s position in the surroundings and thereby provide opportunities and constraints on his behavior. When this is said it can be difficult to give a further theoretical explanation. It has been argued (Daniel J Brass; 1995) that Social Network can be seen more as a tech-nique rather than a theory (Daniel J Brass; 1995). In the article PWC’s expatriate in Chi-na, Claire Sandford says: “But the best thing about being here is the international network I am building.” This quotation shows clearly how important these networks are. Building international networks can be very beneficial for the expatriates’ future career. Statistics shows that 25 % of the expatriate managers leave their company within a year of return-ing their expatriate assignment (Noe; page 642f). There can multiple reasons for this to happen, but two things get a lot of attention in the different literature: the culture shock (Noe; page 642f) and the employers missing ability to show, that people that are willing to go abroad can skip stages in their careers. With this is mind the benefits of the interna-tional social networks created on your expatriate assignment can be very valuable, when you leave your company and are looking for a new employer.

Social network is not the only gain an employee can get from going abroad. For example, Kobrin (1988) proposed that the on-the-job internationalization of key manag-ers, in terms of acquiring cross-cultural expertise, language skills, and local knowledge of the host country, was a clear benefit at the individual level (McNulty; 2005).

In the article, “The Lure of Opportunity” the director of human resources at Ernst & Young, Richard Gartside, says: “Persuading people to uproot themselves can be a battle”. He says that this problem gets bigger when the employee gets older, because then the personal and the professional interests come into conflict. He talks about the mismatch between the times when professionals are happiest to travel and the time where they have the most to offer as mobile workers.

To examine how much influence these personal interests have, when you as a HRM pro-fessional have to choose a candidate to go abroad for your company, we will take a look at a research done by Jan Selmer at Hong Kong Baptist University. In this research he uses different variables such as age, gender and marital status as regressors on Sociocul-tural and Psychological Adjustment in Hong Kong. The research concludes that in this age can be used as proxy variable for maturity in the way, that as older the employee is the more successful his assignment abroad will be. Furthermore it states that gender has no effect on the two dependent variables; Sociocultural and Psychological Adjustment. Last the researcher advises the MNC’s to assign married professionals to go abroad. The regression shows, that an “accompanying spouse” actually facilitates the tasks the profes-sional is send there to do (Jan Selmer; 1999).

This research was done amongst professionals who had already chosen to go abroad, and it can be used at useful information for future recruitments of employees. The question is now how the personal factors affect the actual choice of the employee to go abroad or stay at home. “A survey conducted by Windham International and the National Foreign Trade Council (1999), revealed that a large number of international assignments are turned down or interrupted because of spouse and family issues. The survey’s respon-dents cited family adjustment (65%), spousal resistance (53%) and spouse’s career (45%) as the most critical roadblocks to acceptance and success of international assignments” (Chew J.; 2004). The main finding here is, that family commitments are the main factor to prevent managers from going abroad.

We must conclude that family commitments are a very important factor, when it comes to expatriates. It is the main reason for managers to choose not to go abroad, but if the com-pany puts in some effort on this aspect and for example makes it possible to go abroad with your spouse, it can increase the possibility for a successful assignment. As we have seen so far there are a lot of challenges for the HRM professionals when it comes to the recruitment of the right employee, when the company has an expatriate assignment.

6. Conclusion

The main focus in this essay was to analyze the various challenges and possibilities re-garding the increasingly use of expatriates as we see it nowadays. This was done from the perspective of the firms as well as the perspective of the individual employee. We used two different perspectives of human resource management in our analysis, the economical and the sociological.
We found throughout answering our first research question that expatriates are a source of competitive advantage due to their contribution to the development of knowledge across the firm. In addition, we suggested that they mediate between the companies’ local and global tension helping to the create of a universal organizational culture by integrating and acquiring new HR practices.
The second research question can be divided into two sub questions with one concerning the personal gains the individual employee can get from going abroad as an expatriate for a MNC, and the second focuses on the personal characteristic of the expatriate. We found the main reasons for an employee to go abroad including international networks, cross-cultural expertise, language skills, and local knowledge of the host country. We also look into some of the most important personal characteristics that the HR professionals should pay extra attention to such as age, and family commitments.

7. References

PWC’s webpage: www.pwccn.com/home/eng/hra.html

Raymond Andrew Noe, Barry Gerhart, John R. Hollenbeck (2004): Human Resource Management: Gaining a Competitive Advantage 4. Edition.

Jan Selmer (1999), "Adjustment to Hong Kong: US v European expatriates", Human Resource Management Journal, Vol.9, No. 3,

Daniel J Brass; 1995 : A SOCIAL NETWORK PERSPECTIVE ON HUMAN RE-SOURCES MANAGEMENT.

YVONNE M. MCNULTY AND PHYLLIS THARENOU (2005): Expatriate Return on Investment - A Definition and Antecedents.

Chew, J. (2004). Managing MNC Expatriates through Crises: A Challenge for Interna-tional Human Resource Management, Research and Practice in Human Resource Man-agement, 12(2), 1-30.

Patrick Wright, Benjamin Dunford, Scott Snell (2001). Human Resources and the Re-source Based of the firm 701-721

Morris, Snell, Wright (2005). A Resourced based view of International Human Resources

Lertzundi, Hagemeister (2005). Las estrategias de Direccion internacional de recursos humanos