Analysis of motivation and retention in mncs

This paper is based on the analysis of motivation and retention in MNCs, which are the most common problems facing by them in globalization. Being the major participator into the severe global competition, MNCs have become the largest provider of service and products to the world.

However, during their process of expending, resistances can also be met from other countries. Due to the lack of culture analysis, MNCs tend to treat HR in host countries from their own point of view, which would definitely cause failure.

Based on this situation, this paper would analysis the situation faced by MNCs and demonstrate some examples of motivation and retention strategies applied by MNCs in current times. Following this, recommendations would be given on how to improve motivation and retention in different countries and for different group of talents.

Table of Contents 2

1. Introduction 2

2. Challenges faced by MNCs in motivation and retention 3

3. Motivation in MNCs 5

3.1 Methods Taken to Motivate Employees in MNCs 5

3.2 Examples of Practices in MNCs on Motivation 6

4. Practices on Retention in MNCs 8

4.1 Methods of Retention in MNCs 8

4.2 Examples of Practices in MNCs on Retention 9

5. Recommendations 10

6. Conclusion 12

References 13

1. Introduction

Over the past decades, there has been great interests focus on HRM practices in multinational companies, especially their operations on retaining and motivating skilled professional employees.

The trend of globalization is important when managers trying to acknowledge how multinational businesses can manage their human resource effectively across different countries (Zheng& Hyland, 2007).

Actually, it is crucial to understand how to manage human resources in other countries, as it is conducted in a different manner in each country. Today, many multinational companies are headed by leaders who have little understanding about other cultures, which makes large MNCs frequently with no choice but importing talents from elsewhere. For the lake of understanding of other cultures may cause high turnover rate in local employees (Rodsutti& Swierczek,2002). However, the critical question lies on how to motivate and retain local employees according to their culture, which can in turn save cost of hiring and training staffs from elsewhere.

The intent of this paper is analyzing current situation of motivation and retention on human resources in multinational companies. Examples would be given on strategies under different culture backgrounds in order to support analysis. Following this, some recommendations would be given on how to improve practices on these categories to attract and retain talents from leaving.

2. Challenges faced by MNCs in motivation and retention

As trade barriers are eliminated, more and more companies are involved in severe global competition. According to definition the International Labor Organization, multinational company refers to a corporation who has its management headquarter in its home country and operates in several other counties known as host countries. Thus, it can be assumed that multinational companies are playing as the powerful players in global competition.

Problems on HRM in host countries have arisen with this competition. While many MNCs open their subsidiaries progressively in other host nations around the world, some nations have been welcoming, and others facing them with resistance ¼ˆBardhan& Patwardhan,2004¼‰. Since it’s hard to get involved in local business, let along attract local talents joining company. Hence, faced with resistance, MNCs should make a great effort to understand the historical and cultural reasons behind such resistance.

In discuss of HR problems in multinational companies, there is no area that takes as much attention as the one of motivation and retention. Many managers and leaders believe that cultures differences make the goals they set to their members differ a lot (David, 1971). For instance, it is a common belief that Americans are materialistic, and Frenchmen anti-authoritarian when compared with Germans who are most care about authoritarian. Meanwhile, Japanese is more care about their security in jobs.

Studies show that multinational staffs may enhance creativity in organizations (Kobrin.1999). With the development of economy, more multinational companies will gradually reduce the assignment to other countries from headquarter. Hence, human resource management in multinational companies has to face corporation of expatriates and local staffs, and providing necessary, adequate and effective incentives to different staffs.

For staffs from host country, they always cover the largest composition in company. Meanwhile, there must be a procedure for them to understand the existing knowledge and relationship. Because of the different culture, language, social background as well as political elements, it is complex to make these employees adjusted with the main culture of headquarter. Despite of efforts putting to socialize local staffs, the effectiveness of the results are very limited. According to the social cognitive theory, the effectiveness of management comes from self-efficiency, that is, people believe that they have the ability to realize targets through certain activities (Bandura,1997). When managers facing problems or targets, unless they have the confidence to fix the problems, they would be intimidated and develop self-denial. According to the same theory, the staffs in host country would also feel self-denial when they can not be socialized into the company culture successfully. This phenomenon would rather more obvious in the host country who owns a strong sense of collectivism (Anderson& Forsgren, 1999).

The leading causes of self-denial may come from different culture, economy and experience background, however, these elements are exactly things headquarter hopes its foreign staffs bring to their company. Thus, fixing the problem of socialize procedure is the essential mission most multinational companies facing in recent years in order to avoid turnover and lower performance. Compared with this, the expatriates are out of this problem, since they are always assigned to take higher position in host countries, they must have experience of the culture in headquarter.

Although years of dominance of American management theories has produce the belief that they can be applied in anywhere of the world, the research still shows that managerial attitudes, values as well as behaviors differ across nations (Myloni& Harzing,2004). Thus, different staffs in different host country may not be highly motivated by the same elements.

3. Motivation in MNCs

3.1 Methods Taken to Motivate Employees in MNCs

Since MNCs are never isolated, they recognize the differences and make expatriate managers deal with staffs from other countries to avoid suffering of company competitiveness (Baker&Cobb 2000).

In order to motivate local staffs, most MNCs set up the tone for observe culture in host countries. Once the culture established in subsidiary, top management would conduct their behaviors to the code in order to make it effective. Generally, the managers in subsidiaries are expatriates. They are required to take ethical norms in host country which may be different from their home ones. This procedure is hard to be taken by its nature, thus, most MNCs provide their managers with necessary training in order to make them aware the differences and benefit the company. The basic principal here is that the local employees would exert themselves, once they feeling the respect of their own culture from managers.

Meanwhile, MNCs are trying to establish mutual trust mechanism in host countries. Mayer defined this trust as the relationship between client and agent. That is, the client is defenseless to the agent, since they believe that the agents would take actions favorable to client no matter they are being monitored or not. Most managers in MNCs aware a fact, that is, in the globalized environment, it is not realistic to simply rely on hierarchical control. That’s exactly the reason they adopt the trust mechanism. Through this mechanism, the culture of headquarter can be passed to individuals and teams. Staffs in host countries would be motivated and maintain their own culture. Research shows that successful career of local employees have positive relationship with the set of trust mechanism (Bartlett&. Ghoshal,2000).

3.2 Examples of Practices in MNCs on Motivation

According to the self-denial analyzed above, it is no wonder to find out that even there are differences in cultures and languages, there is also similarity like sense of self-achievement which is important for staffs all around the world (David,1971). Motivator based on this element can be challenging goals, training opportunities and high earnings as well as advancing opportunities.

In order to realize the motivation in host countries, MNCs would develop their own strategies. Analysis would be carried in order to compare different strategies of European MNCs and Japanese MNCs as follows

When analyzing the subsidiary of European MNCs, it is easy to find that they have more emphasis on practices of classical motivation theories. Many subsidiaries own their own consultant in host country who can help them in the design of motivation system. Meanwhile, European companies tend to focus on individual value, which makes them putting the performance payment first in compensation package. This reflects the efficiency, competence advocates by European companies. However, due to the matrix structure of most European MNCs, headquarter controls its subsidiaries by various means like products, functions as well as regions. Combined with the geographical and cultural elements, it is difficult to coordinate the motivation of local staffs. The subsidiary in large country, China for instance, may have different needs of staffs in different regions, thus, the overall policy in China area may be lake of flexibility and cannot make appropriate adjustments timely.

Compared with this, Japanese MNCs tend to give their staffs in host countries more security. That is due to the lift-long employment system which also carries within Japan. Meanwhile, the Japanese companies focus more on equity. They tend to hire people with great enthusiasm rather than higher ability, even this may cause more cost on training. However, the pace of management level localization is relatively slow in Japanese MNCs. From the practical point of view, the president, minister or above in subsidiaries are nearly all sent by headquarter, even big companies like Panasonic and Sony. Sticking to seniority doctrine may undermine the enthusiasm of talents and result in a high turnover rate.

4. Practices on Retention in MNCs

Since many expatriates are send to host countries working as managers, there are problem on retention strategy for this group of people. Another group of local skilled and professional staffs may face the same problem, while their turnover rate may relatively lower. The retention strategy and turnover rate are related to the job satisfaction and organizational commitment (Lueke&. Svyantek,2000).

The concept of retention has close relationship with motivation mentioned above. When employees, especially those with skills and knowledge are motivated in proper way, they would develop sense of belonging to organization and have the intention to maintain their positions within organizations. In a perfect situation the productive employees are encouraged to stay and nonproductive are encouraged to leave (Sigler,1999). However, in host countries, if the expatriates can not be socialized successfully and local talents can not feel being respected, they can not avoid to be choose leaving.

4.1 Methods of Retention in MNCs

For expatriates from home country, there is a procedure named cross-cultural adaption. Haslberger defines this procedure as a complex one in which person becomes capable of functioning effectively in a culture other than the one he is originally socialized (Haslberger,2005). Thus, many MNCs design training programs in order to help expatriates being familiar with another culture. The retention strategies provided to expatriates can be separated into two kinds. One is from the point of organizations, for instance, MNCs always provide managers working abroad with higher payment and great chances of promotion. The other one is from the point of individuals. In order to encourage these expatriates working in subsidiaries, headquarter can provide their families with better working opportunities.

In today’s highly competitive environment, retention can be realized trough many ways like assessment, regular feed back and ongoing support (Glen,2006). However, in subsidiaries of MNCs, there are obvious obstacles to feedback and assessment procedure, that is, the difficulty of cross-cultural management. Most middle level managers in subsidiaries are local talents, who are in need of feedback from their expatriate managers. However, due to the cultural background, the feedback is mostly disappointing. MNCs have to try another ways to maintain those local talents, for instance, giving them much higher payment than ones in the local labor market.

4.2 Examples of Practices in MNCs on Retention

Taken MNCs in China as an example, their main problem is the lake of qualified employees who also have understanding of multinational business. Thus, most foreign enterprises take their time to understand what exactly in China to make employees more satisfied and more likely to stay (Zhang &Carter, 2009). For the characteristics of Chinese labor market, that is, the over supplying. High payment is attractive to local talents, especially for those graduates. The salary of MNCs in China is much higher than local companies, and therefore, most graduates show their interests without doubt. For instance, the Motorola Electronics Co. Ltd. has recruit 50% graduates in China in its peak time. Besides high payment, the MNCs also try to set safe net by providing satisfying profits to local staffs, which are a blank area in many local companies.

Meanwhile, data demonstrates that Chinese employees highly appreciate chances for training and development. Since most local talents in MNC are young generations, their pursuit for development push them into any chances for further learning (Cai & Klyushina,2009). Nowadays, more and more MNCs apply their training to Internet in order to meet these huge demands. Meanwhile, this strategy provides the training program with more flexibility. In the year of 1999, the Chinese subsidiary of Cisco took 80% of its training program by Internet, and extended this to its partners in 2000. Tens of thousands local talents get trained through this way. That would definitely give them confidence to stay within such company.

The MNCs in China here are only mentioned as example of retention strategy. The most important elements when considering retention should be the combination of local situation.

5. Recommendations

Facing the constantly changing environment, severe competition, MNCs today realize the importance of retention and motivation employees, including expatriates and local staffs. Meanwhile, global competition gives MNCs no choice but find ways to reduce cost and new markets (Jansson, 2007).

In order to help its subsidiaries acquire more competitiveness in host countries, it is advisable to find solutions to motivate and maintain talents. Among all the obstacles, culture is the first thing ahead. Even all talents have their own demands according to their own cultural background, there are common incentives like self-achievement and challenge goals (David,1971). Thus, in order to motivate higher levels of managers, setting higher targets for them is an ideal way. For lower-level talents, it is crucial to develop their sense of belonging, since they must fit themselves into a foreign company.

Considering the different kind of staffs, the recommendations for motivation and retention can be conclude as follows. First, for expatriates who taking higher positions in host countries, it is unavoidable to have a procedure feeling isolated. Thus, advices for headquarter is that, before assign their managers abroad, an interview is indispensable. Once the managers have the intention to work abroad, they should be provided with language and culture training, in order to help them fitting into the business as soon as possible. From this point of view, many MNCs evaluate the qualification of being manager abroad only by how well they have done business in home country. Results getting from this judgment are subjective, since many managers cannot reach high performance when they can not fit into the culture. When they meet failure, they would definitely develop self-denial and choose to leave. Hence, ability of fitting into strange situation should be the very first element considered when sending home managers abroad.

There is also another way to reduce the turnover rate of managers in subsidiaries, that is, the procedure of talent localization. Since many MNCs fare the dangers of recruiting managers from host countries, the procedure of localization is disappointing. However, truth is that local talents acknowledge more characteristics of market in their country. Meanwhile, common staffs are more willing to stay and motivated when they find they are leading by people of their own country.

For lower level talents, the MNCs must provide them with prospect of promotion. Generally, MNCs offers higher payments than local companies, which can attract talents choose them initially. However, a higher payment is not the only way to maintain these local talents. When they find their managers are sending from home country, they would disappointed with the promotion channel and choose use the experience of working in MNCs as further preparation for better position in other companies. This can also be contributed to the procedure of talent localization, that is, when local talents find they are being respected and would be promoted in the future, they would develop sense of belonging to this company which can result in intention to stay.

To sum up, most MNCs now are facing problems of motivation and retention. For whichever group of talents, abroad or local, the culture management is essential. Meanwhile talent localization would be more attractive to local talents and develop their loyalty to company.

6. Conclusion

Better motivation and retention or HR in different countries for MNCs is a challenge posed by the globalization. Actually, it is difficult to identify which practices are best suitable for which country (Bender&Fish,2000). Since the common division of a MNC is home company and host ones, there should be at least two ways of management.

However, facing different host countries and different cultures, classical management theories would be lack of flexibility. As a consequence of this, the only way for MNCs to manage its talents is adjusting to different culture and makes a quick response to changing environment. Different combination of motivators may have different effects in various countries. Thus, in order to motivated staffs in different countries, the first thing is figuring out their special needs. Thus, the cost for culture inquiry or training for fit into other cultures may be huge. For MNCs, however, just remember that the rewards later would be huger.