Reward System HRM Dissertation

Reward System

Before discussing the elements of a reward systems, their aims, other issues related to design strategic reward system, reward strategies, implementation of chosen strategy along the evaluation; it seems worthwhile to explain the reward system which would make the discussion coherent. Armstrong (2004:4) explains the reward system in very lucid words as he regards employee reward system, an organizations’ integrated policies, processes and practices through which organization reward their employees on the basis of their skill, competence, their market worth and their overall contribution to the organization.

A reward system could include financial rewards (fixed and variable pay) and employee benefits, which together comprise total remuneration. The system also incorporates non- financial rewards (Recognition, praise, achievement, responsibility and personal growth) and in many cases, performance management processes. The non-financial compensation, financial rewards and employee benefits form the total reward system (Armstrong, 2004).

Aims and Purpose of a Reward System

Armstrong & Murlis (2007) put forward number of aims of reward management/system which are very helpful to understand what businesses want to drive through these reward systems which are as follows:

  • To create total reward processes that are based on beliefs about what the organization values and wants to achieve;
  • To reward the employees for the value they have created for the organization;
  • To bring into line the reward practices with the employee values and business goals and objectives;
  • To develop the positive psychological contract and employment relationships with the employees;
  • To reward right behaviours in order to deliver the positive message to the employees that what organization expects from them in terms of outcomes and behaviours;
  • To win the war of the talent by attracting and retaining the talented, skilled and competent pool of employees that organization need to make the difference;
  • To gain the commitment and engagement of the employees by motivating them through reward practices;
  • To cultivate and sustain the performance culture within the organization.

Structural Design Issues of Reward system

There are number of options for the organization to design its reward system because there are number of ways through which rewards are given and distributed among the employees in the organization. The reward’s content dimension or structural dimension denotes the practices (e.g. the performance appraisal forms, and the salary structure), formal procedures and mechanisms (Lawler, 1993). In relation to the structural dimension, there are many issues which organization will have to address, some of them are briefly discussed below:

  • Market Position- the organizational preference and its market position would influence not only the organizational environment but also the reward strategy. If business wants itself ahead of its competitors, it would rather go for setting the higher pay levels than the competitors. If organization sees its employees less important for the organizational effectiveness, it would be likely to have different reward system (Marchington & Wilkinson, 2005).In conclusion, market position of organization could influence its overall structural design of reward strategy.
  • Structure- the structural choice of organization also influence the organization overall reward system as what type of structure, an organization wants to pursue whether it would like to have the flexible and broad banded structure or comparatively formal (narrow-banded) and hierarchical (Armstrong, 2004).
  • Reward Priorities-The organizational reward priorities have influence on the reward system. Organization decides whether it has to limit the reward to the small number of key players only or it wants to share the reward many in the organization in order to support the steady improvement of many (Armstrong, 2004).
  • Reward Mix- The form of rewards actually shows that what type of culture or environment an organization wants to cultivate and maintain. Whether it wants to give the mix of rewards (base pay, benefits, non-financial reward) or it allows employees to choose their own package (such as Cafeteria-Style Approach) influence the overall reward system (Marchington & Wilkinson, 2005).

Strategic Reward

According to Armstrong & Murlis (2007:30)‘’Strategic reward management is the process of looking ahead at what an organization needs to do about its reward policies and practices in the middle or relatively distant future’ ’It enables the organization to drive its reward management to deal with the wider business issues for obtaining its long-term business goals (Armstrong & Murlis, 2007).

Reward Strategies

Reward strategy drives an organization to achieve business goals by developing and implementing the reward practices, processes and policies in order to address critical reward issues in the long-term (Armstrong & Brown, 2006:31). The three reward strategies are discussed below along with their strengths and weaknesses:

  • Financial Rewards: -A various ways by which a company can gives money to its employees is known as financial rewards. According to Armstrong (2007), financial rewards can be the one of the component that could motivate people in the workplace to work hard and to be able achieve higher standard as these rewards will be only given if the workers are competent in their jobs. These rewards come in ‘Pay packages’ such as salaries, fringe benefits, time-rate pay, commission, performance-related pay and pensions. However, the drawback of the rewards is that the company might not be able to pay the market rate and can be at the risk of losing a worker if the others organizations are offering higher standard of pay mix.
  • Non-Financial Rewards: -Some businesses find non-financial rewards methods are more approachable when it comes to motivate staff and it involves indirect payments. An achievement, autonomy, recognition, scope to use and develop skills, training, career development opportunities and high quality leadership which concerned with expectations and self-efficacy all are a part of non-financial rewards (Armstrong, 2007). These rewards can boot employee’s confidence and can satisfy employees. The possible downside of the reward could be that the employees can have better opportunities in the competitors company, who are willing to offer financial rewards along with non-financial rewards.
  • Total Reward Strategy:-According to Manus & Graham (2003) as cited in Armstrong (2006:629)‘’ total reward includes all types of rewards- indirect as well as direct, and intrinsic as well as extrinsic’ ’This strategy is proved to be very successful for many companies who implemented this strategy to motivate their employees as mentioned by Armstrong (2006). This is the holistic strategy in which every aspect of reward practices are employed so employees could gain satisfaction through their work Armstrong (2006). Maintaining the balance in financial and non-financial reward while pursuing according to the organization’s circumstances could be very difficult for the organization which could be regarded as the weakness for using this approach.

Implementation of Chosen Strategy

The chosen strategy of total reward could be implemented as it has number of benefits and it incorporates both the financial and non-financial rewards. Developing reward strategy is easy but implementation is hard. According to Armstrong (2006), implementation initiates the challenge of change management. The guidelines for implementation of chosen strategy which are as follows:

  • The value in-depth employee consultation should never be undervalued.
  • Without looking at the return on investment, no initiative should be implemented.
  • Actions should be taken as required and effectiveness of programmes should be evaluated.

Evaluation and Monitoring of Implemented Reward Strategy

After implementing the reward strategy, through number of ways effectiveness of implemented reward strategy is assessed and evaluated. Armstrong (2010) puts forward number of suggestions to assess and evaluate the reward strategy as follows:

  • A reward review should be done through gathering and researching from qualitative and quantitative information on the reward practices inside the organization.
  • By using this information the effectiveness of the delivery of reward goals from various reward practices should be assessed.
  • The time to time audit should be performed in order to evaluate the effectiveness of the reward investment.
  • Through reward surveys, employees could be asked and analysed in order to monitor the effectiveness of the implemented reward strategy.
Reward System Dissertation
Reward System Dissertation

Motivation and Reward Practice

One cannot separate the process of motivation and the reward practices. It is very essential to comprehend those factors which motivate the employees and it would be recommendable for the organizations to design their reward strategies and practices in the light of those factors in order to increase performance of employees throughout the organization. Practical guidance is provided by the motivation theories in developing the reward systems. The theories of motivation tell that what factors exactly encourages individual, or group of employees to adopt something behaviour or to do something differently. These factors guide the human behaviour and could affect their efforts to do something (Armstrong, 2007). So, designing reward practices in the light of motivating factors could be very beneficial and effective.

Process Theory of Motivation and Reward

Porter & Lawler (1968) modified Vroom’s Expectancy Theory (1964) as cited in Morris & Vascular (2005:8) expectancy theory of behaviour. Bartol and Locke (2000, p. 111) as cited in Morris & Vascular (2005:8) state that expectancy theory “…holds that people make choices based on (1) their expectancy that their efforts will lead to a certain 8 level of performance, (2) their belief that their performance will lead to valued outcomes (instrumentality) and (3) the degree of value they place on those outcomes (valence).”

Expectancy theory underpins best fit thinking because it provides a design framework so that each element of a reward system can be used to the element’s best advantage. Lawler’s (1995) as cited in Morris & Vascular (2005) new pay model provides guidance on what behaviours to measure. They must be linked to organisational strategy. However, Lawler (1981, p. 22)as cited in Morris & Vascular (2005:8) emphasises in an earlier work, the importance of the implementation process when he states: “In order for employees to believe that a performance-based pay relationship exists, the connection between performance and rewards must be visible, and a climate of trust and credibility must exist in the organization.”

The measurement of performance is a critical characteristic of ‘new pay’. Armstrong (2002) as cited in Morris & Vascular (2005) emphasises the need for a robust performance management process. Schuster and Zingheim (1992, p. 210) as cited in Morris & Vascular (2005:8), states “measurement is the core of new variable pay because it provides the justification for sharing performance improvements with employees.”

Content Theory of Motivation and Reward

Best practice advocates rely on content theories of motivation as the basis of their reward systems. Herzberg (2003, p. 91) as cited in Morris & Vascular (2005:8) found ‘…that the factors involved in producing job satisfaction (and motivation) are distinct form the factors that lead to job dissatisfaction.’ Motivators, the source of job satisfaction, are intrinsic to the job including ‘achievement, recognition for achievement, the work itself, responsibility and growth or advancement.’ (Herzberg, 2003, p. 92) as cited in Morris & Vascular (2005:8) Hygiene factor, including salary, are extrinsic to the job and are a potential source of job dissatisfaction.

Performance Related Pay

Provision of financial rewards in terms of increment in the basic pay or any cash bonuses after assessment of the individual’s performance against the set objectives is regarded as performance related pay (Armstrong, 2002). Research and surveys show the both negative and positive aspect of the performance related pay.

One survey showed that, 14% respondents have opinion that PRP has made the fairness worse, 67% respondents have opinion that it conveys the message of clarity regarding performance of organization, while 57% respondents thinks it is fair to be get rewarded by performance related pay (Armstrong, 2002). However, study of IPM in 1997 found no relationship between the performance-related pay and the enhanced organizational performance (Armstrong, 2002).

When decisions are being in regards to the type of reward system, the main strategic decision that needs consideration is whether or not the reward system will be made on the basis of performance, which allows most of the reward systems feature to fit into the right places. However, it could also be based on seniority. In most government agencies, the pay rates are based on factors such as the roles of the employee and the length of their service. Although, in Japan, seniority is mostly used to decided individual pays, employees also receive bonuses based on the performances of the corporate (Lawler 1993).

According to Milkovish and Wigdor (1991) as cited by Lawler (1993), in America, most businesses use individual performances to reward its employees using the pay system and promotion system which is known as merit systems in America. Although it is believed that having a merit pay or promotion system in place helps businesses stay organised but according to Kerr (1975) as cited in Lawler, (1993) it is better to keep pay and promotion separate from performance and find ways to improve performances of an individual. There is a lot of evidence (Whyte, 1955; Lawler, 1971; Schuster and Zingheim, 1992 as cited in Lawler, 1993) that suggest that having a merit system could be harmful.

In order to improve team work and produce integration, organisational and group bonus plans have proven to be effective. A group and organisational plan means that everyone contributes towards the financial results of higher performance. Therefore, an individual work effectively and efficiently as everyone support, empower and encourage each other. People are more likely to empower and support others workers if they feel their performance would benefit them which is less likely to happen under individual plans as it increase competition and differentiation (Lawler 1993).

There are other factors that could arise from using performance based reward system such as poor practise, small rewards and failure to explain the system. Nevertheless, it is hard to determine whether or not pay should be based on performance as there is a lot of evidence to support the system. In conclusion, the negative impact of having such systems should not be overlooked (Lawler 1993).


Armstrong, M. (2004), Employee Reward: 3rd ed. London: Chartered Institute of Personnel and Development.

Armstrong, M. (2006). A handbook of employee reward management and practice. 2nd ed. Philadelphia: Kogan Page Limited

Armstrong, M. (2007), A Handbook of Human Resource Management Practice. 10th ed London.

Armstrong, M. and Brown, D. (2006), Strategic Reward: Implementing More Effective Reward Management: 2nd. Philadelphia.

Armstrong, M. and Murlis, H. (2007), Reward Management: A Handbook of Remuneration Strategy and Practice. 5th ed. Philadelphia.

Armstrong, M., Brown, D. and Reilly, P. (2010), Evidence-Based Reward Management: Creating Measurable Business Impact from your pay and reward practices. Philadelphia.

Lawler, E.E. (1993) Effective Reward Systems: Strategy, Diagnosis, Design, and Change. Online.

Marchington, M and Wilkinson, A. (2005). Human Resource Management at Work: People Management and Development. 1st ed. London: Chartered Institute of Personal and Development.

Morris, D. & Vascular, M. (2005) Strategic Reward Systems: Understanding the difference between ‘Best Fit’ and ‘Best Practice’. Online.

Armstrong, M. (2004), Employee Reward: 3rd ed. London: Chartered Institute of Personnel and Development.

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Human Resource Management Practices

Effectiveness of Human Resource Management Practices at RMC Global

In this era of global competition, the importance of Human Resource Management practices in the context of organizational performance has been realized to a great extent. In last few decades, great research has been conducted in the field of HRM and its relation to organizational performance. The researchers have found a strong positive relationship between human resource practices and enhanced organizational performance. Primary purpose of this research was to investigate the relation between human resource activities and organizational performance at RMC Global Company. Data was collected through mail questionnaire sent to employees of HR department of RMC Global Company, UK. 51 filled responses or questionnaires were received and utilized in the analysis of this study.

Overall research methodology of the study was based on onion model presented by Sounders. According to analysis, employees believed that they are provided an opportunity to participate in decision making, of business which affected their performance. Findings of the study show a positive relationship between human resource management practices and organizational performance. It depicts that RMC employees participate in innovative technologies to a great extent in order to contribute positively in the organizational performance. Further, the findings can draw a road map for the managers of UK insurance companies in order to appreciate the efforts of human resources to get sustaining competitive advantage in the industry. In conclusion, HR practices have positive relation with the organizational performance.

However, it is recommended that RMC Global Company should provide employees with more conducive and learning environment. Entire HRM activities should be executed in a best way in order to enhance the organizational performance. Aims and objectives of the study have indispensable importance and define various implications of this study, its beneficiaries, as well as the study outcomes. The main aim of the study is to examine how HR activities impact on performance of RMC Global Company.

Dissertation Objectives

  • Identification and investigation of various aspects of human resource management practice
  • Investigation of the impact of HR activities on individuals’ performance at RMC Global Company
  • Examination of the impact of HR activities on RMC Global Company’s performance
  • Suggesting of an effective implementation plan of HR practices to future performance of RMC Global Company and other insurance companies

All of these objectives are specific, measurable, reliable, attainable, and actionable that will contribute to the enhancement of RMC Global Company’s performance. These will also help the RMC Global Company to gain enduring growth in insurance sector.

Human Resource Management Practices
Human Resource Management Practices

As a result of growing forces which appeared in response of rapid change in the business environment, the direction of the policy is steered towards an assortment of reactions between industrial organizations, the rate of technological invention, variation in consumer demand as well as Globalization of markets. Manufacturers are the features that amplified the vitality of the competitive environment within which organizations are required to retort. Today a competitive and efficient human resource is important for the power of organizations that is facing the trials of business. Nowadays, the implication of containing a competitive human resource is equal to the achievement of organizations. An effective and competent human resource would produce productive and quality individuals that will ultimately decrease the difficulties associated with human resource just like absenteeism, turnover and job dissatisfaction of employees. What is meant by human resource management? Actually Human resource management is a philosophy, a policy, practice and a system which can stimulate individuals who are working in an organization. Activities of HRM are composed of staffing, development, performance appraisal, training and compensation management, health and safety as well as industrial relations.

HRM practices are the activities which can inspire the workers also enhance employees’ levels of job satisfaction and organizational commitment. In the early 1980s the Concept of HRM became prevalent, there was growing educational concern in the area of research and concept. Initial models of HRM were mostly conceptual lacking considerable experimental indication for their rationality. Decade of 1990s perceived a considerable change in the concept as experiential research began which initiated the process to probe link between performance and HRM practices. In modern times the research provides empirical confirmation of the relationship among performance and practices of HRM. Many researchers also contain a cumulative concern in the notion of HRM practices as well as the strongest connection among organizational performance and HRM practices. Basically, the concept of HRM surfaced in the 1980s from outdated personnel management practices. Typically personnel management was mostly considered a connecting the recital of simple functions of staffing, frequently steered, devoid of concern to other organisational actions as well as devoid of arrangement of administrative objectives. HRM is like a business that is progressed as an allowance of the typical role of personnel in the form of a very operative organisational action.

A human resource audit is a single system that is used to assess and evaluates all the activities in the arena of human resource management. Its sub-grouping is not perfect and methods of human resource assessment are not acknowledged evenly in the textbooks of modern times. Though, the literature of the combination of human resource auditing along with some other HRM assessment methods contain indication for the determinations of comparison and discussion.

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Strategic Issues HRM

Strategic Issues in HRM

Owing to the globalization, many companies have begun setting up their business boundaries beyond a single place. They are going from their primary market to other countries in order to have access to the much larger international market (Heidenreich, 2012). In management terms, the foreign countries where these businesses attempt to set up are the host countries while the country where the corporation has its head office is the home country. Multinational companies are a function of sovereign companies, each focusing on its domestic markets. But the independence of the subsidiary is not always true since a lot of times the subsidiary also has to borrow the policies of the parent company. While multi-nationalization is an organization wide phenomenon, dealing with the employees, from recruiting to managing is the job of the human resource department. It is assumed that Human resource management is a soft skill; however effective practice within the organization demands a much strategic focus in order to confirm that the organizational goals can be achieved via human resource. Today, when the terms ‘strategy’ and ‘human resource’ are combined, it means that the human resources becomes responsible for adopting the steps and practices to achieve the longer term organizational goals and objectives (Jiang, 2012).

There are not only the huge advantages that the multinational are benefitted from the host and the home country but also, there exist several critical strategic issues that these companies have to face. However, there are a lot of advantages the host country gets from multinationals in the form of investment opportunities, income for unemployed resulting in a much better standard of living. Speaking of multi-nationals, the main idea behind these multinational organizations is that they organize as per the local responsiveness in order to be efficient worldwide (Shah, 2012). This local responsiveness does not always hold true; some firms borrow the policies of the parent company assuming it to be better for the overall corporate results.

Misalignment of subsidiary from overall corporate strategy

Moving from one country to another creates the problem of misalignment between various departments and the overall corporate strategy. Usually the problem occurs when the human resource department is not aligned with the parent company’s mission and vision as it begins operations in another country to adapt as per local standards. The drift in one department of the organization causes the entire subsidiary to shake up as a result of unguided principles and policies.

Cultural diversity

Besides the merits of multinationals, one major strategic issue that the Human resource manager faces is based on the fact that when companies go global they tend to have a diverse workforce in their organization. And it is this organizational diversity that makes managing people across various religious, cultures, and standards, a major problem in implementing the goals of the organization as a team. Talking of diverse workforce culture, when a company moves from a country where unethical practices are considered to be the norm to a country that has stringent policies against any unethical practice, it is at that time when the problem for the management takes a start. For example, in countries such as Saudi Arabia, where bribery is thought to be the norm to run the business but such a practice is highly disregarded and looked down at in countries such as Brazil (Rose, 2012). Then managing employees from such a background becomes a problem for the manager in order to ensure that the disease of unethical does not spread in the organization.

Recruitment, selection and placement problems

Recruitment, selection and placement of the employees are the main functions of the human resource managers. However, this function is important and is viewed as the backbone of any business which guides the success or failure of the organization. Studies have also identified the three forms of approaches used to employ people beyond the local boundaries. Of the three approaches quite often multinational companies adopt the ethnocentric approach (CHOY, 2007). For instance had the company have a policy of employing people only from the parent company, the practice of ethnocentrism can pose a difficult situation for HR managers challenging them to train such nationals as per the local standards, policies and demands of the consumers such as American employees going to Saudi Arabia. Given the limited independence to select and recruit the people as HR wills, this diverse workforce tends to pose a problem of controlling of human power, their communication and remuneration.

The differences of employment practices

Another problem that the human resource faces is with respect to the employment practices. Under this are the problems of age, racial, sex and cast discrimination arises of which gender discrimination is very common (Wu, 2008).Given the differing laws and rules in each country it is important for the human resource to go by those laws to sustain and succeed beyond borders. For instance, countries such as India are really high in gender discrimination by restricting management and engineering position to men and softer skills jobs to women. Research by Pudelko (2007) clearly shows that when the a MNC moves from a country that does not offer equal employment opportunities such as India to a country that gives equal employment opportunity such as Thailand, the manager explicitly tends to discriminate the jobs based on gender in the latter case as followed previously in the other country. This happens because the HR manager is accustomed to policies adopted and practiced in the parent company and would be likely to follow the same policies at the subsidiary.

Basic salary and other forms of compensation

Human resource has the major function of motivating its employees to keep them committed to the organizational goal and mission. This motivational strategy largely comes from the compensation that the human resource manager engages in. Other than the selection problems, what is of particular challenge for the HR employer and the employee working in the organization is how to compensate employees in the multi-national context. The concern is how to appropriately measure and manage the compensation of the human power within the organization relative to employee contribution and performance in the MNC. And this is the basic function and duty of the HR managers towards their employees to regularly appraise the performance of its workers and keep giving proper constructive feedback (Sepura, 2009). For instance, if a company is based in the US, it tends to evaluate its employees based on performance only while that is not the case in Japan. Japanese firms value seniority and experience and would evaluate performance based on the employees experience in the industry and his position in the hierarchy (Harzing, 2006; Kono & Clegg, 2001).

Strategic Issues HRM
Strategic Issues HRM

Having offices in both developed and developing countries there tends to be a huge gap in the salary payout. For instance, workers working in US might earn 5 times more than their counterparts working in any underdeveloped nation, example India or Pakistan with the same skill set. Here comes the challenge for human resource to make sure that wherever it operates must do so in acceptable and fair boundaries. Nike a well-known company outsourced its manufacturing to Pakistan where under aged children worked for extensive long hours at a very low pay out of around 60 cents (Buckley, 2000). Quite similar is the case of MNCs that operate in low cost countries. In this case, the human resources management may face the ethical issue of whether to narrow the gap in compensation.

When it comes to paying basic salary, it is observed that a lot of MNCs that are fair in their practices want to and try to pay its workers a fair wage that is in line with the wage of their parent company. They also do so to retain and attract the best employees and avoid extensive training costs, but then again such practices are seen as disruptive for the local companies and the economy as a whole. The problem comes in when the local companies are not able to pay as much and this lead to disruption of the entire wage structure (Timo, 2005). As a result of this, the healthy competition falls out and they themselves fail to compete and work towards the economic growth. However, as a result of this factor the human resource is unable to decide again what compensation can work best for the employees. And how can this compensation make the organization seem as a non-disrupting entity which exists for the good of the economy (Marin, 2010).

Industrial relation factors

Freedom, voicing the opinion and autonomy are some concrete terms that are quite popularly used and practiced in countries such as Germany, UK and USA. Industrial relation factors pertaining to workers, employer and unions may vary from country to country. For instance, in much developed and open economies such as Germany, co-determination is the rule. This means that a lot of firms in Germany have their employees speak up and voice their opinion in corporate strategy and company operations such as wage and hour setting but that might not be appreciated elsewhere. For instance in countries like Japan where there is high power distance and a lot of centralization, employee contribution in these areas might not be the norm (McCrae, 2004). Here comes an issue that must be worked over by the human resource manager and this tends to greatly impact the HRM practices. If a multinational company appoints a local from Japan as the head of HR and have some workers from the parent company shifted to the subsidiary, this can create conflicts between the employer and employee. Because the head might not be familiar with the idea of employees collaborating and working together on issues of pay or perhaps other HR related issues, he might consider the employee to be interfering in matters he is not responsible which creates an uncomfortable working environment within the firm.

Attempting a balance between global and local amalgamation

One key challenge facing the MNC Human resource is how to attempt a balance between the global amalgamation and the local adaptation. The dilemma for the human resource is the fact whether it should go by the policies and practices of the home country because it views those practices to be much fair or should it adopt local policies which can be exploitative. When the human resource decides to adopt a fair culture for its employees based on ‘not-so-local’ practices they are accused of exporting the practices of another country and trying to impose it on locals ignoring their traditional and cultural values (Chen, 2008). However, when the human resource decides to go by the standards of the country where they are operating, a problem originates of ‘trying to exploit’ the employees that work under it and not being there for the better living standards of the host country citizens just because the policies of that country are generally exploitative in nature. This puts the practices and workings of the human resource manager at question as to which root to take. All in all, the country of origin for these MNCs is seen to be the major influence in shaping what balance to take (Almond, 2011). Quite a lot of research has been conducted on this issue and it was eventually comprehended that the way MNCs manage their foreign subsidiaries tends to be out of the result of the national origin (Harzing, 2003).Elaborating on the view, Harzing (2003) concluded that although MNCs are quite internationalized, their major controlling practices are determined by their country of origin.

Transferring the policies from the parent company is also much more problematic for the service oriented industries than the manufacturing firms. Because service provision requires the firm to deal with employees and the expectations of the customers who have differing cultural values, the burden of localization falls on the human resource to meet the local customer demands (Gamble, 2003).

Cultural differences

The major cultural differences between various countries demand human resource department to act in accordance with the culture of the country’s foreign subsidiary. Lingual skills form another sort of barrier to most organizational growth. When a company is moving to another country they must make sure they are well aware of that company’s priority and value system in order to enhance the intercultural communication in cross-cultural management (Gullestrup, 2002). A lot of times, employees from the local context tend to prefer to be spoken in their own language because they tend to feel ethnocentric of their culture. For example, in Saudi Arabia, the locals do business in their own language and prefer to be spoken in Arabic only. A company moving to another country must also educate its employees of various languages to settle in well with the local populace. The difficulty for the human resource manager is when they have no knowledge of the culture of another country and do not have the required training to deal with the ethical dilemmas (WriteWork, 2004)

When there is a drift between the values of the parent company and the subsidiary that’s where human resource department has to come in and get to a congruent solution. Culture clashes are the most prominent problem in these businesses. When the company decides to shift, it must have an adaptive approach to its subsidiary, where there is high independence between the parent and the subsidiary and the corporation is much consistent with the local environment (Grewal R, 2008). However, given the senior management, usually it’s the other way round. Subsidiary is expected to borrow a lot of rules from the parents creating cultural differences to take over the legitimacy. Generally, US MNCs have an organizational structure that is often more centralized and formalized; in contrast, Japanese MNCs have strong but informal centralized co-ordination with a network of Japanese expatriate managers, yet are likely to adapt HRM practices to local conditions due to the perceived periphery status of subsidiaries. Now given the different cultures in each country it becomes difficult for the human resource to organize people from one country to the other with the cultural air being so different (Caprar, 2011).

Local labor laws

When a company begins its operations beyond its borders, it is important for them to recognize that the local employment relationship is governed by local labor laws. There are certain countries that favor the employees while there are others that favor the employer. Contrasting the labor laws in America and Europe, there is considerable difference in each area. Taking an example of US, they usually have really brief offer letters stating the pay, compensation, bonus or stock options and at the same time it also includes a statement favoring the employer that sates that the employees might be terminated at any time by the company without giving reasons. This concept of employment is a form of employment contract that is not recognized in any other country because it is seen as harsh and as a result it does not have a legal standing in the court. However, companies that have operated in Japan, Brazil or China would not be appreciative of such HR practices had the parent company been in US had the employer adopted the same policies.

Communication glitches

Communication forms the backbone of any organization. It is only effective when taught rightly by the superior management in the company. Had the communication not been so strong and transparent, it can lead to major ethical problems for the organization as a whole and the HR particularly who is primarily concerned with the effective training of its people. It is the duty of the human resource manager to prepare its employees communication via training. It must be noted that broken communication can lead to corruption problems (Lager, 2010). Corruption might not be that big issues in the developed economies but developing economies do pose a question mark. In a survey in 2012 by Ernst and Young, around 39% people said that corruption occurred quite often in the developing countries (Newswire, 2012). Countries such as Pakistan and Brazil are rated quite high on the corruption continuum. A problem that occurs for the human resource is to prepare its employees shifting, or moving to these countries on how to deal and communicate with the people in such countries.

Four level training to avoid merger failure

It is important to make sure that a harmonious organizational culture is maintained and there is no merger failure of subsidiary and the culture (Weber, 2004). It is extremely important for the managers to train and orient their employees before shifting them to the international operation. Yet a lot of countries even today do not have structured or systematic overseas oriented training practices in order to acquaint them to the foreign country economics and practices. A lot of organizations are realizing the worth of international businesses and have been trying to incorporate the special training in their operations for their employees. This sort of training has four basic levels. The first level deals with cultural awareness. This initiative must be undertaken to acquaint the employees of the cultural differences and it impacts the business outcomes. The second level knowledge must deal with attitude formation as to how the attitude can lead to a particular type of behavior towards other. For instance, managers who form stereotypes tend to view their foreign based employees with a critical eye and unconsciously have a favorable or unfavorable behavior towards them. Level three is the factual knowledge of the country the subsidiary is going to be developed in. And lastly the problem comes of building up skills and adapting to those skills such as language adjustment (Weber, 2004).


However, in order to overcome the problem of strategic differences within the MNC, firms must look into the generic strategic international orientations when crossing the local borders to step in the international market. MNCs and the human power can help and create a hybrid of the strategic orientations in order to make sure that the practices of the host country are molded blue print of the home country corporation so that it meets the local demands of the customers, enable employees to adapt to the local standards to counter the overseas problems and ensure an alignment between the subsidiary and the parent entity.


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Almond, P., 2011. Re-visiting ‘country of origin’ effects on HRM in multinational corporations. Human Resource Management Journal, 21(3), pp. 258-71.

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Workforce Diversity

Managing Workforce Diversity – An Examination of McDonald’s Workplace Diversity Strategy

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This dissertation is focused on evaluating how workforce diversity within the workplace can be effectively managed in order to achieve desired level of performance. Managing diversity can be defined as formulating and implementing the systems that can be helpful in managing the people in a way that potential advantages of diversity are maximized and potential disadvantages are minimized. Workplaces nowadays are becoming increasingly diverse with employees from different cultures, genders, races and ethnic backgrounds are working together in order to achieve the common goals and objectives. This increases the importance of formulating and implementing effective strategies in order to manage workforce diversity at the workplace. Existing research highlights the importance of managing diverse workforce has been significantly increased because due to the increasing trend of globalization, the organizations are establishing their business operations in different countries of the world which requires them to recruit the employees who belong to different cultures and backgrounds, encouraging diversity is helpful for the businesses to grow and achieve the strategic competitive advantage. Academics believes a diversified workforce is helpful in strengthening the organization which results in increased growth and improved business profitability. It is a fact that when recruiting employees from different backgrounds it provides an opportunity to the firm to understand the perspective of different types of customers. The workforce quality can also be improved with the help of an effective diversity policy because it enables the organization to reach a larger pool of candidates who have desired skills and capabilities which are essential to fulfill the business needs.

Workforce Diversity
Workforce Diversity

Research Objectives

  • To identify the role of managing workforce diversity in achieving high level of business performance
  • To discuss the role of effective human resource management practices in managing diversity at the workplace
  • To evaluate that how the diversity related issues can affect the motivation and satisfaction level of the employees at the workplace
  • To identify that how the management of workforce diversity can be helpful in improving the coordination among the employees at the workplace?

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I do hope you enjoyed reading this post on managing employee diversity in the workplace. There are many other titles available in the HRM dissertation collection that should be of interest to human resource management students and CIPD professionals. There are many dissertation titles that relate to other aspects of HRM such as employee engagement, HRM Theory, absenteeism, training and development to name a few. It took a lot of effort to write this post and I would be grateful if you could share this post via Facebook and Twitter. Feel free to add your thoughts in the comments section. Thank you.