Human Resources Management Strategy Of Nokia Siemens Network Business Essay
Frequent introduction of new products or using of first-class technology is no longer a kind of success for a company or corporation in current business environment. Companies have realized that they must also seek sustaining competitive advantage from the effective management of human resources. That means Human resource managements (HRM) has increasingly been recognized as a critical segment of international business operations (Hertog, 2010). Moreover, the more rapid pace of internationalization and globalization leads to a more strategic role for HRM as well as changes in the content of HRM. However, Multinational companies (MNCs) often face the challenge of balancing between centralized control of international HRM strategy and responsiveness to local circumstances in term of unit variation in HR policies and practices. Thus, studying about this issue can promisingly bring an interesting and new experience to both IHRM practice and IHRM academics.
In fact, although IHRM is becoming one of the most interesting topics for both practice and science, not many academics research had a sufficient study on the current strategic transformation process in the IHRM of MNCs with regard to the differences in culture between home and host countries; the dynamics of labor markets, and the changes of business environment (i.e changes in industry and company characteristic), etc, (Rowley C., 2002). As a result, there is lack of understanding in the strategic change process in IHRM of MNCs such as the considering for a new strategy from the beginning, knowledge transferring for new IHRM procedure from headquarter to subsidiaries; or the implementation of the new IHRM policies in practice, and the evaluation of the process’ effectiveness in the end. This study would like to contribute to business and governance research an interesting experience concerning this issue through the case study about IHRM transformation of Nokia Siemens Networks- Telecommunications Corporation. Because of the limited sources from the studied companies, the research will mainly focus on the implementation of the HRM transformation process in NSN at local level and generally analyze the most significant improvements in the company’s current HRM strategy after the change.
The objective of this research is studying and analyzing NSN IHRM strategies during the years and its HRM modal transformation process. Besides describing and comparing the previous and current approaches of NSN’s HRM, another main assignment of this research is identifying the role of their local HR departments in supporting the organization to deal with regional HRM issues and how they react with the HRM changed progress
Nokia Siemens Networks Background
Nokia Siemens Networks (NSN) is second largest telecommunications equipment suppliers in the world. It was created as the result of a joint venture between Siemens’s COM division and Nokia’s Network Business Group. The main products and services of NSN are mobile and fixed broadband networks; consultancy and managed services; and multimedia technology. Nokia Siemens Networks operates in approximately 200 countries worldwide which divided into seven main regions: North East, West & South Europe, Greater China, Asia Pacific, India, Middle East & Africa and Latin America. They have approximately 60,000 employees. Most of them work in one of the five central hubs around the world. The customer base of NSN includes 1,400 customers in 150 countries (including more than 600 operator customers). Due to the company’s dynamics including the industry’s context and the development of the company such as company’s expansion in different markets and the increase of its new products and services, this young corporation continuously needs to improve its organizational structure and HRM strategy to gain the effectiveness. Remarkably, the transformation in organizational as well as HRM mode in 2008 has contributed a significant role to the strategic development of the company. In more details, from 2008, top management has decided to change their organizational form from country- based mode to customer orientation-based mode. It led to the fact that HRM became more centralized to the regional level instead of being mostly decentralized to each of their country subsidiaries like it was in 2007.
Background of Human Resource Theory:
Telecommunications industry- Context, Product Market and Global Telecoms Strategies
Context and product market of telecommunication industry
During the early 1970’s, the telecommunication industry entered into a period of rapid change (Steven, 1996). The mid- 1980s was marked by an explosion in demand for new information and communication products and services. From the point of view of the telecoms industry, most important were mobile telecoms services and the Internet. Both created rapid growth in relatively new markets and at the same time generated new business opportunities for responsibilities ( Fransman, 2001). Since 2000, several major business drivers that fueled the original phenomenal growth include deregulation of telecommunications; high- speed Internet access; IP packet technology; mobile communications services; acquisition strategies and equipment vendor financing (Joe, 2003).
Global telecoms strategies
Multinational corporations in general and telecoms companies are thought to follow three main types of international strategy which are global strategy, multi-domestic strategy (local responsiveness strategy) and transnational strategy (Perlmutter, 1969, Cristiano 1995, Rugman 2001). In global strategy, control is centralized; subsidiaries resemble the parent company and are managed as dependent business. In multi-domestic strategy, control is decentralized; subsidiaries conform to local practices and are seen as an independent business. In transnational strategy, subsidiaries and headquarters alike adhere to worldwide (or regional) standards as part of the organizational network and subsidiaries are managed as interdependent business.
International HRM (IHRM)
IHRM has defined as the HRM issues and problems arising from the internationalization of business and the HRM strategies, policies and practices which firms pursue in response to the internationalization of business. International HRM was essentially concerned with the six core activities of recruitment and selection, training and development, compensation, performance management, labor relations management and expatriates management. Each activity plays an important role in IHRM policy (Welch, 1994; Dowling, 1999; Carl, 2001 and Sonja, 2001).
Decentralized or Local HRM vs. Centralized or Global HRM in multinational company
Scullion (2000) mentioned the fact that while the nature of global business calls for consistency in the management of people, cultural diversity requires adaptation and differentiation. There is a fundamental goal for HR to achieve a balance between centralized control of international HRM strategy and responsiveness to local circumstances. Evan (2002) suggests that there are three approaches to achieving this aim: centralization, coordination and decentralization. Centralization refers to focusing on activities carried out at global level, and decentralization on activities carried out at local subsidiaries level. Coordination refers to a middle ground, balancing those activities that would be best be undertaken by local subsidiaries with those managed by global or regional centers. This is dependent on the degree of integration or differentiation desired. Organizations often operate with a global and centralized HRM strategy for top managers and high-potential executives but a more polycentric and decentralized one for all other employees (Scullion, 2000).
Transformation in HRM
The HR strategies and policies of an organization interact with its strategic environment, corporate and business strategy often in a complex and recursive relationship. HRM also becomes a part of the organization to develop the necessary capabilities to enact business strategy (Hertog, 2010). In addition, Mohramn (1997) argued that in traditional bureaucratic organizations, the human resource function added value by creating systems that produced bureaucratically correct behavior as well as the predictable and orderly development of people and their careers. But the era of traditional bureaucratic organizations is over; stability needs to be replaced by change, innovation, and new organizational designs. This fact represents both a major threat and a major opportunity for the human resource function. If it can create human resource management systems that fit the new organization designs that are appearing, the function can not only survive, it can thrive because it will make a major contribution to organizational effectiveness.
Due to the process nature of HRM as well as the lack of rigorous theoretical model, a qualitative case study approach was utilized and following Yin (1994) an embedded single case design was chosen. This implies that one single organization was selected as representative of a general phenomenon, here understood to be “the large contemporary firm, in the midst of developing Knowledge Management initiatives”. The research indicates the improvement in organizational structure and HRM strategies of NSN in order to manage more effectively their global business performance and be able to gain the market share among various telecommunications equipment corporations.
To sum up, choosing an appropriate global strategy is a big challenge for MNCs, especially at the beginning of their globalization. MNCs, as a result, might face with the change in their policies to become more sufficient managing the business. That will also lead to the transformation process in HRM for management improvement if needed. The characteristics of the industry and its product market; the life cycle of the MNCs and its affiliates; the features of host country like regulations and culture; and the understanding and loyalty level of employees toward the change in policies may be the main factors that influence the concept of IHRM transformation. The headquarter HR function will carry out the HRM transformation process in three main steps: contracting with line management for a new role for HR, identifying and developing new HR competencies and redesigning HR work, systems and organization.