How Coca Cola Select & Compensate Expatriates

Abstract

International human resource management has become one of the most controversial issues in the world today, and as a result of the complexity of international management it is essential to have the right person at the right position. The aim of this paper is to identify how Coca Cola Select & Compensate its expatriates. Start from brief idea about the Coca Cola background, Selection process, Factors influencing the Expatriates selection, Role of expatriates, Training and development, and compensation.when looking at selection process it was found that Coca Cola considers the technical ability and previous performance are selection central.This paper also discusses the previous and recent approaches Coca Cola for international compensation.

Introduction

Country boundaries no longer exist when it comes to international trade (Ashamalla 1993).In such a active Global competition, international experience has become a requirement rather than an option and forced many business to recognize that they must consider management from a different perspective.

IHRM is an important component of firms’ global strategy and is often recognized as an influencing factor of success or failure of international business (Deresky, 2003). Phatak, Bhagat and Kashlak (2005) state that IHRM involves developing human resource capabilities to meet the diverse needs of multinational and global corporations. Ensuring high-quality management is critical due to the complexity of managing international operations (Deresky, 2003). Furthermore, in the competitive global economy, human resources are not as easy to duplicate as factors of production, and can therefore provide the source of competitive advantage (Phatak et al., 2005).

When looking at global assignments Black et al. (1999) have presented five basic dimensions of people management: recruit/select; train; appraise; reward and; develop. These dimensions build upon one another and develop into a management process (ibid). First, when it comes to recruiting and selecting, managers need to identify, recruit and appropriately position individuals within the organization. Phatak et al. (2005) suggest that it is a key process when corporations wish to bring new employees into their networks. Deresky (2003) indicates the importance of having the right people at the right place and at the right time by describing it as a key factor of success in international operations.

Company background

The Coca Cola Company is the world’s largest beverage company. It is no.1 brand according to fortune 2009 survey. The company operates a franchised distribution system dating from 1889. The Coca Cola Company is headquartered in Atlanta, Georgia.

Its major markets consist of USA, Brittan, Europe, Middle East, Asia, Russia and North America. It has activities in 200 countries, about 3000 branches, and 55,000 employees across the world. Over 200 expatriates are assigned for international positions every year, as region managers. Most of the expatriates are sent from USA and Britain, and most often sent to Middle East, Asia and Russia.

Expatriates Selection process

Expatriate selection process starts when they need to fill abroad position due to lack of local talent and/or management experience working in a multinational.Selection process is not defined with rules at Coca Cola. Every international assignment requires different criteria. Usually, familiarity within the exact area of international assignments is recommended but not for all times a prerequisite.

Moreover, Coca Cola has lately changed their way when selecting expatriates. It used to concern of sending executives as expatriates, while at the present it has the concern of sending high potentials younger employee.

Coca Cola usually considered the recommendation and suggestions of candidate’s expatriates. Significant sides of the candidate improve his chance to be selected, and can also raise the issues for instance, losing some employee within the department or whether it can give advantage in the future. Coca Cola does not focus on developing repatriation training programs for the expatriates. However, the expatriates informed that at the end of assignment they will return home and they will have their job back, which gives expatriates secure feeling once they leave the international assignment

Factors influencing the Expatriates selection

(Dowling, Welch et al. 2004) shows some of the issues HR managers will take into consideration when selecting expatriates for international assignments.

Source: Dowling & Welch 2004

Coca Cola look at several vital criteria when selecting candidates for international assignments. Expatriates should aware of Coca Cola’s values, additionally the ability to deliver their knowledge and expertise, and gather further knowledge as they are overseas. Expatriates are employee where Coca Cola have faiths in them, and believed to be exceptional performer within the company. In general, selected expatriates are employees who hit the expectations when dealing with everyday difficulties and critical jobs. Besides they are motivated employee with a capability to figure things from a strategic standpoint.

Expatriates required some abilities such as, technical and managerial skills, in order to complete the requested task when selected for international assignments The technical ability consider a significant factor when selecting expatriate candidates according to (Dowling, Welch et al. 2004). (Harris and Brewster 1999) confirm that technical skill of expatriates is a vital criterion to be taken into consideration and in real assignment consider significant. The evaluation of expatriates candidate’s technical ability is based on previous job performance, On the other hand, past performance in some cases does not play major role when work out with particular difficulties in a new host country new culture and environment (Dowling, Welch et al. 2004). At Coca Cola the technical ability has significant weight when decide who to select for international assignment. However, expatriates with extensive international knowledge are sent to achieve more specific knowledge and expertise, whereas expatriates with general expertise are sent to achieve more international knowledge.

According to (Dowling, Welch et al. 2004) cross-cultural suitability is important attribute and has to be considered when assessing expatriates candidates’ as they will work in different or unfamiliar environments. The cross cultural suitability of expatriate candidates is evaluated at Coca Cola but not measured as a significant selection factor. (Ashamalla 1993) highlights the cultural understanding, and the importance for expatriates to value and respect diverse characteristic and features of other cultures. Moreover, (Hutchings 2002) emphasize the importance to tolerate the differences in race, beliefs and cultures, including the norms and values.(Dowling, Welch et al. 2004) state that it is hard to assess the cultural suitability because it is difficult to determine exactly what the aspects that should be comprised.

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(Avril and Magnini 2007) agrees that family has strong influence on the expatriate’s success in international assignment. However a few global organization focus on the family aspect and not to consider family as disadvantage aspect when selecting expatriates’ candidates (Dowling, Welch et al. 2004). As a result of incapability to integrate into a new culture, families can experience feeling of loneliness. Furthermore, Coca Cola does not consider the as disadvantage part when assessing expatriate candidates. Once the decision made then they consider the family for any further training or advice. The partner’s job, kids’ disruption in education and the looking after old parents are issues of family pressure (Johnsson and Lennbro 2008).

Country and cultural requirements is considered when selecting expatriates for international assignments at Coca Cola. First of all, the host government may stop expatriate for many reasons, such as visa issues, no available candidates can fill the position from the host country, and legislations (Dowling, Welch et al. 2004).Moreover, some international assignments at rural area or war-zone mean hard living conditions (Johnsson and Lennbro 2008).

(Dowling, Welch et al. 2004) highlight the language skills of expatriates and assert to be measured as an additional factor when selecting expatriate. According to (Avril and Magnini 2007) expatriates who have language skills will be more effective, gain the respect and trust of their colleagues, and more easily establish partnerships and solid working relationships with local nationals that will, in turn, generate good will for the organization and positively impact the bottom line. (Dowling, Welch et al. 2004) find out that the consequences of language skills changes according to the type of assignment.

Characters and skills of the expatriate are important aspect to consider. Coca Cola states that some of the preferred attributes are personal liability, enthusiasm to build up his experience and develop the organization, ability to be criticized, and be self-confident. The interpersonal talents of expatriate are not a spoken criterion, but if the expatriate do not have the ability to work with people, then they will not be chosen.

Finally, Coca Cola highlighted the individual’s motivation. The people who select expatriates review their explanations to select them for international assignment, and as staffs apply for international assignment, take into consideration that they are to some extent motivated.

Expatriates Roles

According to (Dowling, Welch et al. 2004) , there are many reason for transferring employees for international assignments as expatriates linked to the intended purpose of the expatriate. Roles of expatriates are listed as the following

Source: Dowling & Welch 2004

The Figure provides a general idea of the expatriate’s roles, and how these roles shape by home and host country. First of all, Coca Cola using expatriates as agents of direct control, where expatriates roles are to make sure subsidiary commitment through direct administration and management (Dowling, Welch et al. 2004). Moreover, expatriates also used to manage personal and cultural matters in the host country as stated by (Harzing 2001).

Knowledge can be shared cross international assignments. as a result, Coca Cola use overseas agents of socialization, which is likely helps the integration of corporate values and beliefs (Dowling, Welch et al. 2004). It is a means of informal and non-direct control.(Harzing 2001) label the expatriates as “bumblebees” since expatriates help in the transfer of a common culture of companies. This formulates and creates more decentralized organization.

In addition, Coca Cola can use expatriates as agents to build and enhance the network between the host and home branches (Dowling, Welch et al. 2004). Internationally, strengthen the links between individuals is significance way of implementation of informal control. It is also a way to transfer ideas and efficiency.

According to (Dowling, Welch et al. 2004),one of the expatriates role is to increase the organization borders . Expatriates would have an exceptional ability to gather information on the market, and enhance the representation of the company in the host country.

(Collings, Scullion et al. 2007) state that there is more than one reason of using expatriates for international assignments. First, if there are no appropriate managers available at the host country for a specific project or function, then the employment of expatriates could be used to guarantee the desired value of work. In addition, using of expatriates gives the chance for managerial development. (Collings, Scullion et al. 2007) indicates expatriates will build and developed their competences throughout the international assignment and motivate the organization for using expatriates and help achieving the organizational development.

International Training & Development

Source: Dowling & Welch 2004

International training and development is another aspect of IHRM. Training intends to develop employee skills and behavior, whereas development objective is to increase abilities in relation to some potential position, generally a managerial skills (Dowling, Welch et al. 2004).

According to (Shen 2005) expatriates need a set of context-specific abilities, for instance industry-specific knowledge, and a central part of certain skills, such as cultural sensitivity, ability to handle responsibility, ability to develop subordinates and ability to exhibit and demonstrate. These skills are measured as vital international competencies at Coca Cola and all can be developed through effective international training and management development. Moreover, pre-departure training will help expatriate success more than failure (Katz and Seifer 1996).

Coca Cola focus on human resources development by concentrated on the education and training of its employees as an important part of their development. Coca Cola allegedly spent millions every year for training its employees. On the other hand, Coca Cola undertook a cost cutting drive, and started looking for methods to train its staff effectively at lower Costs. After significant investigation and researches, Coca Cola In 2007, launched Coca Cola University (CCU) a virtual, global university for all learning and capability-building activities across the Company. E-Learning was used to train Coca Cola newly recruited managers and expatriates.

Four types of training for international assignments (Baumgarten 1995).

pre-departure training for expatriates:

Once expatriates selected for international assignment, they will receive language training and an orientation to the host country culture. Family will be included in orientation training sessions. These training sessions will provide expatriates and their family with information related housing, schools, shopping, and health care facilities in the host country. During the training expatriates will have full discussion with the organisation about how the international assignment would fit into their profession strategy and what future position they would have when return to home country.

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On-site training for expatriates:

At the host country the expatriate will receive additional onsite training to familiarize the expatriate with the local working procedures and work environment. These formal programs will deliver orientation about the host country customs and cultures.

Repatriation:

Expatriates and their family will adapt the host country norms and culture especially in long-term assignment. Usually they will experience high level of stress and cultural shock when return to the home country as a result of changes that have taken place since their leaving. Expatriates have to assume what ability they want to build up and the sort of jobs that might be offered in the home country with those new skills. As the expatriate a broad, many changes at the home country company could happen such as colleagues or managers may leave. Therefore expatriates should maintain contact with company. Otherwise expatriates will have re-entry shock because of new employees, a new passion, and a new culture that may have changes.

Training for (HCNs) and (TCNs):

To ensure the understanding of corporate strategy and culture, training will be provided to HCNs and TCNs.

All employees from team leaders upwards are given an annual skills assessment and development plan. The Company also in­vests in formal training. During 2008, em­ployees received on average more than 16 hours of formal training each. An additional valuable means in expatriate pre-departure training is an initial visit to the host country. These visits often give the expatriates and their family a clearer idea about the new environment in which they will be living. Sometimes expatriate will refuse the international assignment based on the initial visit. According to (Coopers 1997) study shows that 53% of organizations which offer initial visits to their employees and spouses to the host country, of those 13% refused the international assignment. On the other hand, since the expenses and costs for an expatriate failure are so high it is valuable to know of the refusal earlier to the actual assignment

Performance Management

Source: Dowling & Welch 2004

Coca Cola manages its performance management system through 4 Stages during an Annual Business Cycle and has multiple Objectives. Some of these include Objectives leading to Significant Accomplishments, Breakthrough Objectives, and Business Plan Achievement objectives. Furthermore, Coca Cola has an extensive training and development programs for the employees to focus on the day-to-day needs of the employees and to adapt new culture difficulties and differences.

Competency framework encompasses thought leadership, people leadership and results leadership that Coca Cola uses to manage and assess its workforce. A point ranking scale is used to define a system in an organized systematic form to avoid ambiguity and bias when conducting performance appraisal and rating to compensate employees based on performance and competencies as identified in the appraisal process.

According to (Dowling, Welch et al. 2004) when expatriate agree to have the job for international assignment, they will look forward to having financial benefits from doing that assignment. Therefore organisation should take compensation packages into its consideration because it has major affects at the expatriate’s when making decision. Expatriates successes will have big advantage for the organisation especially in this competitive market.

(Dowling, Welch et al. 2004) points out two approaches to develop international compensation:

Firstly, the Going Rate Approach

Going Rate approach is straightforward and easy to understand which make the compensation package parallel to the host country nationals. In this approach the base salary is linked to the salary structure of the home country. It is based on local market rates. This compensation approach has some disadvantage especially when expatriates return to home country. When going rate is different in the host country, there might be some pay cut.

Secondly, the Balance Sheet Approach

Balance sheet approach delivers a compensation package to balance an expatriate manager’s purchasing power between host country and home country. In other words, since expatriate assigned to an international position by using balance sheet approach expatriates will not be affected by spending power. The negative side of the balance sheet can be its cost and unfairness between expatriate managers and local national managers, and even among expatriates who come from different countries.

Components Coca Cola takes into consideration when it comes to an International Compensation:

Base Salary

Extra pay the expatriate receives for working outside his or her country of origin which encourage to accept foreign postings

Allowances

(Housing allowances, Cost-of-living allowances, Education allowances, Relocation allowances, Parent country wages everywhere ,Wean expatriates from allowances ,Pay based on local or regional markets ,Global pay systems)

Tax differentials

Coca Cola pays the expatriate’s income tax in the host country when a host country has a reciprocal tax treaty with the expatriate’s home country.

Benefits

Coca Cola ensure that their expatriates receive the same level of medical and pension benefits abroad that they received at home

The new host country environment and difficult to function efficiently are core problems for the majority of expatriates (Harris and Brewster 1999) Pre-departure training is essential for improving expatriates’ culture knowledge and cross-culture adjustment (Dowling, Welch et al. 2004).On the other hand, many cross-culture training is not sufficient or incomplete. Since it’s hard to assess the efficiency of such training (Waxin, Katsioloudes et al. 2007).

According to (Sims and Schraeder 2005) Healthcare is another significant aspect when it comes to compensation package. Many international organizations would have different health care insurance company between home and host country.

Coca Cola rewarding system for employee is excellent to retain, motivate and influence employees towards organizational goals with their best potential utilization. Coca Cola uses Self Assessment tools for staff to assess themselves on top accomplishments in the previous year.

Analysis

Operating as agents of direct control is usually not the role of expatriates at Coca Cola , which is not consistent with (Dowling, Welch et al. 2004) believed as they remark that expatriates are often used to control and monitor local operations. Another role of expatriates according to (Dowling, Welch et al. 2004) is agents of socialization, where expatriates are likely to share business values and beliefs so as to build some informal control.