Effect of Human Resources on Global Expansion of MNCs

case of gracious race Resources on world-wide Expansion of MNCsMBA Literature reviewThe Relevance of groundbreaking valet de chambre Resource Programs to Facilitate spherical Expansion of Multinational Companies (MNCs) from the UK.2. IntroductionThe activities of transnational companies (MNCs) argon at the heart of Britains world-wideistly open and b totally(prenominal)-shaped economy. This spherical economy has emerged as companies all ein truthplace the world atomic consider 18 get together forces by alliances, mergers, joint ventures, acquisitions, and the like, thus creating the make for a constant roving workforce and the HRM strategies to leap out and develop it. This would at that placefore imply a complete shift in the role of serviceman resources from transaction and administration to outline and occupation transformation by dint of innovative computer course of instructions which gos the orbicular dodge of the comp whatever.This percentage gives an e genuinelywhereview of the belles-lettres review and the theoretical basis for the forthcoming chapters. The chapter consists of journals, books and research materials which picture much than light into ripe homophile Resource Programs to Facilitate orbiculate Expansion of Multinational Companies (MNCs) from the UK.The following were the primary knowledge sources social function for the literary works reviewACM Digital LibraryPro-Quest DirectEBSCO PublishingGale Group info TrackOCLC First-SearchJava Sun Micro governances LibraryIEEE LibraryEmerald Database2.1 Evolution from military unit Management to HRM consort to Guest (1987), the origins of the tralatitiousistic concept of force wariness apprise be traced to the post World War One public assistance tradition of concern for the basic con decennaryds of employees. The developing and mature phases of power forethought from the 1940s to the 1970s saw an increase in the berth and professionalism acc orded to the personnel function, particularly in relation to industrial relations (IR) matters (see dunnock 2004).The concept of HRM, as a wise strategicalalalalalal approach to the localise of people, evolved in the early 1980s (Ericksen 2005). Its evolution was influenced by a consecrate of factors, including increased competitive pressures ca apply by deregulation and globoseisation, and the influence of notable academics in the US and the UK (Ericksen, 2005). Although it has been suggested that HRM whitethorn be no more than old title personnel circumspection with a untested name (Gunnigle and Flood, 1990), Storey (1992) identifies quaternity features of HRM which distinguish it from tralatitious personnel localizeingit is explicitly linked with embodied dodgingit seeks to obtain the commitment of employees rather than their complianceemployee commitment is obtained through an compound approach to serviceman resource policies (for example, reward, idea, se lection, training) andunlike personnel anxiety, which is earlier the domain of specialists, HRM is owned by line managers as a direction of fostering integration.2.1.1 Approaches to pitying Resource Management2.1.1.1 Hard ApproachIf an g everywherening body foc utilizations on control of resources and achievement of outline, it may adopt a impenetrable approach to HRM (see Storey, 1989) in which employees argon viewed as a resource to be managed like any early(a) factor of production. In this approach, the critical undertaking for management is to align the formal structure and HR systems of the placement so that they drive the strategic preys of the organisation. This approach is exemplified in the strategic object lesson of HRM real by Fombrun et al (1984). It has been argued however that an oer-emphasis on knotty HRM ignores the po gotial unsusceptibility of workers and trade unions, factors which drive outnot be ignored if course strategy is to succeed (see Hend ry, 1995).2.1.1.2 fluffy ApproachIn contrast, an organisation may place an emphasis on a soft approach to HRM (Storey, 1992 p. 30), in which employees argon viewed as a valuable as practice whose commitment will assist in achieving organisational success. The clinical for organisations in such an approach is to integrate HR policies with the strategic readiness touch on, to gain the willing commitment of employees, to achieve tractableness through turning away of rigid bureaucratic structures and to make amend quality (see Guest, 1987). The most easy cognise soft feigning of HRM is cognise as the Harvard position of HRM (Beer et al 1984), views traffic strategy as just iodine situational factor which influences managements approach to HRM. This pretending identifies a scope of former(a) situational factors which influence HR indemnity choices, including overabundant management philosophy, laws and societal esteems. In the context of this study, this mannequin is signifi flowerpott in that it identifies a range of stakeholder interests (including unions, government and management) which influence HR indemnity choices. It is argued that unless HR policies ar influenced by tell apart stakeholders, the enterprise will fail to partake the invites of these stakeholders, and ultimately its own objectives (see Beer et al 1984).2.1.1.3 Ideal Type model Integrated links from personnel office to HRMStorey (1992) outlines a further model which illustrates the operate involved in shifting from traditional personnel management to HRM. While this is an ideal type model, it comprises features which atomic number 18 signifi bottomlandt for this study. For example, it stresses the contend for coordinated links in the midst of beliefs, assumptions, management electric receptacles and paint elements of HRM. It likely identifies secernate levers of salmagundi in the various elements of HRM, including enlisting and selection, training and dev elopment and conditions of example. A strategic approach to HRM can be true by creating effective policies in these areas (Storey 1992)2.1.2 The integrative aspects of HRMA discover theme running through many an(prenominal) of the models is integration, which according to Guest (1987) lies at the heart of HRM. He identifies integration at three levelsintegration of HRM policies with course strategyintegration of a hardening of complementary HRM policiesintegration of HRM into the line management function.2.1.3 The Role of Management match to Storey (1992), best practice indicates that the extent to which the conversion process from traditional personnel functions to strategic HRM functions can be achieved will be influenced importantly by the belief and support of senior management in the added apprise that HRM can contribute to the organisation. More importantly, this belief must be visibly demonstrated, for example by committing additional resources to the development of HR strategy and the make up of HR skills levels. As a first step, the head of HR should be afforded a genuine role in the formulation of blusher occupation decisions. This contribution must be an integral part of the descent strategy formulation process, so that HR yields are accorded a reveal priority as opposed to simply being added on to, or indeed excluded from, the core business of the organisation. On an ongoing basis, heads of HR should in any case be enabled to puddle a genuine input into decisions taken at top management level which study implications for HR. Clearly, if the head of HR is to be enabled to play a genuine role in ensuring that HRM issues become a top management priority, it is important that the professionalism accorded to HR, for example through the development of expertness in integrating HR and business strategies, begins at this level.2.2 Definitions Innovative HR Programmes tally to Agarwala (2003), defines innovative homo beings resource co urses of a company can be set forth asAny intentional introduction or change of HRM program, policy, practice or system designed to influence or adapt employee the skills, behaviours, and interactions of employees and piddle the potential to provide two the implantation for strategy formulation and the mode of strategy implementation that is perceived to be new and creates accredited capabilities and competencies (Agarwala, 2003). 2.2.1 Innovative HR Programmes fit to James (2002), innovative course of studys can be grouped into a set of new initiatives which are associated with the process of developing a strategic approach to HRMenhancing its competitiveness. A few of these take onReducing costs through shared run centres, self-service, and outsourcing.Develop resembling HR processes recognising local regulatory lookments to help foster a low-cost, administrative delivery model. Create a self-service culture for employees and managers. Establish globose employee shared serve centres cogitate on delivering HR administrative support to multiple geographic areas, thereby reducing administrative overhead. Outsource key services that can be more efficiently managed and administered externally.Streamlining engine room and info managementImprove nurture feeler to help companies more efficiently manage their human beings capital assets, provide employees and managers with enhanced rag to culture, meliorate HR reporting, and address growing compliance carryments. Reduce HR applied science operating costs by consolidating multiple technologies, technical infrastructure, and IT skills.Managing people planetarylyHelp enable the company to respond to the interdependencies of globose grocery store places by managing human assets spherically rather than nationally or regionally thereby change competitiveness in the worldwide marketplace.Enabling HR to shift its focus from administration to strategyRemove the administrative comp whiznt of th e work of business HR professionals, enabling them to provide more nurture-added services and to focus on consultative and analytical interactions with line managers. Facilitate HRs passageway to a strategic partnership with the company by upgrading talent and skills inwardly the HR function.2.3 downplay Human Resource EvolutionAccording to Cooke (2003), first Generation HR chemise represented a of import shift in HRs role, from legal proceeding and administration to strategy and business transformation. First Generation HR alteration focus on changing the existing affinity amidst employees, managers, and HR, (Randall 2006). With applied science as a key enabler and process re-engineering playing a gelid role, this First Generation effort sought to help make employees more self-sufficient, whilst asking them to take more responsibility for their own careers (Datta et al 2005). It as wholesome sought to help remove HR from the middle of the employee/manager alliance b y making managers more responsible for handling their employees HR needs. all over the past ten years, HR Transformation has led to a study(ip) restructuring of HR operations and processes transforming the way HR services are delivered Cooke (2003).2.4 UK MNCs Achieving world-wide ExpansionMNCs in the United Kingdom postulate long been well indicateed in manufacturing, but in recent years they beat emerged as dominant players in the private service welkin and throw even become involved in the provision of public services (Edwards 2004). Levels of both(prenominal) inward and outward investment are high overseas direct investment (FDI) into the UK by companies based overseas count ons for almost 9% of the total planetary stock while UK-based companies investments overseas banknote for over 14% of the ball-shaped stock (Edwards 2004). In both instances, the UK is second barely to the worlds largest economy, the United States. As a result MNCs are significant employers in Britain for example, 18% of the workforce in the production field are active by overseas-owned companies with many more being employed in the interior(prenominal) operations of British-owned planetarys (Edwards 2004).For multinational companies in the UK to achieve a successful transition in their drive for global blowup and competitive advantage, multinational companies would require innovative HR programmes which would enable them to anticipate critical workforce trends, cause and executing business strategy, identifying and addressing people- related to to risks and regulations, enhancing workforce mathematical process and productivity, and offering new HR services to help a company improve and grow (Edwards et al 2007).2.5 HR Practices EffectivenessA issuing of references have explored the links amongst undivided HR practices and bodily fiscal process. For example, Lam and White (1998) describe that sures HR orientations (measured by the effective enlisting of employees, above average compensation, and panoptic training and development) were related to return on assets, harvest-feast in sales, and developing in stock places. Using a taste of banks, Richard and Johnson (2001) examined the impact of strategic HRM effectiveness (ratings of how effectively a variety of HR practices were performed) on a topic of performance varyings. They engraft that strategic HRM effectiveness was directly related to employee turnover and the race amongst this measure and return on law was heartyer among banks with higher capital intensity (greater investments in branches). In this thesis, HRM would be set forth in the context of a publication of innovative practices which have been prove to enable MNCs manage the transition process in their drive for global blowup, thus enabling fundamental lawal effectiveness and fall apart performance outcomes. Wright and McMahan (1992) defined innovative human resource programmes as practices and a ctivities employed to enable an system achieve its goals. These practices are seen as a departure from the traditional HR activities. Delery and Doty (1996) asserts that these practices are key drivers required by MNCs to respond with the right strategy as they expand their operations in opposite environments (Boselie et al, 2005).2.6 Empirical explore Human Resource Factors MNC globular ExpansionThe drive for global expansion by UK MNCs has necessitated the need for a human resource strategy that would experience that the company is able to sustain its workforce. This has therefore led to the departure from the traditional HR administrative role to a more robust global HR function which takes cognisance of employee profile, the work and environment demographics, de-skilling, re-skilling and multi-skilling and issues related to outsourcing and synergism of its processes vis--vis work-force reduction Lam and White (1998).The largest survey of workout practice of multinational companies (MNCs) in the UK was carried out by Edwards et al (2007). The key findings from the first large-scale, congresswoman survey of employment practice in MNCs which have operations in the UK. The survey is comprehensive in its coverage of all but the smallest international companies. The findings derive from interviews with senior HR executives in each of 302 multinationals operating in Britain, both overseas- and UK-owned. The findings from the research suggest a connection between human resource practices and the performance of libertines, a summary acknowledge the following HR programmes stated below.2.6.1 Innovative HR Practice Compensation Payment85% of the dissolutes surveyed were found to have a robust innovative program in terms of compensation and payment. This is achieved through a performance judgment programme such as upward/peer appraisal and forced diffusion. 72% of the MNCs utilized an innovative scheme for managers, through soulistic output criteria which were supplemented by a range of differentwise criteria including behaviour in relation to coveted competencies and to collective values.2.6.2 Innovative HR Practice Training Development ProgrammesIn detectfulness of adoption of high potential innovative training programmes among MNCs, the organisations were asked if both their UK and overseas operations had a management development programme specifically trailed at developing its high potentials or senior management and employee potential. The information immortalize that high potential programmes are adopted by 70% of organisations 30% of organisations are not using them. Organisations were asked whether they used a global high potential programme that was adopted elsewhere worldwide, or a local, nationally specific programme. Most organisations indicated that their programmes are global in scope.2.6.3 Innovative HR Practice Appraisal ActivitiesIn comparison of performance appraisal practices and management values, the formal performance appraisal schemes for all three groups are very widespread over nine out of ten dissolutes have them for key group and managers, and over 80% have them for large occupational groups. Only 3% of loadeds have no formal appraisals at all. just over a fifth of unassailables use forced distributions for the results of appraisal. A vindicated majority of firms use the results of appraisal as the basis of decisions on surpl economic consumption and redeployment.2.6.4 Innovative HR Practice Employee Involvement CommunicationUK-based multinationals most ordinarily cite setting a broad policy HR programme as being significant or very significant (62% and 66% for training and development and for employee function policy singlely). HR advice and consultancy is as well as relatively prominent for training and development policy (53% significant or very significant), but less so for employee meshing policy (33%). For training and development, and employee inv olvement, policy, the respective(prenominal) proportions reporting the other means of influence as significant or very significant are setting expound HR policies (32% and 31%) monitoring HR policy implementation (39% and 34%) and HR benchmarking and information exchange (42% and 28%).2.6.5 Innovative HR Practice spheric noesis Sharing DiffusionIn respect of innovative HR programmes which lug employee knowledge, learning and diffusion, international employee learning mechanisms are used longly crossways all MNC both inwardly the UK and crossways overseas operations. The survey focused on vanadium formal organisational learning mechanisms used by managers that are international in their scopeInternational brooks groups or toil forces, which are often used to address specific issuesInternational formal committeesSecondments involving the placing of MNC employees in external organisations such as suppliers, customers, universities or private RD companiesExpatriate assignme ntsThe say proveed that the most common organisational learning mechanism adopted among the managerial residential district within MNCs is the informal network (used by 84% of companies). International bemuse groups/task forces also play a prominent role (used by 73% of organisations) and to a lesser degree expatriate assignments (used by 60% of organisations) and international formal committees (53% of organisations). In contrast, secondments are simply adopted by around a quarter of the organisations (26%). The majority (82%) of organisations use two or more organisational learning mechanisms, with 53% adopting between three and quartette of the quin organisational learning mechanisms among their managerial residential area. Around 9% fail to use any of the mechanisms listed. MNCs requiring integration between the UK operations and other sites worldwide are significantly more likely to adopt multiple organisational learning mechanisms (Tregaskis, Glover and Ferner, 2005). However, these national variations show that the form that organisational learning and diffusion take is safely shaped by the national context of the parent firm.2.6.6 Innovative HR Practice UK MNCs give of Shared ServicesAccording to Edwards et al (2007), the findings from the study found that one- fractional of the UK MNCs operate shared services centres and have international HR policy formation bodies. They are far less likely, comparisond to US and other European MNCs, to have a worldwide approach to workforce management. UK firms consistently project to pay a greater proportion of employees (managers, LOG and key group) in the top or 2nd quartile. Nine in ten UK firm have performance appraisal for their managers while seven in ten have formal appraisals for their LOG (Edwards et al 2007). hold of forced distribution is uncommon as is the use of 360-degree feedback. An overwhelming majority of UK MNCs tend to spy trade unions for collective bargaining purposes. Formally d esigned teams and problem-solving groups are usually found in UK MNCs as are a large number of communication mechanisms with representings between line managers and employees, newsletters/emails and systematic use of the management twine the most commonly found communication mechanisms. Although the majority of UK MNCs have eon formulation and formal management development programmes these tend to be comparatively less than other MNCs.2.6.7 Use of ExpatriatesAccording to Edwards et al 2007, UK MNCs make advantageously greater use of parent country expatriates than third country expatriates. This may reflect the short geographical proximity and cultural convertibleity between the UK and Ireland. UK MNCs tend to have considerable discretion over the various HR policy areas, much more than US firms.2.6.8 IT Based Networks ServicesA key development in HR service provision over the past two decades has been the increased use of information engine room (IT) (Edwards et al 2007) . This is all the more relevant in MNCs, where IT systems may be used to monitor policy implementation and performance, and also to facilitate communications and networking, crosswise borders. It thus provides an insight on the extent to which incorporated management has access to HR data on its international operations and can equation performance on HR metrics crossways sites and countries. Specifically examined was the impost of IT based HR information systems (HRIS) and shared services provision on an international level.In regard to the diffusion of HRIS, respondents were asked whether the worldwide company had an HR informationrmation System (such as People quiet or SAP HR) that holds data relating to the firms international workforce. The responses for both foreign and UK-owned MNCs showed that just over half (54 per cent) of all MNCs in the UK account the use of HRIS that operates on an international basis. This is a similar to a study by Collings et al (2007), that fo und in the correspond UK study, where some 52 per cent used such a system (Edwards et al., 2007). However, among MNCs in the UK, a greater proportion of foreign-owned MNCs (56 percent) than UK-owned MNCs (44 per cent) reported the use of HRIS on an international basis (Edwards et al 2007).There were some discernable differences in regard to ownership. As indicated from the study, American firms were the highest users of HRIS (70 per cent), while the rest of the world MNCs is the to the lowest degree likely. This again resonates with the UK findings where US MNCs were among the great users of HRIS and japanese MNCs the lowest (Edwards et al, 2007). The impact of sector on the take-up of HRIS will be fully outlined and put in the appendix in the forthcoming chapters. Among UK MNCs, the service sector accounted for the sterling(prenominal) number of firms with HRIS. However, among foreign-owned MNCs multi-sector firms were by far the largest users, followed by those in the service .2.7 Previous look into Human Resource FactorsPrevious studies have been utilized in exploring the watercourse human resource innovative programmes that UK MNCs must take into account in their drive for global expansion. One of the main limitations of this review is that it is limited within the context of UK MNCs as there was the lack of secern to determine the cause of these practices on MNCs operating in the context of both emerging and non-emerging economies. This is in consonance with Ericksen and Dyer (2005) and Wright et als., (2005), both of who also called for further empirical research from unlike contexts. Gerhart (2005) substantiate the question, to what extent are these innovative HR programmes valid for other context by saying This is a concern because it seems unlikely that one set of HR practices will work equally well no matter what context. To shed more light on the issue and to further examine the relevance and make of such programmes, it is important to lot research in non-US / UK context, (Katou Budhwar, 2007), especially in emerging economies.2.8 HR Factors for Global Expansion EffectivenessPrevious research has explored the links between psyche HR practices and corporate overall performance. For example, Lam and White (1998) reported that firms HR innovative programmes which are largely measured by the effective recruitment of employees, compensation programme, and extensive training and development were related to return on assets, growth in sales, and growth in stock values. Using a try of manufacturing companies, multinational servicing companies and global monetary institutions, Richard and Johnson (2001) examined the impact of strategic HRM effectiveness (ratings of how effectively a variety of HR practices were performed) on a number of performance inconstants. The findings suggested that implementation of innovative HR programmes had an effect on employee turnover and the overall performance of the company.2.8.1 Recruit ment SelectionAccording to Terpstra and Rozelles (1993), who compared the descent between recruiting / selection practices among US / UK MNCs and the firms performance, it was found that there was a steady connection in the companys performance between implementation of the new HR practices and the previous traditional practices, this was focused mainly on recruiting, selection and the use of formal selection procedures and firm performance. Cascio (1991) also states that the improved performances recorded subsequently implementation of such new HR practices are generally substantial.2.8.2 transaction Training ProgrammesRussel, Terborg and Powers (1985) in a survey of 30 US MNCs entrap a link between the adoption of employment training programs and financial performance. The use of performance appraisals (Borman, 1991) and linking such appraisals with compensation has brawnyly been connected with the performance of a firm. (Gerhart Milkovich, 1990). Koch and McGrath (1996) r eported that firms using more sophisticated staffing practices (planning, recruiting, and selection) had higher aim productivity.2.8.3 Communication Employee InvolvementHuselid (1995) reported that HR practices can influence firm performance through provision of organization structures that support involvement among employees and provides flexibleness for improvement of job performance. Green et al (2006) states from findings of a survey that organizations that vertically aligned and horizontally integrated core human resource functions and practices performed better and produced more committed and satisfied HR function employees who exhibited improved individual and organizational performance.2.8.4 Other ModelsMost of the work on innovative human resource programmes and the companys performance has been undertaken in the context of MNCs who consider the US and the UK as their home country. The question which arises, though, is whether the UK and US-oriented models are appropriate and case in other contexts (see debate in special issue of the International Journal of Human Resource Management, 12(7), 2001). Other studies analyzed such as Harel and Tzafrir (1999) found that in parts of Asia and the middle-east, innovative HR practices were related to perceived organizational and market performance. Bae and Lawler (2000) did find a significant descent between HR practices and firm performance in their sample of 140 manufacturing firms in Asia, covering china, japan and South Korea. Lee and Miller (1999) also found a strong kindred between HR practices and performance among a number of MNCs in Asia, but it is assailablely stated that this relationship was most strongly say among firms using dedicated positioning (marketing differentiation or innovative differentiation) strategies. Bae et al., (2003) in their study of HR strategy in Pacific Rim countries found that the evidence of a strong relationship was however based on strict high-performance work syste m with a number of variable conditions. Morishima (1998) found support for the contingency perspective in a sample of Japanese companies. Firms with well-integrated high-involvement work practices and firms with well-integrated practices consistent with more traditional Japanese employment strategies both did better than firms with poorly integrated practices. Bae et al (2003) in their investigation of Hong Kong multinational companies found an increase in the firms performance due to real core innovative HR work practices (training and compensation techniques) with high involvement characteristics.2.9 executionWhilst there are currently limited researches in respect of implementation of innovative HR programs in the context of UK MNCs, however, according to Briscoe and Schuler (2004), murder may vary in respect of what and how, thus limiting the value of comparative survey research. Chew and Horowitz (2004) states that the subject of implementation should only be considered in t he context of the specific MNC or firm involved, as there are lots of contextual factors and limitations in implementation hence the need to be cautious and dissuade any hasty conclusions when taking on findings from research journals on implementation. Horowitz (2004) states that primary research on implementation would need to focus on contingency approaches and mediating variables affecting the MNC level application. A number of theoretical approaches would also add to the importance of context frameworks such as integration/divergence or universalism versus local particularism, and ethnocentric, geocentric, regiocentric and polycentric managerial strategies (Chew et al 2004). The power believes that such an extensive approach would not only examine the relationship between human resource innovative practices and relevance, but would take into account the host environment.2.9.1 Implementation Expansion Formation of HR StrategiesAccording to Briscoe et al (2004), very little wor k has been done on the formation of methods for implementing and lordly the transition from specific administration HR services unto innovative programmes that are directly linked to strategic challenges such as increasing receipts through new market entry or mergers and acquisitions. The formation of the UK MNCs corporate strategy has to take into account the balance between those activities that need to be centralized or standardized and the degree of flexibility required by the affiliate to operate in the host country Brock (2005).The formation of HR strategies is distinguishable by variance in terms of level of stimulus generalisation and scope. The level of precis refers to the level at which the HR strategy is focused. According to Combs et al. (2006), there are different levels of abstraction in the design of a global HR system. Levels vary from recommendations, policy, to running(a)-level procedures. With a policy-level of abstraction, affiliates are given the immunity to implement their own HR strategies within the broad parameters of the standardized policies. However, with an practicable level of abstraction, affiliates are expected to implement a more slender HR management practice. Scope refers to the extent of HR management practices dealt with in the HR strategy. For example, the HR strategy may have aEffect of Human Resources on Global Expansion of MNCsEffect of Human Resources on Global Expansion of MNCsMBA Literature reviewThe Relevance of Innovative Human Resource Programs to Facilitate Global Expansion of Multinational Companies (MNCs) from the UK.2. IntroductionThe activities of multinational companies (MNCs) are at the heart of Britains internationally open and global economy. This global economy has emerged as companies all over the world are connectedness forces through alliances, mergers, joint ventures, acquisitions, and the like, thus creating the need for a constant supple workforce and the HRM strategies to support and de velop it. This would therefore imply a fundamental shift in the role of human resources from transaction and administration to strategy and business transformation through innovative programmes which supports the global strategy of the company.This sectionalization gives an overview of the literature review and the theoretical basis for the forthcoming chapters. The chapter consists of journals, books and research materials which create more light into Innovative Human Resource Programs to Facilitate Global Expansion of Multinational Companies (MNCs) from the UK.The following were the primary information sources used for the literature reviewACM Digital LibraryPro-Quest DirectEBSCO PublishingGale Group Info TrackOCLC First-SearchJava Sun Microsystems LibraryIEEE LibraryEmerald Database2.1 Evolution from Personnel Management to HRMAccording to Guest (1987), the origins of the traditional concept of personnel management can be traced to the post World War One upbeat tradition of co ncern for the basic needs of employees. The developing and mature phases of personnel management from the 1940s to the 1970s saw an increase in the lieu and professionalism accorded to the personnel function, particularly in relation to industrial relations (IR) matters (see dunnock 2004).The concept of HRM, as a new strategic approach to the management of people, evolved in the early 1980s (Ericksen 2005). Its evolution was influenced by a range of factors, including increased competitive pressures caused by deregulation and globalisation, and the influence of notable academics in the US and the UK (Ericksen, 2005). Although it has been suggested that HRM may be no more than old zeal personnel management with a new name (Gunnigle and Flood, 1990), Storey (1992) identifies four features of HRM which distinguish it from traditional personnel managementit is explicitly linked with corporate strategyit seeks to obtain the commitment of employees rather than their complianceemployee c ommitment is obtained through an integrated approach to human resource policies (for example, reward, appraisal, selection, training) andunlike personnel management, which is chiefly the domain of specialists, HRM is owned by line managers as a means of fostering integration.2.1.1 Approaches to Human Resource Management2.1.1.1 Hard ApproachIf an organisation focuses on control of resources and achievement of strategy, it may adopt a hard approach to HRM (see Storey, 1989) in which employees are viewed as a resource to be managed like any other factor of production. In this approach, the critical task for management is to align the formal structure and HR systems of the organisation so that they drive the strategic objectives of the organisation. This approach is exemplified in the strategic model of HRM developed by Fombrun et al (1984). It has been argued however that an over-emphasis on hard HRM ignores the potential confrontation of workers and trade unions, factors which canno t be ignored if business strategy is to succeed (see Hendry, 1995).2.1.1.2 Soft ApproachIn contrast, an organisation may place an emphasis on a soft approach to HRM (Storey, 1992 p. 30), in which employees are viewed as a valuable asset whose commitment will assist in achieving organisational success. The objective for organisations in such an approach is to integrate HR policies with the strategic planning process, to gain the willing commitment of employees, to achieve flexibility through shunning of rigid bureaucratic structures and to improve quality (see Guest, 1987). The most well known soft model of HRM is known as the Harvard Model of HRM (Beer et al 1984), views business strategy as just one situational factor which influences managements approach to HRM. This model identifies a range of other situational factors which influence HR policy choices, including rule management philosophy, laws and societal values. In the context of this study, this model is significant in tha t it identifies a range of stakeholder interests (including unions, government and management) which influence HR policy choices. It is argued that unless HR policies are influenced by key stakeholders, the enterprise will fail to meet the needs of these stakeholders, and ultimately its own objectives (see Beer et al 1984).2.1.1.3 Ideal Type Model Integrated links from Personnel to HRMStorey (1992) outlines a further model which illustrates the process involved in shifting from traditional personnel management to HRM. While this is an ideal type model, it comprises features which are significant for this study. For example, it stresses the need for integrated links between beliefs, assumptions, management issues and key elements of HRM. It also identifies key levers of change in the various elements of HRM, including recruitment and selection, training and development and conditions of employment. A strategic approach to HRM can be developed by creating effective policies in these a reas (Storey 1992)2.1.2 The integrative aspects of HRMA key theme running through many of the models is integration, which according to Guest (1987) lies at the heart of HRM. He identifies integration at three levelsintegration of HRM policies with business strategyintegration of a set of complementary HRM policiesintegration of HRM into the line management function.2.1.3 The Role of ManagementAccording to Storey (1992), best practice indicates that the extent to which the transition process from traditional personnel functions to strategic HRM functions can be achieved will be influenced significantly by the belief and support of senior management in the added value that HRM can contribute to the organisation. More importantly, this belief must be visibly demonstrated, for example by committing additional resources to the development of HR strategy and the edifice up of HR skills levels. As a first step, the head of HR should be afforded a genuine role in the formulation of key bu siness decisions. This contribution must be an integral part of the business strategy formulation process, so that HR issues are accorded a key priority as opposed to simply being added on to, or indeed excluded from, the core business of the organisation. On an ongoing basis, heads of HR should also be enabled to have a genuine input into decisions taken at top management level which have implications for HR. Clearly, if the head of HR is to be enabled to play a genuine role in ensuring that HRM issues become a top management priority, it is important that the professionalism accorded to HR, for example through the development of expertness in integrating HR and business strategies, begins at this level.2.2 Definitions Innovative HR ProgrammesAccording to Agarwala (2003), defines innovative human resource programmes of a company can be described asAny intentional introduction or change of HRM program, policy, practice or system designed to influence or adapt employee the skills, be haviours, and interactions of employees and have the potential to provide both the foundation for strategy formulation and the means of strategy implementation that is perceived to be new and creates current capabilities and competencies (Agarwala, 2003). 2.2.1 Innovative HR ProgrammesAccording to James (2002), innovative programmes can be grouped into a set of new initiatives which are associated with the process of developing a strategic approach to HRMenhancing its competitiveness. A few of these includeReducing costs through shared services centres, self-service, and outsourcing.Develop render HR processes recognising local regulatory requirements to help foster a low-cost, administrative delivery model. Create a self-service culture for employees and managers. Establish global employee shared services centres focused on delivering HR administrative support to multiple geographic areas, thereby reducing administrative overhead. Outsource key services that can be more efficientl y managed and administered externally.Streamlining technology and information managementImprove information access to help companies more efficiently manage their human capital assets, provide employees and managers with enhanced access to information, improve HR reporting, and address growing compliance requirements. Reduce HR technology operating costs by consolidating multiple technologies, technical infrastructure, and IT skills.Managing people globallyHelp enable the company to respond to the interdependencies of global markets by managing human assets globally rather than nationally or regionally thereby astir(p) competitiveness in the international marketplace.Enabling HR to shift its focus from administration to strategyRemove the administrative component of the work of business HR professionals, enabling them to provide more value-added services and to focus on consultative and analytical interactions with line managers. Facilitate HRs transition to a strategic partnership with the company by upgrading talent and skills within the HR function.2.3 solid ground Human Resource EvolutionAccording to Cooke (2003), first Generation HR Transformation represented a fundamental shift in HRs role, from minutes and administration to strategy and business transformation. First Generation HR Transformation focused on changing the existing relationship between employees, managers, and HR, (Randall 2006). With technology as a key enabler and process re-engineering playing a glacial role, this First Generation effort sought to help make employees more self-sufficient, whilst asking them to take more responsibility for their own careers (Datta et al 2005). It also sought to help remove HR from the middle of the employee/manager relationship by making managers more responsible for handling their employees HR needs. everyplace the past ten years, HR Transformation has led to a major restructuring of HR operations and processes transforming the way HR services are d elivered Cooke (2003).2.4 UK MNCs Achieving Global ExpansionMNCs in the United Kingdom have long been well established in manufacturing, but in recent years they have emerged as dominant players in the private service sector and have even become involved in the provision of public services (Edwards 2004). Levels of both inward and outward investment are high foreign direct investment (FDI) into the UK by companies based overseas accounts for almost 9% of the total global stock while UK-based companies investments overseas account for over 14% of the global stock (Edwards 2004). In both instances, the UK is second only to the worlds largest economy, the United States. As a result MNCs are significant employers in Britain for example, 18% of the workforce in the production sector are employed by overseas-owned companies with many more being employed in the national operations of British-owned multinationals (Edwards 2004).For multinational companies in the UK to achieve a successful transition in their drive for global expansion and competitive advantage, multinational companies would require innovative HR programmes which would enable them to anticipate critical workforce trends, cause and executing business strategy, identifying and addressing people-related risks and regulations, enhancing workforce performance and productivity, and offering new HR services to help a company improve and grow (Edwards et al 2007).2.5 HR Practices EffectivenessA number of authors have explored the links between individual HR practices and corporate financial performance. For example, Lam and White (1998) reported that firms HR orientations (measured by the effective recruitment of employees, above average compensation, and extensive training and development) were related to return on assets, growth in sales, and growth in stock values. Using a sample of banks, Richard and Johnson (2001) examined the impact of strategic HRM effectiveness (ratings of how effectively a variety o f HR practices were performed) on a number of performance variables. They found that strategic HRM effectiveness was directly related to employee turnover and the relationship between this measure and return on law was stronger among banks with higher capital intensity (greater investments in branches). In this thesis, HRM would be described in the context of a number of innovative practices which have been prove to enable MNCs manage the transition process in their drive for global expansion, thus enabling organizational effectiveness and better performance outcomes. Wright and McMahan (1992) defined innovative human resource programmes as practices and activities employed to enable an organization achieve its goals. These practices are seen as a departure from the traditional HR activities. Delery and Doty (1996) asserts that these practices are key drivers required by MNCs to respond with the right strategy as they expand their operations in different environments (Boselie et a l, 2005).2.6 Empirical inquiry Human Resource Factors MNC Global ExpansionThe drive for global expansion by UK MNCs has necessitated the need for a human resource strategy that would reckon that the company is able to sustain its workforce. This has therefore led to the departure from the traditional HR administrative role to a more robust global HR function which takes cognisance of employee profile, the work and environment demographics, de-skilling, re-skilling and multi-skilling and issues related to outsourcing and synergy of its processes vis--vis work-force reduction Lam and White (1998).The largest survey of employment practice of multinational companies (MNCs) in the UK was carried out by Edwards et al (2007). The key findings from the first large-scale, representative survey of employment practice in MNCs which have operations in the UK. The survey is comprehensive in its coverage of all but the smallest international companies. The findings derive from interviews with senior HR executives in each of 302 multinationals operating in Britain, both overseas- and UK-owned. The findings from the research suggest a connection between human resource practices and the performance of firms, a summary include the following HR programmes stated below.2.6.1 Innovative HR Practice Compensation Payment85% of the firms surveyed were found to have a robust innovative program in terms of compensation and payment. This is achieved through a performance appraisal programme such as upward/peer appraisal and forced distribution. 72% of the MNCs utilized an innovative scheme for managers, through individual output criteria which were supplemented by a range of other criteria including behaviour in relation to desired competencies and to corporate values.2.6.2 Innovative HR Practice Training Development ProgrammesIn respect of adoption of high potential innovative training programmes among MNCs, the organisations were asked if both their UK and overseas operations ha d a management development programme specifically aimed at developing its high potentials or senior management and employee potential. The data show that high potential programmes are adopted by 70% of organisations 30% of organisations are not using them. Organisations were asked whether they used a global high potential programme that was adopted elsewhere worldwide, or a local, nationally specific programme. Most organisations indicated that their programmes are global in scope.2.6.3 Innovative HR Practice Appraisal ActivitiesIn comparison of performance appraisal practices and management values, the formal performance appraisal schemes for all three groups are very widespread over nine out of ten firms have them for key group and managers, and over 80% have them for large occupational groups. Only 3% of firms have no formal appraisals at all. but over a fifth of firms use forced distributions for the results of appraisal. A clear majority of firms use the results of appraisal a s the basis of decisions on redundancy and redeployment.2.6.4 Innovative HR Practice Employee Involvement CommunicationUK-based multinationals most commonly cite setting a broad policy HR programme as being significant or very significant (62% and 66% for training and development and for employee involvement policy respectively). HR advice and consultancy is also relatively prominent for training and development policy (53% significant or very significant), but less so for employee involvement policy (33%). For training and development, and employee involvement, policy, the respective proportions reporting the other means of influence as significant or very significant are setting detailed HR policies (32% and 31%) monitoring HR policy implementation (39% and 34%) and HR benchmarking and information exchange (42% and 28%).2.6.5 Innovative HR Practice Global fellowship Sharing DiffusionIn respect of innovative HR programmes which press employee knowledge, learning and diffusion, international employee learning mechanisms are used extensively across all MNC both within the UK and across overseas operations. The survey focused on five formal organisational learning mechanisms used by managers that are international in their scopeInternational projects groups or task forces, which are often used to address specific issuesInternational formal committeesSecondments involving the placing of MNC employees in external organisations such as suppliers, customers, universities or private RD companiesExpatriate assignmentsThe evidence showed that the most common organisational learning mechanism adopted among the managerial community within MNCs is the informal network (used by 84% of companies). International project groups/task forces also play a prominent role (used by 73% of organisations) and to a lesser degree expatriate assignments (used by 60% of organisations) and international formal committees (53% of organisations). In contrast, secondments are only adopted by around a quarter of the organisations (26%). The majority (82%) of organisations use two or more organisational learning mechanisms, with 53% adopting between three and four of the five organisational learning mechanisms among their managerial community. Around 9% fail to use any of the mechanisms listed. MNCs requiring integration between the UK operations and other sites worldwide are significantly more likely to adopt multiple organisational learning mechanisms (Tregaskis, Glover and Ferner, 2005). However, these national variations show that the form that organisational learning and diffusion take is strongly shaped by the national context of the parent firm.2.6.6 Innovative HR Practice UK MNCs Use of Shared ServicesAccording to Edwards et al (2007), the findings from the study found that half of the UK MNCs operate shared services centres and have international HR policy formation bodies. They are far less likely, compared to US and other European MNCs, to have a worldwide approach to workforce management. UK firms consistently aim to pay a greater proportion of employees (managers, LOG and key group) in the top or 2nd quartile. Nine in ten UK firm have performance appraisal for their managers while seven in ten have formal appraisals for their LOG (Edwards et al 2007). Use of forced distribution is uncommon as is the use of 360-degree feedback. An overwhelming majority of UK MNCs tend to notice trade unions for collective bargaining purposes. Formally designed teams and problem-solving groups are commonly found in UK MNCs as are a large number of communication mechanisms with meetings between line managers and employees, newsletters/emails and systematic use of the management chain of mountains the most commonly found communication mechanisms. Although the majority of UK MNCs have sequence planning and formal management development programmes these tend to be comparatively less than other MNCs.2.6.7 Use of ExpatriatesAccording to Edwards et al 2007 , UK MNCs make considerably greater use of parent country expatriates than third country expatriates. This may reflect the short geographical proximity and cultural similarity between the UK and Ireland. UK MNCs tend to have considerable discretion over the various HR policy areas, much more than US firms.2.6.8 IT Based Networks ServicesA key development in HR service provision over the past two decades has been the increased use of information technology (IT) (Edwards et al 2007). This is all the more relevant in MNCs, where IT systems may be used to monitor policy implementation and performance, and also to facilitate communications and networking, across borders. It thus provides an insight on the extent to which corporate management has access to HR data on its international operations and can compare performance on HR metrics across sites and countries. Specifically examined was the usage of IT based HR information systems (HRIS) and shared services provision on an internation al level.In regard to the diffusion of HRIS, respondents were asked whether the worldwide company had an HR Information System (such as PeopleSoft or SAP HR) that holds data relating to the firms international workforce. The responses for both foreign and UK-owned MNCs showed that just over half (54 per cent) of all MNCs in the UK reported the use of HRIS that operates on an international basis. This is a similar to a study by Collings et al (2007), that found in the analogue UK study, where some 52 per cent used such a system (Edwards et al., 2007). However, among MNCs in the UK, a greater proportion of foreign-owned MNCs (56 percent) than UK-owned MNCs (44 per cent) reported the use of HRIS on an international basis (Edwards et al 2007).There were some discernable differences in regard to ownership. As indicated from the study, American firms were the highest users of HRIS (70 per cent), while the rest of the world MNCs is the least likely. This again resonates with the UK finding s where US MNCs were among the greatest users of HRIS and Japanese MNCs the lowest (Edwards et al, 2007). The impact of sector on the take-up of HRIS will be fully outlined and pose in the appendix in the forthcoming chapters. Among UK MNCs, the service sector accounted for the greatest number of firms with HRIS. However, among foreign-owned MNCs multi-sector firms were by far the largest users, followed by those in the service.2.7 Previous look for Human Resource FactorsPrevious studies have been utilized in exploring the current human resource innovative programmes that UK MNCs must take into account in their drive for global expansion. One of the main limitations of this review is that it is limited within the context of UK MNCs as there was the lack of evidence to determine the effects of these practices on MNCs operating in the context of both emerging and non-emerging economies. This is in consonance with Ericksen and Dyer (2005) and Wright et als., (2005), both of who also called for further empirical research from different contexts. Gerhart (2005) substantiate the question, to what extent are these innovative HR programmes valid for other context by saying This is a concern because it seems unlikely that one set of HR practices will work equally well no matter what context. To shed more light on the issue and to further examine the relevance and effects of such programmes, it is important to comport research in non-US / UK context, (Katou Budhwar, 2007), especially in emerging economies.2.8 HR Factors for Global Expansion EffectivenessPrevious research has explored the links between individual HR practices and corporate overall performance. For example, Lam and White (1998) reported that firms HR innovative programmes which are largely measured by the effective recruitment of employees, compensation programme, and extensive training and development were related to return on assets, growth in sales, and growth in stock values. Using a sample of man ufacturing companies, multinational servicing companies and global financial institutions, Richard and Johnson (2001) examined the impact of strategic HRM effectiveness (ratings of how effectively a variety of HR practices were performed) on a number of performance variables. The findings suggested that implementation of innovative HR programmes had an effect on employee turnover and the overall performance of the company.2.8.1 Recruitment SelectionAccording to Terpstra and Rozelles (1993), who compared the relationship between recruiting / selection practices among US / UK MNCs and the firms performance, it was found that there was a strong connection in the companys performance between implementation of the new HR practices and the previous traditional practices, this was focused mainly on recruiting, selection and the use of formal selection procedures and firm performance. Cascio (1991) also states that the improved performances recorded after implementation of such new HR prac tices are generally substantial.2.8.2 occupation Training ProgrammesRussel, Terborg and Powers (1985) in a survey of 30 US MNCs establish a link between the adoption of employment training programs and financial performance. The use of performance appraisals (Borman, 1991) and linking such appraisals with compensation has strongly been connected with the performance of a firm. (Gerhart Milkovich, 1990). Koch and McGrath (1996) reported that firms using more sophisticated staffing practices (planning, recruiting, and selection) had higher labour productivity.2.8.3 Communication Employee InvolvementHuselid (1995) reported that HR practices can influence firm performance through provision of organization structures that support involvement among employees and provides flexibility for improvement of job performance. Green et al (2006) states from findings of a survey that organizations that vertically aligned and horizontally integrated core human resource functions and practices per formed better and produced more committed and satisfied HR function employees who exhibited improved individual and organizational performance.2.8.4 Other ModelsMost of the work on innovative human resource programmes and the companys performance has been undertaken in the context of MNCs who consider the US and the UK as their home country. The question which arises, though, is whether the UK and US-oriented models are appropriate and representative in other contexts (see debate in special issue of the International Journal of Human Resource Management, 12(7), 2001). Other studies analyzed such as Harel and Tzafrir (1999) found that in parts of Asia and the middle-east, innovative HR practices were related to perceived organizational and market performance. Bae and Lawler (2000) did find a significant relationship between HR practices and firm performance in their sample of 140 manufacturing firms in Asia, covering china, Japan and South Korea. Lee and Miller (1999) also found a st rong relationship between HR practices and performance among a number of MNCs in Asia, but it is clearly stated that this relationship was most strongly pronounced among firms using dedicated positioning (marketing differentiation or innovative differentiation) strategies. Bae et al., (2003) in their study of HR strategy in Pacific Rim countries found that the evidence of a strong relationship was however based on strict high-performance work system with a number of variable conditions. Morishima (1998) found support for the contingency perspective in a sample of Japanese companies. Firms with well-integrated high-involvement work practices and firms with well-integrated practices consistent with more traditional Japanese employment strategies both did better than firms with poorly integrated practices. Bae et al (2003) in their investigation of Hong Kong multinational companies found an increase in the firms performance due to sealed core innovative HR work practices (training and compensation techniques) with high involvement characteristics.2.9 ImplementationWhilst there are currently limited researches in respect of implementation of innovative HR programs in the context of UK MNCs, however, according to Briscoe and Schuler (2004), Implementation may vary in respect of what and how, thus limiting the value of comparative survey research. Chew and Horowitz (2004) states that the subject of implementation should only be considered in the context of the specific MNC or firm involved, as there are lots of contextual factors and limitations in implementation hence the need to be cautious and dissuade any hasty conclusions when taking on findings from research journals on implementation. Horowitz (2004) states that primary research on implementation would need to focus on contingency approaches and mediating variables affecting the MNC level application. A number of theoretical approaches would also add to the importance of context frameworks such as integratio n/divergence or universalism versus local particularism, and ethnocentric, geocentric, regiocentric and polycentric managerial strategies (Chew et al 2004). The author believes that such an extensive approach would not only examine the relationship between human resource innovative practices and relevance, but would take into account the host environment.2.9.1 Implementation Expansion Formation of HR StrategiesAccording to Briscoe et al (2004), very little work has been done on the formation of methods for implementing and supreme the transition from specific administration HR services unto innovative programmes that are directly linked to strategic challenges such as increasing tax revenue through new market entry or mergers and acquisitions. The formation of the UK MNCs corporate strategy has to take into account the balance between those activities that need to be centralized or standardized and the degree of flexibility required by the affiliate to operate in the host country Brock (2005).The formation of HR strategies is distinguishable by variance in terms of level of abstraction and scope. The level of abstraction refers to the level at which the HR strategy is focused. According to Combs et al. (2006), there are different levels of abstraction in the design of a global HR system. Levels vary from recommendations, policy, to operational-level procedures. With a policy-level of abstraction, affiliates are given the liberty to implement their own HR strategies within the broad parameters of the standardized policies. However, with an operational level of abstraction, affiliates are expected to implement a more detailed HR management practice. Scope refers to the extent of HR management practices dealt with in the HR strategy. For example, the HR strategy may have a