considerations for the hr planning

8/6/2019 Considerations for the HR Planning

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1.1. Considerations for the HR PlanningImportant considerations for the HR planning function include the determination of work demand and labor supply basedon strategic objectives, external environment scanning, work organization and job design, and analysis of importantsources of labor supply.1) From Strategy to Decisions about Work Demand and Labor Supply: Once international business strategies are

determined, specific cost-effective (i.e., highly effective at minimal expense) implementation or action plans must beconsidered. Global HR planning plays a central role in this implementation phase in determining both what kinds of human work and tasks need to be carried-out and who will do this work. The what component in this HR involvement may be considered part of work demand; it leads directly to decisions regarding work organization anddesign, such as breaking-down larger business performance plans and goals into specific coordinated and integratedtasks, responsibilities, and jobs for people to perform. The who component of global HR planning for strategyimplementation comprises many different kinds of decisions related to the supply of appropriate human resources or labor with specific skills to address the identified work demand.

2) External Environmental Scanning: HR planning personnel should also continuously scan the environment for thearray of complex, interrelated challenges that present themselves. The major overarching current trends, influences,and developments including globalization, contingent work arrangements, technological advancements, changingdemographics, and national culture, must be monitored regularly in terms of their implications for new work demandand the ability to meet that demand through human labor or automation.

Other important external challenges pertinent to global HR planning that should be assessed on an ongoing basisinclude:i) Labor Market Conditions and Characteristics: One of the primary engines driving our increasing globalization

is the opportunity presented by increased demand for manufactured goods to satisfy an ever-increasing worldconsumer appetite. The opportunity is especially attractive with the burgeoning growth in the sourcing of themanufacturing operations for these goods to countries such as China, Vietnam, Romania, Malaysia, India, Brazil,Portugal, Mexico, and Thailand representing attractive labor markets where the labor supply is plentiful, of anadequate skill level, and relatively inexpensive compared with the labor supply in more developed countries. Infact, some countries with a relatively low-cost laborforce also hold a comparative advantage in terms of technicalskills, such as India and the countries of Central and Eastern Europe, which are attracting considerable high-techwork demand, in addition to back-office administrative services, to be filled by their low-cost but highly skilledcomputer programmers and engineers. Inevitably, market forces of supply and demand come into play in globalHR planning. As more firms source their work to a foreign country with an attractive, heretofore low-costlaborforce, there is increasing competition for a limited labor supply, which then eventually drives-up the cost of labor for the MNC, as has recently been reported regarding labor characteristics in Southern coastal regions of China.

Within the increasing globalization movement, human resource planning should include a careful and ongoingscanning of various national labor markets to identify particular opportunities or potential problems related to thesupply of labor to support ongoing MNC strategic objectives. Scanning of global labor markets might consider current levels of adult literacy and technical skills among the present laborforce. For example, the UnitedKingdom is significantly behind France and Germany in the number and proportion of the national laborforceachieving craft-level qualifications in engineering and technology, suggesting that plans for expanding heavyR&D and high-tech business activities into the European Union might favor Germany or France where the globallaborforce would be more capable of supporting these more demanding and knowledge-intensive business

activities. In cases, where MNCs open operations in host countries that have a plentiful labor supply for low-skilled jobs but lack a sufficient supply to meet higher-skilled and technical work demand, they should maintainflexibility and mobility to supply the needed higher-skilled labor through expatriate assignments from the homecountry. Or they might seek such higher-skilled labor from a third country, as is common in U.S. manufacturing

plants in Mexico along the U.S.-Mexico border where a large percentage of technical employees and mechanicalengineers come from India.

ii) Governments and Other Labor Interest Organizations: Governments in host country low-cost labor marketsare becoming very competitive in providing MNCs with attractive incentives in the form of tax breaks andexemptions from certain costly labor regulations in exchange for foreign direct investment. Yet they also can

begin to exact increasing costs for the access to and use of its labor supply in the form of higher taxes and the passage and enforcement of more costly and restrictive labor laws. These foreign governments also can requiresignificant company payments to address the social costs of employee job displacement when the MNC

determines to close operations in that country and move to another country with more favorable labor and other operational costs. In addition, local labor unions and, increasingly, international and local NGOs and other international bodies that monitor labor concerns (e.g., the United Nations International Labor Organization) can


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place great pressure on MNCs to improve HR policies and practices related to labor standards, job security, equalopportunity, compensation and benefits, and skill development.

iii) Global Competition: Companies compete both at home and abroad to attract and retain customers by attemptingto consistently deliver high-quality products and services at lower costs. Organizations also compete for thehuman talent itself that drives competitive advantage. Therefore, a critical function of HR planning is tocontinuously watch the competition and scan the environment for best practices in employee recruitment,

selection, placement, work design, training and development, compensation, change and performancemanagement, and other HR management practices that contribute to a world-class, high-performing workforce.

iv) Cross-National Cooperation and Conflict: Several different regional and multinational trade treaties andagreements among various countries have important HR planning implications related to business conducted withand within participating countries.

Important HR planning implications of those agreements include joint venture formation and appropriate staffing to promote treaty country partnerships, standardization and harmonization of acceptable HR practices, formation andstaffing of regional headquarters and HR functions corresponding to treaty member geographic arrangements,movement of workforce operations across participating national borders to take advantage of operational efficiencies,and appropriate cross-cultural awareness skill development for those involved with treaty country interactions. Inaddition, managers and decision-makers must be aware of important current and changing guidelines and evendetailed requirements that these multiple-country agreements can have related to professional licensing, unionrepresentation, benefits, training, work standards, and worker rights.

Aside from various forms of global cooperation, serious forms of conflict within and between countries, includinglocalized and global terrorism, can have important implications for the human side of business and must be attended toas part of HR planning. Ongoing trade wars and skirmishes between countries can present obstacles for foreign

business development in those countries, including those associated with human resource staffing and utilization.More serious cross-country conflicts, such as that between Pakistan and India, can also thwart regional businessstability and business development efforts affecting HR planning.

3) Job Design for Meeting Global Strategy Work Demand: Once work demand that directly addresses theimplementation of company strategy and business objectives has been identified, decisions are needed regarding work organization and design, involving breaking-down larger business performance plans and goals into specificcoordinated and integrated tasks, responsibilities, and jobs for people to perform. The work responsibilities and tasks,

as well as the qualifications or requirements necessary to perform them (e.g., knowledge, skills, and abilities), areconsidered in detail through a process called job analysis. The job analysis process forms the basis upon which keyemployment decisions related to recruitment, selection, training, performance appraisal, and compensation are made.The process of job analysis typically results in the development of a document known as a job description, listing theduties and responsibilities, working conditions, supervision or reporting arrangements, and knowledge and skillsrequired to perform the job effectively. This document should be reviewed regularly and discussed with employeesand revised if necessary to ensure that work performance expectations are clearly understood.

Factors influencing Global Work DesignThe primary factors influencing global work design include cultural adaptation considerations, regulatory influence onwork design, labor market skill level, available technology and infrastructure, and personal accommodation needs.

Major forms of international working arrangements include extensive travel, short-term foreign assignments, expatriate

assignments, inpatriate assignments, virtual expatriate assignments, and multinational virtual teams, which are utilizedfor implementing international business strategic goals and objectives.

4) Sources of Global Labor Supply for Meeting Work Demand: Once work demand has been identified and human jobs (as opposed to automated or robot-delivered work) have been designed into specific tasks and responsibilities,various sources of labor can be considered to fill this work demand.

These sources of labor may be regular or standard employees or employees that are often classified as non-standard or contingent.i) Regular or Standard Employees: They have been better known in the past as full-time or permanent

employees. Regular or standard employees often are considered full members of the organization and generallyare recipients of full benefits typically provided by the organization. These employees often are considered to beat the core of the organizations employment picture, where other non-core employees serve as layers beyondthe core that provide work as needed and as afforded by the organization. As has been practiced by large Japanese

firms for many years, the non-core employees serve as a protective buffer for their core employee counterparts,


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and these non-standard employees tend to be the first ones to lose their jobs or to have their working hoursdiminished in tight financial times.

Three major groups of regular employees as sources of labor in global human resource planning are:a) Parent Country Nationals (PCNs): PCNs are managers who are citizens of the country where the MNC is

headquartered. In fact, sometimes the term headquarters nationals is also used. These managers arecommonly called expatriates or, simply, expats, which refers to those who live and work away from their

parent country. Historically, multinationals have staffed key positions in their foreign affiliates with PCNs.On the basis of research in U.S., European and Japanese firms, Rosalie Tung found that U.S. and Europeanfirms used PCNs in less developed regions. The Japanese and Koreans, however, make considerably moreuse of parent country personnel in all geographic areas, both at the middle- and upper-level ranks.

There are a variety of reasons for using PCNs. Tung found that the most common reason (given by 70 per cent of the respondents) was to start-up operations. MNCs prefer to have their own people launch a newventure. The second most common reason, (cited by 68 per cent of the respondents) was that the parentcountry people had the necessary managerial and technical expertise. Other reasons for using PCNs include: The desire to provide the companys more promising managers with international experience to equip

them better for more responsible positions; The need to maintain and facilitate organizational coordination and control; The unavailability of managerial talent in the host country; The companys view of the foreign operation as short lived; The host countrys multi-racial population, which might mean that selecting a manager of one race

would result in political or social problems; The companys conviction that it must maintain a foreign image in the host country; and The belief that a parent country manager is the best person for the job.

b) Host Country Nationals (HCNs): HCNs are local managers who are hired by the MNC. There are manyreasons for hiring them at the lower- or middle-level ranks. Many countries require the MNC to hire localtalent as part of opening their markets to MNCs. For example, in Brazil, two-thirds of employees in anyforeign subsidiary have to be Brazilian nationals. In India also, before approving joint venture agreements,government restricts the number of expatriates to be employed, primarily to limit the foreign exchangeoutflow and to prepare Indian nationals to undertake the responsibility at a future time. Further, even if a

multinational wanted to staff all management positions with home country personnel, the MNC is unlikely tohave so many available managers, and the cost of transferring and maintaining them in the host countrywould be prohibitive.PCNs fill usually top positions, but this is not always the case. For example, companies following the multi-domestic philosophy or polycentric approach would select most positions, including top ones, from the hostcountry, but usually after starting the operations. For example, HILL, a subsidiary of the Unilever group inIndia is currently headed by an Indian. Sometimes, if a product is to be launched worldwide, PCNs may be

posted to make the launch successful and then operations are handed to HCNs.

European countries prefer to keep their nationals posted in host countries for long durations unlike Americancompanies which post them back to headquarters or to some other subsidiaries. Sales function is usuallyheaded by a local person (HCN). However, the Japanese are an exception; they post a Japanese CEO andother important posts are also occupied by Japanese. They even make it clear that if any one has a problem

with this arrangement, he is free to choose another company.Tung has identified four reasons for use of host country managers, which are as follows: These individuals are familiar with the culture; They know the language; They are less expensive and know the way things are done, the rules of local market and how to get

things done or who can influence; and Hiring them is good public relations. Third Country Nationals (TCNs) : TCNs are managers who are citizens of countries other than the one

in which the MNC is headquartered or the one in which it is assigned to work by the MNC. Tung foundthat the two most important reasons that American MNCs use third country nationals are:

These people have the necessary expertise; and They were judged to be the best ones for the job.

Japanese companies usually do not hire TCNs, while Phatak found that U.S. companies usually prefer TCNs fromEurope.


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TCNs are found typically in large MNCs in advanced stages of growth. A number of advantages are cited for using them. One is that the salary package is usually less than that of a PCN. The knowledge of local language,like English was the reason for choosing British Managers by U.S. companies in former British colonies likeIndia, Jamaica, West Indies, and Kenya.

Today, a new breed of multi-lingual, multi-experienced global managers has emerged. These new managers are part of a growing group of international executives who can manage across borders and do not fit the traditionalthird country mold. With a unified Europe, and North America and Asia becoming business hubs, these globalmanagers are in great demand.

ii) Contingent or Non-Standard Workforce: Contingent or non-standard employees are those who work on aflexible basis as needed or contingent to an organizations work demand and have neither an explicit nor implicit contract for continuing employment. These on call employees, in their many different forms,represent a rapidly growing source of labor for filling global work demand and serving to increase overallworld employment, not just to fill in for lay-offs and lost jobs. Estimates of the size of the contingentworkforce vary, mostly because of the differing ways in which contingent or non-standard employees aredefined. An international study estimated an average of approximately 25 per cent of the world laborforce isin casual non-standard or contingent employment.

Reasons for Major Growth of the Contingent Labor Sectora) Promoting Company Flexibility: To meet increasing global competitive demand, contingent employees are

used on an economical as needed basis, allowing the company to relatively easily adjust up or down thenumber of workers employed and their working hours based on the existing work demand, and thus not haveto pay for excess labor supply when work demand slackens.

b) Supply Factors: In some cultures, a large sector of the labor may be available to work only on a part-time basis, such as where women are expected to attend to most of the childcare and other household managementresponsibilities. In several countries, we also have noted that senior citizens, with increased health andlongevity, may return from complete retirement to the workplace on a part-time basis to generate extraincome and provide additional variety in their lives.

c) Screening Function: Temporary employees and their part-time employee counterparts who are working asmaller number of hours allow for management to sample their work performance before making a long-termcommitment for more regular employment. Such an approach also gives the potential to new regular employee a chance to get to really get to know the organization. Thus, this probationary process may enhancethe effectiveness of new standard-employee staffing decisions.

d) Technological Change: Significant changes in technology often lead to: Outsourcing or re-assigning work outside of the company to those specializing in new technology

expertise; Automation of work and robotics that typically reduce the number of needed employees as well as

change the nature of the work; and Rapid changes that demand flexibility and diminish the need for long-term employment commitments

all of which lead to a greater demand for contingent employment arrangements.

e) Employment Legislation and Deregulation: Some forms of employment legislation on behalf of full-

time or regular employees, such as what many regard as very generous employment benefits for regular employees in Scandinavian countries, might therefore create an economic motive for companies to increasetheir use of part-time and other non-standard employees. Also, through deregulation, companies might

become freer to utilize more flexibility in their staffing practices, where part-time, temporary, and other contingent staffing arrangements typically play a dominant role.

f) Worldwide Growth in Numbers of Small Businesses: Many forces have contributed to the global increasein the number of small businesses, including the increase in corporate outsourcing of functions, corporatedownsizing, and the lure of being ones own boss. Unwilling or unable to handle specialized businessfunctions peripheral to the small companys core competency (e.g., security, payroll, marketing research, andstaffing) and reluctant to employ a permanent workforce to handle these activities, many small businessesoutsource these services for a fee to consultants, contractors, and special service vendors.

g) Changes in Employer-Employee Relationships and Expectations: The longstanding psychological

contract between employers and employees of lifelong employment and job security is greatly diminishingworldwide. Downsizing, such as following privatization (where excess employees were previously carried bystate-owned enterprises), due to workforce redundancies after mergers and acquisitions, as a result of


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technological integration and productivity improvements, or simply due to companies worldwide trying tolower employment costs in the face of global competition, has led to an increased sense of employees beingtheir own free agents and not committed on a long-term basis to a single employer.

h) Changes in Employee Personal-Life Needs and Lifestyle Preferences: In addition to changes in the psychological contract between employers and employees, major changes in employee needs, expectations,and lifestyles have come to alter work arrangements in the workplace. The dramatic increase, especially indeveloped countries, in the number of working mothers and the rise of the two-career family have led to thedemands for flexible working arrangements provided by contingent employment. Employees withresponsibilities for the care of children or aging parents, or both, often secure contingent employment becauseof the flexibility in hours and days worked.

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