Managing Expatriates in Multinational Companies

This study explores the challenges faced by expatriates in MNCs, the strategies adopted by HR in managing cultural fit, and recommendations for successful expatriate management. It emphasizes the importance of training, cultural understanding, and strategic HR approaches.

[human resource management]
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Table of Contents
INTRODUCTION..........................................................................................................................3
EXPATRIATES IN MNC.................................................................................................................4
CHALLENGES FACED BY EXPATRIATES IN CROSS-CULTURAL ENVIRONMENT...........................5
EXPATRIATE MANAGEMENT PROCESS.......................................................................................7
STRATEGIES ADOPTED BY MNC IN MANAGING EXPATRIATES..................................................9
ROLE OF HR IN CULTURAL FIT..................................................................................................11
RECOMMENDATIONS...............................................................................................................12
CONCLUSION............................................................................................................................13
REFERENCES.............................................................................................................................14
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INTRODUCTION
Due to high paced growth and increasingly changing the world for business, many
companies are opting to go global which means they are entering into joint ventures and
strategic alliances to ensure their presences in international competition. It is very
important for the business organizations to understand effective operations of the
multinational company (Farndale, et al, 2017). Here the international HRM becomes the
critical component for multinational companies. There are various challenges and
opportunities faced by the organizations such as McDonald's, KFC, Unilever, Reckitt
Benckiser Groups, H & M, ZARA, P& G etc which creates the needs for expatriates to be
placed as managers and other skilled staffs in international locations.
The aim of this assignment is to understand the management of expatriates in the
multinational companies so as to assist them in managing the cultural difference they may
face (Reiche, et al, 2016). One of the major challenges faced by the expatriates is the
difference in the culture of other nation. Employing an excellent expatriate is a very crucial
task as it gets complicated by the difference of various factors such as labour markets,
culture, legal and economic systems between the countries. The assignment highlights the
measures taken by the multinational company to prevent expatriates from the cultural
shocks.
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EXPATRIATES IN MNC
An expatriate is an employee who is sent to work in foreign countries by an employer of the
company. The company that sends the employee is the parent company and the host
country is the country of employment (Furusawa & Brewster, 2016). For example, if P& G
sends some of its employees to work in the any of the foreign countries, then these
employees will be referred as expatriates. In order to manage the overseas operation of any
organization, expatriates are sent by various corporations. S many of the companies are
faced global competition; these give rise to the needs and requirements of expatriates such
as internally competent employees or managers.
The HRM of an organization needs to understand the dynamics of maintaining the
relationship between staffing and the productivity. Employing expatriates can be beneficial
in MNCs in order to have a great parental control and also for particular expertise. It helps
the employees in getting the opportunities in both personal and professional development
as well as advancement in a career (Suutari, et al. 2017). Due to the high cost incurred in
maintaining the expatriates, this is the topmost reason of discouragement in use of
expatriates. A higher degree of failure is faced by the company because of inability to adapt
to the culture of other nations.
It is very important for international human resource management to provide proper
training and development to understand the cross-cultural transition in order to succeed in
performing their jobs by adjusting to an intercultural environment. Motivation is one of the
crucial factors after allowance along with the family situation in the success of an expatriate
(Harzing, et al. 2016). Various type of allowance is provided to Expatriates such as Foreign
Service allowance, cost of living allowance, hardship allowance, furnishing allowance. Home
leave allowance, utility allowance and relocation allowance and much more.
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CHALLENGES FACED BY EXPATRIATES IN CROSS-CULTURAL
ENVIRONMENT
There are many challenges faced expatriates while working in foreign companies or on
foreign assignments. Though it is considered as one of the lucrative and adventurous
careers of an expatriate, they may face some of the below challenges in foreign or host
country.
Some of the major challenges are given below:
CULTURAL DIFFERENCES: this is the major and critical issue faced by any expatriate while
moving to work in any country. The difference in culture is prevalent between the different
countries and to be faced by an expatriate in the remote country (Reiche, et al, 2016). It is
essential to have information and knowledge regarding the c beliefs and customs of the new
homeland so as to be able to accommodate the culture of another country while respecting
own belief or culture.
However, with the changing scenarios, the world has now become more accommodating
places. An expatriate needs to understand the potential difference between the different
cultures which may arise after moving overseas. The problems and issues arise in the culture
are the issues of law and order. This issue creates cultural frictions (Furusawa & Brewster,
2016). Embracing and experiencing the different culture is the major element avoided by
the people while mover abroad.
LANGUAGE BARRIER: many people face these barriers as most of the people around the
world do not speak English. Although English is considered as an international language
people of some nations such as Africa, Asia, Middle East Nations, European and North
American nations do not follow this language (Wang, 2014). It is very difficult for the
expatriates to adjust and communicate with the local people.
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SAFETY AND SECURITY: while living in a new country, health problems and accidents are the
few problems faced by the expatriates. As they are not adaptable to the new surroundings
they become the easy target for theft and scammers (Moeller & Maley, 2017). The climatic
change led to getting sick abroad which is not covered by travel insurances. Most of the
health issues are realised by the expatriates while moving to host countries.
LOCAL ADJUSTMENTS: it is difficult for the expatriate to maintain the social life as building
relationships in new surroundings can be very challenging. It results in depression and lonely
ness. The relocation process can be very hectic for the expatriates (Ferraro & Briody, 2017).
Change in eating habits and standard of living result in making the situation adverse for
expatriates.
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EXPATRIATE MANAGEMENT PROCESS
Expatriate management process includes the selection, training and development,
compensation and expatriate retention. In order to effectively manage the expatriates, HRM
considers different cross-cultural models to understand the cultural difference between the
countries by using different cultural dimension models.
Some of the cross-cultural dimension models are:
HOFSTEDE’S CULTURAL DIMENSION THEORY: the framework of this model was developed
by Geert Hofstede in order to explain the impact of culture and society on its people and the
difference in the cultural dimensions between countries (Guo, et al. 2016). Culture is
defined as collective programming of the mind which differentiates the member of one
group to the member of another group. The research is based on six dimensions of national
cultures which are widely used in the management settings of both academic and
professional. Each dimension is expressed on the scale starting from 0 to 100. These cultural
dimensions represent the independent preference which differentiates one country from
another. The dimensions are:
Power distance index: unequal distribution of power among the members of society is
evaluated in this dimension. It exhibits the fundamental issues of handling the inequality
among the people (Baum & Isidor, 2017). High score in scale refers to the acceptance of
inequality whereas low power distance reflects the demand for justification in inequality of
power according to a hierarchical order.
Individualism versus collectivism: individualism represents less preference is given by the
people to look after themselves and their immediate families in this dimension. Collectivism
refers to the high preferences given by the individuals in taking care of their relatives and
immediate families.
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Masculinity versus femininity: higher score refers to the masculinity which represents
achievement, assertiveness, heroism and material rewards for success being competition
oriented (Lakshman, et al. 2017). Low score refers the femininity representing the presences
of cooperation care, modesty and quality of life being consensus-oriented. It is related as
tough versus tender in a business context.
Uncertainty avoidance index: this dimension describes the un-comfortability of individuals
regarding the uncertainty and ambiguity. It explains the fundamental issues of society
dealing with the future.
Long-term orientation: pragmatic approach is related to a high score in this dimension
where encouragement in education is done to prepare for the future which is opposite in
the low score where societal changes are viewed as suspicion (Furusawa & Brewster, 2016).
Links are maintained by the society in past to deal with the challenges to occur in present or
future.
Indulgence: indulgence is referred ha freely gratification of basic and natural desires of
human which is related to enjoyment in life and having fun. Indulgence in society relates to
control in the life and emotions.
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STRATEGIES ADOPTED BY MNC IN MANAGING EXPATRIATES
Managing the expatriate is the most important task in international human resource
management of the company. It is essential for the company to ensure that the workforce
of the company is familiar with the nuances of the international business and cultural
differences. While selecting and recruiting any employee, international knowledge and
experiences should be the critical criteria (Lakshman, et al. 2017). The HR management of
the company should be able to forecast the changes in the market to exploit them in
effective manners. An effective international human resource management will hire the
individual around the world who are efficient in international business operations of the
organization. There are various strategies adopted by the international HRM to manage the
expatriates in the multination company they are:
ETHNOCENTRIC STRATEGY: this starter is followed by the company by selecting the
employees from the parent country to move them to work in the host country. Generally,
the high-level positions in the multinational company are given to the expatriate employees
from the parent country. It is considered that the interest of headquarters can be effectively
managed by the employees from parent country who can link the objectives of the company
to that of the parent country.
POLYCENTRIC STRATEGY: when the company recruits and manage the local people of the
host country then this strategy is adopted by the company. The aim of recruiting local
employee is to minimise the cost required for the operations (Guo, et al. 2016). The
company that adopted ethnocentric strategy may switch to polycentric strategy. Generally,
people at a lower level are recruited and managed from the host country which helps them
in understanding the local market conditions, cultural requirements, political scenario and
legal framework effectively. This method adopted by the company has local HR department
in order to manage the human resources of the company in the host country.
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GEOCENTRIC STRATEGY: in this strategy, the company adopts the strategy of recruiting and
managing the most eligible person for the vacant positions despite the nationalities of the
person (Moeller & Maley, 2017). If the nature of the company is truly global than the
company adopts the globally integrated business strategy as the operations of HR can be
constrained by various factors such as government laws and regulations, political and ethical
factors which is very difficult for the company. In order to achieve considerable success, the
geocentric strategy is adopted by large international companies. International companies
develop an internal database system to manage and track the performance of the
employees so as to identify the eligibility of employees for global postings.
REGIOCENTRIC STRATEGY: the international business of the company is divided into two
geographical regions in which managers are appointed from different countries within the
geographical region of the company (Ferraro & Briody, 2017). The operations of the
company are managed by the managers in the region who don’t go to the headquarters of
the company. This strategy is adopted by the company that have company and product
strategies where regional expertise is needed.
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ROLE OF HR IN CULTURAL FIT
Role of HR management becomes crucial in providing training and development to the
expatriate to be adaptive in the foreign country. It is essential for the HR management of
the multinational company to train its employees so as to overcome the challenges they
might face in the cultural as well as business issues (Guo, et al. 2016). The aim of these
training is not only to embrace the business issues but also focus on the lifestyle, cultural
and technological issues as well. A comprehensive training is to be provided by the HR
department for the expatriates.
Cross-cultural business training: the HR department of the company needs to provide
training by covering the elements such as labour relation laws and Acts as well as effective
leadership style followed in the new culture (Ahammad, et al. 2016). The expatriate should
have the knowledge regarding the productivity standards, disciplinary methods, hiring
practices and other location regulations followed in the new locations. All the business
topics can be covered by the HR department that can influence the performance of the
expatriate.
Remote Training: HR department should follow the continuous training and development
procedure for the expatriates. Training can be provided to the expatriates through live
meetings via computer, web-based training as well as teleconferencing which will be helpful
in updating them on the progress and development of the company.
Cross-cultural social training: social training is to be offered to the employees who are given
assignments to work abroad (Ferraro & Briody, 2017). Through this training, the aim of the
company is to make them familiar with the local customs, traditions, taboos and also the
expectations in order to interact socially. Information is provided to the expatriates
regarding the culture and norms of the host country starting from serving meals for guests
to etiquette for giving gifts which differ from country to country.
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RECOMMENDATIONS
It is recommended to the HR management of the company to provide detailed information
regarding the customs and tradition followed by the people in the culture of the host
country. Taking guidance from the popular case study of the Euro Disney case Study which
resulted in heavy failure due to lack of efforts in understanding the culture of France before
commencing the national theme park in France (Baum & Isidor, 2017). There was a cultural
difference between the US and France which was not focused on the Walt Disney. The
consequence of which was heavy loss and failure in the French market.
It is also recommended to the HR manager of the company to provide the training and
development session to the people regarding the business topics and social life of the host
country. Various factors are to be considered such as language barriers, cultural adaption,
loneliness and depression (Guo, et al. 2016). Local customs, the expectation in local
interactions is to be familiarized to the expatriates. Security training is to be given to the
employee to protect themselves in case of any incidents and scams. Laws and regulation
knowledge is to be provided to the employees so as to protect themselves in case of being
arrested by the local authorities as well as being judged by the local laws.
Repatriation training is to be given to employees who return to their homeland in order to
make adjustments for the employees who have worked abroad. Expatriates need to be
familiarised with the practices of the home office and also adjusting to reporting hierarchy
(Wang, 2014). The company should also incorporate the insights and knowledge of the
employees who have returned from the host country in order to train potential employees
who would go to work in the host country.
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CONCLUSION
Thu it can be concluded that to ensure the success of the multinational companies, they
should adopt appropriate methods and strategies to make cultural compatibility between
the expatriates and culture of host countries. Sufficient training is to be provided to them to
avoid poor performance and failure (Farndale, et al, 2017). Increasing competition in a
global business environment made it essential for expatriate managers and employees to
develop a learning session of the culture of host countries through training courses and
programs. An expatriate employee who has received training is more valuable as compared
to those who did not obtain such training.
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