clarifies the IHRM theoretical side and how the company uses it

IHRM concepts in Coca Cola’s practices and reasons to transfer employees to the host countries 6

Selecting staff for global assignments in Coca Cola 7

The disadvantages of traditional selection in Coca Cola 8

Abstract

This research project explains how the International Human Resource theories are used in Coca Cola as a multinational organization. More over it clarifies the IHRM theoretical side and how the company uses it in its practices. Also it explains both of the strength and weak points of the practical methods. Coca cola is an example of Multinational enterprises (MNEs) as it operates its business in more than 200 countries.

Introduction

Local Human Resource Management practices are different of international Human Resource Practices, because the core different in the organizational structure. The structure of a Multinational organization as Coca Cola should be different of another American local organization. These differences come from the significant role and senior strategies of the company. This should cause some significant change in the HR practices and functions.

Since Coca Cola is a company operates its business around a huge number of countries around the world it began to respond to both of local and international needs. Environment, culture and political differences exist from a region to another.

Globalization is the most important factor of the multinational enterprises phenomenon. Coca Cola one of the American companies became a multinational company to take the benefits of new markets and to minimize the labour costs. Haile (2002) mentioned that Bernadin and Russell (1998) and Robbins (1997) all stated that Coca-Cola and Pepsi receive more than half of their revenues from operations outside the United States. These reasons and more encourage the company to operate its business outside the boundaries. While the company started its operations outside USA it considered the environmental, cultural and political change. Also it considered the differences among the multinational employees. Therefore it started to find the methods and the practices which help to avoid any obstacles since the IHRM has new concepts were developed internationally. As a core point, the international human resource practices should be aligned with the predefined strategic business goals.

Company’s background

Coca Cola was invested in May 1886 by Dr. John S. Pemberton in Atlanta, Georgia. Currently, its operations are in more than 200 countries, and with diverse work force of approximately 55,000 employees.

The local and global strategy

The strategic vision of the company is to achieve five strategic goals: Profit, people, value, partners and planet.

One of the above strategic is people, which is the most important element in Coca Cola as people are the workforce which operates the whole work. Moreover the company gives its attention to the HRM to control the human functions and roles and to be aligning with the company’s senior strategy. In line with the higher objectives of the company, human resources management seriously seeking to get the best management achieve the objectives of the company. For these reasons, IHRM should define know the structure of the company as a global.

(The Times Newspaper, 2005, P. 2)

The company’s structure

The home country of Coca Cola is USA it controls both of centralization and localization’s functions. Senior decisions at The Coca Cola Company are made by an Executive Committee of 12 company Officers. This committee helped to shape the strategic priorities. The chair of the executive committee acts as a head for the company and chairs the board meetings. He is also the Chief Executive Officer (CEO) and as such he is the senior decision maker. Other executives are responsible either for the major regions (e.g. Africa) or have an important business specialization for example the Chief Financial Officer.

(The Times Newspaper, 2005, P. 3)

There are seven main regions where Coca Cola operates in as the following:

North America, Africa, Asia, Europe, Eurasia, Middle East, Latin America. Each region has divided into countries and each country has its own structure the following figure explains the structure of Coca Cola in Great Britain.

(The Times Newspaper, 2005, P. 3)

IHRM concepts in Coca Cola’s practices and reasons to transfer employees to the host countries

Staff selection, international assignments, international training and development, international compensation, and IHRM in the host Country context are some key concepts of the international practices which Coca Cola’s HRM is responsible to deal with. And it is important to know the reason of transferring people from a region to another among Coca Cola parent company, host countries and subsidiaries.

The reason of sending staff for international assignment in Coca Cola is to achieve three major goals within short and long terms: to fill positions, develop the management and to fulfil Coca Cola’s development. (Hartono 2009)

The following table shows the reasons of transferring staff from the parent country of Coca Cola to the host countries (e.g. china).

Why does Coca Cola transfer staff from the parent country (USA) to the host countries

Transfer of technical or Managerial knowledge, training of subsidiary managers, or lack of qualified local personal

(Position Filling)

Level of education in host country is low

Subsidiary is young

Subsidiary is Greenfield establishment

Gain international experience

develop global awareness

(Management Development)

MNC is more internationalized

MNC is large

Control and coordination of subsidiary operations

(Organizational Development)

Uncertainly avoidance in home country is high

Level of cultural distance between home country and host country is high

Level of political risk in host country is high

Subsidiary is large

Subsidiary is majority-owned

Subsidiary is higher in corporate reporting chain Subsidiary is young

Subsidiary is under-performing

improvement of communication channels between head quarter and subsidiary

(Organizational Development)

Level of cultural distance between home and host country is high

Level of political risk in host country is high

Subsidiary is young

Selecting staff for global assignments in Coca Cola

Hartono (2009) argued that studies explained that selecting employees for global tasks to achieve international specific jobs is difficult. Also wrong selection may lead to significant problems. Therefore Coca Cola developed its own system for careful selecting employees, in this system the company determines carefully the appropriate persons for each assignment. (Slavenski 2003)

In Coca Cola they always give enough time to assess employees they wish to go for an international assignment. First step is to receive applications from the employees who find that he is qualified for the task. Then conduct five hours assessment for all the applicants to identify the following nine skills:

1. Organizing and planning

2. Perception and analysis

3. Decision making

4. Oral communication

5. Decisiveness

6. Adaptability

7. Interpersonal skills

8. Written communication

9. Perseverance

Second step is to determine the best applicants who have succeed in the first assessment and ask them to return next day for the organizational orientation, also there is three days of training for the line managers who are responsible for this selection. In Coca Cola usually the third step is an interview to select one of three applicants to do the international assignment.

Comparing with the old approach of selecting staff to do a global task there are a significant change in the way and technique used currently in Coca Cola. According to Slavenski (2003) he stated that These results indicate that the new method of interviewing is more effective than traditional interviewing. Hence, the assessment/hiring ratio was lowered from 3: 1 to 2:1. T hat is, for every two people assessed in the center, one could be selected. The cost savings amounted to about $48,000 per center or $4,000 per candidate.

The disadvantages of traditional selection in Coca Cola

Selecting people who have equivalent skills, information, and organizational expectations is more complex than it earliest appears. Someone who has been successful somewhere else in a related position may not always be a good selection. Old selection in most organizations is not as useful as it could be because it is not based on an analysis of job necessities, rather than being prepared and logical, it is unofficial and incompatible, making it hard to compare and assess candidates, it may involve unrelated, and sometimes unlawful, it allows the candidates small chance to express actual job skills and it is based on poor inspection and records and generally relies on the interviewer’s ability to bring to mind complex information about number of candidates.