Research on the Localization of Human Resource Management of Multinational Corporations and Its Influence Factors

Abstract
Since the rapid development of multinational corporations that operate in different countries and regions with different cultures, their subsidiary companies have to adopt appropriate management styles 留學生dissertation網and strategies so as to maintain effective operation in the local business environment. Human resource management as an core element of the organizational management has also faced a series of problems, while the localization of human resource management of the multinational corporations has been an issue of great significance. Accordingly, this paper aims to research on the HRM localization of those multinational corporations, involving its major influence factors and what strategies can facilitate it effectively. Primarily, the paper reviews literature about the important issues related to the research, which mainly include the concept of human resource management, the strategic types of human resource management, motivation theories and diversity management. Afterwards, the paper indicates and discusses the major influence factors and problems existed in the HRM localization process, which mainly involves environmental differences, cultural differences and cultural conflicts, increasing costs on human resources, and the influences of the host countries. Based on these discussions and analyses, strategies for promoting the HRM localization of multinational corporations are developed: recruiting local employees; establishing effective performance management system; improving staff motivation; and developing diversity management.

Table of Contents

1.0 Introduction 4
1.1 Background and Context 4
1.2 Aim and Objectives of the Research 4
2.0 Literature Review 5
2.1 Definition of Human Resource Management 5
2.1.1 Concept of HRM 5
2.1.2 Role of HRM 5
2.2 Strategic Types of HRM 6
2.2.1Ethnocentrism 6
2.2.2 Polycentrism 7
2.2.3 Regiocentrism 7
2.2.4 Geocentrism 7
2.3 Motivation Theories 8
2.3.1 Mslow's Hierarchy of Needs 8
2.3.2 Alderfer's ERG Theory 8
2.3.3 Herzberg's Two-Factor Theory 9
2.4 Diversity Management 9
2.4.1 Workforce Diversity 9
2.4.2 Opportunities and Benefits of Diversity Management 10
3.0 Influence Factors and Problems of HRM Localization of MNCs 11
3.1 Environmental Differences 11
3.2 Cultural Differences and Cultural Conflict 11
3.3 Increasing Costs on Overseas Assignment 12
3.4 Influences of Host Countries 12
4.0 Recommended Strategies for Human Resource Management Localization 12
4.1 Recruiting Local Employees 12
4.2 Enhancing Performance Management System 13
4.3 Improving Staff Motivation 13
4.4 Developing Diversity Management 14 #p#分頁標題#e#
4.4.1 Approaches to Effective Diversity Management 14
4.4.2 Principles of Diversity Management 15
5.0 Conclusion 15
References 16

1.0 Introduction
1.1 Background and Context
Since the rapid development of many aspects of the human society in the recent decades, there are increasing changes occurred in the developmental trends of economy and business. In particular, http://www.ttc-switch.com/Thesis_Writing/HRM/under the background of globalization, multinational corporations have been the main power in the world business environment, with great influences on world politics, economics and cultures as well as other fields. Multinational corporation is a form of enterprise organization and operational mode that emerged in response to the needs of internationalization of production and capital, which is also a supreme organizational model of modern enterprise system (Holm et al, 2009). Effective operation of a multinational corporation is greatly depending on its ability of human resource management, as it will determine the workforce performance so as to affect the performance of the corporation in achieving its strategic goals(Bjorkman and Budhwar, 2007). Further, there are many aspects of human resource management, from recruitment and selection of employees, training and communication, performance management and staff motivation, compensation and others (Mathis and Jackson, 2007). In addition, there are many factors that may influence the human resource management of the multinational corporations operated in cross-cultural environments, concerning the relevant aspects of HRM stated by Mathis and Jackson. Accordingly, the researcher plans to conduct a research on the localization of HRM of those multinational countries and try to figure out the influence factors.
1.2 Aim and Objectives of the Research
As indicated above, this research focuses on the localization of human resource management of the multinational corporations. Specifically, the research is aiming to investigate the influence factors of the HRM localization of multinational operations, as well as to try to develop effective strategies that can facilitate the HRM localization. Accordingly, there are various more specific objectives of the research, which include:

• To investigate relevant aspects of the localization of human resource management of a multinational corporation;
• To figure out influence factors that will affect the HRM localization process;
• To indicate problems that may occur in the HRM localization process;
• To propose and develop effective strategies that can facilitate the multinational corporations in promoting HRM localization.
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2.0 Literature Review
2.1 Definition of Human Resource Management
2.1.1 Concept of HRM
In the present time, the world has entered in a new economic era that is knowledge based. In this new era, the human resource management has been the base of the management of organizations, because the great values of human resources and knowledge as a specific type of capital, making the core competency of the organizations (Saffu et al, 2008). The value of human resources of an #p#分頁標題#e#留學生dissertation網organization is in close relation with the competitiveness of the organization operating in a increasingly competitive business environment.

To be specific, as indicated by Mathis and Jackson (2007), Human Resource Management (HRM) is a strategic function of an organization, for managing the most valuable assets, namely the employees, which mainly focuses on various aspects, such as employee selection and recruitment, administration and performance management, training and safety, compensation and benefits/welfare, as well as employee motivation and communication, and some other relevant aspects, with the aim of facilitating the organization to achieve its goals and objectives.
2.1.2 Role of HRM
Differing to the traditional personnel management, human resource management is influenced deeply by the international business environment, technological environment, and the information environment, as well as legal and political environments, which then leads to much more functions than the traditional personnel management (Baptiste, 2008). As in an organization, human resource management plays an important role in achieving the strategic goals and objectives through facilitating and motivating the employees to work more effectively. In this case, the specific role and functions of human resource management can be indicated as:

• To make plans for human resource management, keeping in consistence with the strategies and plans of the organization;
• To analyse the working positions needed in the organization, including the specific requirements for each position like responsibilities and required skills, working experience, rights and obligations, as well as health condition requirement;
• To select and recruit qualified employees for the positions for the organization, for example, conducting examinations and tests;
• To manage the training programs and continuous development of the staff, helping new employees to understand their jobs and adapt to the new workplace as soon as possible;
• To management the relationships between employers and employees, ensuring that the rights and benefits of both parties can be protected;
• To cooperate with other departments such as the financial department, for establishing an complete human resource management system, for example, involving performance management system and human resource accounting system;
• To conduct performance assessment and performance management appropriately and timely, so as to provide evidence for deciding the promotion, awards and salary increase of the employees;
• To assist the staff to make their developing and working plans, so as to be competitive and productive within the organization, for better performance;
• To pan and determine the wages and other benefits for the employees, so as to make sure a stable and secure development of the employees and the organizations; #p#分頁標題#e#
• To maintain the records of the employees' information and keep the files well (Ozcelik and Aydinli, 2006).
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2.2 Strategic Types of HRM
In order to achieve their business goals and respond to the increasing competition, multinational corporations will adopt different strategic types of human resource management, taking into consideration the actual conditions of the corporations in addition to the overall environments of the host countries. Generally, there are four strategic types of human resource management, which are: ethnocentrism, polycentrism, regiocentrism, and geocentrism (Heenan and Perlmutter, 1979).
2.2.1Ethnocentrism
As for the multinational corporations that adopt the strategic type of ethnocentrism, the major management staff of their subsidiary companies in other countries and regions are usually assigned by the parent company from the original country (Heenan and Perlmutter, 1979). In this way, the policies and operational modes of the parent company will then be transplanted into the overseas subsidiary companies; so the parent company can implement close control on the operations of the subsidiary companies. Accordingly, the advantages of the ethnocentrism include: the assigned staff have close contact with the parent company and great loyalty; they are familiar with the strategic goals, policies, management style and system of the company. Moreover, it is beneficial to the parent company controlling the operations of the subsidiary companies, in addition to keeping confidential the parent company's top end technologies and business privacy. However, there are also disadvantages of adopting ethnocentrism, which mainly include the cultural misunderstanding due to the differences in language, work style and lifestyle, which makes it difficult to develop normal business activities effectively; and lead to high business costs, as well as national friction and political risks (Thomas and Hills, 1999).
2.2.2 Polycentrism
Adopting polycentrism, the parent company and the subsidiary companies are basically independent with each other. Each subsidiary company will adopt human resource management policies that fit the local environment, so the management staff are also selected from the local country (Heenan and Perlmutter, 1979). In this way, the HR manager of the subsidiary company has greater power on human resource management, which makes it easier to work. However, there are also disadvantages with this strategic type: first, the local managers are less familiar with the policies and operational mode of the parent company, which is not good for effective communication; second, using local policies may cause inconformity with other parts of the multinational corporations; third, it will be difficult for the parent company to control the subsidiary company's operations; fourth, it will be less possible for the parent company to gain experiences in international or cross-cultural operations (Cabral-Cardoso, 2006).
2.2.3 Regiocentrism#p#分頁標題#e#
When adopting regiocentrism, the multinational corporations will divide different regions into categories, such as the European region, the North American region, and the Greater China region, and others (Heenan and Perlmutter, 1979). The HRM policies within a region will be coordinated in different subsidiary companies, while the HR management staff will be recruited from any countries within the region. In this way, within the same region, the subsidiary companies are highly coordinated with close communication; however, coordination and communication is still limited between the regions and the parent company (Kane, Crawford and Grant, 1999).
2.2.4 Geocentrism
Adopting geocentrism, the multinational corporations will recruit management staff of the subsidiary companies from any country in a global range (Heenan and Perlmutter, 1979). However, this strategic type is not widely used for several reasons. First, the host countries tend to require the subsidiary companies of the foreign corporations to recruit locally, through using some restriction policies. Second, this strategic type takes high costs, since it tend to recruit management staff in a large range, in addition to the costs on language training, cultural orientation training, migration, overseas expenses of the management staff and their families. Third, it takes a long time to implement this strategic type of HRM (Lertxundi, 2008).
2.3 Motivation Theories
2.3.1 Mslow's Hierarchy of Needs
As one of the most influential content theory, Maslow's hierarchy of needs has been greatly accepted and respected by other motivation theories. According to this theory, five levels of human needs are introduced by Maslow, which are the most basic physiological needs, safety and security needs, social needs, in addition to self-esteem needs and self-actualization needs. Further, Maslow believes that these different levels of human needs are instinctive, which means that motivation to some extent is an unconscious process. Therefore, most people are unaware of what motivates their behaviours and how it works. According to Maslow, when a lower level of need is satisfied, the need will have less impact on the human behaviours; thus, the higher need at the next level will then be more influential on the human behaviours. Specifically, people are primarily motivated by physiological needs, such as food and warmth; however, when these needs are achieved, they will be less motivated; but the security needs at the next level will be more likely to influence their behaviours (Schermerhorn, Hunt and Osborn, 2008). Accordingly, the ultimate level is self-actualization, but Maslow observes that it is very difficult to achieve this level.
According to Maslow's motivation theory, it will be impossible to satisfy all the needs of the employees in an organization, as they will need more from the employers. Specifically, when job opportunities are limited, the employees will be more likely to be motivated by deficiency needs. However, when there are many opportunities for jobs with good pay, then higher needs will be the major motivators to motivate the employees. In this case, the organizations should try to satisfy the needs at all levels for the employees continuously, so as to motivate them effectively (Petri and Govern, 2003). #p#分頁標題#e#
2.3.2 Alderfer's ERG Theory
Differing from Maslow's hierarchy of needs, Alderfer's ERG theory introduces three types of needs, which are: existence needs, relatedness needs and growth needs. Existence needs refers to the http://www.ttc-switch.com/Thesis_Writing/HRM/nutritional and material requirements like workplace conditions and the pay; relatedness needs are in relation to family and friends, workmates and managers, which can be satisfied through good relationships with these people; while growth needs refers to the psychological developments of the individuals (Schermerhorn et al, 2008). Further, differing from Maslow's needs theory that argues lower level and higher level needs, Alderfer argues that these three types of needs can generate impacts on the human behaviours at the same time. Moreover, Alderfer argues that if one of the needs is not met, it may turn to another direction, namely, other two types of needs, which means that it will not stay at the same type of need till it is met. Accordingly, this motivation theory indicates that the organizations should make relevant changes according to the changing needs of the employees.
2.3.3 Herzberg's Two-Factor Theory
Herzberg's two-factor theory introduces two sets of factors that are in close relation with job satisfaction and dissatisfaction. One set of the factors are the sources of satisfaction, so it refers to motivators that involves intrinsic aspects of work, such as acheivement, advancement, recognition and autonomy. The other set of factors is then referring to hygiene factors that represent the sources of dissatisfaction, mainly involving the workplace conditions, salary and welfare, job security and organizational policies, as well as the relationships with the leaders and managers. Accordingly, the presence of motivations will then cause motivation in the workplace while the absence will not necessarily cause dissatisfaction; in addition, the presence of hygiene factors may cause job satisfaction in the workplace, but their absence may cuase job dissatisfaction, which is different from the situation of motivators. In this case, motivators reflect an individual's higher-order needs like self-actualization, while hygiene factors reflect his/her needs for avoiding unpleasant situations. However, according to this motivation theory, through redesigning the jobs, the potentials of motivators can be developed (Schermerhorn et al, 2008). Accordingly, managers can seek to motivate the employees through changing and redesiging their jobs.
2.4 Diversity Management
2.4.1 Workforce Diversity
Entering the age of globalization, with the development and expansion of economy and the organization itself, the human resources of an organization have also been growing and changing. The trend of the workforce is the development of diversity within an organization. Since human resource management is so crucial to the survival and development of an organization, the diversity of the workforce should be also paid special attention to. Therefore, the diversity management has come into play within many organizations (Boone, Wezel and van Witteloostuijn, 2006) Diversity is everywhere. The world is of diversity including different backgrounds, religion, ethnicity, race, culture, age, gender, sexual orientation, nationality, education, personality and many other elements. At the work place, the diversity is of many visible and non visible differences which have impacts on the workforce’s work attitude and performance. Diversity shows that all people and the working staffs are unique individuals.#p#分頁標題#e#

Since globalization came into picture in 1990s, it has swept across the organizations in the world. With this happened, there is a trend of diverse workforce from different countries, values, cultures and styles, etc. Meanwhile, the working staffs are very different from gender, age, ethnicity, race and sexual orientation. One can find people from different countries and cultures working together in one organization, as well as the disabled and handicapped, the elderly, gays and lesbians. Though they work together, they still maintain their individual culture, lifestyle and personality. In this situation, the management of human resources has been more complicated for the organization, since the diverse workforce has presented great opportunities as well as challenges (Boone et al, 2006). However, with proper human resource management, the organizations will greatly enhance their productivity and creativity, and improve the decision making. To effectively manage the diversity has become an essential concern for organizations in this information and knowledge age, because the workforce diversity is the most valued assets for most organizations.

Diversity Management is a management system to strategically manage and implement and utilize the diverse human resources from different gender, ethnicity, age, culture within an organization. In simple words, managing diversity is to manage the working staffs for the best interests of both the organization and the workforce. Managing diversity is a continuous process to explore the talents and abilities of a diverse workforce bringing to the organization, create a best environment for the workforce to work in, and maximize the potential of opportunities but minimize the disadvantages from the challenges (Allen et al, 2004).
2.4.2 Opportunities and Benefits of Diversity Management
Diversity seems to easily cause misunderstandings, conflicts and inefficiency in the work place, however, through proper management, the diversity will be able to bring in opportunities to enhance the effectiveness of the organization. Such opportunities are as follows:

• To promote new products and services. With diversified ideas and opinions, an diverse workforce will be more creative and innovative, concerning the development of new alternatives, which can help the organization to promote new products and services for satisfying the customers' needs and desires;
• To develop better teamwork. Teamwork is inevitable and necessary for an organization to operate and function effectively. In this situation, to develop diversity management effectively for better teamwork will then be more likely to facilitate the workforce to generate better ideas and motivate them to work more effectively in the organization;
• To establish better organizational image. Forming a diverse workforce is more likely to generate better image for the organization, and will also extend the business of the organizations through attracting more talents;
• To develop effective workforce with job satisfaction. Effective diversity management can improve the motivation and productivity of the employees, as they can obtain dignity in the workplace, being valued equally and treated fairly. Accordingly, absenteeism and stress,, discrimination and frustration are more likely to be reduced in the workplace; #p#分頁標題#e#
• To gain more market potentials. As indicated, with diverse abilities and opinions, the diverse workforce is more likely to offer much more creative and innovative solutions to the problems occurred in the organization, and help the organization to expand their markets more effectively (Aoki, 2010).
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3.0 Influence Factors and Problems of HRM Localization of MNCs
The HRM issues facing multinational corporations are much more complicated that normal domestic corporations, which is caused by various reasons and factors. In the meantime, problems will then occur in the multinational corporations' human resource management.
3.1 Environmental Differences
Since the subsidiary companies are operated in the host countries, which have much different environments from the original country where the parent company is, there are differences in their operational environments. Specifically, the host countries have their unique characteristics, such as their political environment, legal environment, social-cultural environment, and economic environment, languages; in addition to the natural environment, human resources, infrastructure, market size and others (Liu, 2004). Due to this, there are barriers for the parent company to execute its policies in the subsidiary companies.
3.2 Cultural Differences and Cultural Conflict
Since the multinational corporation operates in different cultural regions and backgrounds as a multicultural organization, it will definitely be impacted by different cultures. As in multinational corporations, cultural conflict generates for several major reasons: ethnocentric attitude; inappropriate use of management style; different opinions; misunderstanding in communication, as well as cultural attitudes and others. This cultural conflict will cause a series of problems in human resource management of the multinational corporations (Boonsathorn, 2007).

First, cultural conflict affects the development of harmonious relationship between the cross-border managers and the local employees. Since the cross-border managers manage the subsidiary companies totally according to the policies of the parent company, it makes the employees become more and more estranged from the management, which then affects their creativity and enthusiasm.

Second, since there are different cultures of the two countries, or even conflicts existed between them, some irrational ethnocentric managers will treat the local employees irrationally, which then further facilitates the conflict, leading to the irrational revenge from the employees.

Third, cultural conflict will easily lead to resentment between different parties. Facing cultural conflict, if the management staff and the employees do not seek for universal opinion instead of complaining, the resentment will finally cause the failure of management.
3.3 Increasing Costs on Overseas Assignment
Overseas assignment will lead to the increase in human resource costs, due to two major reasons. First, the managers that are assigned to the overseas subsidiary companies need to be trained before going, which is a great costs on HRM; in the meantime, overseas assignment itself costs a large sum of budget. Second, overseas assignment will usually lead to the extension or delay of the contract, so the company needs to pay extra compensation. Moreover, overseas assignment will probably cause negative influences on the managers, such as being less confident. Because of this, overseas assignment may easily increase the costs on human resources of the company (Harvey and Novicevic, 2001). #p#分頁標題#e#
3.4 Influences of Host Countries
Employment issue is one of the goals or reasons for the host countries to attract investment from overseas, and also a focused issue by the governments. In order to avoid the negative influences of multinational corporations on their national economies, the host countries tend to establish policies that limit the proportion of local employees within the companies. The governments will also require the multinational corporations to recruit a certain proportion of the senior mangers from the local countries. In the meantime, the multinational corporations have also realized the effectiveness of local managers dealing with the governments, so they speed up their HRM localization process (Myloni, Harzing and Mirza, 2004).

4.0 Recommended Strategies for Human Resource Management Localization
4.1 Recruiting Local Employees
As indicated above, the cultural differences that cause cultural conflicts and then ineffectiveness in the workplace is a major influence factor that affects the HRM localization process of the multinational corporations. In this case, in order to avoid the cultural conflict in the workplace, the multinational corporations should then try to recruit employees from the local host countries, so as to minimize the cultural differences. Furthermore, this will to a great extent reduce the costs on training overseas assigned managers and the transportation costs. in the meantime, it can help the multinational corporations to develop experiences in cross-cultural management and operation (Gerhart, 2009). In this case, recruiting employees locally is a primary strategy for the multinational corporations to facilitation their HRM localization.
4.2 Enhancing Performance Management System
Performance assessment is a management method that determines the working achievement of the employees, through checking and assessing the implementation of their tasks at the specific positions, in accordance to established standards (Morris and Jackson, 2007). This has great significance to the promotion of the management level of the corporations. In this case, performance management that focuses on staff performance assessment will then achieve the short term goal of the management staff, but will also meet the long term strategic goals of the multinational corporations. Accordingly, developing an effective performance management system will help the management staff to better manage the performance of the employees within the multinational corporations.
4.3 Improving Staff Motivation
Motivation is an important process in human resource management. In management practice, motivation refers to arouse the employees’ motivation at work, namely, utilize various effective methods to promote the activity, creativity and productivity of the employees, so as to complete the tasks and achieve the goals. Therefore, managers should correctly conduct their employees and motivate them at work. In this situation, how to effectively apply motivation theories is a key issue for the managers. There are mainly three kinds of channels that the managers use to increase motivation in their teams, which are material motivation, spiritual motivation, and emotional motivation (Killmer, 2008).#p#分頁標題#e#

Material motivation means that the manager motivates the employees with material rewards. This is mainly used to meet the material demands of the employees. There is positive motivation such like salary, allowance and welfare, and negative motivation like penalty. Material demand is the primary need of humans and the basic driver for people’s behaviors, so certain material guarantee is the key to increasing the motivation of the employees. To meet the employees’ demands in life and remove their worries, they will be motivated to work more productively. It will also reduce absenteeism in the workplace. Therefore, material motivation is the major channel to increase motivation in a team.

Spiritual motivation refers to satisfying the psychological needs of the employees through spiritual rewards and encouragement. Humans need a sense of security and a feeling of beloved and understood; as well, they desire for cognition and trust, self-esteem and other’s respect. These psychological needs can not be satisfied by material motivation. So, spiritual motivation is used by the managers to increase the employees’ motivation at a higher level.

Emotional motivation is that the managers strengthen emotional communication with the employees and respect them, to make the employees keep good emotions and motivate their working enthusiasm. With good emotions, people will have opening thought, and be quick-minded, to solve problems fast.
4.4 Developing Diversity Management
4.4.1 Approaches to Effective Diversity Management
With the great opportunities and benefits brought by diversity and diversity management, it is important for organizations to make any efforts to manage diversity effectively. To be specific, there are various approaches to effective diversity management, which are as follows:

• To accept diversity. To accept multiculturalism is the foundation of valuing diversity. Embracing the value of diversity should be presented both in actions and words.
• To recruit broadly. To recruit employees from diverse backgrounds. Do not rely on referring from current staffs, because this will lead to recruiting candidates that are similar to existing working staffs.
• To select equally. Make sure there is no discrimination during the process of selecting from candidates.
• To sensitize the workforce. Encourage all the working staffs to accept diversity and train all of them to observe the value of diversity.
• To be flexible. Different workforces have different values and demands, so the values of diversity in them are also different. Therefore, the organization should be flexible in accordance with the real situation.
• To motivate individually. The organization should be aware of the backgrounds, values, cultures and other differences of all the working staffs. According to the specific information, try to motive individual working staff with different styles.
• To consider completely. When establishing a program, the organization should involve as many employees as possible from all levels. This will make all the employees feel equal, fair and respected, a sense of belonging. #p#分頁標題#e#
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4.4.2 Principles of Diversity Management
In order to implement effective diversity management, the organizations have to operate in accordance with a series of principles, which include:

• To establish appropriate business strategies, so as to manage the diverse workforce effectively;
• To create a supportive environment in the workplace;
• To promote continuous development of the employees;
• To assist the employees in developing full potential of them;
• To attract and maintain talents from different cultural backgrounds;
• To reduce or remove barriers to embracing diversity and diversified workforce.
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5.0 Conclusion
This paper has conducted an research on the issue of human resource management localization of the multinational corporations operated in different cultural environments. Specifically, the research has firstly reviewed various issues that are related to the HRM localization, such as the concept of human resource management, the major strategic types of human resource management, in addition to motivation theories and diversity management, which are all in close relation to the HRM localization of multinational corporations. Based on this, the research has then indicated and discussed the various influence factors and problems of the HRM localization of multinational corporations. Further, strategies for facilitating the HRM localization have been proposed for the multinational corporations, concerning the major influence factors and problems, which include: to recruit local employees; to establish effective performance management system; to improve staff motivation; and to develop diversity management, as these are all important aspects of HRM within multinational corporations.
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