In today’s world economy, we are becoming increasingly interdependent, and businesses are competing on a global level. The on-going process of globalisation has influenced company strategies and the way they do business. In order to retain a competitive advantage, multinational companies (MNCs) have to embrace globalisation by expanding to other countries. Human Resource (HR) managers face a great challenge as a result of this, in the recruitment and management of new personnel for the subsidiaries.
Since the commencement of expatriate assignments, researchers have conducted many studies on different aspects related to the expatriation in MNCs. The view of international manager transformed from myth to daily routine practices. This essay will critically evaluate HR practices based on extensive secondary research. Furthermore, it will make some conclusions and recommendation to improve HR expatriate practices, to make this experience beneficial to both the organisation and individuals. At the end of each section, practical application of human recourse management (HRM) practices will be discussed in relation to the IKEA case study.
IKEA Case Study: A brief overview According to IKEA’s Company History the story of IKEA began in 1943 in the small village of Agu nnaryd, Sweden, when Ingvar Kamprad, the founder, was just 17. Since then, the IKEA Group has grown into a global retail brand with 332 stores, 131,000 co-workers in 41 countries generating annual sales of more than 24. 7 billion EURO. The IKEA Group itself encompasses all IKEA operations – the Swedwood industrial group, distribution and warehousing divisions and the companies that own stores in countries around the globe.
Low prices and well-designed, functional home furnishings available to everyone are the cornerstone of the IKEA vision, business idea and concept. IKEA has been called the king of globalisation in relation to the many local rivals in the furniture industry (Capell et al. , 2005; Hollensen, 2007), and has become a pioneer in leading the globalisation process to greater transparency and mutual awareness among economic, political, and social units in the world (Guillen, 2001). Swedish culture and management practices can be seen throughout the IKEA’s culture.
IKEA operates in different countries and diverse cultures and is a prime example of an MNC which practices are based on six decades and history of dealing with expatriates and gender issues. This research will analyse the HR practices related to international staffing and managers in IKEA. Moreover taking IKEA as a case study, the research will unveil the myth regarding to international managers; show integration and promotion of gender norms; describe the expanded ethnocentric approach in response to globalization for international staffing.
IKEA Case Study: A brief overview According to IKEA’s Company History the story of IKEA began in 1943 in the small village of Agu nnaryd, Sweden, when Ingvar Kamprad, the founder, was just 17. Since then, the IKEA Group has grown into a global retail brand with 332 stores, 131,000 co-workers in 41 countries generating annual sales of more than 24. 7 billion EURO. The IKEA Group itself encompasses all IKEA operations – the Swedwood industrial group, distribution and warehousing divisions and the companies that own stores in countries around the globe.
Low prices and well-designed, functional home furnishings available to everyone are the cornerstone of the IKEA vision, business idea and concept. IKEA has been called the king of globalisation in relation to the many local rivals in the furniture industry (Capell et al. , 2005; Hollensen, 2007), and has become a pioneer in leading the globalisation process to greater transparency and mutual awareness among economic, political, and social units in the world (Guillen, 2001). Swedish culture and management practices can be seen throughout the IKEA’s culture.
IKEA operates in different countries and diverse cultures and is a prime example of an MNC which practices are based on six decades and history of dealing with expatriates and gender issues. This research will analyse the HR practices related to international staffing and managers in IKEA. Moreover taking IKEA as a case study, the research will unveil the myth regarding to international managers; show integration and promotion of gender norms; describe the expanded ethnocentric approach in response to globalization for international staffing.
Staffing orientation: Expat vs. Local Manager One of the main challenges affecting international human resource managers is the staffing orientation in the MNC’s global subsidiaries. The recruitment and selection process of a company must first and foremost be in line with the company’s strategy as well as being suited to the goals of the foreign subsidiary. Therefore, the human resource manager is largely dependent on the company’s strategic decisions towards foreign direct investments, whether they adapt a global strategy or respond to local needs.
One of the themes most commonly referred to in the literature on this topic, is Perlmutter’s (1969) ethnocentric, geocentric and polycentric approaches towards staffing. In principal, the selection of an expatriate manager versus a local manager comes down to the needs of the subsidiary and the socioeconomic factors of the host country (Liu and Chen, 2012). Where an MNC has adopted a global strategy in one country, the same company may choose to localise in another, based on the location advantages of that particular country. For companies who choose to localise, the immense costs of sending n expatriate manager can be reduced, as well as helping to break down language barriers (Mayrhofer and Brewster, 1996). It may also ease the process of gaining access to the complex network of business and personal contacts needed to develop presence in various countries (Lassere, 2007). This staffing strategy is characterised as the polycentric approach, where managerial positions are filled by host country nationals (Perlmutter, 1969). On the other hand, expatriate managers provide a vital communication link between the headquarters and subsidiaries.
In some cases, despite an unstable political climate, an MNC may actually prefer to appoint an expatriate manager, because government officials may favour dealing with high-ranking senior expatriates, due to them being more likely to make offhand decisions (Lassere, 2007). Some of the drawbacks of hiring an expatriate manager over a local manager are that tension may arise between the host country nationals and the expatriate manager as a result of conflicting culture and significant income gap (Mayrhofer and Brewster, 1996).
In addition to this, sending an expatriate manager would mean less career opportunities for host country nationals which may affect the company’s reputation, as localisation is a valuable means of showing benevolence and a willingness to integrate (Lassere, 2007). Which style: Ethnocentric or Geocentric? A second challenge arises when the MNC decides to appoint an expatriate manager – should the individual be a parent country national or third country national? The choice between the ethnocentric and polycentric approach again lies in the interests of the MNC and of the particular subsidiary.
The geocentric approach is based on hiring someone with the right qualifications regardless of nationality (Perlmutter, 1969). With this kind of staffing strategy, the MNC is able to develop a network of so called ‘international managers’, whose acumen of tacit knowledge and global reach will give them a competitive advantage (Lazarova and Cerdin, 2007). Edström and Galbraith (1977) argue that managers who have been transferred often, will have a better grasp on communication, and are bound to have larger networks than those who have not been transferred.
Edström and Galbraith’s theory is built on by Beaverstock (2004), who argues that the transfer of an individual is essential to their personal development and communication skills. However, from an ethnocentric point of view, the MNC can exhibit more control over the subsidiary by employing a parent country national. Additionally, the expatriate manager will act as an intermediary to express the HCN’s requirements to the headquarters and vice versa (Moore, 2006).
While Perlmutter’s models provide a comprehensive framework for the staffing orientation of MNCs, there are limitations to his work. Due to the intricate structures of multinational corporations, they cannot be classified as having but one staffing strategy. Rather, the different strategies can be looked at interdependently as growing into one another depending on the stage at which the subsidiary is. Furthermore, the staffing orientation will vary from country to country, and subject to the changes in the MNC’s strategic outlook.
HR managers in MNCs must be willing to adapt to changes in the socio-economic environment of the host country or organisational structural changes, by applying a new model of staffing orientation when needed. Case Study IKEA: Staff orientation and HR practices In relation to the case, Ikea can be perceived as being ethnocentric as everything about the company reminds you of its host country Sweden. By having a glance at their website, this quickly becomes evident as they express: “It is no accident that the IKEA logo is blue and yellow.
These are the colours of the Swedish flag. ” (IKEA, 2012) However, while the ethnocentric approach may have been true in the past, Ikea no longer focuses on hiring Swedish managers only. Recently, Ikea has changed its staffing strategy in response to globalisation and varying market preferences, by hiring managers locally (Svensson, 2012). Ikea’s strategic approach exemplifies the continuous needs for MNCs and their HRM departments to adapt to the ever-changing international environment. Case Study IKEA: Staff orientation and HR practices
In relation to the case, Ikea can be perceived as being ethnocentric as everything about the company reminds you of its host country Sweden. By having a glance at their website, this quickly becomes evident as they express: “It is no accident that the IKEA logo is blue and yellow. These are the colours of the Swedish flag. ” (IKEA, 2012) However, while the ethnocentric approach may have been true in the past, Ikea no longer focuses on hiring Swedish managers only. Recently, Ikea has changed its staffing strategy in response to globalisation and varying market preferences, by hiring managers locally (Svensson, 2012).
Ikea’s strategic approach exemplifies the continuous needs for MNCs and their HRM departments to adapt to the ever-changing international environment. The International Manager In continuation to the previous section of staffing orientation, we will discuss the challenges in recruiting the ‘International Manager’. Just over a decade ago, Forster (2000) debated that the ‘International manager’ was a myth, and that such status would only be available as a possible reward at the end of a successful career. Reasons for this were the high expatriate failure rates, and the enormous costs of sending employees abroad.
As a result, there has been a noticeable shift from conventional, or long-term expatriate assignments to short-term transfers (Collings, Scullion and Morley, 2007). As new staffing patterns are emerging in international business, MNCs and their human resource departments are put under an increasing amount of pressure to recruit and retain talent within the organisation. The first challenge pertaining to the recruitment of international managers is simply, who is the right person for the job? Spending substantial periods of time away from ones country of origin can be very challenging for most people (Forster, 2000).
Some authors argue that there are certain personality traits that enable someone to perform successfully at an international level in order to avoid stress which ultimately leads to expatriate failure (Edwards and Rees, 2006). These inherent personality traits are described by Gregersen et al. (2006) as cultural flexibilities and cross-cultural competencies. Studies suggest that third culture individuals, defined as “people who lived outside their passport country during their developmental years”, are more capable of adapting to foreign situations.
Nowadays with the rise of borderless culture, more and more individuals have become ‘cultural hybrids’ (Moore and Barker, 2012). Meanwhile, there are studies that suggest that with the right amount of training anyone can adapt to the life of an international manager (Semler, 2002). The task for MNCs is to decide on the level of training required, that is proportional to the organisational needs and resources available. Training of an employee before sending them on an expatriate assignment is an important part of the preparation process.
However, if individuals, such as third culture individuals, who display these certain personality traits, are readily available, it is in the MNC’s best interest to seize the opportunity by hiring them, thereby reducing the costs of training. Another challenge international HRM faces is within the retention of competent employees. According to Collings, Scullion and Morely (2007), 20% of North American managers who complete foreign assignments wish to leave their company on return. This recognisably contributes to the growing cost of expatriate turnover (Dowling and Welch, 2004), and gives rise to the concern of loyalty within the company.
With the increasing phenomenon of dual career couples, and the fear of disruption to children’s educations, MNCs are struggling to recruit and retain employees for expatriate purposes (Collings, Scullion and Morely, 2007). Furthermore, individuals have become more concerned with their own personal development, rather than career advancement the traditional way, within the multinational company in which they work. This emphasises the need for improved reward systems and incentives to stay with one organisation (Edwards and Rees, 2006).
Case Study IKEA: Myth of international managers uncovered IKEA describes the background for their diversity management practice: “We encourage an environment where people of different views, age, nationality, gender and ethnic background feel welcome. We believe that a diverse workforce will improve business results, strengthen our competitiveness and make IKEA a better place to work” (IKEA, 2006). This reflects the high importance and big effort IKEA puts into recruitment (Kling and Goteman, 2003) in the international context.
The IKEA’s People Philosophy that managers should be only Swedes was abandoned in 1998, since then firm’s way of life was that diversity issues is a matter of creating a more business challenging atmosphere, by growing the employment base. By creating a diverse workforce within all their subsidiaries, Ikea has helped eliminate the cultural barriers some managers face when going abroad. Furthermore, their welcoming policy creates a sense of loyalty towards the company, enabling them to retain a skilled workforce.
Case Study IKEA: Myth of international managers uncovered IKEA describes the background for their diversity management practice: “We encourage an environment where people of different views, age, nationality, gender and ethnic background feel welcome. We believe that a diverse workforce will improve business results, strengthen our competitiveness and make IKEA a better place to work” (IKEA, 2006). This reflects the high importance and big effort IKEA puts into recruitment (Kling and Goteman, 2003) in the international context.
The IKEA’s People Philosophy that managers should be only Swedes was abandoned in 1998, since then firm’s way of life was that diversity issues is a matter of creating a more business challenging atmosphere, by growing the employment base. By creating a diverse workforce within all their subsidiaries, Ikea has helped eliminate the cultural barriers some managers face when going abroad. Furthermore, their welcoming policy creates a sense of loyalty towards the company, enabling them to retain a skilled workforce. Gender inequality: The barriers women face
Discrimination against women and ethnic minorities has been a recurring issue within international business for decades. Until recently, the typical expatriate manager from a Western point of view was a white, middle-aged man. The same concept is prevalent in other cultures, for example a Chinese male would be appointed expatriate manager for a Chinese firm (Davison and Punnett, 1995). While research indicates that women and men were evaluated on par in terms of job performance (Sinangil and Ones, 2003), women are more hesitant to work in certain overseas locations due to fear of discrimination (Lowe, Downes and Kroeck, 1999).
Although seldom detailed in a job description, gender, race and religion are distinctive personal characteristics that influence decisions in appointing an expatriate manager (Davison and Punnett, 1995). The challenge for international human resource managers today is weighing up the many factors that define expatriate success to appoint someone who is the best fit for the job. In this section we will discuss the factors that lead to the metaphorical ‘glass ceiling’ which prevents women from achieving promotions to higher levels within organisations.
One of the biggest barriers women face to being hired on an expatriate assignment is the perceived suitability of a female manager to cope with the host country’s environment. While this notion may be another myth, it is a strong factor influencing corporate reluctance to selecting female managers for international assignments, thereby restraining the diversity within the international workforce (Sinangil and Ones, 2003). Historically, the division of gender roles within business has happened on worldwide basis.
More recently however, an effort towards gender equality has been made in the form of various initiatives such as the Equal pay and the Equality Act 2010 in Europe (Equality and Human Rights Comission, 2013). While some nations have taken a step towards equality, some remain fairly segregated, and the problem lies within transferring from a more egalitarian business culture to one where women don’t have equal rights (Edwards and Rees, 2006). In a study conducted by Metcalfe (2007), it is apparent that women in the Middle East don’t experience equal opportunities due to culture and Islamic influence on gender roles.
In many societies, women remain consigned to domestic duties and low-level work (Sinangil and Ones, 2003). Implications for women in such environments may include stress due to increased pressure to meet requirements, resulting in poor performance and inability to complete the task (Edwards and Rees, 2006). It is also important to note that gender inequality on international assignments may also be a result of diverging choices in career paths for women and men. Studies show that educational barriers in North American organisations are mainly dependent on MBA studies (Adler and Izraeli, 1994).
Furthermore, women who graduate from MBAs are still experiencing lower pay than men, and this gap is actually increasing as the years go by (Damast, 2012). However, demographic factors may also play a role, as “women who take the Graduate Admission Test are on average a year younger than men are, and are therefore more likely to graduate at a younger age, with less work experience, and thus fetch lower salaries,” according to Renz (Damast, 2012). In addition to this, the family element should be mentioned.
Women in double career relationships often hit the ‘glass ceiling’ in terms of expatriate positions because of doubt on whether they can find a suitable job for the partner (Li and Wearing, 2004). Gender inequality: Implications for HRM Then again, literature on the topic of gender within international human resource management is abundant with examples of success for female expatriates. As Anne Fisher wrote in a 1992 issue of Fortune magazine, “… in a ferociously competitive global economy, no company can afford to waste valuable brainpower simply because it’s wearing a skirt. (Adler, 1994) There are also prevailing arguments that suggest women may actually be more suited for certain expatriate assignments than their male counterparts. Although women face many obstacles in male-dominated cultures, foreign women, on the other hand, are likely to be treated with respect and admiration by their male colleagues (Sinangil and Ones, 2003). Furthermore, researchers found that the success of expatriates depends on their ability to understand cultural differences, which gave women an advantage due to their management styles (Napier and Taylor, 2002).
Overall on this topic, most authors seem to focus on the misperceptions of disinterest among women to take up international assignments (Hutchings, Lirio and Metcalfe, 2012). While there is no doubt that gender discrimination is established in international business, the literature doesn’t cover the bigger picture that includes demographic factors, family issues, and the simple career decisions that some women make. While some papers address these issues as myths, we cannot deny the fact that starting a family poses a huge impediment to a female manager’s career, whereas her spouse would largely be unaffected (Blossfeld and Huinink, 1991).
As a result, implications for HR managers looking to appoint someone for an expatriate assignment would be that there are fewer women than men pursuing such positions. Nowadays, most of the ‘ethical’ issues within organization are dealt by HR department. Poor public image and negative media coverage damages a MNCs employment and retention of staff (Edwards and Rees, 2006). Through research, it was established that if MNCs strategy is to increase productivity then there is a need to achieve high morale.
Theretofore, HR should address broader CSR issues, such as inequality of gender and other ‘ethical’ issues. Additionally, HR should implement several practices, such as code of ethics (cited in CIPD, 2002), code of conduct as well as some other forms of voluntary regulation. Using this as a useful tool, will increase company’s public image, legitimacy, accountability and will successfully engage not only employees, but also customers and other stakeholders. Case Study IKEA: example of Gender inequality and HR practices IKEA have had their share of gender equality disputes.
In October 2012, a scandal arose from Ikea removing pictures of women in their Saudi Arabia catalogue, rousing disapproval from Western feminist groups (Lais, 2012). In response, Ikea apologised by saying: “We should have reacted and realised that excluding women from the Saudi Arabian version of the catalogue is in conflict with the Ikea Group values. ” (Quinn, 2012) IKEA does in fact have a very open recruitment policy, which is driven by talent regardless of gender, nationality or religion. According to their head of recruitment, Tanja Fröhlich, there are“40 per cent of the top 200 managers are women” (Kenexa, 2012).
Moreover, IKEA CEO Anders Dahlvig shares his vision “… in Sweden, we are pretty focused on gender issues…there are also more woman in our customer base. We have also some initiative on diversity of ethical and cultural backgrounds. I think immigrants are a bigger issue since society becoming more multinational…” (Kling and Goteman, 2003). It is reasonable assume that diversity and equality practices and vision cascades down from CEO throughout the organization and enriches IKEA’s culture on the levels below.
This is also reflects through the relationship between customer’s profile and diversity of the workforce. Case Study IKEA: example of Gender inequality and HR practices IKEA have had their share of gender equality disputes. In October 2012, a scandal arose from Ikea removing pictures of women in their Saudi Arabia catalogue, rousing disapproval from Western feminist groups (Lais, 2012). In response, Ikea apologised by saying: “We should have reacted and realised that excluding women from the Saudi Arabian version of the catalogue is in conflict with the Ikea Group values. (Quinn, 2012) IKEA does in fact have a very open recruitment policy, which is driven by talent regardless of gender, nationality or religion. According to their head of recruitment, Tanja Fröhlich, there are“40 per cent of the top 200 managers are women” (Kenexa, 2012). Moreover, IKEA CEO Anders Dahlvig shares his vision “… in Sweden, we are pretty focused on gender issues…there are also more woman in our customer base. We have also some initiative on diversity of ethical and cultural backgrounds. I think immigrants are a bigger issue since society becoming more multinational…” (Kling and Goteman, 2003).
It is reasonable assume that diversity and equality practices and vision cascades down from CEO throughout the organization and enriches IKEA’s culture on the levels below. This is also reflects through the relationship between customer’s profile and diversity of the workforce. Conclusion Having explored in detail the HR practices in MNCs, it can be established that without competent HR managers, who are not only able to implement proven practices, but also spot new trends and global initiatives, the organisation would not be able to retain a competitive advantage.
With regards to the staffing of expatriate employees, it is important to recruit individuals who are in line with the organisation’s strategy and goals. With the rise of globalisation, it has become increasingly crucial for MNCs to adapt to changing international management strategies. With the example of IKEA, the company’s global success is mainly due to their thorough understanding of the globalisation process long before other organisations saw it. Moreover, there is an emphasis on attracting and selecting the best managers for international assignments in different staffing orientations where applicable.
Additionally, research evaluated the importance of the HR in relation to gender and inequality. Competitive advantage and optimisation of resources could be achieved through the use of gender diversity within the organisation. IKEA is a prime example of a gender-diversified organisation, where almost half of the top managers are females. Furthermore, there is an increasing need to retain skilled employees, in order not to lose business to competitors, who have become more innovative and knowledgeable.
