Strategic Issues In Training And Development Multinational Corporations Management Essay

Strategic Issues In Training And Development Multinational Corporations Management Essay Nowadays Multinational corporations are more and more widespread, but a problem that they still don t have accomplished is how to have successful employees, and most importantly how to train their employees and make them a useful and successful resource of the their enterprises. The increase of multinational corporations has led to employees sent in a foreign country to undertake international assignment more than ever before, with estimation that the use of expatriate will continue to increase in the future (Van der Bank Rothmann, 2006). Some researchers estimated that around 30% of all expatriates sent to undertake overseas assignments return home prematurely (Kim Slocum, 2008; Mendenhall, Dunbar, Oddou, 1987). And failure rates increase further when is considered also employees who return home and leave their company within one year (McGinley, 2008). One of the major causes attributed to expatriates failure is the inability of these expatriates or their spouses to adapt themselves in the host-country s new environment and different culture (Tung, 1988). Failed adjustment of expatriates leads to high amount of economic and social costs for multinationals corporations. Expatriate failure is defined as the inability of the expatriate to perform effectively the international assignment, with the consequence of being fired or recalled to home (Tung (1982), therefore it is crucial to identify the ways to reduce and eliminate such failures. Although estimations of the costs of expatriate failure tend to vary in regards to each different country and are not based on a fixed set of criteria, they certainly cannot be neglected by multinationals (Gregersen Black, 1990). This essay aims to explore the strategic issues around training and development that are faced by Multinational corporations. What is International training and development One of the most important activities of International Human Resource Management (IHRM) is International training and development and its potential benefits are highly recognized in the literature. (Dowling and Welch, 2004; Kamoche, 1996; Mendenhall et al., 1987; Tung, 1982). Kamoche (1996) says: The human resource refers to the accumulated stock of knowledge, skills and abilities that individuals possess, which the firm has built up over time into an identifiable expertise (p. 216). In the management literature, the two words International training and management development are always related to each other. Training has the aim to increase work skills and behaviour, and development has the aim to improve abilities in regards to some future position (Dowling et al., 1999, p. 155). Dowling and Welch (2004) argue that the issue for multinationals is how to retain and leverage their employees in order to have at disposal highly trained, internationally oriented human resources to support their strategic responses and concur to their key competencies. Multinationals are increasing their usage of training to improve and assist expatriates activities. The importance of training and development in MNCs Nowadays, a successful international manager has to detain a set of specific abilities in regards to the context, such as ability to handle responsibility, cultural sensitivity, ability to develop subordinates, ability to demonstrate and to exhibit (Baumgarten, 1992). These ability are considered important international skills and characteristics which can be generated with an effective international training and development program. International training is the type of training specifically set for who has been allocated an international assignment. In Multinational corporations there are mainly three different group of international trainings. They are divided in: 1. Pre-departure training for expatriates: before an expatriate s departure for the international assignment, there will be a preparatory training course, this has the scope to ensure that the expatriate has the right capacity and knowledge to accomplish his assignment in a successful way. 2. Post-arrival training for expatriates: Once the expatriate is arrived in his destination to fulfil his international assignment, he will be provided with on-site training, in order to familiarize with the new working environment. 3. Training for host country nationals (HCNs) and third-country nationals (TCNs): This training aims to help HCNs and TCNs to understand the corporate strategy and the different culture. In the international literature the group of international training that has received more attention is Pre-departure training for expatriates, as overseas failure (i.e. the return of an expatriate employee before the completion of the assigned assignment) is most of the time caused by failure to provide adequate international training for expatriates and their spouses. In order to measure the effectiveness of employees expatriation, the expatriate failure rate is a good indicator. One of the reason MNCs have to avoid expatriation failure is certainly because their cost are really high, involving direct (salary, training, travel and relocation costs) and indirect expenditure. The average direct cost per failure to the parent company goes from US$ 55.000 to US$ 80.000, depending to the assignment s destination (Mendenhall and Oddou, 1986). Whereas indirect costs can be considerable and difficult to quantify, including the damage of the relationships with host country s government, other organizations and with customers, losing market share and company s reputation, therefore also missing future business opportunities. Some research conducted among American s multinationals has revealed a high rate of expatriate failure and therefore it remain a recurring problem (Brewster, 1988). Table 1 shows this phenomenon (Shen and Edwards, 2004). The global environment is becoming more and more complex and in continuous change, for this reason it requires flexibility. Therefore organizations have to devise strategic responses with the help of suitably trained and internationally oriented employees. Researches find that there is positive correlation between the rigor of the selection and training process and its expatriate success rate (Tung, 1981). This means that if a company use a more rigorous training program then it will significantly benefit and improve the performances of the expatriate in the overseas environment, therefore decreasing the failure rate (Mendenhall et al.,1987). Cultural training aims to enables personnel to adjust themselves in the foreign culture and then work more effectively in the new environment (Earley, 1987). Table 2 shows (in descending order of importance) some reasons of expatriate failure in US and Japanese MNCs (Tung, 1982). Table 2. SOURCE: Tung, 1982. From the table it s important to note that the more important cause of expatriate failure is not expatriates absence of adequate technical skills, but the inability of expatriates and their spouse to adapt themselves in the new overseas environment and culture. The aims of international management development is to identify, promote and use international managers, and it is expected to play a central role in MNCs because it is fundamentally needed in order to develop a cross-national corporate culture and to integrate international operations. Bartlett and Ghoshal (2000), argue that multinational corporations can construct their inter-unit linkages by creating a pool of international managers from different countries. International training and development programs Pre-departure training Most of the literature is concentrated on expatriate pre-departure training programs and their scope is to provide and develop host-country s cultural awareness to expatriates. Once expatriates have been selected by the multinational for an international assignments, pre-departure training is the next indispensable step to be taken in order to ensure the successful and effective performance of expatriates assignment in the host-country (Dowling, Engler, Festing, 2008). Pre-departure training programs to be effective have to include different components: cultural awareness training, preliminary visits, language instruction and assistance with practical, day-to-day matters (Mendenhall Oddou, 1986). Cultural awareness programs Is generally known that expatriates have to feel comfortable and adapted in the host-country in order to perform effectively their task, therefore is fundamental to provide them with a well-designed cultural awareness training program. Receiving this kind of training expatriates will understand and appreciate host-country s different culture and can behave accordingly or develop appropriate coping patterns. Without any understanding of host-country s different culture, expatriates are likely to feel disoriented and face difficult behavioural problems during their time abroad. Therefore, cultural awareness training is considered the most common and important part of pre-departure training. Cultural awareness training programs is formed by different components which may vary according to country of destination, duration of the assignment, purpose of the expatriation, and the provider of such programs (Dowling, Engler, Festing, 2008). Preliminary visits One methods for orientating the expatriates is to send them in the host-country for a short trip. If the trip overseas is well planned can provide a useful preview to expatriates and their spouse about the international assignment s destination, and allow them to assess their suitability for the new environment. This kind of trip is needed also to introduce expatriates to the new business context in the host-country and provide them with more information before their departure. Preliminary visit to the host-country can assist in the initial adjustment process when used as part of a pre-departure training program (Dowling, Engler, Festing, 2008). Even if the useful adoption of preliminary visits is well known, some European multinationals do not provide it. The 1997 European study reported what one firm admitted: We do not provide pre-assignments visits where conditions are so poor that nobody would want to go. Language training Language training is an important component of a pre-departure training program. However its importance is always put after that of cultural awareness training. It is generally worldwide accepted that English is the common language of the business world. The ORC Worldwide 2002 survey discovered that the adoption of language training for expatriates and their spouse, as part of the pre-departure training program is increased. In fact, results say that 59% of the sample firms provided language training before the departure of expatriates, and 74% provided language training once expatriates arrived on the assignment s destination. The ability to speak the foreign country s language is essential to perform better and improve negotiating ability, indeed Tung (1997) discovered from a survey of 400 expatriates that language competence is a critical part of the assignment s performance. Language skills is not important only for task performance but also for cultural adjustment. One reason for multinational not providing language training may be the difficulty and long time required to learn even a base level of a foreign language. A solution to this problem for multinationals is to hire a large language competent staff from which they can choose the potential expatriates to send abroad, but multinationals have also to keep an up-to-date information on all employees, and make frequent tests to verify if those language skills have been maintained (Marschan, Welch, 1997). Practical assistance Providing practical assistance is another component of a pre-departure training program. Practical assistance aims to help expatriates and their family to adapt themselves to the new foreign environment. Many multinationals are paying specialized assistants in order to help expatriates and their family, providing practical assistance in finding a suitable accommodation or school for their children. Trainees: Who should be trained? The support of the expatriate s family is of critical importance for any international assignment to be successfully completed. From this point of view, is clear that multinationals have to train all family members of the expatriate in order to receive a high and effective performance of the assignment. According to a survey conducted by Organizational Resource Counselors (ORC), 47% of multinationals offer training program to the entire family of the expatriate, 33% offer to their employee and spouse, and 20% offer training only to the expatriate employee. Different researchers have analysed this phenomenon and argue that the most important and common reasons for which expatriate cannot perform effectively their international assignment is the inability of their spouses to settle well and live in the host culture (Black, Gregersen, Mendenhall, 1992; Adler, 1997; Kohls, 1994). While expatriate are sustained by the workplace with familiar routines and job tasks, the situation of his or her family members is quite different. The spouse is left alone and have to face difficult challenges in a new international environment such as how to deal with relocation logistics, to establish the household, to settle the children at school, to negotiate with the local services, and to become part of a social network. Obviously the level of difficulty depends on spouses level of confidence and skills. According to findings of a research made by Bennett Associates and Price Waterhouse, most of the times all expatriates are married and the accompanying spouse is female, and they have to face the dual-career dilemma situation at the time of the international relocation. When the accompanying partner is in front of this situation, she or he may feel ambivalent about the move and worried about how to find employment once arrived abroad. So all training programs should take in consideration these issues and help the spouse in order to have a positive growth and development during the time abroad. Therefore is very important that the spouse feel that he or she is also an active part in the international assignment (Lublin, 1999). Training programs should also include young family members, supporting them to adapt in the new environment. All these programs should be tailored according to different needs of children, and they are particularly useful in case of strong difference between childrens culture and host-country ones. In most major business centers there are international schools that help expatriate community, trying to facilitate their transition from their own country s environment to the new foreign country s environment. In other cases, when is not possible to find this kind of international schools, children have to put more efforts in facing new education system, social norms, and the challenges posed by a new language. Some recent research studies and innovative multinational companies practices suggest that there are three main emerging topic that managers working in multinational corporations have to be aware: 1) In-Country, Real-Time Training; 2) Global Mindset Training; and 3) CD-ROM/Internet-Based Training. In-Country, Real-Time Training The majority of multinational corporations think that pre-departure cross-cultural training alone can already give expatriate the necessary skills and knowledge to perform well in the overseas environment. But researchers in this area have analyzed the expatriation process from different perspectives and discovered that multinationals thinking is erroneous, and argued that is important to continue the cross-cultural training program in the early stages of the international assignment (Gudykunst, Guzley, Hammer, 1996; Mendenhall, 1999). Living in a totally new environment facing different culture is a complex task and pre-departure training can provide expatriate with skills and knowledge only to survive, not to excel and overcome problematic situations where expatriates don t know what they should do, because pre-departure training methods cannot cover all the specific cross-cultural situations that expatriates encounter during the international assignment. Therefore once arrived in the foreign country is important to provide expatriates with further education and training in order to make them able to process accurately the new environment around them and to undertake wise moves. In-country training suits these specific needs. How to deliver In-Country Training In-country training can be delivered from: traditional or real-time training. The traditional training is the kind of training that brings all expatriates together, forming a group, when they are in-country, and provides them with in-depth skills and knowledge of the complexities and difficulties they have to face in the host culture, which are not covered in the pre-departure training program. In-country training and pre-departure training in its traditional format are different only for the location where the training is held and the depth of the content. One negative aspect of the traditional format is that all expatriates receive the same content.