Last updated: July 12, 2019
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Contemporary business world witnesses the changing of the workforce’s composition. This trend first has been completely appreciated in the practice of multination corporations (MNCs). According to Dowling, Schuler and Welch HRM policies and practices of MNCs are likely to be different from those found in domestic firms (Dowling, et al, 1994). For MNCs the difference in geographical spread meant that MNCs should normally engage in a number of HR and organizational behavior activities that were not needed in domestic firms – such as providing relocation and orientation assistance to expatriates, administering international job rotation programs, dealing with international union activity, managing multicultural and virtual groups, etc. Managing the diversity generated a number of coordination and communication problems that had not arisen in domestic firms, and simultaneously fostered specific methods designed for the resolutions of diversity related problems. The experience of MNCs indicates that companies that want to be competitive in the turbulent and evolving marketplace need to appreciate the compositional changes of workplace and apply HR and international organizational behavior practices/strategies towards attracting, recruiting, developing, and retaining a diverse workforce.

In addition, the experience of MNCs provides justification for Adler’s statement (2002) that multicultural teams can potentially become the most effective and productive teams in an organization. At the same, the effectiveness of multicultural teams heavily depends on environment a MNC is operating as well as company’s managerial ability to guide, motivate and control diverse workforce. From the critical perspective, developing a multicultural workforce, working groups, etc offers numerous opportunities for both not-for-profit organizations and profit companies, because a diverse workforce is a source of creativity and ideas as people with various cultural and racial backgrounds have different attitudes, values, and norms. However, managing culturally diverse teams requires specific approaches and sophisticated strategies.

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What emerges from contemporary research is that the multinationals often outperform their domestic counterparts in nearly all aspects of human resource management and organizational behavior, including the degree of attention given to employee relations, the ability to motivate working groups, retain high potentials, and the use of innovative and progressive OB practices. For example, a survey of 143 organizations in Britain in 1985 indicated that foreign-owned organizations used more advanced HRM and OB techniques, devoted more resources to personnel management and were more likely to use a variety of new communication and work design methods in order to gain employee loyalty (Margerison, Edwards, Martin, Purcell and Sissons, 1988).

The 1999 study supported the view that multinational companies are more likely than their domestic counterparts to use advanced OB and HRM techniques and practices (Sharpe, 2004). However, researchers suspected that in many cases the differences in OB might have been associated with the specific sector, or the competitive strategy being pursued by the organisation. Therefore, to test for this possibility, the questionnaire data were entered into a multivariate analysis, which examined how much of the total variation in HR practices could be explained by the firm’s nationality, industry sector, management philosophy and/or competitive strategy (Sharpe, 2004). The results showed that:

(1) Companies that were pursuing a strategy of high product innovation were particularly likely to have quality circles, career guidance programs, specialized career paths, and some type of creativity assessment for new hires. In contrast, companies that were primarily competing on the basis of cost leadership put relatively more emphasis on formal manpower planning (to determine future manpower requirements), and preferred to handle employee relations on an ad-hoc basis rather than through formal procedures.

(2) Service companies were more likely than manufacturing firms to share information among employees, link pay to performance and delegate authority to the lowest possible level. In contrast, manufacturing firms were more likely to offer job security, flexible working arrangements, financial support to those who wish to take external training courses.

(3) A wider variety of HRM practices were used when top managers saw employees primarily as “a source of talent that must be developed”, rather than primarily as “a cost factor that must be reduced”(Sharpe, 2004). Not surprisingly, top managers who saw employees as a source of talent were more likely to do the following things:

– Delegate responsibility to the lowest possible level,

– Offer flexible working arrangements to employees

– Openly share information about the goals and results of the company

– Use quality circles to seek out the ideas of their workers

Researchers and practitioners have found solid operational traction by focusing on the interaction of individual and multicultural group practices with organizational processes, systems, and technologies for acquiring, sharing, retaining, and applying knowledge-all within the broadly identified “knowledge management” field (McCann ; Buckner, 2004). It is smart knowledge management strategy, for example, for an organization to cultivate functionally diverse and geographically dispersed “communities of practice” around important technical challenges. Such “communities” are grounded in basic human needs to problem-solve and share, and by enabling sharing behaviors through sophisticated global information systems and communications technologies individual and group learning is leveraged to an organization and industry level. From a knowledge management perspective, effective organizations are those that promote individual and group learning through management practices that amplify and move information through organization-level systems, processes, and technologies (McCann ; Buckner, 2004).

Moreover, IHRM imperatives include achieving intercultural effectiveness among the diverse workforce of an organization within and across national boundaries, and achieving intercultural effectiveness in intercultural business interactions. It is well documented in literature that national culture affects the way that people of different cultures interact (Hofstede, 1995; Trompenaars, 1993). Further, at the functional level, culture has been identified as influencing HRM practices, leadership and organizational strategy (Schneider and De Myer, 1991). There is, however, significant debate as to whether this translates into actual performance differences in the international setting.

The four-dimensional model of national culture (power distance, uncertainty avoidance, individualism-collectivism, and masculinity-femininity) suggested by Hofstede (1980) has been broadly accepted as a descriptor of national culture. In attempting to apply culture to the management of organizations, Hofstede and associates (1995) suggest that five, rather than four, dimensions influence the way that managers manage. The fifth dimension is long and short-term time focus, also called Confucian values (Hofstede, 1980). This dimension is consistent with the Kluckholm and Strodtbeck (1961) time orientation dimension. It is noted, however, that there has been little comprehensive empirical research as to the relationship between Hofstede’s time dimension and performance outcomes (Sondergaard, 1994). The research available tends to focus on a limited number of dimensions and/or a small number of countries. Often performance is not measured, but when it is, it tends to be represented with a single measure of financial performance, which reflects organizational, not managerial, effectiveness.

In contemporary context, international human resource management faces important challenges, and this trend characterizes many Japanese, US and European MNCs.  From the critical point of view, Japanese companies experience more problems associated with international human resource management than companies from the US and Europe (Shibuya, 2000). Lack of home-country personnel sufficient international manage­ment skills has been widely recognized in literature as the most difficult problem facing Japanese compa­nies and simultaneously one of the most significant of US and European MNCs as well. The statement implies that cultivating such skills is difficult and that they are relatively rare among businessmen in any country. Japanese companies may be particularly prone to this problem due to their heavy use of home-country nationals in overseas management positions. European and Japanese MNCs also experience the lack of home country personnel who want to work abroad, while it is less of an impediment for the US companies.

In the US MNCs expatriates often experience reentry difficulties (e.g., career disruption) when re­turning to the home country: This problem was the one most often cited by US firms.  Today Japanese corporations report the relatively lower incidence of expatriate reentry diffi­culties, and it is surprising given the vivid accounts of such problems at Japanese firms by White (1988) and Umezawa (1990). However, the more active role of the Japanese person­nel department in coordinating career paths, the tradition of semi­annual musical-chair-like personnel shuffles, and the continu­ing efforts of Japanese stationed overseas to maintain close contact with headquarters might underlie the lower level of difficulties in this area for Japanese firms (Inohara, 2001). In contrast, the decentralized structures of many US and European firms may serve to isolate expatriates from their home-country headquarters, making reentry more problematic. Also, recent downsiz­ing at US and European firms may reduce the number of appropriate management positions for expatriates to return to, or may sever expatri­ates’ relationships with colleagues and mentors at headquarters. Furthermore, within the context of the lifetime employment system, individ­ual Japanese employees have little to gain by voicing reentry concerns to personnel managers. In turn, personnel managers need not pay a great deal of attention to reentry problems because they will usually not result in a resignation. In western firms, reentry problems need to be taken more seriously by personnel managers because they frequently result in the loss of a valued employee. A further possible explanation for the higher incidence of expatriate reentry problems in western multinationals is the greater tendency of those companies to implement a policy of transferring local nationals to headquarters or other international operations. Under such a policy, the definition of expatriate expands beyond home-country nationals to en­compass local nationals who transfer outside their home countries. It may even be that local nationals who return to a local operation after working at headquarters or other international operations may have their own special varieties of reentry problems.

Literature on international human resource practices in Japan, the US and Europe suggest that the major strategic difficulty for the MNCs is to attract high-caliber local nationals to work for the company. In General, multinationals in general may face greater challenges in hiring high-caliber local employees than do domestic firms due to lack of name recognition and fewer relationships with educators or others who might recommend candidates. However, researchers suggest that this issue is significantly more difficult for Japanese than for US and European multinationals. When asked to describe problems encoun­tered in establishing their US affiliates, 39.5% of the respondents to a Japan Society survey cited “finding qualified American managers to work in the affiliate” and 30.8% cited “hiring a qualified workforce” (Bob ; SRI, 2001). Similarly, a survey of Japanese companies operating in the US conducted by a human resource consulting firm found that 35% felt recruiting personnel to be very difficult or extremely difficult, and 56% felt it to be difficult (The Wyatt Company, 1999). In addition to mentioned problem, Japanese MNCs encounter high local employee turnover, which is significantly more prob­lematic for them due to the near-total absence of turnover to which they are accustomed in Japan.

The US, European and Japanese companies admit very rarely that they encounter local legal challenges to their personnel policies. However, in regard to Japanese MNCs large amount of press coverage has been given to lawsuits against Japanese companies in the United States and a Japanese Ministry of Labor Survey in which 57% of the 331 respondents indicated that they were facing potential equal employ­ment opportunity-related lawsuits in the United States (Shibuya, 2000).

Firms often think that local personnel issues are the concern solely of the overseas operations, thus leaving it to the managers on the scene to solve problems and develop local personnel. The comparison provided in the above, however, show that human resource issues at overseas offices are im­pacted by the international human resource paradigm that is set at head­quarters. Companies experiencing problems related to their local per­sonnel should reexamine how their headquarters staffing and policy decisions affect the employment environment and career path develop­ment at overseas operations. The causes may be a monopolization of managerial posts by expatriates and a lack of policies at headquarters that are designed to internationalize human resources.

Where there is a greater utilization of local nationals in managerial posts, especially those at higher levels, firms are less likely to experience problems involving friction and poor communication between expatri­ates and local personnel, as well as complaints by local nationals of lack of opportunities for advancement. The international personnel function at headquarters needs to pay attention to this issue in its assignment of expatriates; the potential for using a local national instead of an expatri­ate should be considered explicitly when posts become available. Anoth­er reason for systematically considering local nationals for key overseas posts is the often-reported lack of home country personnel who have sufficient international management skills.

Given the shortage of the needed skills among home-country nation­als and the problem-reducing benefits of using more local nationals in managerial positions, companies can benefit by increasing their selec­tion pool to include local nationals. To do so, headquarters will need to become involved in the identification of promising locally hired manage merit candidates. This can be done through the creation of centralized personnel rosters and performance evaluation measures. A centralized personnel roster is a systematic means of tracking managerial talent throughout the world. Internationally standardized performance mea­sures facilitate comparisons between home country and local nationals. In addition, headquarters can become involved in grooming local na­tionals who possess the requisite skills for managerial posts. This can be done by initiating activities such as training programs and experiential, international, rotation programs.

The significant incidence of expatriate reentry problems also suggests that another potential widening of the international human resource function’s role is to expend more effort to help reintegrate returned expatriates. International rotation programs for local nationals are also creating a new group of expatriates whose reentry problems must be addressed.

There are many advantages to having culturally diverse teams in the company. In their book Workforce 2020, Judy and D’Amico discuss some important statistics. They stated that in the US the number of white non-Hispanics would decrease from 80 percent of the nation’s population in 1980 to only 64.3 percent in 2020 (Judy and D’Amico, 1997).Undoubtedly, helps attracting and retaining the most qualified candidates. The Strategic Human Resource Management (SHRM) study found that 91 percent of respondents think diversity initiatives helped their organizations maintain a competitive advantage. (Pelled et al, 1999, p. 17). In any case companies are likely to obtain a competitive advantage of being able to market and deliver their products within different countries and cultures. Having inside information on how to communicate and what a community would like to see in a product is a great asset. (White, 1999, p. 477). Moreover, employing someone within the organisation who can negotiate, understand and speak the language of the country is a very valuable even strategic asset. For instance, Chevrolet committed a marketing mistake in the Latin America, when the company produced a car, called the Nova. The product was not having success with it in the Latin countries, until they learned that Nova, or “no va” as the Spanish speaking communities perceived it, meant “does not go” when translated from Spanish. Practically, it could have been prevented if the company appreciated the value of multicultural workforce, which in many cases can help avoid instances of cultural blindness.

From the critical perspective, Adler’s notions regarding frequent lack of productivity among culturally diverse groups are justified because the approach to the management of these groups has been usually inadequate. For instance, the company should understand that usually many people feel threatened by working with people of a different age, sex, or culture. Unlike dealing with mono-cultured teams, the company’s management must anticipate an increase in the cost of training, in the form of seminars, programs and lectures conducted to promote diversity in the organization. Practically, various training programs are to be integrated at all levels of personnel within the company. Normally such programs teach employees how to understand and appreciate the personalities and ideas or thoughts of other group members as well as how to deal with conflicts and prejudice in a professional and civil manner (White, 1999).

Simultaneously, implementing the emphasis on multicultural teams, the management should be aware that diversity can trigger an increase in conflicts, which usually are not anticipated within single cultural groups. For instance, in contemporary business environment many companies implement the strategy of virtual teams, which proves to be very productive and efficient from the financial perspective. However, in a virtual team communication is a pivotal element for team success. According to Chidambaram (1992) communication is an essential human behavior and one that is necessarily influenced by culture. Differences may include initiation and coordination mechanisms, temporal orientation and modes of reaching decisions. In real groups, conflict can arise due to prejudice, derogatory comments, etc and as White indicates, “this can produce negative dynamics such as ethnocentrism, stereotyping and culture clashes” (White, 1999, p.477). Ignorance of exhibited by the management can play a “detrimental role in such circumstances, because as a logical result of these conflicts the teams’ performance may suffer” (White, 1999, p. 478). If the management is successful in implementing necessary programs of cultural tolerance, workplace ethics and communication skills, team members will work harder to gain acceptance by creating a solution or invention first. In addition, these goals can be attained if managers reconcile competing goals, promote in a representative manner, stand behind the minority group member, and act when resources are plentiful and cultural differences are low or well understood (White, 1999).

As articulated above, mismanaged cultural diversity can have long-reaching effects on company’s productivity particularly on international scope. It should be also emphasized that cultural minority-group members often feel less valued than do majority-group members due to problems of stereotyping, ethnocentrism, and prejudice. Therefore, when organization’s management ignores the existence and importance of cultural diversity, conflict can emerge and neither the company nor its employees will realize their potential.

It is evident that more and more companies in contemporary business environment serve customers/clients of diverse backgrounds in one way or another. By creating a diverse workplace, managers are not only more capable of dealing with diversity externally in the community, but also facilitate effective organizational learning. When assessing the goals, strategies, advantages, and disadvantages of creating and managing a culturally diverse workforce management should examine if they could accomplish these factors and become a successful diverse organization. Whilst cultural diversification becomes an acute need for every international company, it implies the application of adequate diversity-oriented managerial approaches and OB techniques.
































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