Employment Relations Aspects of Managing Global Business

From Biki

Contents 1 Employment Relations 1.1 Organisational Structure 1.1.1 Centralisation vs. Decentralisation 1.1.2 Types of organisational structures 1.2 Staffing 1.3 Labour Law Variations 1.4 Minimum Standards of Labour 1.5 Staffing Systems 1.5.1 Ethnocentric staffing 1.5.2 Polycentric staffing 1.5.3 Geocentric staffing

Employment Relations

Organisational Structure

This refers to the way in which a business divides its activities among separate units and coordinates activities between those units

Centralisation vs. Decentralisation

• Centralised is the extent to which decision making is centralized at a high level in one part of the business
  • It helps coordinate the operations of international subsidiaries, which is particularly important where the business is operating in many markets. Purchasing is often centralized (bulk buying) for discounts
• Decentralised is the degree to which decisions are made by individual subsidiaries.
  • This results in products better suited to local needs as subsidiary has better understanding of local culture, politics, laws and competitors.
  • Local manager is in a better position to react to changes in the environment and trends than a centralised structure would allow

Types of organisational structures

International division structure

• It separates domestic and international operations with their own managers. International division is then subdivided into units. Each unit has own manager – they carry out their own marketing, finance and production.
• Managers become specialists in a wide range of related activities, therefore allowing the business to reduce costs, increase efficiency and prevent international activities interrupting domestic services
• Useful for businesses that are new to international business or where international activities account for a small % of total business

International area structure

• Here the businesses global operations are organised into countries or geographic regions. Commonly in regions such as Asia-Pacific or otherwise according to countries
• Each division operates as a self-contained unit, with most of the decision-making decentralized
• It’s suited to businesses that treat each area as unique. Useful where there are large cultural, political or economic differences between markets

Global product structure

• This divides worldwide operations according to the businesses product areas. Its then subdivided into domestic and international units
• Each function such as marketing, finance and operating are duplicated in the separate units
• Suitable for businesses offering diverse set of products because it overcomes some of the coordination probs of international division structure

Global matrix structure

• Splits the chain of command between product and area divisions. Each managers reports to the head of the product division and the head of the geographic area
• Main goal is to unite geographic and product area managers for joint decision-making
• Common for businesses trying to increase local responsiveness, reduce costs and coordinate worldwide operation

Staffing

• Staffing issues involve the recruitment, training and retaining of managerial and executive staff and office and production staff.
• Size of issue depends on the level of businesses international activities
• Using home country managers makes communications and coordination with corporate headquarters easier as the language barrier does not exist
• Issue of costs also influences the choices between home country transfers or the local employees

Shortage of skilled labour

• One of the factors that influence the use of non-parent or local skilled labour is its availability
• There may be shortages of appropriate staff in the host country which can be a critical issue in the performance of the subsidiary
• Skill and knowledge of workers tends to be low where the labour cost is low. Others may lack experience in the industry and in a customer focused environment
• Lack of managers qualified to run a global operation can create difficulties for the business
• Can be costly and time consuming as the business will have to train the workers or not set up in that particular country

Labour Law Variations

• Important for a global business to comply with the local labour laws, therefore managers need to be aware of the difference in the laws compared to their own home country.
• Issues are:
  • Wages and conditions
  • Affirmative action
  • Religious holiday observances
  • EEO
  • Summary dismissal
  • The right to below to a union or trade association

Minimum Standards of Labour

Fundamental ILO (international labour organisation) conventions

• Seven conventions have been identified by the ILO as being fundamental to the rights of human beings at work, irrespective of levels of development of individual member states
• Ratifications are the formal commitments by govts to follow international agreements
• These conventions include “right to organise and collective bargaining”, “minimum age convention” and “abolition of forced labour convention”

Child labour

• Is a serious problem. It is the most important source of child exploitation and child abuse in the world
• Many children are working at an early age in hazardous working environment which takes advantage of their vulnerability

OH&S

Staffing Systems

Ethnocentric staffing

• Involves the use of using the parent company employees in senior management positions, “locals” in middle management and “local” in the low-level skill positions.
• Advatages are that the expatriate (employee from another country usually the company headquarters) will be most effective in transposing the corporate culture
• Also used when qualified workers are not available locally
• Disadvantages are the expense of relocating managers from the home – their wages, their families/ pressure of cultural differences can leave manager in culture shock (disoriented, frustrated)/ it can also become a barrier as the manager may be conservative in changes/ lack of knowledge of host country laws, culture, social structure etc

Polycentric staffing

• Here the host country nationals are employed. Can be used for top or middle management, as well as for non-managerial staff.
• Large companies run extensive training programs for host managers to expose them to the corporate culture and business practices
• Adv is the saving on high cost of the expatriate. Local managers have the advantage because they know the local market well in terms of culture and accepted business practices
• Disad is the potential to lose control of the operation. By employing a local manager, the business risks becoming a collection of national businesses rather than a global operator

Geocentric staffing

• Focuses on employing the best available person, regardless of nationality
• This helps a business develop global managers who can adjust to many business and cultural environments.
• Disadvantage is that it is expensive. Global managers are highly sought after, and the combo of high demand and less supply can lead to higher salaries and associated packages

---

This page is a stub and is incomplete.

Why not add to it? Don't be intimidated - we welcome all contributions!